<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CYBEX INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CYBEX INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(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:/1/
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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- ----------
/1/ Set forth the amount on the filing fee is calculated and state how it was
determined.
<PAGE>
CYBEX INTERNATIONAL, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
----------------
The Annual Meeting of Shareholders of Cybex International, Inc., a New York
corporation (the "Corporation"), will be held at the Boston Harbor Hotel, 70
Rowes Wharf, Boston, Massachusetts 02110 on Tuesday, May 5, 1998 at 11:00
A.M., local time, for the following purposes:
1. To elect three directors.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 23, 1998 as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
TO MAKE CERTAIN THAT YOUR SHARES WILL BE VOTED AT THE MEETING, WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY WHICH IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS.
By Order of the Board of Directors
Joan Carter
Secretary
Medway, Massachusetts
April 3, 1998
<PAGE>
CYBEX INTERNATIONAL, INC.
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Cybex International, Inc. (the
"Corporation" or the "Company") to be voted at the Annual Meeting of
Shareholders of the Corporation to be held on Tuesday, May 5, 1998 and at any
adjournments of the meeting (the "Annual Meeting"). Shareholders of record at
the close of business on March 23, 1998 will be entitled to notice of, and to
vote at, such meeting.
The mailing address of the Corporation's principal executive offices is 10
Trotter Drive, Medway, Massachusetts 02053. The approximate date on which this
Proxy Statement and the form of proxy were first sent or given to the
shareholders of the Corporation was April 3, 1998.
The Annual Report of the Corporation for the year ended December 31, 1997,
including audited financial statements, accompanies this Proxy Statement.
Merger. On May 23, 1997, the shareholders of the Corporation approved the
merger of Trotter Inc. ("Trotter") with a wholly-owned subsidiary of the
Corporation (the "Merger"). As a result of the Merger, (1) Trotter became a
wholly-owned subsidiary of the Corporation, (2) 4,273,056 shares of the
Corporation's common stock were issued to UM Holdings, Ltd. ("UM") in exchange
for all of the issued and outstanding Trotter shares, and (3) options to
purchase Trotter Shares held by various officers, directors and employees of
Trotter were converted to options to purchase shares of the Corporation's
common stock. See "Certain Relationships and Related Transactions" for further
information pertaining to the Merger.
VOTING RIGHTS
As of the close of business on the record date, the Corporation had
outstanding 8,676,559 common shares, par value $.10 per share ("Common
Shares"). At all meetings of shareholders, holders of Common Shares are
entitled to one vote, exercisable in person or by proxy, for each Common Share
held.
Shareholders who execute proxies may revoke them at any time before they are
voted by notice to the Corporation in writing or at the meeting or by
delivering, at or prior to the meeting, a properly executed later-dated proxy.
Shares represented by an effective proxy given by a shareholder will be voted
as directed, unless authority to vote is withheld. If a signed proxy is
received but no specification is made thereon, the shares represented thereby
will be voted in accordance with the recommendations of the Board of
Directors.
A majority of the outstanding shares entitled to vote must be represented in
person or by proxy at the meeting in order to conduct the election of
directors and any other matters which may come before the meeting. If such a
majority is represented at the meeting, then the three nominees for director
who receive the highest number of votes cast will be elected. Any other matter
coming before the meeting will require the approving vote of at least a
majority of the votes cast. For purposes of determining the number of votes
cast with respect to a particular matter, only those cast "For" or "Against"
are included. Abstentions and broker non-votes are counted only for purposes
of determining whether a quorum is present at the meeting.
1
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors consists of nine directors divided into three
classes. Three persons are to be elected to the Board of Directors at the
Annual Meeting to serve until the 2001 Annual Meeting. Management's nominees
for election as directors are James H. Carll, Peter C. Haines and Arthur W.
Hicks, Jr. Robert R. McMillan, a director whose term was to expire at the
Annual Meeting, informed the Company that he did not wish to seek re-election
at the meeting and accordingly Mr. McMillan resigned in February 1998; the
remaining six directors will continue in office for the terms specified below.
The persons named in the enclosed Proxy intend to vote for the election of the
three nominees named above, unless instructions to the contrary are given
therein. Proxies may not be voted for a greater number of persons than the
number of nominees named below.
The nominees have indicated that they are able and willing to serve as
directors. However, if some unexpected occurrence should require the
substitution of some other person or persons for any one or more of the
nominees, the person or persons voting the proxies will vote for such nominees
as the Board of Directors of the Corporation may select.
