SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-ll(c) or ss.240.14a-12
CSP Inc.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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and 0-11
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[ ] Check box if any part of the fee is offset as provided by Exchange
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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:
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4) Date Filed:
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CSP INC.
(A MASSACHUSETTS CORPORATION)
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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DECEMBER 10, 1996
Notice is hereby given that the Annual Meeting of Stockholders of CSP Inc.
(the "Company") will be held at the offices of Foley, Hoag & Eliot LLP,
Sixteenth Floor, One Post Office Square, Boston, Massachusetts on Tuesday,
December 10, 1996, beginning at 10:00 a.m. local time, for the following
purposes:
A. To elect two Class I Directors, each for a three-year term, and
one Class III Director, for a two-year term.
B. To transact such further business as may properly come before the
Meeting, or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 1, 1996
as the record date for determining the stockholders of the Company entitled to
notice of, and to vote at, said Meeting and any adjournment thereof. Only
stockholders of record on such date are entitled to notice of, and to vote at,
said Meeting or any adjournment thereof.
By Order of the Board of Directors
DEAN F. HANLEY,
Clerk
November 11, 1996
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
CSP INC.
(A MASSACHUSETTS CORPORATION)
-----------------
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 10, 1996
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of CSP Inc. ("CSPI" or the "Company") of proxies for use at
the Annual Meeting of Stockholders to be held on December 10, 1996 (the
"Meeting") and at any adjournment thereof. A form of proxy is enclosed. Any
stockholder executing such a proxy may revoke it at any time insofar as it has
not been exercised. All properly executed proxies that are received by the
Company before the Meeting and that are not revoked will be voted in accordance
with the stockholder's direction at the Meeting. The principal executive offices
of the Company are located at 40 Linnell Circle, Billerica, Massachusetts 01821.
The approximate date on which this Proxy Statement and the form of proxy will be
sent to stockholders is November 11, 1996.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report for the fiscal year ended August 30, 1996
accompanies this Proxy Statement, but is not incorporated herein and is not to
be deemed a part hereof.
ELECTION OF DIRECTORS
The Company, as a Massachusetts corporation with a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), has a Board of Directors divided into three classes, as nearly equal in
size as practicable, referred to as Class I, Class II and Class III. The
Directors in each class serve for a term of three years and until their
successors are duly elected and qualified. As the term of one class expires, a
successor class is elected at the annual meeting of stockholders for that year.
There are currently two Class I Directors, whose terms will expire at the Annual
Meeting to be held on December 10, 1996; two Class II Directors, who were
elected to serve until the annual meeting to be held with respect to the end of
the 1997 fiscal year; two Class III Directors, who were elected to serve until
the Annual Meeting to be held with respect to the end of the 1998 fiscal year;
and one Class III Director who was elected by the Board of Directors to fill a
vacancy on the Board of Directors, who is nominated to be elected a Class III
Director to serve until the Annual Meeting to be held with respect to the end of
the 1998 fiscal year.
Pursuant to the by-laws of the Company, the Board of Directors has fixed the
number of Directors that will constitute the entire Board of Directors at seven,
and has nominated two Class I Directors and one Class III Director for election
at the Annual Meeting to be held December 10, 1996.
Unless authority is withheld, proxies in the accompanying form will be voted
in favor of electing (a) as Class I Directors, to hold office until the annual
meeting to be held with respect to the end of the 1999 fiscal year and until
their respective successors are elected and qualified, the two Class I nominees
identified in the table below and (b) as Class III Director, to hold office
until the annual meeting to be held with respect to the end of the 1998 fiscal
year and until his successor is elected and qualified, the
Class III nominee identified in the table below. If the proxy is executed in
such a manner as to withhold authority to vote for one or more nominees for
Director, such instructions will be followed by the persons named in the proxy.
Under the by-laws of the Company, a majority of the shares of the Company's
common stock, par value $.01 per share ("Common Stock"), issued and outstanding
and entitled to vote will constitute a quorum for the Meeting. If a quorum is
present, the vote of the holders of a plurality of the shares of Common Stock
present or represented at the Meeting and entitled to vote is required to elect
Directors. If a quorum is not present at the scheduled time for the Meeting, the
persons named in the proxy will vote to adjourn the Meeting until a later date
when a quorum can be obtained. Pursuant to the Company's by-laws, if it is
necessary to adjourn the Meeting for that purpose, no notice of the time and
place of the adjourned meeting is required to be given to stockholders.
