<PAGE>
================================================================================
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 Section 240.14a-11(c) or Section 240.14a-12
FLIR SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF FLIR SYSTEMS]
16505 S.W. 72ND AVENUE
PORTLAND, OREGON 97224
(503) 684-3731
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
To the Shareholders of FLIR Systems, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of FLIR Systems, Inc. (the "Company") will be held on Tuesday, May
5, 1998, at 2:00 p.m., at the Multnomah Athletic Club, 1849 S.W. Salmon
Avenue, Portland, Oregon 97205 for the following purposes:
1. ELECTION OF DIRECTORS. To elect six directors.
2. AMENDMENT OF THE COMPANY'S 1992 STOCK INCENTIVE PLAN. To approve an
amendment to the Company's 1992 Stock Incentive Plan.
3. RATIFICATION OF APPOINTMENT OF AUDITORS. To ratify the appointment by
the Board of Directors of Price Waterhouse LLP as independent auditors of
the Company for the fiscal year ending December 31, 1998; and
3. OTHER BUSINESS. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
March 6, 1998 as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting. Only shareholders of
record at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting or any adjournments thereof.
By Order of the Board,
/s/ Robert P. Daltry
Robert P. Daltry
Chairman of the Board of Directors
and Chief Executive Officer
Portland, Oregon
April 3, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE DATE,
SIGN AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
FLIR SYSTEMS, INC.
16505 S.W. 72ND AVENUE
PORTLAND, OR 97224
(503) 684-3731
----------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
----------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of FLIR Systems,
Inc., an Oregon corporation ("FLIR" or the "Company"), as part of the
solicitation of proxies by the Company's Board of Directors (the "Board of
Directors") from holders of the outstanding shares of FLIR common stock, par
value $0.01 per share (the "Common Stock"), for use at the Company's Annual
Meeting of Shareholders to be held on May 5, 1998, and at any adjournments or
postponements thereof (the "Annual Meeting"). At the Annual Meeting,
shareholders will be asked to elect six members of the Board of Directors,
amend the Company's 1992 Stock Incentive Plan, ratify the appointment by the
Board of Directors of Price Waterhouse LLP as independent auditors of the
Company for the fiscal year ending December 31, 1998, and transact such other
business as may properly come before the meeting or any adjournments thereof.
This Proxy Statement, together with the enclosed proxy card, is first being
mailed to shareholders of FLIR on or about April 3, 1998.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on March 6, 1998 as
the record date for the determination of the shareholders entitled to notice
of and to vote at the Annual Meeting. Accordingly, only holders of record of
shares of Common Stock at the close of business on such date will be entitled
to vote at the Annual Meeting, with each such share entitling its owner to one
vote on all matters properly presented at the Annual Meeting. On the record
date, there were approximately 3,500 beneficial holders of the 9,857,399
shares of Common Stock then outstanding. The presence, in person or by proxy,
of a majority of the total number of outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum at
the Annual Meeting.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Annual Meeting, the shares represented thereby will be voted
in accordance with the instructions marked thereon. EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED FOR THE ELECTION OF THE SIX NOMINEES FOR ELECTION TO THE
BOARD OF DIRECTORS, FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S
1992 STOCK INCENTIVE PLAN AND FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998. The Board of Directors does not know of any matters
other than those described in the Notice of Annual Meeting that are to come
before the Annual Meeting. If any other matters are properly brought before
the Annual Meeting, the persons named in the proxy will vote the shares
represented by such proxy upon such matters as determined by a majority of the
Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. A shareholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of revocation with,
or by delivering a duly executed proxy bearing a later date to, Corporate
Secretary, FLIR
1
<PAGE>
Systems, Inc., 16505 S.W. 72nd Avenue, Portland, Oregon 97224, or by attending
the Annual Meeting and voting in person. However, a shareholder who attends
the meeting need not revoke a previously executed proxy and vote in person
unless such shareholder wishes to do so. All valid, unrevoked proxies will be
voted at the Annual Meeting.
ELECTION OF DIRECTORS
At the Annual Meeting six directors will be elected. Unless otherwise
specified on 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 the persons named below as nominees. The Board of
Directors believes that the nominees will stand for election and will serve if
elected as directors. However, if any of the persons nominated by the Board of
Directors fails to stand for election or is unable to accept election, the
number of directors constituting the Board of Directors may be reduced prior
to the Annual Meeting or the proxies may be voted for the election of such
other person as the Board of Directors may recommend.
Under the Company's articles and bylaws, the directors are divided into
three classes. The term of office of only one class of directors expires in
each year, and their successors are elected for terms of three years and until
their successors are elected and qualified. There is no cumulative voting for
election of directors.
In December 1997, the size of the Company's Board of Directors was increased
from six to nine members. This action was taken in connection with the
Company's acquisition of all of the outstanding shares of capital stock of
AGEMA Infrared Systems AB, a corporation organized under the laws of Sweden,
and certain of its affiliates ("AGEMA") in exchange for a total of 4,162,000
shares of the Company's Common Stock (the "Acquisition"). The Acquisition was
completed effective as of December 1, 1997 pursuant to the terms of a
Combination Agreement dated as of October 6, 1997 (the "Combination
Agreement") by and among FLIR, Spectra-Physics AB, a corporation organized
under the laws of Sweden ("Spectra") and certain of Spectra's affiliates
(together, the "Spectra Companies"). In connection with the Acquisition, the
Board of Directors elected as directors Lars Spongberg, Leif Bergstrom,
Patrick L. Edsell and Egon Linderoth (together, the "New Directors"), three of
whom were designated by Spectra, to fill the vacancies created by the increase
in the size of the Board and the retirement of George Porter from the Board.
Each of the New Directors was elected to a term expiring at the Annual
Meeting, and each has been nominated for election at the Annual Meeting for
the terms described under "Information as to Nominees and Continuing
Directors" below.
Pursuant to the terms of the Combination Agreement, FLIR has agreed to use
its reasonable best efforts to cause the number of designees of Spectra who
are serving on the Board of Directors to be maintained at the number described
below: (i) three designees if on the date of mailing of the notice for the
annual shareholder meeting where such directors shall be up for election, the
Spectra Companies own thirty percent (30%) or more of the then issued and
outstanding shares of Common Stock, (ii) two designees if on the date of
mailing of the notice for the annual shareholder meeting where such directors
shall be up for election, the Spectra Companies own less than thirty percent
(30%) but more than or equal to twenty percent (20%) of the then issued and
outstanding shares of Common Stock, and (iii) one designee if on the date of
mailing of the notice for the annual shareholder meeting where such directors
shall be up for election, the Spectra Companies own less than twenty percent
(20%) but more than or equal to ten percent (10%) of the then issued and
outstanding shares of Common Stock. If at some point in the future the Spectra
Companies own less than ten percent (10%) of the then issued and outstanding
shares of Common Stock, the Spectra Companies shall no longer be entitled to
the rights described above.
As a result of the Acquisition, Spectra and its affiliates now own
approximately 42 percent of the outstanding shares of Common Stock. By virtue
of their stock ownership position and Board representation, Spectra and its
affiliates will be able to significantly influence the direction and policies
of FLIR, the election of the FLIR Board of Directors and the outcome of any
other matter requiring shareholder approval, including any merger,
consolidation, sale of substantially all of the assets of FLIR or other change
of control transaction.
2
<PAGE>
Information as to Nominees and Continuing Directors. The following table
sets forth the names of the Board of Directors' nominees for election as a
director and those directors who will continue to serve after the Annual
Meeting. Also set forth is certain other information with respect to each such
person's age at April 3, 1998, principal occupation or employment during the
past five years, the periods during which he has served as a director of FLIR,
the expiration of his term as a director and the positions currently held with
FLIR.