Nominees for directors who receive a plurality of the votes cast by the
holders of the outstanding Common Shares entitled to vote at the Annual
Meeting will be elected. Abstentions, broker non-votes, and withheld votes are
not counted in determining the number of votes cast for any nominee for
director. The Board of Directors recommends a vote FOR each nominee.
The following table lists the name, age, principal occupation and certain
business experience of each of the three nominees and the six continuing
directors of the Corporation whose terms of office will continue after the
Annual Meeting, the year in which each director's term of office will expire
(assuming, in the case of each of the nominees, such nominees are elected at
the Annual Meeting) and the year in which each director was first elected as a
director of the Corporation.
<TABLE>
<CAPTION>
AGE AT YEAR FIRST
MARCH 1, PRINCIPAL OCCUPATION AND YEAR TERM BECAME
NAME 1998 CERTAIN BUSINESS EXPERIENCE WILL EXPIRE DIRECTOR
- ---- -------- ------------------------------------------- ----------- ----------
<S> <C> <C> <C> <C>
Nominee for Director
James H. Carll.......... 49 Partner since 1983 of Archer & Greiner, A 2001 1997
Professional Corporation, a law firm which
acts as general counsel for the
Corporation. Director, Southern Jersey
Bancorp, a bank holding company.
Peter C. Haines......... 47 President and Chief Executive Officer of 2001 --
the Corporation since May, 1997. Prior to
the Merger Mr. Haines was employed by
Trotter since 1980, serving as its
President since 1983.
Arthur W. Hicks, Jr. ... 39 Vice-President and Chief Financial Officer 2001 1997
of UM Holdings, Ltd. ("UM") since 1988. UM
was the sole stockholder of Trotter prior
to the Merger, and is presently a
significant shareholder of the Corporation.
Mr. Hicks was elected to Trotter's Board of
Directors in 1994. Director, Premier
Research Worldwide, Ltd., a clinical
research organization.
Continuing Directors
John Aglialoro.......... 54 Chairman and Chief Executive Officer of UM, 2000 1997
which he co-founded in 1973. He has served
on Trotter's Board of Directors since 1983.
Director, Premier Research Worldwide, Ltd.
Joan Carter............. 54 President and Chief Operating Officer of 1999 1997
UM, which she co-founded in 1973. She has
served as a Director of Trotter since 1983.
Director, Premier Research Worldwide, Ltd.
and Chairman of the Board, Federal Reserve
Bank of Philadelphia
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AGE AT YEAR FIRST
MARCH 1, PRINCIPAL OCCUPATION AND YEAR TERM BECAME
NAME 1998 CERTAIN BUSINESS EXPERIENCE WILL EXPIRE DIRECTOR
- ---- -------- ------------------------------------------- ----------- ----------
<S> <C> <C> <C> <C>
Kay Knight Clarke....... 59 President, Templeton, Ltd., a management 2000 1996
consulting company, since July 1995.
President, Micro Marketing Division of
Advo, Inc., a direct marketing company,
from December 1991 to July 1995. Senior
Vice President of Business Development,
Advo, Inc., from October 1990 to December
1991. Director, Guardian Life Insurance
Corporation of America (a mutual insurance
company) and the Providence Journal Co.
Thomas W. Kahle......... 47 Partner, Graydon Head & Ritchey since 1980. 1999 1991
Jerry Lee............... 61 Retired. Partner of Ernst & Young, LLP from 2000 1997
1969 to 1995, including managing partner of
the Philadelphia office from 1979 to 1989.
Director, Premier Research Worldwide, Ltd.
Alan H. Weingarten...... 57 Alan H. Weingarten & Associates, Inc., 1999 1987
consultants in general management,
marketing and product planning, since 1986.
</TABLE>
With the exception of Mr. Aglialoro and Ms. Carter, who are married, there
are no family relationships between the directors and executive officers of
the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation held ten meetings during 1997. All
incumbent directors attended more than 75% of the meetings of the Board and
their respective Board Committees.
The Board of Directors has standing Executive, Audit, Compensation and
Personnel, and Stock Option Committees.
At the end of 1997, the Executive Committee consisted of Joan Carter, James
Carll and John Aglialoro (Chair). The Executive Committee has, with certain
exceptions, all of the authority of the Board of Directors. In addition, the
Executive Committee makes recommendations to the Board with respect to
management nominees to the Board and reviews and makes recommendations with
respect to such shareholder nominees to the Board as may be submitted to the
Corporation. The Executive Committee will consider the names and
qualifications of candidates for the Board of Directors submitted by
shareholders in accordance with the procedures described in "Shareholder
Proposals and Director Nominations for 1999 Annual Meeting".