In general, votes withheld from any nominee for election as Director,
abstentions, and broker "non-votes" are counted as present or represented for
purposes of determining the presence or absence of a quorum for the meeting. A
"non-vote" occurs when a broker or nominee holding shares for a beneficial owner
does not vote on a proposal because, in respect of such proposal, the broker or
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. The vote on each matter submitted to
stockholders is tabulated separately. Abstentions are included in the number of
shares present or represented and voting on each matter. Broker "non-votes" are
not so included.
Each of the nominees for Director is currently a member of the Board of
Directors. Although the Company expects each nominee to accept nomination and to
serve if elected, if a nominee is unable to serve at the time of election, then
proxies will be voted for some other person or the Board of Directors will fix
the number of Directors at a lesser number.
NOMINEES
Listed below are the nominees for Class I Director and the nominee for Class
III Director with information showing the age of each, the year each was first
elected a Director of the Company, and the business affiliations of each.
<TABLE>
<CAPTION>
NAME, AGE AND CLASS BUSINESS AFFILIATION
------------------- --------------------
<S> <C>
Boruch B. Frusztajer (66) ...... Director of CSPI since 1977; since July 1984,
Class I President of BBF Corp., an industrial
management company; founder in 1976 and
until July 1984 President of BBF Inc., a
manufacturer of components, materials and
systems for measurement and control;
Director of PRI Automation Inc.
Sandford D. Smith (49) ......... Director of CSPI since 1993; President of
Class I Specialty Therapeutics of Genzyme Corp.,
a biopharmaceutical company, since April
1996; President and Chief Executive
Officer of Repligen Corporation from 1987
to 1996; Director of Ariad Pharmaceuticals,
Inc. and Chemex Pharmaceuticals, Inc.
Alexander R. Lupinetti (51) .... Director, Chief Executive Officer and
Class III President of CSPI since October 1996;
President and Chief Executive Officer of
each of the TCAM Systems Inc., Shared
Systems Corporation and SoftCom Systems,
Inc. subsidiaries of Stratus Computer Inc.
from November 1987 to September 1996;
Northeastern General Manager for the
Engineering and Scientific Division of
International Business Machines, Inc. from
1984 to 1987.
</TABLE>
2
DIRECTORS
Listed below are the continuing Directors of the Company, with
information showing the age of each, the year each was first elected a
Director of the Company, and the business affiliations of each. Mr. Ochlis
and Dr. Ingram are Class II Directors, whose terms expire in 1997. Messrs.
Fingerhood and James are Class III Directors, whose terms expire in 1998.
<TABLE>
<CAPTION>
NAME, AGE AND CLASS BUSINESS AFFILIATION
------------------- --------------------
<S> <C>
Samuel Ochlis (73) ............. Director of CSPI since 1972; Chairman of the
Class II Board from December 1991 to the present;
Chief Executive Officer from October 1991
to December 1991; President and Chief
Executive Officer from June 1990 to October
1991; President and Chief Operating Officer
from 1978 to June 1990; Executive Vice
President from 1974 to 1978.
John D. Ingram (60) ............ Director of CSPI since 1994; Research Fellow
Class II at Schlumberger Limited from 1991 to the
present; Vice President-Chief Technical
Officer of Schlumberger Limited from 1987
to 1991. Dr. Ingram serves on the External
Advisory Board of the School of Earth and
Planetary Sciences, California Institute
of Technology; the Advisory Board of the
School of Computer Science of Carnegie
Mellon University; and the External
Advisory Board-NSF-Center for Research in
Parallel Computation -- Rice
University/CAL Tech/Oak Ridge/Los Alamos.
Stanford A. Fingerhood (70) .... Director of CSPI since 1977; Director of
Class III Research of National Securities, a stock
brokerage firm, from October 1996 to the
present; Senior Vice President of Laidlaw
Holdings, Inc., a stock brokerage firm,
from 1987 to October 1996; founder in 1978
and President of York Capital Company, a
financial consulting firm.
C. Shelton James (57) .......... Director of CSPI since 1994; President of
Class III Fundamental Management Corporation, which
is engaged in the management of investment
partnerships, since 1993, Executive Vice
President from 1990 to 1993; Chief
Executive Officer and Chairman of the Board
of Elcotel, Inc. since May 1991; Director
of NAI Technologies, Concurrent Computer
Corporation, Cyberguard Corp. and S.K.