<TABLE>
<CAPTION>
EXPIRATION
OF TERM
DIRECTOR EXPIRATION FOR WHICH
NOMINEES: AGE SINCE OF TERM NOMINATED POSITION HELD WITH FLIR
--------- --- -------- ---------- ---------- -----------------------
<C> <C> <C> <C> <S> <C>
W. Allen Reed 50 1992 1998 2001 Director
J. Kenneth Stringer III 45 1993 1998 2001 President, Chief Operating Officer
and Director
Leif Bergstrom 59 1998 1998 1999 Vice Chairman of the Board of Directors
Lars Spongberg 53 1998 1998 2001 Director
Patrick L. Edsell 50 1998 1998 2000 Director
Egon Linderoth 61 1998 1998 2000 Director
CONTINUING DIRECTORS:
---------------------
Robert P. Daltry 54 1987 1999 -- Chairman of the Board of Directors and
Chief Executive Officer
John C. Hart 64 1987 1999 -- Director
Ronald L. Turner 51 1993 2000 -- Director
</TABLE>
W. Allen Reed. Mr. Reed has served as a Director of the Company since April
1992. Mr. Reed is President of General Motors Investment Management
Corporation. From 1991 to 1994, Mr. Reed was Vice President and Treasurer of
GM Hughes Electronics Corporation and Hughes Aircraft Company ("Hughes"). From
1984 to 1991, Mr. Reed was President of the Hughes Investment Management
Company, a wholly-owned subsidiary of Hughes. Prior to joining Hughes, Mr.
Reed was Vice President and Portfolio Manager for Allen & Associates
Investment Management Company. Mr. Reed serves on the Boards of Directors of
Westrec Financial Corporation, General Motors Acceptance Corporation, Motors
Insurance Corp., Taubman Centers, Inc. and Foreign Fund, Inc. Mr. Reed also
serves as Chairman of the Investment Advisory Committee for the Howard Hughes
Medical Institute.
J. Kenneth Stringer III. Mr. Stringer joined the Company in 1984 as Vice
President of Finance and Chief Financial Officer and was appointed Executive
Vice President in 1990. Mr. Stringer was elected to the Board of Directors in
April 1993. In April 1995, Mr. Stringer was appointed President and Chief
Operating Officer. Prior to joining the Company, Mr. Stringer spent six years
with Evans Products Company, Portland, Oregon, as Director of Financial
Reporting. He started his career with Touche Ross and Company (which
subsequently became Deloitte & Touche). Mr. Stringer received his B.S. degree
from the University of Oregon, with a major in Accounting. He is a Certified
Public Accountant.
Leif Bergstrom. Mr. Bergstrom joined the Company in December 1997 in
connection with the Company's acquisition of AGEMA, and currently serves as
Vice Chairman of the Board. Prior to the acquisition of AGEMA, from 1995 to
1997, Mr. Bergstrom served as President of the Industrial Measurement Group of
Spectra-Physics AB, the former parent company of AGEMA. From 1984 to 1995, he
was President and Chief Executive Officer of AGEMA. Mr. Bergstrom currently
serves on the Board of Directors of Nobel Elektronik AB, BLH Electronics, Inc.
and the Institute for Optical Research. Mr. Bergstrom received a M.Sc. in
Electronic Engineering from The Royal Institute of Technology in Stockholm and
received an MBA from the Stockholm School of Economics.
Lars Spongberg. Mr. Spongberg was elected to the Board of Directors in
December 1997 in connection with the Company's acquisition of AGEMA. Mr.
Spongberg has served as President of Spectra-Physics AB, the former parent
company of AGEMA, since 1996 and has been a member of the Spectra Board of
Directors since
3
<PAGE>
April 1997. From 1995 to 1996, he was Senior Vice President of Autoliv AB, an
automotive parts manufacturer, and was previously President of Svenska
Handelsbaken, a commercial bank, from 1993 to 1995.
PATRICK L. EDSELL. Mr. Edsell was elected to the Board of Directors in
December 1997 in connection with the Company's acquisition of AGEMA. Mr.
Edsell is currently President and Chief Executive Officer of Spectra-Physics,
Inc., formerly a U.S. subsidiary of Spectra-Physics AB, and has served in that
capacity since 1990. Mr. Edsell also served as Vice President of Finance and
Chief Financial Officer of Spectra-Physics AB from 1984 to 1991. A graduate of
the U.S. Air Force Academy with a B.S. in Economics, Mr. Edsell received an
M.A. in Economics from Ohio State University and an MBA from the University of
New Mexico.
EGON LINDEROTH. Mr. Linderoth was elected to the Board of Directors in
December 1997 in connection with the Company's acquisition of AGEMA. Mr.
Linderoth is President of Ostermans Aero AB, an aerospace company in Sweden.
Prior to joining Ostermans, Mr. Linderoth served as President and Chief
Executive Officer of Celsius Industries AB from 1995 to 1996, and President
and Chief Executive Officer of Bofors AB from 1992 to 1995. Mr. Linderoth
currently serves on the Board of Directors of Spectra-Physics AB, the Swedish
Industrial Development Fund, Faufoss AS, Karlskoga Invest AB and is a member
of the Swedish Royal Academy of War Science. Mr. Linderoth received his
Baccalaureate in 1958 and an MBA from the Stockholm School of Economics.
ROBERT P. DALTRY. Mr. Daltry joined the Company in 1987 as President and
Chief Executive Officer and a member of the Board of Directors. He was elected
Chairman of the Board of Directors in April 1993. From 1984 to 1987, Mr.
Daltry was employed by Lear Siegler, Inc., an aerospace company, where he
served as Vice President of Marketing for the Instrument and Avionics Systems
Division. From 1981 to 1984, Mr. Daltry served as Regional Manager for Singer-
Kearfott, an aerospace company. Mr. Daltry holds a B.A. in Accounting from
Grove City College and is a graduate of the U.S. Army Command and General
Staff College.
John C. Hart. Mr. Hart has served as a Director of the Company since
February 1987 and as Chairman of the Board of Directors from 1987 to April
1993. From 1982 until his retirement in 1993, Mr. Hart served as Vice
President of Finance, Treasurer and a member of the Board of Directors of
Louisiana-Pacific Corporation.
Ronald L. Turner. Mr. Turner was elected to the Board of Directors in 1993.
Since 1997, Mr. Turner has served as Executive Vice President of Ceridian
Corporation. From 1993 to 1997, Mr. Turner served as President and Chief
Executive Officer of Computing Devices International, an aerospace company,
which is a division of Ceridian Corporation. From 1987 to 1993, Mr. Turner was
President and Chief Executive Officer of GEC-Marconi Electronic Systems
Corporation, a defense electronics company. Prior to 1987, Mr. Turner worked
for Martin Marietta Corporation for 14 years in a variety of executive
positions. Mr. Turner serves on the Board of Directors of BTG, Inc., the
American Electronics Association and on the Board of Governors of the
Aerospace Industries Association of America, Inc. He is also a past President
and a member of the Board of Governors of the Massachusetts Institute of
Technology Society of Sloan Fellows.
Board of Directors Committees and Nominations by Shareholders. The Board of
Directors acts as a nominating committee for selecting nominees for election
as directors. The Company's bylaws also permit shareholders to make
nominations for the election of directors, if such nominations are made
pursuant to timely notice in writing to the Company's Secretary. To be timely,
notice must be delivered to, or mailed to and received at, the principal
executive offices of the Company not less than 60 days nor more than 90 days
prior to the date of the meeting, provided that at least 60 days notice or
prior public disclosure of the date of the meeting is given or made to
shareholders. If less than 60 days notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be received by the Company not later than the
close of business on the tenth day following the date on which such notice of
the date of the meeting was mailed or such public disclosure was made. A
shareholder's notice of nomination must also set forth certain information
specified in the Company's bylaws concerning each person the shareholder
proposes to nominate for election and the nominating shareholder.
4
<PAGE>
The Board of Directors has appointed a standing Audit Committee. The members
of the Audit Committee currently are Messrs. Reed and Hart. The Audit
Committee reviews the scope of the independent annual audit, the independent
public accountants' letter to the Board of Directors concerning the
effectiveness of the Company's internal financial and accounting controls and
management's response to that letter, if deemed necessary. The audit committee
met one time during the fiscal year ended December 31, 1997. The Board of
Directors also has appointed a Compensation Committee which reviews executive
compensation and makes recommendations to the full Board regarding changes in
compensation, and also administers the Company's stock option plans. During
the fiscal year ended December 31, 1997, the Compensation Committee held two
meetings. The members of the Compensation Committee currently are Messrs. Hart
and Turner.
During 1997, the Company's Board of Directors held seven meetings. Each
incumbent director attended more than 75% of the aggregate of the total number
of meetings held by the Board of Directors and the total number of meetings
held by all committees of the Board on which he served during the period that
he served.