The Executive Committee also evaluates the performance of the Corporation's
Chief Executive Officer, recommends committee selections to the Board, and
evaluates and makes recommendations regarding the administration of the Board
of Directors and Director compensation. The Executive Committee held one
meeting during 1997, and also acted by unanimous written consent.
At the end of 1997, the Audit Committee consisted of Alan H. Weingarten,
Jerry Lee and Arthur W. Hicks, Jr. (Chair). The functions of the Committee are
to recommend to the Board of Directors the engagement and discharge of the
independent auditors for the Corporation, analyze the report of such auditors,
and make such recommendations to the Board with respect thereto as such
committee may deem advisable. The Committee held eight meetings in 1997.
The Compensation and Personnel Committee currently consists of Thomas W.
Kahle, Kay Knight Clarke, and Joan Carter (Chair). The function of the
Committee is to make recommendations to the Board of Directors concerning
executive compensation and benefits policies for the Corporation. The
Committee held nine meetings during 1997.
The Stock Option Committee consists of Kay Knight Clarke and Jerry Lee
(Chair). The Committee administers the Corporation's stock option plans,
awarding stock options to key employees and non-employee directors of the
Corporation and determining the terms and conditions on which the options are
granted. The Committee held two meetings during 1997.
3
<PAGE>
COMPENSATION OF DIRECTORS
The Company's compensation program for nonemployee directors during 1997
provided that each nonemployee director receive an annual retainer of $18,000
in quarterly installments, seventy percent of which was paid in shares of
Company Common Stock (using the price per share on January 1 of such year)
pursuant to the Company's 1995 Stock Retainer Plan for Nonemployee Directors
(the "Retainer Plan"). In addition, Committee chairmen receive an annual
retainer of $2,400. Directors also receive $1,000 per day for each Board
meeting attended, $500 per telephone meeting and $500 for each Committee
meeting attended. During 1997 pursuant to the Retainer Plan, non-employee
directors received, depending upon the portion of the year served, between 535
shares and 1,284 shares of Company Common Stock, representing the stock
component of their annual retainer. In addition, John Aglialoro receives, for
serving as the Chairman of the Board, shares of Company Common Stock at the
rate of 5,000 shares per annum. During 1997, Mr. Aglialoro was entitled to
receive, for the portion of the year during which he served as Chairman, 2,917
shares pursuant to this program. These shares are reissued out of treasury and
not from the Retainer Plan.
John C. Spratt, Chairman of the Board of Directors until his resignation in
May 1997, received a monthly consulting fee through the date of the Merger,
aggregating $100,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 23, 1997, Trotter, Inc. ("Trotter") and a wholly-owned subsidiary of
the Corporation were merged (the "Merger"). As a result, Trotter became a
wholly-owned subsidiary of the Corporation. Prior to the Merger, Trotter was
an indirect, wholly-owned subsidiary of UM Holdings, Ltd. ("UM"). As a result
of the Merger, UM was issued 4,273,056 shares of the Corporation's Common
Shares in exchange for all of Trotter's outstanding shares. Due to the stock
issuances, the Merger can be deemed to have caused a change of control of the
Corporation. UM as of March 15, 1998 beneficially owned approximately 48.2% of
the outstanding Common Shares.
In addition, options to purchase Trotter shares held by certain of its
officers, directors and employees were converted in the Merger to options to
purchase an aggregate of 436,920 shares of the Corporation's Common Shares,
including the options indicated below issued to the following executive
officers and directors of the Corporation:
<TABLE>
<CAPTION>
NAME OPTION SHARES
---- -------------
<S> <C>
Peter C. Haines................ 213,653
William S. Hurley.............. 42,730
Raymond Giannelli.............. 21,365
Karen A. Slein................. 10,683
Arthur W. Hicks, Jr............ 42,730
Jerry Lee...................... 4,273
</TABLE>
The listed options are fully vested, have a term to May 23, 2002 (subject to
early termination), and have a per share exercise price of $5.85 (except for
the options to Mr. Hurley and Ms. Slein and 10,682 options to Mr. Giannelli,
which have exercise prices of $10.375). The exercise prices of all the options
were based upon the exercise prices in the Trotter options, adjusted to
reflect the conversion ratio implicit in the Merger, except the noted options
to Messrs. Hurley and Giannelli and Ms. Slein, the exercise price of which
equals the market price of the Common Stock on the date of the Merger.