Technologies; Trustee of Clarkson
University.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR
DIRECTOR LISTED IN THIS PROXY STATEMENT.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors met ten times during the fiscal year ended
August 30, 1996 ("fiscal 1996"). One incumbent Director, Dr. Ingram, attended
fewer than 75% of the total number of meetings held by the Board and Committees
of the Board on which he served.
The Board of Directors has an Audit Committee and a Compensation Committee,
but does not have a nominating committee or other committee performing similar
function. The Audit Committee consists of Messrs. Frusztajer, Fingerhood and
James and is responsible for recommending the selection of the Company's
independent accountants, reviewing the scope of the annual examination of the
Company's
3
financial statements, reviewing the report of the independent accountants,
reviewing the independent accountants' recommendations to management concerning
auditing, accounting and tax issues, aiding the Board in discharging its
responsibility in financial reporting and related matters and reviewing the fees
of the independent accountants. The Audit Committee met twice during fiscal
1996. The Compensation Committee consists of Messrs. Smith and Frusztajer and
Dr. Ingram and is responsible for determining the compensation of the executive
officers and management of the Company and administering the Company's stock
option plans and granting stock options to employees and other persons eligible
thereunder. The Compensation Committee met once and acted once by written
consent during fiscal 1996.
COMPENSATION OF DIRECTORS
Each Director, other than the Chairman of the Board, who is not an employee
of the Company receives a quarterly fee of $440 to serve as a Director, a
quarterly fee of $138 for each committee of the Board of which he is a member
and a fee of $550, plus expenses, for each meeting of the Board which he
attends. The Chairman receives a quarterly fee of $660 to serve as Chairman, a
quarterly fee of $206 for each committee of the Board of which he is a member
and a fee of $825, plus expenses, for each meeting of the Board which he
attends. The Chairman of the Board does not currently serve on any committee of
the Board, but served as a member of the Compensation Committee for part of
fiscal 1996.
Each non-employee Director also receives an annual non-discretionary grant
of a non-statutory option to purchase 1,000 shares of Common Stock on the last
business day of January in each year. The aggregate number of shares that may be
issued pursuant to this arrangement is 20,000. These non-discretionary options
have an exercise price per share equal to the fair market value of the Common
Stock on the date of grant, are not exercisable until after six months following
such date, have a term of three years and are fully vested after six months.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following Summary Compensation Table sets
forth certain information regarding compensation paid or accrued by the Company
with respect to the former Chief Executive Officer of the Company and the
Company's most highly compensated officers other than the former Chief Executive
Officer who served as officers in fiscal 1996 and whose annual compensation
exceeded $100,000 for fiscal 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND PRINCIPAL POSITION FISCAL OPTION ALL OTHER
(AT AUGUST 30,1996) YEAR SALARY BONUS GRANTS COMPENSATION
- --------------------------- ------ -------- ------- ------ -------------
<S> <C> <C> <C> <C> <C>
David S. Botten............ 1996 $ 80,048 $ 0 0 $216,500(1)(2)
Former President and 1995 $166,500 $ 0 0 $ 5,249(3)
Chief Executive Officer 1994 $166,522 $14,319 0 $ 0
James A. Waggett .......... 1996 $101,760 $18,950 0 $ 36,659(4)
Vice President Advanced 1995 $ 95,804 $ 3,000 0 $ 32,368(5)
Development and 1994 $ 96,473 $ 4,128 0 $ 29,323(6)
Assistant Clerk
Michael M. Stern .......... 1996 $120,020 $ 0 0 $ 36,065(7)
Vice President of Operations 1995 $112,998 $ 0 2,000 $ 31,937(8)
and Treasurer 1994 $111,016 $ 9,632 0 $ 28,797(9)
Gary W. Levine ............ 1996 $111,173 $ 0 0 $ 3,042(10)
Vice President of Finance, 1995 $ 85,685 $ 0 0 $ 2,862(10)
Acting Chief Operating 1994 $ 85,802 $ 7,810 0 $ 3,288(10)
Officer and Chief
Financial Officer
</TABLE>
- ---------
(1) This amount is comprised of $166,500 in severance pay and $50,000 paid to
Mr. Botten for the cancellation of all of the vested Incentive Stock
Options he held upon the termination of his employment with the Company in
February 1996. Mr. Botten held vested Incentive Stock Options to acquire up
to 50,000 shares of the Common Stock at an exercise price per share of
$7.00.
4
(2) Mr. Botten had an employment contract with the Company that entitled him to
severance compensation equal to one year's pay at his then current rate of
compensation. The Company paid Mr. Botten a lump sum of $166,500 in
satisfaction of such severance compensation obligation.