See "Management--Executive Compensation" for certain information regarding
compensation of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF ITS NOMINEES FOR DIRECTOR. If a quorum is present, the Company's
bylaws provide that directors are elected by a plurality of the votes cast by
the shares entitled to vote. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum exists at the Annual Meeting, but are
not counted and have no effect on the determination of whether a plurality
exists with respect to a given nominee.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert P. Daltry........ 54 Chairman of the Board of Directors and Chief Executive
Officer
Leif Bergstrom.......... 59 Vice Chairman of the Board of Directors
J. Kenneth Stringer III. 45 President and Chief Operating Officer
Arne Almerfors.......... 53 Executive Vice President
Joseph E. Conrad........ 61 Vice President, Manufacturing
James A. Fitzhenry...... 42 Vice President, General Counsel and Secretary
Dr. J. Richard Kerr..... 60 Vice President, Advanced Technology Business Development
William N. Martin....... 42 Vice President, Sales
Steven R. Palmquist..... 47 Vice President, Operations
J. Mark Samper.......... 37 Vice President, Finance and Chief Financial Officer
David Smith............. 38 Vice President, International Sales
</TABLE>
Information concerning the principal occupation of Messrs. Daltry, Stringer
and Bergstrom is set forth under "Election of Directors." Information
concerning the principal occupation during the last five years of the
executive officers of the Company who are not also directors of the Company is
set forth below.
Arne Almerfors. Mr. Almerfors joined the Company in December of 1997 in
connection with the Company's acquisition of AGEMA, and currently serves as
Executive Vice President. From 1995 to 1997, Mr. Almerfors was President and
Chief Executive Officer AGEMA. From 1989 to 1995, Mr. Almerfors served as
President and Chief Executive Officer of CE Johansson AB, a manufacturer of
coordinate measuring devices. Mr. Almerfors received a Masters of Political
Science in addition to post-graduate courses in corporate finance and
accounting from the University of Stockholm.
5
<PAGE>
JOSEPH E. CONRAD. Mr. Conrad joined the Company in August of 1996 as Vice
President of Manufacturing. He comes to the Company with over thirty years of
experience in operations and manufacturing management. Prior to joining the
Company, Mr. Conrad served since 1994 as Cable Plant Manager and Business Unit
Operations Manager for Precision Interconnect (AMP, Inc.) and also served as
Vice President of Operations for both Burr-Brown Corporation and Bipolar
Integrated Technologies, Inc., Division General Manager and Manufacturing
Manager of several divisions of Tektronix, Inc. and Manufacturing Manager of
several divisions of Hewlett Packard Company. Mr. Conrad received his B.S. in
Electrical Engineering from the University of Wisconsin.
JAMES A. FITZHENRY. Mr. Fitzhenry joined the Company in 1993 as Corporate
Counsel and Director of Administration, and was appointed Vice President,
General Counsel and Secretary in 1995. From 1990 to 1993, Mr. Fitzhenry served
in the White House during the Bush Administration in the Office of Policy
Development and the Office of Cabinet Affairs. Previously, he served as legal
counsel and legislative director to Senator Mark O. Hatfield (R-Ore.) and
practiced law in Portland, Oregon. Mr. Fitzhenry received his B.A. from the
University of Oregon and received his J.D. and Masters of Management degrees
from Willamette University.
DR. J. RICHARD KERR. Dr. Kerr joined the Company in 1987 as Vice President
of Engineering and Product Development. In 1995, Dr. Kerr was named Vice
President of Advanced Technology Business Development. Previously he acted as
a consultant with several venture capital firms and start-up high technology
businesses for four years. He was Vice President of Marketing of Flight
Dynamics, an aviation electronics company, from 1979 to 1984. Dr. Kerr also
served as President, Vice President and Professor of the Oregon Graduate
Center. Dr. Kerr received his Ph.D., M.S. and B.S. in Electrical Engineering
from Stanford University.
WILLIAM N. MARTIN. Mr. Martin joined the Company in 1994 as Director of
Sales and was appointed Vice President of Sales for the Company in 1995. Prior
to joining the Company, Mr. Martin was employed by AGEMA Infrared Systems,
Inc., where he initially served as Western Regional Sales Manager and then
National Sales Manager. Prior to joining AGEMA, Mr. Martin served as Regional
Manager for Hughes Aircraft Company. Mr. Martin who is an instrument multi-
engine commercial pilot, attended Wichita State University, majoring in speech
and communications.
STEVEN R. PALMQUIST. Mr. Palmquist joined the Company in January of 1997 as
Vice President of Engineering and was named Vice President of Operations in
January 1998. Since 1988, Mr. Palmquist has held several management positions
with Tektronix, Inc., including Product Definition and Development Manager,
Business Unit Manager for the Color Printer Division, and Vice President of
Engineering. From 1983 to 1988 he was the founder, President and Chief
Executive Officer of Integrated Measurement Systems, Inc. Mr. Palmquist
received a B.S. in Electrical Engineering from Washington State University and
a M.S. in Electrical Engineering from the University of Illinois.
J. MARK SAMPER. Mr. Samper joined the Company in 1990 as Corporate
Controller and was appointed Vice President of Finance and Chief Financial
Officer in March 1995. Prior to joining the Company, Mr. Samper spent six
years with Price Waterhouse where he served as an Audit Manager. Mr. Samper
received his B.S. degree from Oregon State University, with a major in
accounting. He is also a Certified Public Accountant.
DAVID SMITH. Mr. Smith joined the Company in December of 1997 in connection
with the Company's acquisition of AGEMA and currently serves as Vice President
of International Sales. Since 1996, Mr. Smith has served as President of AGEMA
Infrared Systems, Inc., the U.S. subsidiary of AGEMA. From 1993 to 1996, Mr.
Smith served as the UK Sales Director for AGEMA Infrared Systems Ltd., the
British subsidiary of AGEMA. Mr. Smith received his national diploma from
Wetford Technical College, England and his engineering degree from the
Hatfield Polytechnic Institute, England.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning the compensation of the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company (the "named executive officers")
for the fiscal years ending December 31, 1997, 1996 and 1995 or such periods
as the named executive officer was an officer of the Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ----------------------
STOCK LONG-TERM
NAME AND PRINCIPAL OPTIONS INCENTIVE PLAN ALL
POSITION YEAR SALARY BONUS GRANTED PAYOUTS(1) OTHER(2)
- ------------------ ---- -------- -------- ------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Daltry........ 1997 $252,372 $122,500 25,000 $607,500 $4,750
Chairman of the Board of 1996 227,846 130,000 10,000 183,315 5,550
Directors and Chief 1995 212,846 55,000 40,000 -- --
Executive Officer
J. Kenneth Stringer III. 1997 216,292 99,000 20,000 455,625 4,750
President and Chief Op- 1996 183,125 100,000 8,000 137,486 5,775
erating Officer 1995 173,055 40,000 30,000 -- --
William N. Martin....... 1997 174,484 50,000 11,000 151,875 --
Vice President, Sales 1996 175,956 35,000 5,000 45,829 --
1995 134,597 -- 15,000 -- --
Steven R. Palmquist..... 1997 163,596 50,000 15,000 151,875 1,031
Vice President, Opera-
tions
James A. Fitzhenry...... 1997 149,391 40,000 11,000 151,875 4,750
Vice President, General 1996 134,584 35,000 5,000 45,829 5,113
Counsel and Secretary.. 1995 125,374 20,000 7,500 -- --
</TABLE>
- --------
(1) The amounts set forth under Long-term Incentive Plan Payouts represent the
dollar value of shares of restricted stock that were earned in 1996 and
1997 based upon achievement of specified performance goals. The value of
these shares was calculated based upon the closing price of the Common
Stock on December 31, 1996 and February 3, 1998, respectively.
(2) The amounts set forth under All Other Compensation represent matching
amounts contributed on behalf of the named executive officers to the
Company sponsored 401(k) employee savings and retirement plan covering all
of the Company's employees.
STOCK OPTIONS
The following table sets forth information concerning options granted to the
named executives during the year ended December 31, 1997 under the Company's
1992 Stock Incentive Plan:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------
NAME GRANTED (1) IN 1997 PER SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Daltry........ 25,000 6.9% $13.75 01/02/07 $216,183 $547,849
J. Kenneth Stringer III. 20,000 5.5% $13.75 01/02/07 172,946 438,279
William N. Martin....... 11,000 3.0% $13.75 01/02/07 95,120 241,054
Steven R. Palmquist..... 15,000 4.1% $15.06 01/20/07 129,710 328,709
James A. Fitzhenry...... 11,000 3.0% $13.75 01/02/07 95,120 241,054
</TABLE>
7
<PAGE>
- --------
(1) Options granted in 1997 became exercisable starting 12 months after the
grant date, with one-third of the options becoming exercisable at that
time and with an additional one-third of the options becoming exercisable
on the second and third anniversary dates of the option grant,
respectively.