John Aglialoro and Joan Carter are executive officers and directors of UM
and effectively own 100% of the stock of UM; upon consummation of the Merger,
Mr. Aglialoro was elected the Chairman and Ms. Carter a director of the
Corporation. In accordance with the merger agreement, Messrs. Carll, Hicks and
Lee were also elected to the Board and Mr. Haines was appointed the
Corporation's Chief Executive Officer.
4
<PAGE>
UM historically provided various administrative services to Trotter,
including accounting, human resources and computer services, for which it was
charged $3,000 for 1997. Trotter also participated in UM's deferred savings
program for employees pursuant to Section 401(k) of the Code. Trotter was
charged $68,000 for 1997 for profit sharing plan contributions made pursuant
to this program on behalf of its employees.
Until the consummation of the Merger, Trotter was included in the
consolidated income tax filings of UM. Trotter, UM and other subsidiaries of
UM have entered into a tax sharing agreement pursuant to which Trotter paid to
UM amounts equal to the income taxes which Trotter would otherwise have paid
had it filed separate income tax returns. Trotter paid $1,582,000 to UM for
the period January 1, 1997 to the merger date under this tax sharing
agreement. UM has agreed to indemnify Trotter from any liability pertaining to
an adjustment or proposed adjustment of the UM consolidated tax returns, to
the extent pertaining to UM or its subsidiaries other than Trotter and its
subsidiaries; likewise, Trotter has agreed to indemnify UM from any liability
relating to any adjustment or proposed adjustment to the consolidated tax
returns of UM to the extent pertaining to Trotter or any of its subsidiaries.
James H. Carll, a director of the Company, is a stockholder of Archer &
Greiner, P.C., which acts as general counsel of the Corporation and UM.
Thomas W. Kahle, a director of the Company, is a partner in the Cincinnati
law firm of Graydon Head & Ritchey, which is general counsel to Surgical
Appliance Industries, Inc., a 6.1% shareholder in the Company. See "Security
Ownership of Certain Beneficial Owners and Management." Mr. Kahle disclaims
any beneficial interest in the shares of the Company owned by Surgical
Appliance Industries, Inc.
5
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Personnel Committee of the Board of Directors consists
entirely of non-management directors, and its primary function is to make
recommendations to the Board of Directors concerning executive compensation
and benefit policies for the Company.
The Company's current executive officers were employees of Trotter prior to
the Merger, and compensation paid to those individuals for services rendered
prior to the date of the Merger was determined solely by Trotter. Following
the Merger, the Committee reviewed and analyzed the Company's compensation
programs to determine an appropriate and effective compensation program for
the Company's executive officers. The Committee believes that the most
effective compensation program is one that provides executives with incentives
to achieve both current and long-term strategic business goals of the Company,
with the ultimate objective of enhancing shareholder value. Incentive
compensation should reward results and be tied to shareholder value. The
Committee seeks to accomplish this result by tying annual incentive
compensation to measurements based on earnings per share. Long-term incentive
compensation is based on stock option awards, where the ultimate value depends
upon the future performance of the Company's common stock over the term of the
option.
The Company's executive compensation programs are designed to:
--Motivate and challenge executive officers to achieve both annual and
long-term strategic business goals.
--Align the interest of executive officers with the long-term interest of
shareholders.
--Support an environment that rewards executive officers based upon
corporate and individual performance and results.
--Attract and retain executive officers critical to the long-term success
of the Company.
The three basic components of executive officer compensation consist of (1)
base salary; (2) annual incentive compensation; and (3) long-term incentives
in the form of stock options. The executive officers also participate in
employee benefit plans available generally to the Company's employees.
Base Salary. In determining executive compensation levels, the Committee
reviewed compensation levels at non-technical manufacturing companies located
in the New England region of comparable size to the Company. The base salary
of each executive officer is determined at levels considered appropriate for
comparable positions at these peer companies. The Committee's policy is to
target base salary at the peer average, and ranges to the 75th percentile to
reflect special circumstances. In 1997, executive officer base salaries were
as a general matter at the peer average, and in any event not above the 75th
percentile, except for the Chief Executive Officer's salary as discussed
below.
Annual Incentive Compensation. To reinforce the attainment of Company's
goals, the Committee believes that a significant portion of the annual
compensation of executive officers should be in the form of variable incentive
pay. The executive officers who prior to the Merger were employees of Trotter
were eligible under Trotter's bonus program for bonuses based upon Trotter
pre-Merger performance. After the Merger, the Committee instituted a
performance-based bonus program for executive officers (other than the CEO)
for the balance of 1997. To further align the interests of the executive
officers with the interests of the Company's shareholders, the bonus was based
upon earnings per share, and permitted the executive officers to earn up to
30% of base salary in cash bonus awards. Based upon actual 1997 performance,
these executive officers earned bonuses equal to 17.9% of base salary.