(3) This amount is comprised of a $5,249 contribution by the Company to Mr.
Botten's 401(k) plan.
(4) This amount is comprised of a $3,336 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $33,323 under the Company's
supplemental retirement income plan.
(5) This amount is comprised of a $3,179 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $29,189 under the Company's
supplemental retirement income plan.
(6) This amount is comprised of a $3,822 contribution by the Company to Mr.
Waggett's 401(k) plan and the accrual of $25,501 under the Company's
supplemental retirement income plan.
(7) This amount is comprised of a $3,908 contribution by the Company to Mr.
Stern's 401(k) plan and the accrual of $32,157 under the Company's
supplemental retirement income plan.
(8) This amount is comprised of a $3,770 contribution by the Company to Mr.
Stern's 401(k) plan and the accrual of $28,167 under the Company's
supplemental retirement income plan.
(9) This amount is comprised of a $4,179 contribution by the Company to Mr.
Stern's 401(k) plan and the accrual of $24,618 under the Company's
supplemental retirement income plan.
(10) This amount represents a contribution by the Company to Mr. Levine's 401(k)
plan.
Fiscal Year-End Option Table. The following Fiscal Year-End Option Table
sets forth certain information regarding stock options held as of August 30,
1996 by the executive officers named in the Summary Compensation Table:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David S. Botten ..... 0 0 n/a n/a
James A. Waggett .... 11,825 1,475 $25,539 $704
Michael M. Stern .... 14,000 2,000 $25,563 $633
Gary W. Levine ...... 14,000 2,000 $28,335 $704
</TABLE>
- ---------
(1) Value is based on the last sales price of Common Stock ($8.125) on Thursday,
August 29, 1996, the last day prior to the end of the fiscal 1996 for which
a trade in the Common Stock was reported by the Nasdaq National Market, less
the applicable option exercise price. These values have not been and may
never be realized. Actual gains, if any, on exercise will depend on the
value of the Common Stock on the date of the sale of the shares.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board is composed of three Directors,
Messrs. Smith and Frusztajer and Dr. Ingram. The Compensation Committee also
administers the Company's stock option plan. This Committee is charged with the
responsibility of reviewing and approving executive officers' compensation and
approving all discretionary grants of stock options under the Company's stock
option plan. The following describes the compensation programs in effect during
fiscal 1996.
5
COMPENSATION POLICY
The Company's compensation policies are designed to pay executives an annual
salary that is industry competitive and an annual bonus that is based both on
the performance of the Company and on individual goals established for each of
the executives for the fiscal year. The Company also has longer term incentives
based on stock options. All three components of compensation are reviewed
annually by the commmittee to ensure salaries remain competitive, bonuses reward
performance and stock options provide continued incentives.
Salaries for the executive officers are based on the duties and
responsibilities of the position held by the executive compared with executive
officers of other companies in the industry. Salaries are reviewed and
established annually. Various industry salary surveys are reviewed and provided
to the Committee to review in establishing the new compensation. Each executive
has a performance review prepared by the Chief Executive Officer. During this
review the officer's performance over the prior year is assessed and goals are
established for the next year. This information is communicated to the
Compensation Committee and, based on this review and salary surveys, the annual
salary for the executive is established for next year.
Executive officers and key management employees participate in the bonus
plan. Payments under the plan are contingent on the Company meeting its sales
and operating profit objectives for the fiscal year. Based on the extent to
which the Company achieves those objectives, each participant receives up to 50%
of the maximum bonus. If, in addition, the officer or employee achieves his
individual goals established by the Company, the balance of the bonus will be
paid. The Committee reviews both the individual and Company goals annually. In
fiscal 1996 James A. Waggett, Vice President of Advanced Development, was the
only executive paid a bonus by the Company. Mr. Waggett received a bonus of
$18,950 based on the attainment of his sales and profit objectives.
Approximately 3.8% of the Company's compensation to executives in fiscal 1996
was in the form of bonuses.