(2) The amounts shown are hypothetical gains based on the indicated assumed
rates of appreciation of the Common Stock compounded annually for a ten
year period. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the Common Stock will
appreciate at any particular rate or at all in future years.
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table sets forth, for each of the named executive officers,
the shares acquired during 1997 and the related value realized, and the number
and value of unexercised options as of December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS EXERCISED NUMBER OF SECURITIES VALUE OF UNEXERCISED
IN LAST FISCAL UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
YEAR(1) OPTIONS AT DECEMBER 31, 1997 DECEMBER 31, 1997(2)
------------------ ---------------------------- -------------------------
NUMBER OF VALUE
SHARES REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- -------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Daltry........ 51,600 $733,150 113,600 45,000 $1,479,267 $355,833
J. Kenneth Stringer III. 10,000 145,250 64,517 35,333 752,555 279,167
William N. Martin....... 12,500 60,781 -- 19,333 -- 150,333
Steven R. Palmquist..... -- -- -- 15,000 -- 85,313
James A. Fitzhenry...... 5,834 29,692 -- 16,833 -- 133,042
</TABLE>
- --------
(1) The value realized is based on the difference between the market price at
the time of exercise of the options and the applicable exercise price.
(2) The value of unexercised in-the-money options is based on the difference
between $20.75, which was the closing price of the Common Stock on
December 31, 1997, and the applicable exercise price.
RESTRICTED STOCK AWARDS
The following table sets forth information concerning outstanding restricted
stock awards for each of the named executive officers under the Company's 1992
Stock Incentive Plan:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED
PLANS(1)
-----------------------------
MAXIMUM
NUMBER PERFORMANCE OR OTHER THRESHOLD TARGET NUMBER
OF PERIOD UNTIL NUMBER NUMBER OF
NAME SHARES MATURATION OR PAYOUT OF SHARES OF SHARES SHARES
- ---- ------ -------------------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Robert P. Daltry........ 40,000 1/1/98--12/31/98 0 40,000(/2/) 40,000
J. Kenneth Stringer III. 30,000 1/1/98--12/31/98 0 30,000(/2/) 30,000
William N. Martin....... 10,000 1/1/98--12/31/98 0 10,000(/2/) 10,000
James A. Fitzhenry...... 10,000 1/1/98--12/31/98 0 10,000(/2/) 10,000
Steven R. Palmquist..... 10,000 1/1/98--12/31/98 0 10,000(/2/) 10,000
</TABLE>
8
<PAGE>
- --------
(1) Payouts of awards are tied to the Company's achievement of specified
levels of pretax earnings growth, pretax return on equity and stock price
appreciation. No payouts are made if the Company does not achieve at least
10% growth in pretax earnings and pretax return on equity, and stock price
appreciation at least equal to that of a pre-selected index during the
performance period. The maximum payout is made if pretax earnings growth
exceeds 25%, pretax return on equity exceeds 17.5% and stock price
appreciation exceeds the performance of the index by more than 20%.
(2) The target number of shares payable with respect to the 1998 performance
period are not presently determinable. As required by the regulations of
the Securities and Exchange Commission, the target number of shares shown
for the 1998 performance period represents the number of shares that would
be earned in 1998 based on the Company's actual performance in 1997. Fifty
percent of the economic value of the total number of shares earned in 1998
will be paid in the form of shares issued by the Company. A cash payment
representing eighty percent of the remaining amount earned will be paid to
cover the tax consequences of the total award.
EMPLOYMENT AGREEMENTS
FLIR has entered into employment agreements (the "Employment Agreements")
with certain of its executive officers, including Robert P. Daltry, J. Kenneth
Stringer III, James A. Fitzhenry, William N. Martin, Steven R. Palmquist and
J. Mark Samper. Each of the Employment Agreements is for a term ending
December 31, 1999, provided that if a Change of Control (as defined) occurs
before December 31, 1999, the Employment Agreements will continue in effect
until two years after the Change of Control. If the executive officer resigns
voluntarily or is properly terminated for Cause (as defined) all pay and
benefits under the Employment Agreement will cease as of the effective date of
the termination or resignation. In the event of the death of an executive
officer, the designated beneficiary of the executive officer would receive a
lump sum payment equal to twelve months base salary at the then current rate.
With respect to Messrs. Daltry and Stringer, in the event that the employment
of such executive officer is terminated by the Company without cause, such
executive officer would be entitled to receive a lump sum payment in an amount
equal to two year's base salary plus bonuses earned through the date of
termination. For a period of two years following a Change of Control, each
executive officer would have the right to terminate his employment for Good
Reason (as defined), and to receive upon such termination a lump sum payment
in an amount equal to two times (three times in the case of Messrs. Daltry and
Stringer) their average annualized compensation during the five year period
preceding the Change of Control. In addition, the executive officers would be
entitled to the continuation of health and insurance benefits for certain
periods. For purposes of the Employment Agreements, a "Change of Control"
includes (i) any merger or consolidation transaction that results in the
shareholders of the Company immediately before such transaction owning less
than 50 percent of the total combined voting power of the surviving
corporation in the transaction, (ii) the acquisition by any person of 20
percent or more the Company's total combined voting power, (iii) the
liquidation of the Company or the sale of substantially all of its assets, and
(iv) a change in the composition of the Board of Directors during any 24 month
period such that the directors in office at the beginning of the period and/or
their successors who were elected by or on the recommendation of the directors
in office at the beginning of the period do not constitute at least a 70
percent majority of the Board. In connection with the Company's acquisition of
AGEMA, the Employment Agreements were amended to provide that the consummation
of that transaction would not constitute a Change of Control for purposes of
the Employment Agreements. This amendment to the Employment Agreements will
terminate and become null and void upon the acquisition by Spectra-Physics AB
and/or its affiliates of any shares of Common Stock if at the time of such
acquisition Spectra and its affiliates would beneficially own more than 45
percent of the issued and outstanding shares of Common Stock. For purposes of
the Employment Agreements, "Cause" means the failure to satisfactorily perform
the duties assigned to the executive officer within a certain period after
notice of such failure is given and commission of certain illegal or wrongful
acts.
DIRECTOR COMPENSATION
The members of the Company's Board of Directors are not compensated for
their service on the Board, but are reimbursed for out-of-pocket and travel
expenses incurred in attending Board meetings. Under the
9
<PAGE>
Company's 1993 Stock Option Plan for Nonemployee Directors, as amended, an
option to purchase 6,000 shares of Common Stock is automatically granted to
each nonemployee director each year on the day of the Annual Meeting.
COMPENSATION COMMITTEE REPORT
Under rules established by the Securities and Exchange Commission (the
"SEC"), the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's Chairman of
the Board of Directors and Chief Executive Officer and the four other most
highly compensated executive officers. In fulfillment of this requirement, the
Compensation Committee, at the direction of the Board of Directors, has
prepared the following report for inclusion in this Proxy Statement.
EXECUTIVE COMPENSATION PHILOSOPHY. The Compensation Committee of the Board
of Directors is composed entirely of outside directors. The Compensation
Committee is responsible for setting and administering the policies and
programs that govern both annual compensation and stock ownership programs for
the executive officers of the Company. The Company's executive compensation
policy is based on principles designed to ensure that an appropriate
relationship exists between executive pay and corporate performance, while at
the same time motivating and retaining executive officers.
EXECUTIVE COMPENSATION COMPONENTS. The key components of the Company's
compensation program are base salary, an annual incentive award, and equity
participation. These components are administered with the goal of providing
total compensation that is competitive in the marketplace, rewards successful
financial performance and aligns executive officers' interests with those of
stockholders. The Compensation Committee reviews each component of executive
compensation on an annual basis.
Base Salary. Base salaries for executive officers are set at levels believed
by the Compensation Committee to be sufficient to attract and retain qualified
executive officers. Base pay increases are provided to executive officers
based on an evaluation of each executive's performance, as well as the
performance of the Company as a whole. In establishing base salaries, the
Compensation Committee not only considers the financial performance of the
Company, but also the success of the executive officers in developing and
executing the Company's strategic plans, developing management employees and
exercising leadership. The Compensation Committee believes that executive
officer base salaries for 1997 were reasonable as compared to amounts paid by
companies of similar size.