Long-Term Incentive in Form of Stock Options. The Committee believes that
significant management ownership of the Company's stock effectively motivates
the building of shareholder wealth and aligns the interests of management with
those of the Company's shareholders. Each of the Company's executive officers
6
<PAGE>
who are former employees of Trotter received in the Merger options to acquire
Company common stock in exchange for outstanding Trotter stock options. See
"Certain Relationships and Related Transactions". In order to provide a
further incentive to the Company's executives, and to ensure consistent stock
option grants at various levels of management, each executive officer received
an additional stock option grant during 1997. All of the options were granted
under the terms of the Company's stock option plan at a per share exercise
price equal to market price on the date of grant. The option to the CEO is
described below. The options granted to the other executive officers become
exercisable over five years in annual increments of 20% beginning one year
after the date of grant, contingent upon the officer's continued employment
with the Company. The table appearing under the heading "Option Grants in
1997" provides further information about the options granted to the Named
Executive Officers.
Chief Executive Officer Compensation. The compensation plan for Mr. Haines,
except as indicated, contains the same elements and operates in the same
manner as the compensation plan described above for the other executive
officers. Mr. Haines' compensation prior to the Merger was determined solely
by Trotter. After the Merger, the Committee renegotiated Mr. Haines'
employment agreement. As part of this renegotiation, his base salary was
increased to $365,000 per annum through 1998. While Mr. Haines' base salary is
above comparable salaries at the peer companies utilized by the Committee, the
Committee believes that such salary is appropriate in light of Mr. Haines'
strong performance at Trotter over a number of years, Mr. Haines' importance
to the Company, both in the consolidation following the Merger and long-term,
and is necessary for competitive purposes. Because of the bonus paid in 1997
to Mr. Haines for his performance at Trotter prior to the Merger, no annual
incentive compensation was made available to Mr. Haines for the balance of
1997. However, he will be eligible for annual incentive compensation for 1998,
based upon 1998 return on net assets and earnings per share performance.
In order to provide Mr. Haines with a substantial stake in the Company's
success, he was granted during 1997 options to acquire 238,000 shares of the
Company's Common Stock. These options will become exercisable (contingent upon
continued employment) in five annual installments, but only if certain
performance standards, based upon the market price of the Company's stock, are
met. If such standards are not met, Mr. Haines' option will become exercisable
in 2004. The Committee believes that this option, together with the Trotter
stock option converted in the Merger, provides a significant incentive to Mr.
Haines and aligns his interests directly with the Company's shareholders. The
options also place a significant portion of Mr. Haines' total compensation at
risk, since the options' value depends upon the Company's common stock
performance over the option term.
The Executive Committee of the Board of Directors, which is composed solely
of non-employee members of the Board, will perform an annual evaluation of the
CEO's performance. The first such evaluation will be made in 1998 based upon
performance during 1997.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code disallows a tax deduction to publicly-held companies for
compensation paid to certain of their executive officers, to the extent that
compensation exceeds $1,000,000 per covered officer in any fiscal year. The
limitation applies only to compensation which is not considered to be
performance-based. Non-performance-based compensation paid to the Company's
executive officers for 1997 did not exceed the $1,000,000 limit per officer,
and the Committee does not anticipate that the non-performance-based
compensation to be paid the Company's executive officers in the foreseeable
future will exceed that limit.
MEMBERS OF THE COMPENSATION
AND PERSONNEL COMMITTEE:
Joan Carter, Chair
Kay Knight Clarke
Thomas W. Kahle
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At the end of 1997, the Compensation and Personnel Committee consisted of
Thomas W. Kahle, Kay Knight Clarke, Robert R. McMillan and Joan Carter
(Chair). Mr. McMillan resigned from the Board in February 1998. During the
year, the members of the Committee also included Carol G. Nelson, a former
director.
Joan Carter is a Director, President and principal stockholder of UM, which
prior to the Merger indirectly owned all of the outstanding capital stock of
Trotter. See "Certain Relationships and Related Transactions."
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return (change
in stock price plus reinvested dividends) on the Common Stock with the total
returns of the American Stock Exchange Market Value Index, a broad market
index covering stocks listed on the American Stock Exchange, and the companies
in the Sporting and Athletic Goods industry (SIC Code 3949), a group
encompassing approximately 27 companies (the "SIC Index").