The Company periodically grants stock options to some or all of its
executives and key employees as a means of creating a long-term incentive and
benefit. Such stock options are generally granted at the fair market value of
shares of Common Stock on the date of grant. Thus, no benefit will accrue to the
executive or key employee from the stock option grant until the Common Stock
appreciates. This creates a long-term goal for appreciation of the Common Stock
which coincides with the interests of the stockholders. No stock options were
granted to employees in fiscal 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION
David S. Botten joined the Company in October 1991 and served as the Chief
Executive Officer of the Company for approximately four years until his
resignation in February 1996. Mr. Botten's salary was increased from $160,000 in
fiscal 1993 to $166,500 in fiscal 1994 and was not increased in fiscal 1995 or
1996. Mr. Botten was granted 50,000 stock options as part of his original
employment contract, which were cancelled in exchange for a payment of $50,000
upon his resignation, but did not receive additional grants of stock options.
The options were granted at an exercise price per share of $7.00, which was the
then current market value of the Company's Common Stock. Mr. Botten also
participated in the executive bonus plan under which he received bonuses of
$40,000 and $14,319 in fiscal 1993 and fiscal 1994, respectively. Mr. Botten did
not receive a bonus under such plan in fiscal 1995 or fiscal 1996. Mr. Waggett
was the only executive to receive a bonus under such plan in fiscal 1995 or 1996
due principally to the failure of the Company to reach financial objectives set
by the Board in fiscal 1995 and 1996.
COMPENSATION COMMITTEE
Sandford D. Smith
Boruch B. Frusztajer
John D. Ingram
6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Sandford D. Smith, Samuel Ochlis, Boruch B. Frusztajer and John D. Ingram
served on the Compensation Committee during fiscal 1996. Other than Mr. Ochlis,
who served on the Compensation Committee for part of fiscal 1996, persons
serving on the Compensation Committee had no relationships with the Company
other than their relationship to the Company as Directors entitled to the
receipt of standard compensation as Directors and members of certain committees
of the Board and their relationship to the Company as stockholders. Mr. Ochlis
serves as Chairman of the Board and is therefore entitled to receipt of
compensation as Chairman and for his service on the Compensation Committee of
the Board in accordance with the Company's policy relating to service by the
Chairman on a committee of the Board. No person serving on the Compensation
Committee or on the Board of Directors is an executive officer of another entity
for which an executive officer of the Company serves on the board of directors
or on that entity's compensation committee.
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index (the Nasdaq
Stock Market Index) and a published industry index (the Nasdaq Computer
Manufacturers' Index) for each of the most recent five fiscal years. The
cumulative stockholder return for shares of Common Stock and each of the indices
is calculated assuming that $100 was invested on August 31, 1991. The Company
paid no cash dividends during the periods shown. The performance of the indices
is shown on a total return (dividends reinvested) basis. The graph lines merely
connect year-end dates and do not reflect fluctuations between those dates.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------------------------
8/31/91 8/28/92 8/27/93 8/26/94 8/25/95 8/30/96
<S> <C> <C> <C> <C> <C> <C> <C>
CSP INC CSPI 100 123 142 137 135 115
NASDAQ STOCK MARKET-US INAS 100 109 141 148 200 230
NASDAQ COMPUTER MANUFACTURER INAC 100 98 114 120 208 248
</TABLE>
7
401(K) PLAN
The Company has a defined contribution profit-sharing plan pursuant to
Section 401(k) of the Internal Revenue Code for the benefit of its employees,
including officers. The Board of Directors of the Company determines from year
to year whether and to what extent the Company will contribute to the 40l(k)
plan by making matching contributions to the plan or by making profit-sharing
contributions to the plan, allocated in proportion to each eligible employee's
compensation, as a percentage of the compensation of all eligible employees.
During fiscal year 1996, the matching contribution by the Company was set at 50%
of contributions by eligible employees up to a maximum of 6% of salary.
SUPPLEMENTAL RETIREMENT INCOME PLAN
In addition to the foregoing, the Company has a nonqualified supplemental
retirement income plan pursuant to which the Company provides additional
retirement benefits to 12 present or former employees, all of whom are or were
highly compensated or supervisory employees long employed by the Company,
including three of the Company's current executive officers and the Chairman of
the Board. Under the plan, the Company will pay to each participant, generally
over a 10 or 15 year period commencing upon termination of employment with the
Company for any reason after a specified normal retirement date, a series of
monthly payments based on, among other things, a factor based on such
participant's salary as of January 1, 1985 and years of service with the Company
(the "Normal Retirement Benefit"). In the event of termination of employment
prior to the normal retirement date, the Company will pay, in a series of
monthly payments, the actuarial equivalent of the Normal Retirement Benefit
(based on the participant's age at the time of termination of employment) to a
participant (i) whose employment with the Company is terminated after a
specified early retirement date as defined in the plan, (ii) whose employment is
otherwise terminated with the consent of the committee that administers the
plan, or (iii) in the sole discretion of the committee, whose employment is
terminated prior to the normal retirement date by reason of disability. Reduced
benefits are paid to any participant whose employment with the Company is
terminated for any reason other than retirement, disability or death. The annual
benefits payable under the plan upon retirement at the normal retirement date of
Messrs. Waggett and Stern are $51,142, and $57,155, respectively.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an agreement with Samuel Ochlis dated January 5, 1987, as
amended in November 1988 and August 1995 that provides for, among other things,
the payment of deferred compensation to Mr. Ochlis or, if he is not living, to a
trust for the benefit of his children, upon the termination of Mr. Ochlis'
employment with the Company by reason of retirement, disability or death. Mr.