Annual Incentive. The Compensation Committee believes that a significant
proportion of total cash compensation for executive officers should be subject
to attainment of specific Company earnings criteria. This approach creates a
direct incentive for executive officers to achieve desired performance goals
and places a significant percentage of each executive officer's compensation
at risk. Consequently, each year the Compensation Committee establishes
potential bonuses for executive officers based on the Company's achievement of
certain earnings criteria. For 1997 annual bonuses equal to 0% to 49% of base
salaries were paid to executive officers based on the Company's achievement of
such predetermined earnings criteria.
Stock Options. The Compensation Committee believes that equity participation
is a key component of its executive compensation program. Stock options are
granted to executive officers primarily based on the officer's actual and
potential contribution to the Company's growth and profitability and
competitive marketplace practices. Option grants are designed to retain
executive officers and motivate them to enhance stockholder value by aligning
the financial interests of executive officers with those of stockholders.
Stock options also provide an effective incentive for management to create
shareholder value over the long term since the full benefit of the
compensation package cannot be realized unless an appreciation in the price of
the Company's Common Stock occurs over a number of years.
Options to purchase 119,000 shares of the Company's Common Stock were
granted to the Company's executive officers (including the Company's Chief
Executive Officer) for 1997 on February 3, 1998 with an
10
<PAGE>
exercise price equal to the fair market value of the underlying Common Stock
on the date of grant $16.875. These options vest cumulatively in three annual
installments of 33% and expire ten years from the date of grant.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Consistent with the executive
compensation policy and components described above, the Compensation Committee
determined the salary, bonus and stock options received by Robert P. Daltry,
the Chairman of the Board of Directors and Chief Executive Officer of the
Company, for services rendered in 1997. Mr. Daltry received a base salary of
$252,372 for 1997. He also earned a $122,500 bonus and a grant of 40,000
shares of the Company's Common Stock which was paid in the form of 20,000
shares of stock issued by the Company and $270,000 in cash to cover the tax
consequences of the total award. Mr. Daltry received the bonus payable and the
stock grant based upon achieving particular financial performance goals
specified in advance by the Compensation Committee. On February 3, 1998, Mr.
Daltry also received options to purchase 30,000 shares of the Company's Common
Stock.
COMPENSATION COMMITTEE
John C. Hart
Ronald L. Turner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during the fiscal year ended
December 31, 1997, were Messrs. Hart and Turner.
11
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the monthly return for the Company, the
Standard & Poors Mid-Cap 400 Index and the Hambrecht & Quist Technology Index.
COMPARISON OF MONTHLY RETURN*
AMONG FLIR SYSTEMS, INC., THE S & P MIDCAP 400 INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P
Measurement Period FLIR H&O MIDCAP 400
(Fiscal Year Covered) SYSTEMS TECHNOLOGY INDEX
- --------------------- ------- ---------- -----------
<S> <C> <C> <C>
Measurement Pt-06/22/1993 100.00 100.00 100.00
06/1993 93.75 103.98 100.50
07/1993 89.58 98.01 100.31
08/1993 81.25 104.28 104.45
09/1993 100.00 106.19 105.55
10/1993 91.67 108.01 105.90
11/1993 89.58 109.60 103.55
12/1993 81.25 112.05 108.36
01/1994 102.08 118.96 110.89
02/1994 101.04 122.89 109.31
03/1994 114.58 116.18 104.25
04/1994 121.88 113.19 105.03
05/1994 116.67 113.52 104.03
06/1994 107.29 106.28 100.45
07/1994 114.58 110.25 103.85
08/1994 100.00 121.59 109.29
09/1994 102.08 121.20 107.25
10/1994 112.50 132.30 108.42
11/1994 108.33 131.16 103.53
12/1994 108.33 134.59 104.48
01/1995 116.67 132.63 105.57
02/1995 120.83 144.12 111.10
03/1995 129.17 150.72 113.03
04/1995 116.67 162.01 115.30
05/1995 104.17 167.81 118.09
06/1995 118.75 188.01 122.89
07/1995 117.71 205.18 129,30
08/1995 108.33 207.54 131.69
09/1995 102.08 212.49 134.88
10/1995 106.25 215.47 131.42
11/1995 108.33 212.82 137.16
12/1995 102.08 201.25 136.82
01/1996 87.50 204.23 138.80
02/1996 104.17 214.46 143.52
03/1996 102.08 205.13 145.23
04/1996 106.25 233.48 149.67
05/1996 116.67 237.00 151.69
06/1996 102.08 219.73 149.42
07/1996 107.29 197.15 139.31
08/1996 114.58 209.08 147.34
09/1996 109.38 233.26 153.77
10/1996 116.67 229.92 154.21
11/1996 113.54 257.03 162.90
12/1996 114.58 250.13 163.08
01/1997 120.83 276.91 169.41
02/1997 130.21 254.30 171.92
03/1997 135.42 238.41 164.44
04/1997 130.21 247.24 173.89
05/1997 133.33 284.45 173.68
06/1997 131.25 286.96 190.88
07/1997 169.79 333.13 196.24
08/1997 154.17 334.08 213.40
09/1997 165.63 347.78 218.93
10/1997 175.00 310.63 209.60
11/1997 164.58 307.39 207.88
12/1997 172.92 293.25 215.68
</TABLE>
- --------
* The monthly return on investment (change in stock price plus reinvested
dividends) for each of the periods for the Company, the Standard & Poors
Mid-Cap 400 Index and the Hambrecht & Quist Technology Index is based on
the stock price on June 22, 1993, the date of the Company's initial public
offering.
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the SEC.
Such persons also are required to furnish the Company with copies of all
Section 16(a) reports they file.
Based solely on its review of the copies of such reports received by it with
respect to fiscal 1997, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with for fiscal 1997,
except for Joseph E. Conrad, Robert P. Daltry, James A. Fitzhenry, J. Richard
Kerr, William N. Martin, J. Mark Samper and J. Kenneth Stringer III, executive
officers of the Company,
12
<PAGE>
and John C. Hart, George Porter, W. Allen Reed and Ronald L. Turner, Directors
of the Company, each of whom inadvertently filed a Form 5 late, and Arne
Almerfors, Leif Bergstrom, David Smith, executive officers of the Company, and
Patrick L. Edsell, Egon Linderoth and Lars Spongberg, Directors of the
Company, each of whom inadvertently filed a Form 3 late.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company and Hughes Aircraft Company are related parties resulting from
Hughes' stock interest in the Company. The Company purchases inventory parts
from Hughes and its subsidiaries. During the years ended December 31, 1997,
1996 and 1995, the Company purchased parts aggregating $2,243,000, $1,670,000
and $1,320,000, respectively, from Hughes and its subsidiaries. As of December
31, 1997 and 1996, the Company owed Hughes $1,243,000 and $128,000,
respectively. Sales of the Company's products to Hughes and its affiliates
amounted to $34,000, $103,000 and $320,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
As a result of the AGEMA acquisition, Spectra-Physics AB and subsidiaries
("Spectra") are related parties as a result of Spectra's stock interest in the
Company. At December 31, 1997, the Company owed Spectra $4,985,000 which is
payable in full on June 30, 1998.
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of March
6, 1998 by: (i) each person known by the Company to beneficially own more than
5% of the outstanding shares of Common Stock, (ii) each of the Company's
directors, (iii) each of the Company's named executive officers, and (iv) all
directors and executive officers as a group. Except as otherwise indicated,
the Company believes that each of the following shareholders has sole voting
and investment power with respect to the shares beneficially owned by such
shareholder.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING
- ------------------------------------ ------------ ------------
<S> <C> <C>
Spectra-Physics AB................................... 4,162,000 42.2%
Sturgaten 32
Box S226, S-102 45
Stockholm, Sweden
Hughes Aircraft Company(2)........................... 760,500 7.7%
7200 Hughes Terrace Bldg.
Los Angeles, CA 90045
Fidelity Investments(3).............................. 700,200 7.1%
82 Devonshire Street
Boston, MA 02109
Leif Bergstrom....................................... 3,000 *
Robert P. Daltry..................................... 253,128 2.5%
Patrick L. Edsell.................................... 6,000 *
John C. Hart......................................... 33,000 *
Egon Linderoth....................................... 6,000 *
W. Allen Reed(4)..................................... 33,000 *
Lars Spongberg(5).................................... 6,000 *
J. Kenneth Stringer III.............................. 142,850 1.4%
Ronald L. Turner..................................... 33,000 *
James A. Fitzhenry................................... 9,499 *
William N. Martin.................................... 10,000 *
Steven R. Palmquist.................................. 10,000 *
Directors and Executive Officers as a group (17 per-
sons)............................................... 597,671 5.8%
</TABLE>
13
<PAGE>
- --------
* Less than one percent (1%).