[GRAPH APPEARS HERE]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN OF
CYBEX INTERNATIONAL, INC., AMEX MARKET VALUE INDEX
AND THE SIC INDEX
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Cybex International, Inc.......... $100 $ 70.80 $ 90.27 $ 66.37 $ 69.47 $ 86.28
Amex Mkt. Value Index............. 100 118.81 104.95 135.28 142.74 171.76
SIC Index......................... 100 149.04 154.54 139.10 136.15 133.33
</TABLE>
Assumes $100 invested on December 31, 1992 and dividends are reinvested.
Source: Media General Financial Services.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information in respect of the compensation
for 1997, 1996, and 1995 of the persons who were, at any time during 1997, the
Chief Executive Officer, and at the end of 1997, all other executive officers
of the Corporation (sometimes collectively referred to as the "Named Executive
Officers") whose salary and bonus exceeded $100,000 for the year. Includes
compensation received by such individuals from Trotter prior to the Merger.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1) LONG TERM COMPENSATION
---------------- --------------------------------------
RESTRICTED STOCK SECURITIES UNDERLYING ALL OTHER
YEAR SALARY BONUS AWARDS ($) OPTIONS (#)(2) COMPENSATION(3)
---- -------- ------- ---------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL
POSITION
Peter C. Haines......... 1997 $338,700 $72,250 -- 238,000 $ 5,457
President and Chief 1996 300,000 -- -- -- 5,892
Executive Officer 1995 300,000 -- -- -- 7,969
William S. Hurley....... 1997 150,000 31,055 -- 5,000 2,067
Vice President--Chief 1996 42,017 -- -- 42,730 640
Financial Officer 1995 -- -- -- -- --
Raymond Giannelli.......
Vice President-- 1997 134,423 29,309 -- 21,000 3,182
Research and 1996 123,000 -- -- 10,682 4,341
Development 1995 122,134 -- -- -- 2,477
Karen A. Slein.......... 1997 98,762 21,471 -- 5,000 1,936
Vice President--Human 1996 83,602 -- -- 10,683 577
Resources 1995 44,510 -- -- -- 138
J. Raymond Elliott...... 1997 144,231 39,255 207,500 -- 803,831(4)
Former President and 1996 300,000 70,000 -- -- 137,032
Chief Executive Officer 1995 100,000 -- 472,000 25,000 29,858
</TABLE>
- --------
(1) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted in those
instances where the aggregate amount of such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total of annual salary and bonuses for the officer for such year.
(2) The 1996 option grants to Mr. Hurley, Mr. Giannelli and Ms. Slein
represent stock options granted by Trotter. This column excludes in all
cases the options issued in the Merger upon conversion of outstanding
Trotter options. See "Certain Relationships and Related Transactions."
(3) Except in the case of Mr. Elliott, consists of the sum of (a)
contributions made by Trotter under the 401(k) plan in which it
participated or by the Corporation under its Savings and Investment Plan,
which for 1997 aggregated $4,118 for Mr. Haines, $2,474 for Mr. Giannelli
and $1,444 for Ms. Slein; and (b) the taxable portion of group term life
insurance over $50,000, which for 1997 aggregated $1,339 for Mr. Haines,
$2,067 for Mr. Hurley, $708 for Mr. Giannelli and $492 for Ms. Slein. See
Footnote 4 for information pertaining to Mr. Elliott.
(4) The consummation of the Merger constituted a "Change of Control" as
defined in Mr. Elliott's employment agreement with the Corporation,
permitting him the right to terminate employment and receive a severance
amount equal to 2.99 multiplied by his base salary, payable over a 24-
month period. The Corporation chose instead to satisfy this obligation by
making a discounted, lump sum payment of $803,413. Also includes the
taxable portion of Group Term Life Insurance over $50,000, which for 1997
aggregated $418.
9
<PAGE>
OPTION GRANTS IN 1997
The following table shows all grants of options to the Named Executive
Officers of the Corporation in 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS(1)(2) APPRECIATION FOR OPTION TERM(3)
------------------------------------------------- -----------------------------------
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE
GRANTED TO EMPLOYEES PRICE EXPIRATION A
NAME (# OF SHARES) IN 1997 ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ------------- --------------- -------- ---------- ---------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter C. Haines......... 238,000 77.0% $10.875 6/26/07 $ 0 $ 387,677 $ 617,311
William S. Hurley....... 5,000 1.6% 11.75 12/15/07 0 8,144 12,969
Raymond Giannelli....... 21,000 6.8% 11.75 12/15/07 0 34,207 54,469
Karen A. Slein.......... 5,000 1.6% 11.75 12/15/07 0 8,144 12,969
J. Raymond Elliott...... --
</TABLE>
- --------
(1) Does not include previously outstanding Trotter options converted to
Corporation options in the Merger. See "Certain Relationships and Related
Transactions."