Ochlis' term as an employee of the Company ended on August 30, 1995. Under the
agreement, as amended, Mr. Ochlis or his children's trust, as the case may be,
will receive for a period of up to ten years yearly payments in an amount equal
to $84,036, less the amount payable to him or his designated beneficiary in each
of such years under the Company's retirement plans other than its 401(k) plan.
The Company will be relieved of its obligation to pay deferred compensation if
at any time prior to the expiration of the payout period Mr. Ochlis accepts
employment with, or renders any assistance for compensation to, any competitor
of the Company without the prior written consent of the Company.
In connection with his employment agreement, in September 1989, the Company
established a so-called "rabbi" trust for the benefit of Mr. Ochlis. Subject to
claims of the Company's general creditors in the event of the Company's
insolvency or bankruptcy, the trust assets are to be held for the exclusive
purpose of providing deferred compensation to Mr. Ochlis in accordance with the
terms of his employment agreement. The trust agreement provides that Mr. Ochlis
shall have no preferred claims on, or any beneficial interest in, any of the
trust assets until such time as the assets are paid to him. Under current
federal income tax law, Mr. Ochlis will not be taxed until he actually receives
payment from the trust. Instead, the Company is taxable on the trust income and
is not allowed a tax deduction for contributions to the trust or offsetting
deductions for trust income until Mr. Ochlis is actually paid. The trust, which
is irrevocable, was initially funded with a payment of $500,000.
8
The Company has an employment agreement with Alexander Lupinetti dated
September 12, 1996 (the "Employment Agreement"), pursuant to which Mr. Lupinetti
became Director, Chief Executive Officer and President of the Company effective
October 1, 1996. Under the terms of the agreement Mr. Lupinetti's initial base
salary is $200,000 per year with eligibility for bonus compensation of $40,000
based on the achievement of certain goals or an executive bonus of up to 50% of
his salary based on the attainment of certain financial objectives. In addition,
the Company granted Mr. Lupinetti options to acquire up to 60,000 shares of
Common Stock under the Company's 1991 Incentive Stock Option Plan at an exercise
price of $7.63 per share, the fair market value of the Common Stock on the date
of grant. Such options vest under normal circumstances at a rate of 25% a year
commencing after one year of service. However, if the Company is acquired by way
of sale of substantially all of its assets or by merger, such options will fully
vest at the time of such acquisition. The Company also has provided Mr.
Lupinetti with an automobile. Finally, in the event Mr. Lupinetti's employment
is terminated by the Company other than for cause (as defined) Mr. Lupinetti is
entitled to 12 months of severance pay at his then effective annual salary per
month.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The Company's only issued and outstanding class of voting securities is its
Common Stock. Holders of the Common Stock are entitled to one vote per share of
such stock held by them of record at the close of business on November 1, 1996
upon each matter which may come before the Meeting. At the close of business on
November 1, 1996, there were 2,671,231 shares of Common Stock issued and
outstanding.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of November 1, 1996
regarding each person known by the Company to own beneficially more than 5% of
the Company's Common Stock, each Director and nominee for Director of the
Company, each executive officer named in the Summary Compensation Table and all
Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
---- ------------ -----------
<S> <C> <C>
Heartland Value Fund ...................... 510,100(3) 19.1%
790 N. Milwaukee Street
Milwaukee, WI 53202
Fundamental Management Corporation ........ 262,000(4) 9.8%
4000 Hollywood Blvd., Suite 610 N.
Hollywood, FL 33021
Quest Advisory Corp. ...................... 255,205(5) 9.6%
Quest Advisory Co.