(1) Beneficial ownership is determined in accordance with rules of the SEC,
and includes voting power and investment power with respect to shares.
Shares issuable upon the exercise of outstanding stock options that are
currently exercisable or become exercisable within 60 days from March 6,
1998 are considered outstanding for the purpose of calculating the
percentage of Common Stock owned by such person, but not for the purpose
of calculating the percentage of Common Stock owned by any other person.
The number of shares that are issuable upon the exercise of options that
are currently exercisable or exercisable within 60 days of March 6, 1998
is as follows: Mr. Daltry -- 138,600; Mr. Hart -- 33,000; Mr. Reed --
33,000; Mr. Stringer -- 83,850; Mr. Turner -- 33,000; Mr. Bergstrom -- 0;
Mr. Edsell -- 6,000; Mr. Linderoth -- 6,000; Mr. Spongberg -- 6,000; Mr.
Martin -- 1,667; Mr. Fitzhenry -- 1,666; Mr. Palmquist -- 5,000; and all
officers and directors as a group -- 386,282. The table includes shares
subject to options that will be granted to Messrs. Hart, Porter, Reed,
Turner, Edsell, Linderoth and Spongberg under the 1993 Stock Option Plan
for Nonemployee Directors immediately after the Annual Meeting.
(2) This information as to beneficial ownership is based on a Schedule 13G
filed by General Motors Corporation ("GM"), GM Hughes Electronics
Corporation ("GMHE") and Hughes Aircraft Company ("Hughes") with the
Securities and Exchange Commission on February 7, 1994. Hughes is a
wholly-owned subsidiary of GMHE, which is a wholly-owned subsidiary of GM.
Each of GM and GMHE has its principal executive offices located at 3044
West Grand Blvd., Detroit, Michigan 48202-3091. The Schedule 13G states
that as of December 31, 1993 Hughes was the beneficial owner of 760,500
shares of Common Stock as to which it had sole voting and dispositive
power and that GM and GMHE had shared voting and dispositive power with
respect to such shares.
(3) This information as to beneficial ownership is based on a Schedule 13G
filed by Fidelity Investments with the Securities and Exchange Commission
on February 10, 1998. The Schedule 13G states that as of December 31,
1997, Fidelity Investments was the beneficial owner of 700,200 shares of
Common Stock as to which it had sole dispositive power, including 169,000
shares of Common Stock as to which it had sole voting power.
(4) Mr. Reed is President of General Motors Investment Management Corporation.
Mr. Reed disclaims beneficial ownership of the 760,500 shares of Common
Stock beneficially owned by Hughes Aircraft Company.
(5) Mr. Spongberg is President of Spectra-Physics AB. Mr. Spongberg disclaims
beneficial ownership of the 4,162,000 shares of Common Stock beneficially
owned by Spectra-Physics AB.
APPROVAL OF AMENDMENTS TO 1992 STOCK INCENTIVE PLAN
The Board of Directors has approved, and recommends shareholder adoption of,
an amendment to the 1992 Stock Incentive Plan (the "1992 Plan") that would
increase from 1,972,855 shares to 3,472,855 shares the number of shares of
Common Stock that are reserved for issuance upon the exercise of stock options
granted under the 1992 Plan. The purpose of the 1992 Plan is to promote the
interests of the Company and its shareholders by strengthening the Company's
ability to attract and retain the best personnel for positions of substantial
responsibility, to provide additional incentives to the employees of the
Company and to promote business. The following is a summary of the Plan and
should be read together with the full text of the Plan.
The 1992 Plan, which was approved by the Company's shareholders on April 12,
1993, provides for grants of both "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
and "non-qualified stock options" which are not qualified for treatment under
Section 422 of the Code, and for direct stock grants and sales to employees or
consultants (including directors) of the Company. The 1992 Plan is
administered by the Compensation Committee of the Board of Directors. As of
March 6, 1998, approximately 90 persons were eligible to participate in the
1992 Plan. Because the officers and employees of the Company who may
participate in the 1992 Plan and the amount of their options will be
determined by the Compensation Committee in its discretion, it is not possible
to state the names or positions of, or the number of options that may be
granted to, the Company's officers and employees.
14
<PAGE>
The term of each option granted under the Plan will be ten years from the
date of grant, or such shorter period as may be established at the time of the
grant. An option granted under the 1992 Plan may be exercised at such times
and under such conditions as determined by the Compensation Committee. If a
person who has been granted an option ceases to be an employee or consultant
of the Company, such person may exercise that option only during the three
month period after the date of termination, and only to the extent that the
option was exercisable on the date of termination. No option granted under the
1992 Plan is transferable other than at death, and each option is exercisable
during the life of the optionee only by the optionee. In the event of the
death of a person who has received an option, the option generally may be
exercised by a person who acquired the option by bequest or inheritance during
the twelve month period after the date of death to the extent that such option
was exercisable at the date of death.
The exercise price of options granted under the 1992 Plan may not be less
than the fair market value of a share of Common Stock on the date of grant of
the option. The consideration to be paid upon exercise of an option, including
the method of payment, will be determined by the Compensation Committee and
may consist entirely of cash, check, promissory note, shares of Common Stock
or any combination of such methods of payment as permitted by the Compensation
Committee.
Certain options authorized to be granted under the 1992 Plan are intended to
qualify as incentive stock options for federal income tax purposes. Under
federal income tax law currently in effect, the optionee will recognize no
income upon grant or upon a proper exercise of an incentive stock option. If
an employee exercises an incentive stock option and does not dispose of any of
the option shares within two years following the date of grant and within one
year following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange
of a capital asset. If an employee disposes of shares acquired upon exercise
of an incentive stock option before the expiration of either the one-year
holding period or the two-year waiting period, any amount realized will be
taxable as ordinary compensation income in the year of such disqualifying
disposition to the extent that the lesser of the fair market value of the
shares on the exercise date or the fair market value of the shares on the date
of disposition exceeds the exercise price. The Company will not be allowed any
deduction for federal income tax purposes at either the time of the grant or
exercise of an incentive stock option. Upon any disqualifying disposition by
an employee, the Company will be entitled to a deduction to the extent the
employee realized ordinary income.
Certain options authorized to be granted under the 1992 Plan will be treated
as non-qualified stock options for federal income tax purposes. Under federal
income tax law presently in effect, no income is realized by the grantee of a
non-qualified stock option pursuant to the 1992 Plan until the option is
exercised. At the time of exercise of a non-qualified stock option, the
optionee will realize ordinary compensation income, and the Company will be
entitled to a deduction, in the amount by which the market value of the shares
subject to the option at the time of exercise exceeds the exercise price. Upon
the sale of shares acquired upon exercise of a non-qualified stock option, the
excess of the amount realized from the sale over the market value of the
shares on the date of exercise will be taxable.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless
the shares are substantially nonvested for purposes of Section 83 of the Code,
and no Section 83(b) election is made. If the shares are not vested at the
time of receipt, the employee will realize taxable income in each year in
which a portion of the shares substantially vest, unless the employee elects
under Section 83(b) within 30 days after the original transfer. The Company
will be entitled to a tax deduction in the amount includable as income by the
employee at the same time or times as the employee recognizes income with
respect to the shares.
The 1992 Plan will continue in effect until April 12, 2002, unless earlier
terminated by the Board of Directors, but such termination will not affect the
terms of any options outstanding at that time. The Board of Directors may
amend, terminate or suspend the 1992 Plan at any time, provided that no
amendment regarding amount, price or timing of the grants may be made more
than once every six months other than to comport with
15
<PAGE>
changes in certain Securities Exchange Act and Internal Revenue Code
requirements. Amendments that would materially increase the number of shares
that may be issued, materially modify the requirements as to eligibility for
Plan participation, or materially increase the benefits to Plan participants
must be approved by shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL. The
proposal must be approved by the holders of at least a majority of the
outstanding shares of Common Stock. Abstentions and broker non-votes are
treated as "no" votes in determining whether the proposal is approved. The
proxies will be voted for or against the proposal, or as an abstention, in
accordance with the instructions specified on the proxy form. If no
instructions are given, proxies will be voted for approval of the amendment to
the 1992 Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Price Waterhouse LLP to act as
independent auditors for the Company for the fiscal year ending December 31,
1998, subject to ratification of such appointment by the Company's
shareholders.