(2) The options were granted under the terms of the Corporation's stock option
plans at a per share exercise price equal to the market price of a Common
Share on the date of grant. Except in the case of Mr. Haines' options, the
options become exercisable over five years in annual increments of 20%
beginning one year after the date of grant. Mr. Haines' options become
exercisable in five annual installments, subject to meeting certain
Corporation performance standards; if such standards are not met, Mr.
Haines' option will become exercisable on June 26, 2004. The Option
Committee has the right to accelerate the exercisability of any of the
options.
(3) The potential realizable value is the product of (a) the difference
between: (i) the product of the per-share market price at the time of the
grant and the sum of 1 plus the adjusted stock price appreciation rate
(i.e., the assumed rate of appreciation compounded annually over the term
of the option) and (ii) the per-share exercise price of the option; and
(b) the number of securities underlying the grant at fiscal year-end. The
dollar amounts under these columns are the result of calculations at 0%
and the 5% and 10% assumed rates of appreciation prescribed by the
Securities and Exchange Commission and, therefore, are not intended to
forecast possible future appreciation, if any, of the market price of the
Corporation's Common Shares. The actual value that any Named Executive
Officer may realize, if any, will depend on the amount by which the market
price of the Common Shares at the time of exercise exceeds the exercise
price.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND
OPTION VALUES AT DECEMBER 31, 1997
None of the Named Executive Officers exercised options in 1997. The
following table provides information as to the value of options held by the
Named Executive Officers at year-end measured in terms of the closing price of
a Common Share on December 31, 1997 ($12.1875 per share).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF THE UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED OPTIONS AT DEC. 31, 1997 (#) DEC. 31, 1997 ($)(2)
NAME EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Peter C. Haines......... -- -- 213,653/238,000 $1,354,026/$312,375
William S. Hurley....... -- -- 42,730/5,000 77,448/2,188
Raymond Giannelli....... -- -- 21,365/21,000 87,065/9,188
Karen A. Slein.......... -- -- 10,683/5,000 19,363/2,188
J. Raymond Elliott...... -- -- 25,000/0 54,688/0
</TABLE>
- --------
(1) Value realized is the difference between the market price of a Common
Share on the date of exercise and the exercise price of the option,
multiplied by the number of Common Shares underlying the option.
(2) Value of unexercised "in-the-money" options is the difference between the
market price of a Common Share on December 31, 1997 and the exercise price
of the option, multiplied by the number of Common Shares underlying the
option.
EMPLOYMENT AGREEMENTS
The Corporation has entered into employment agreements with each of the
executive officers named in the Summary Compensation Table. Under these
agreements, the employment may be terminated with or without cause at any
time. In the event that the Corporation terminates the officer's employment
other than "for cause", the Corporation is obligated to continue normal salary
payments for up to one year. The employment agreements of the executive
officers other than Mr. Haines provide that upon a change of control, as
defined, the officer may resign and continue to receive salary for up to six
months. Pursuant to the agreement, each officer has agreed not to compete with
the Corporation during his employment and for a period of two years
thereafter.