1414 Avenue of the Americas
New York, NY 10019
Dimensional Fund Advisors Inc. ............ 199,000(6) 7.4%
1299 Ocean Avenue
Santa Monica, CA 90401
David L. Babson & Co., Inc. ............... 159,400(7) 6.0%
One Memorial Drive
Cambridge, MA 02142
C. Shelton James .......................... 264,000(8) 9.9%
c/o Fundamental Management Corporation
4000 Hollywood Blvd., Suite 610 N.
Hollywood, FL 33021
Alexander R. Lupinetti(*) ................. 0 **
Samuel Ochlis ............................. 54,627(9) 2.0%
Boruch B. Frusztajer(*) ................... 16,500(10) **
Stanford A. Fingerhood .................... 3,000(11) **
John D. Ingram ............................ 2,000(11) **
</TABLE>
9
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
---- ------------ -----------
<S> <C> <C>
Sandford D. Smith(*) ...................... 3,000(11) **
James A. Waggett .......................... 29,825(12) 1.1%
Michael M. Stern .......................... 102,500(13) 3.8%
Gary W. Levine ............................ 14,200(14) **
All Directors and executive officers as a
group (11 persons) ....................... 556,627(15) 20.4%
</TABLE>
- ---------
* Nominee for Director.
** Owns less than one percent.
(1) Except as otherwise noted, all persons and entities have sole voting and
investment power over their shares. All amounts shown in this column
include shares obtainable upon exercise of stock options exercisable within
60 days of the date of this table.
(2) Computed pursuant to Rule 13d-3 under the Exchange Act.
(3) Heartland Advisors, Inc. ("Heartland") has furnished the Company with a
report on Schedule 13G dated February 9, 1996, in which it is stated that
Heartland is a registered investment advisor, that Heartland has sole
dispositive power with respect to 510,100 shares of the Company's Common
Stock, and that Heartland has sole voting power with respect to 440,200 of
such shares.
(4) Based on information provided to the Company by Mr. James and on a report
on Schedule 13D and two amendments thereto dated, respectively, April 18,
1994, April 26, 1994 and July 7, 1994, Fundamental Management Corporation
("FMC") solely controls the voting and investment of securities owned of
record by several limited partnerships of which FMC is the sole managing
general partner. C. Shelton James, a Director and nominee for Director of
the Company, is President of Fundamental Management Corporation. See
footnote 8.
(5) Quest Advisory Corp. ("Quest"), Quest Management Company ("QMC") and
Charles M. Royce have furnished the Company with a joint report on Schedule
13G dated February 8, 1994, in which it is stated that both Quest and QMC
are registered investment advisors, that Quest has sole voting and
investment power with respect to 220,805 of these shares, and that QMC has
sole voting and investment power with respect to 34,400 of these shares.
The report also states that Mr. Charles M. Royce may be deemed to be a
controlling person of Quest and QMC, and as such may be deemed to own
beneficially all of the shares covered by the report. Mr. Royce disclaims
beneficial ownership of all such shares.
(6) Dimensional Fund Advisors Inc. ("Dimensional"), DFA Investment Dimensions
Group Inc. (the "Fund") and The DFA Investment Trust Company (the "Trust")
have furnished the Company with a joint report on Schedule 13G dated
February 7, 1996, in which Dimensional has advised the Company that it is a
registered investment advisor and that Dimensional has sole dispositive
power with respect to 199,000 shares of the Company's Common Stock and sole
voting power with respect to 124,000 of those shares, and that persons who
are officers of Dimensional are also officers of the Fund and the Trust
(each an open-end investment company registered under The Investment
Company Act of 1940) and in their capacities as officers of the Fund and
the Trust, these persons exercise the voting power with respect to 15,700
and 59,300 shares of the Company's Common Stock, respectively.
(7) David L. Babson & Co., Inc. ("Babson") has furnished the Company with a
report on Schedule 13G dated February 12, 1996, in which Babson states that
it is a registered investment advisor, that Babson has sole dispositive
power with respect to 159,400 shares of the Company's Common Stock, that
Babson has sole voting power with respect to 106,700 of such shares and
that Babson has shared voting power with respect to 52,700 of such shares.
(8) Includes 262,000 shares directly owned by Fundamental Management
Corporation, as described in footnote 4. Mr. James is President of
Fundamental Management Corporation. Also includes 2,000 shares obtainable
upon exercise of stock options.
(9) Includes 1,000 shares obtainable upon exercise of stock options.
(10) Includes 3,000 shares obtainable upon exercise of stock options.
10
(11) These shares are obtainable upon exercise of stock options.