Unless otherwise indicated, properly executed proxies will be voted in favor
of ratifying the appointment of Price Waterhouse LLP to audit the books and
accounts of the Company for the fiscal year ending December 31, 1998. No
determination has been made as to what action the Board of Directors would
take if the shareholders do not ratify the appointment.
A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting and will be given an opportunity to make a statement if he or
she desires to do so and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the proxy statement and
form of proxy relating to the Company's 1999 Annual Meeting of Shareholders
must be received by the Company not later than December 4, 1998, pursuant to
the proxy soliciting regulations of the SEC. In addition, the Company's bylaws
require that notice of shareholder proposals and nominations for director be
delivered to the Secretary of the Company not less than 60 days nor more than
90 days prior to the date of an annual meeting, unless notice or public
disclosure of the date of the meeting occurs less than 60 days prior to the
date of such meeting, in which event, shareholders may deliver such notice not
later than the 10th day following the day on which notice of the date of the
meeting was mailed or public disclosure thereof was made. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and form of proxy for such meeting any shareholder proposal which
does not meet the requirements of the SEC in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters to be presented for action by the shareholders at the
1998 Annual Meeting. If, however, any other matters not now known are properly
brought before the meeting, the persons named in the accompanying proxy will
vote such proxy in accordance with the determination of a majority of the
Board of Directors.
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COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone by
directors, officers and employees of the Company, who will not be specially
compensated for such activities. Also, W.F. Doring & Co. may solicit proxies at
an approximate cost of $2,500 plus reasonable expenses. Such solicitations may
be made personally, or by mail, facsimile, telephone, telegraph or messenger.
The Company will also request persons, firms and companies holding shares in
their names or in the name of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such persons for their reasonable expenses
incurred in that connection.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997 accompanies this Proxy Statement. The Company is
required to file an Annual Report on Form 10-K for its fiscal year ended
December 31, 1997 with the Securities and Exchange Commission. Shareholders may
obtain, free of charge, a copy of the Form 10-K (without exhibits) by writing
to Investor Relations, FLIR Systems, Inc., 16505 S.W. 72nd Avenue, Portland,
Oregon 97224.
By Order of the Board of Directors
/s/ Robert P. Daltry
Robert P. Daltry
Chairman of the Board of Directors
and Chief Executive Officer
Portland, Oregon
April 3, 1998
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EXHIBIT A
FLIR SYSTEMS, INC.
1992 STOCK INCENTIVE PLAN/*/
1. PURPOSES OF THE PLAN. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected in
the terms of the written option agreement. In addition, shares of the Company's
Common Stock may be Sold hereunder independent of any Option grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean FLIR Systems, Inc., an Oregon corporation.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(f) "Consultant" shall mean any person who is engaged by the Company
or any Subsidiary to render consulting services and is compensated for such
consulting services and any director of the Company whether compensated for such
services or not.
(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than ninety days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
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/*/Note: Matter in BOLD FACE (other than headings) is new, and matter in
[brackets] has been deleted.
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(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(j) "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(k) "Option" shall mean a stock option granted pursuant to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(m) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(n) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(o) "Plan" shall mean this Stock Incentive Plan.
(p) "Sale" or "Sold" shall include, with respect to the sale of
Shares under the Plan, the sale of Shares for consideration in the form of cash
or notes, as well as a grant of Shares without consideration, except past or
future services.
(q) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 425(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
11 of the Plan, the maximum aggregate number of Shares which may be optioned
and/or Sold under the Plan is [1,972,855] 3,472,855 shares of Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
Option grants and/or Sales under the Plan. If Shares Sold under the Plan are
repurchased by the Company pursuant to restrictions applicable to such Shares,
the number of Shares repurchased shall, unless the Plan shall have been
terminated, become available for future Option grants and/or Sales under the
Plan.
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4. ADMINISTRATION OF THE PLAN.
(a) Procedure. The Plan shall be administered by the Board of
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors may
appoint a Committee consisting of not less than three (3) members of the Board
of Directors to administer the Plan on behalf of the Board of Directors, subject
to such terms and conditions as the Board of Directors may prescribe. Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board of Directors. From time to time the Board of Directors may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
Members of the Board who are either eligible for Options and/or Sales or
have been granted Options or Sold Shares may vote on any matters affecting the
administration of the Plan or the grant of any Options or Sale of any Shares
pursuant to the Plan, except that no such member shall act upon the granting of
an Option or Sale of Shares to himself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to the granting of Options or Sale of Shares to
him.
(ii) Notwithstanding the foregoing subparagraph (i), if and in
any event the Company registers any class of any equity security pursuant to
Section 12 of the Securities Exchange Act of 1934, from the effective date of
such registration until six (6) months after the termination of such
registration, any grants of Options to officers or directors shall only be made
by the Board if each member of the Board is a disinterested person, or if every
member of the Board is not a disinterested person, by a committee of two or more
directors, each of whom is a disinterested person, i.e., a director who is not,
during the one year prior to service as an administrator of a plan, or during
such service, granted or awarded equity securities pursuant to the Plan or any
other plan of the Company or any of its affiliates, except that:
(A) participation in a formula plan meeting the conditions
in paragraph (c)(2)(ii) of SEC Rule 16b-3 shall not disqualify a director from
being a disinterested person;
(B) participation in an ongoing securities acquisition plan
meeting the conditions in paragraph (d)(2)(i) of SEC Rule 16b-3 shall not
disqualify a director from being a disinterested person;
(C) an election to receive an annual retainer fee in either
cash or an equivalent amount of securities, or partly in cash and partly in
securities, shall not disqualify a director from being a disinterested person;
and
(D) participation in a plan shall not disqualify a director
from being a disinterested person for the purpose of administering another plan
that does not permit participation by directors.
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(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options in accordance with Section 422 of the Code, or nonqualified stock
Options; (ii) to authorize Sales of Shares of Common Stock hereunder; (iii) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (iv) to determine
the exercise/purchase price per share of Options to be granted or Shares to be
Sold, which exercise/purchase price shall be determined in accordance with
Section 8(a) of the Plan; (v) to determine the Employees or Consultants to whom,
and the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option; (vi) to determine the Employees or
Consultants to whom, and the time or times at which, Shares shall be Sold and
the number of Shares to be Sold; (vii) to interpret the Plan; (viii) to
prescribe, amend and rescind rules and regulations relating to the Plan; (ix) to
determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option; (x) to determine the terms and provisions of each Sale of Shares (which
need not be identical) and, with the consent of the purchaser thereof, modify or
amend each Sale; (xi) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, consistent with the provisions of Section 9 of
the Plan; (xii) to accelerate or defer (with the consent of the Optionee or
purchaser of Shares) the vesting restrictions applicable to Shares Sold under
the Plan or pursuant to Options granted under the Plan; (xiii) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option or Sale of Shares previously granted or authorized by the
Board; (xiv) to determine the restrictions on transfer, vesting restrictions,
repurchase rights, or other restrictions applicable to Shares issued under the
Plan; (xv) to effect, at any time and from time to time, with the con sent of
the affected Optionees, the cancellation of any or all outstanding Options under
the Plan and to grant in substitution therefor new Options under the Plan
covering the same or different numbers of Shares, but having an Option price per
Share consistent with the provisions of Section 8 of this Plan as of the date of
the new Option grant; and (xvi) to make all other deter minations deemed
necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan or Shares Sold under the
Plan.
5. ELIGIBILITY.
(a) Persons Eligible. Options may be granted and/or Shares Sold only
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he is otherwise eligible, be granted an additional Option or
Options or Sold additional Shares.
(b) ISO Limitation. No Incentive Stock Option may be granted to an
Employee which, when aggregated with all other Incentive Stock Options granted
to such Employee by the Company or any Parent or Subsidiary, would result in
Shares having an aggregate fair market value (determined for each Share as of
the date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more Incentive
Stock Options during any calendar year.
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<PAGE>
(c) Section 5(b) Limitations. Section 5(b) of the Plan shall apply
only to an Incentive Stock Option evidenced by an "Incentive Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall qualify as an Incentive Stock Option. Section 5(b) of the
Plan shall not apply to any Option evidenced by a "Nonqualified Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall be a Nonqualified Stock Option.
(d) No Right to Continued Employment. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship at
any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years, unless sooner terminated under
Section 13 of the Plan.