(12) Includes 8,000 shares owned by Mr. Waggett's wife and 11,825 shares
obtainable upon exercise of stock options.
(13) Includes 7,000 shares owned by Mr. Stern's wife and 2,500 shares owned by
Mr. Stern's son. Mr. Stern disclaims beneficial ownership of these shares.
Also includes 14,000 shares obtainable upon exercise of stock options.
(14) Includes 14,000 shares obtainable upon exercise of stock options.
(15) Includes 117,338 shares obtainable upon exercise of stock options.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities Exchange Commission. Officers, directors and
greater-than-10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to the Company during fiscal 1996 and Forms 5 and amendments thereto furnished
to the Company with respect to fiscal 1996, or written representations that Form
5 was not required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-10%
shareholders were fulfilled in a timely manner.
INFORMATION CONCERNING AUDITORS
The Board of Directors selected the firm KPMG Peat Marwick LLP ("Peat
Marwick") to audit the Company's financial statements for the past fiscal year.
The Company's Board of Directors has not yet selected the Company's independent
public accountant for the current fiscal year. A representative of Peat Marwick
is expected to be present at the Annual Meeting, will have the opportunity to
make a statement if such representative desires to do so and will be available
to respond to appropriate questions.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by Directors, officers and
certain employees of the Company, or by American Stock Transfer & Trust Company,
the Company's transfer agent. It is expected that the expense of such special
solicitation will be nominal. All expenses incurred in connection with this
solicitation will be borne by the Company.
DATE WHEN STOCKHOLDER PROPOSALS ARE REQUIRED TO BE FURNISHED
TO THE COMPANY FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's proxy materials,
stockholder proposals to be submitted for vote at the 1997 annual meeting of
stockholders or special meeting in lieu thereof must comply with SEC regulations
and must be delivered to the Company on or before Friday, July 11, 1997.
In addition, Articles II and III of the Company's by-laws set forth certain
procedural requirements, including a notice requirement, that apply to
stockholders wishing to nominate a Director or propose an item of business for
consideration at the scheduled annual meeting or special meeting in lieu
thereof.
MISCELLANEOUS
The Board does not intend to present to the Meeting any business other than
the proposals listed herein, and the Board was not aware, a reasonable time
before mailing this Proxy Statement to stockholders, of any other business which
may be properly presented for action at the Meeting. If any other business
should come before the Meeting, the persons present will have discretionary
authority to vote the shares they own or represent by proxy in accordance with
their judgment.
11
PROXY CSP INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CSP Inc. hereby appoints Alexander Lupinetti
and Samuel Ochlis, and each or either of them, proxies (with power of
substitution to each and to each substitute appointed pursuant to such power) of
the undersigned to vote all shares of stock of the Corporation held by the
undersigned or which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Corporation to be held on Tuesday, December 10,
1996, and at any and all adjournments thereof, with all powers the undersigned
would possess if personally present, as indicated below and on the reverse side
hereon upon the matters set forth herein and more fully described in the Notice
and Proxy Statement for said Meeting and in their discretion upon all other
matters which may properly come before said Meeting. The undersigned hereby
revokes all proxies, if any, hitherto given by him to others for said Meeting.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED
HEREBY WILL BE VOTED. IF A CHOICE IS SPECIFIED ON THE REVERSE SIDE HEREOF BY THE
STOCKHOLDER WITH RESPECT TO THE MATTER TO BE ACTED UPON, THE SHARES WILL BE
VOTED UPON SUCH MATTER IN ACCORDANCE WITH THE SPECIFICATION SO MADE. IN THE
ABSENCE OF ANY SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR ALL LISTED NOMINEES FOR DIRECTOR.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
A [X] Please mark your
votes as in this
example.
FOR ALL WITHHOLD
nominees AUTHORITY
except as marked for all
to the contrary below nominees
1. Election of
directors: [ ] [ ] Nominees: A. Lupinetti Check here if you
B. Frusztajer plan to attend the
S. Smith Annual Meeting. [ ]
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee(s),
print such nominee's(s') name(s) in the
space provided below. To vote for or to
withhold authority for all nominees,
see above.)
- ---------------------------------------
SIGNATURE DATE 1996 DATE 1996
-------------------------- ------ ----------------- -----
IF HELD JOINTLY
NOTE: Please date, sign exactly as name appears hereon and return promptly. If
the shares are registered in the names of two or more persons, both should sign.
Executors, administrators, trustees, guardians, custodians, attorneys and
corporate officers should add their titles.