7. TERM OF OPTION. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement. The term of each Nonqualified Stock
Option shall be ten (10) years and one (1) day from the date of grant thereof or
such shorter term as may be provided in the Stock Option Agreement. However, in
the case of an Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, (a) if the
Option is an Incentive Stock Option, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter time as may be provided in
the Stock Option Agreement, or (b) if the Option is a Nonqualified Stock Option,
the term of the Option shall be five (5) years and one (1) day from the date of
grant thereof or such shorter term as may be provided in the Stock Option
Agreement.
8. EXERCISE/PURCHASE PRICE AND CONSIDERATION.
(a) Exercise/Purchase Price. The per-Share exercise/purchase price
for the Shares to be issued pursuant to exercise of an Option or a Sale (other
than a Sale which is a grant for which no purchase price is payable) shall be
such price as is determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the fair market value per Share on the date of the grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than one hundred percent (100%) of the fair market value
per Share on the date of grant.
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<PAGE>
(ii) In the case of a Nonqualified Stock Option or Sale.
(A) granted or Sold to a person who, at the time of the
grant of such Option or authorization of such Sale, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise/purchase price shall
be no less than one hundred ten percent (110%) of the fair market value per
Share on the date of the grant or authorization of Sale.
(B) granted or Sold to any other person, the per Share
exercise/purchase price shall be no less than eighty-five percent (85%) of the
fair market value per Share on the date of grant or authorization of Sale.
(iii) In the case of an Option granted or Sale authorized on or
after the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six (6) months
after the termination of such regis tration, the per Share exercise/purchase
price shall be no less than one hundred percent (100%) of the fair market value
per Share on the date of grant or authorization of Sale.
(b) Fair Market Value. The fair market value per Share shall be
determined by the Board in its discretion; provided, however, that where there
is a public market for the Common Stock, the fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock for the date of
grant or authorization of Sale, as reported in The Wall Street Journal (or, if
not so reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation (NASDAQ) System) or, in the event the Common Stock
is listed on a stock exchange (including NASDAQ), the fair market value per
Share shall be the closing price on such exchange on the date of grant of the
Option or authorization of Sale, as reported in The Wall Street Journal.
(c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Board and may consist entirely of cash,
check, promissory note, other Shares of Common Stock having a fair market value
on the date of surrender equal to the aggregate exercise/purchase price of the
Shares as to which said option shall be exercised or Sale consummated, or any
combination of such methods of payment for the issuance of Shares.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to
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<PAGE>
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Each Optionee who exercises an Option
shall, upon notification of the amount due (if any) and prior to or concurrent
with delivery of the certificate representing the Shares, pay to the Company
amounts necessary to satisfy applicable federal, state and local tax withholding
requirements. An Optionee must also provide a duly executed copy of any stock
transfer agreement then in effect and determined to be applicable by the Board.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant. If an
Employee or Consultant ceases to serve as an Employee or Consultant (as the case
may be), he may, but only within three (3) months (or with respect to
Nonqualified Stock Options, such other period of time not exceeding the
limitations of Section 7 above as is determined by the Board at the time of
grant of the Nonqualified Stock Option) after the date he ceases to be an
Employee or Consultant (as the case may be) of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event an Employee or Consultant is unable to continue
his employment or consulting relationship (as the case may be) with the Company
as a result of his total and permanent disability (as defined in Section
22(e)(3) of the Code), he may, but only within twelve (12) months (or with
respect to Nonqualified Stock Options, such other period of time not exceeding
the limitations of Section 7 above as is determined by the Board at the time of
grant of the Nonqualified Stock Option) from the date of termination, exercise
his Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the term of the Option who is at the time of his death an Employee or
Consultant of the Company and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the Option may be
exercised, at any time within twelve (12) months (or such other period of time
not exceeding the limitations of Section 7 above as is determined by
the Board at the time of grant of the Option) following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise as of the date of death.
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10. NONTRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will, by the laws of descent or distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the rules
thereunder (a "QDRO"), and may be exercised during the lifetime of the Optionee
only by the Optionee or, if incapacitated, by his or her legal guardian or legal
representative, or pursuant to a QDRO.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or sales made or which have been returned
to the Plan upon cancellation or expiration of an Option, as well as the price
per share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise pro vided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice
or such shorter period as the Board may specify in the notice, and the Option
will terminate upon the expiration of such period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so
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granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided, however, that if required to qualify the Plan under Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended,
no amendment shall be made more than once every six months that would change the
amount, price or timing of the option grants, other than to comport with changes
in the Internal Revenue Code of 1986, as amended, or the rules and regulations
promulgated thereunder; and provided, further, that, the following revisions or
amendments shall require approval of the stockholders of the Company in the
manner described in Section 17 of the Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of Employees or
Consultants eligible to be granted Options; or
(iii) if the Company has a class of equity security registered
under Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, such stockholder approval shall be solicited as described in
Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or a Sale unless the exercise of such
Option or consummation of the Sale and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, applicable state
securities laws, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and
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<PAGE>
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or after
the date the Plan is adopted. If such stockholder approval is obtained at a
duly held stockholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding shares of the Company, such holders
being present or represented and entitled to vote thereon. If and in the event
that the Company registers any class of any equity security pursuant to Section
12 of the Exchange Act, the approval of such stockholders of the Company shall
be:
(a) Solicitation.
(i) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
(ii) solicited after the Company has furnished in writing to the
holders entitled to vote substantially the same information concerning the Plan
as that which would be required by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished; and
(b) Time. Obtained at or prior to the first annual meeting of
stockholders held subsequent to the first registration of any class of equity
securities of the Company under Section 12 of the Exchange Act.
If such stockholder approval is obtained by written consent, it must be
obtained by the written consent of stockholders of the Company in compliance
with the requirements of applicable state law.
18. SIX MONTH HOLDING PERIOD FOR AFFILIATES. If and in any event the
Company registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, from the effective date of such registration
until six (6) months after the termination of such registration, each officer,
director and beneficial owner of ten percent (10%) or more of any
-10-
<PAGE>
class of equity securities of the Company, shall hold the equity security
issuable upon exercise of an Option or issued pursuant to a Sale, at least six
months from the date of grant of the Option or the Sale.
-11-
<PAGE>
FLIR SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of FLIR Systems, Inc., an Oregon corporation
(the "Company"), hereby appoints Robert P. Daltry and J. Kenneth Stringer III,
or either of them, with full power of substitution in each, as proxies to cast
all votes which the undersigned shareholder is entitled to cast at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at 2:00 p.m. on
Tuesday, May 5, 1998 at the Multnomah Athletic Club, 1849 S.W. Salmon Avenue,
Portland, Oregon 97205 and any adjournment or postponements thereof upon the
following matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. UNLESS DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1, FOR
PROPOSALS 2 AND 3 AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF
THE BOARD OF DIRECTORS AS TO OTHER MATTERS. The undersigned hereby acknowledges
receipt of the Company's Proxy Statement and hereby revokes any proxy or proxies
previously given.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD TODAY, USING THE ENCLOSED
ENVELOPE.
(continued and to be signed and dated on reverse side)
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FOLD AND DETACH HERE
<PAGE>
Please mark
your votes [X]
as indicated
FOR the WITHHOLD
nominees listed AUTHORITY to vote
below (except as for all nominees
indicated below) listed below
1. Election of six directors. [ ] [ ]
Nominees: W. Allen Reed,
J. Kenneth Stringer III,
Lief Bergstrom, Lars Spongberg,
Patrick L. Edsell and Egon Linderoth
INSTRUCTION: To withhold authority to vote for any nominee write that
nominee's name(s) in this space:
---------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of amendment to 1992 Stock Incentive Plan. [ ] [ ] [ ]
3. Ratification of appointment of auditors. [ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof.
-----------------------------------
Typed or Printed name(s)
-----------------------------------
Authorized Signature
-----------------------------------
----------- Title or authority, if applicable
|
| -----------------------------------
| Date
|
Please sign exactly as your name
appears on this Proxy Card. If
shares are registered in more than
one name, all such persons should
sign. A corporation should sign in
its full corporate name by a duly
authorized officer, stating his/her
title. Trustees, guardians,
executors, and administrators
should sign in their official
capacity, giving their full title
as such. If a partnership, please
sign in the partnership name by
authorized person(s).
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN
ALL SUCH CARDS IN THE ACCOMPANYING ENVELOPE.
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FOLD AND DETACH HERE