J. Raymond Elliott is the former President and Chief Executive Officer of
the Corporation. The consummation of the Merger constituted a "change of
control" as defined in Mr. Elliott's employment agreement with the
Corporation. Accordingly, as provided in the employment agreement, his stock
options and restricted stock grants fully vested and Mr. Elliott exercised his
right to terminate employment. Pursuant to the employment agreement, he was
entitled to receive, upon termination of employment due to a change in
control, an amount equal to 2.99 multiplied by his base salary, payable over a
24-month period. The Corporation chose instead to satisfy this obligation by
making a discounted, lump sum payment of $803,413.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 1997, information with
respect to the number of Common Shares of the Corporation beneficially owned
by each director and nominee for director of the Corporation, by each of the
Named Executive Officers identified herein under the caption "Summary
Compensation Table" other than Mr. Elliott (who is no longer employed by the
Company and for whom the number of Common Shares beneficially owned, if any,
is unknown), and by all directors and executive officers of the Corporation as
a group. Except as otherwise indicated, all shares are owned directly.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------------- --------
<S> <C> <C>
UM Holdings, Ltd. .............................. 4,178,056(1) 48.2%
56 Haddon Avenue
Haddonfield, New Jersey 08033
Surgical Appliance Industries, Inc.(2).......... 529,600 6.1
3960 Rosslyn Drive
Cincinnati, Ohio 45209
John Aglialoro, Chairman(3)..................... 4,181,722(4) 48.2
Joan Carter, Vice Chair(3)...................... 4,178,805(4) 48.2
Peter C. Haines, President, CEO, Director
Nominee........................................ 213,653(5) 2.4
William S. Hurley, Vice President--Chief
Financial Officer.............................. 42,730(5) *
Raymond Giannelli, Vice President--Research &
Development.................................... 21,365(5) *
Karen A. Slein, Vice President--Human
Resources...................................... 10,683(5) *
James H. Carll, Director........................ 2,749 *
Kay Knight Clarke, Director..................... 2,628 *
Arthur W. Hicks, Jr., Director.................. 43,479(5) *
Thomas W. Kahle, Director....................... 9,617(5) *
Jerry Lee, Director............................. 10,022(5) *
Alan H. Weingarten, Director.................... 5,616 *
All directors, nominees and executive officers
as a group
(consisting of 13 persons)..................... 4,545,013(5) 50.4%
</TABLE>
- --------
* Less than 1%
(1) Represent shares owned by its wholly-owned subsidiaries, UM Equity Corp.
(4,173,056 shares) and UM Investment Corporation (5,000 shares). These
shares have been pledged to a financial institution to secure a loan to UM
Holdings, Ltd. in the normal course of its business, which pledge could
result in a change of control of the Corporation.
(2) The information concerning Surgical Appliance Industries, Inc. was
provided by the shareholder. The Corporation assumes no responsibility for
the accuracy of such information. The natural person exercising voting and
investment power over such shares is L. Thomas Applegate, President of
Surgical Appliance Industries, Inc.
(3) Mr. Aglialoro and Ms. Carter's address is the same as UM.
(4) Includes 4,178,056 shares beneficially owned by UM Holdings, Ltd., of
which Mr. Aglialoro and Ms. Carter are the principal stockholders and act
as executive officers and directors. While Mr. Aglialoro and Ms. Carter
are married, each has sole voting and investment power with respect to his
or her shares of Common Stock, and the amount next to each person's name
reflects the number of shares owned by such person and excludes shares
owned by the other.
(5) Includes shares which the following persons have the right to acquire
within sixty days through the exercise of stock options: Mr. Haines,
213,653 shares; Mr. Hurley, 42,730 shares; Mr. Giannelli, 21,365 shares;
Ms. Slein, 10,683 shares; Mr. Hicks, 42,730 shares; Mr. Kahle, 2,000
shares; Mr. Lee, 4,273 shares. The number of shares which all directors
and executive officers as a group have the right to acquire within sixty
days is 337,434 shares of Company Common Stock. In each case the percent
of class is calculated on the basis that such shares are deemed
outstanding. No voting or investment power exists with respect to shares
prior to acquisition.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of l934 requires the
Corporation's officers and directors, and any persons who own more than ten
percent of the Corporation's Common Shares to file reports of initial
ownership of the Corporation's Common Shares and subsequent changes in that
ownership with the Securities and Exchange Commission and the American Stock
Exchange. Officers, directors and greater than ten-percent beneficial owners
are also required to furnish the Corporation with copies of all Section 16(a)
forms they file. Based solely upon a review of the copies of the forms
furnished to the Corporation, or written representations from certain
reporting persons that no Forms 5 were required, the Corporation believes that
during 1997 all Section 16(a) filing requirements were complied with, except
that reports for two transactions, effectuated on the same day by UM
Investment Corp., were filed late by UM, Mr. Aglialoro and Ms. Carter.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR 1999 ANNUAL MEETING
Any proposals by a shareholder intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Corporation no later than
December 4, 1998 and be in compliance with applicable Securities and Exchange
Commission regulations, for inclusion in the Corporation's proxy statement
relating to such meeting.
The Corporation's by-laws provide that any shareholder entitled to vote for
the election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage pre-paid, to the Secretary of the Corporation not later than (i) with
respect to an election held at an annual meeting of shareholders, 90 days in
advance of such meeting and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. A copy of the pertinent by-law provision,
which sets forth additional requirements for the form of such notice, is
available on request to the Corporate Secretary, Cybex International, Inc., 10
Trotter Drive, Medway, Massachusetts 02053.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP, independent public
accountants, to audit the financial statements of the Corporation for the
fiscal year ending December 31, 1998. Representatives of Arthur Andersen LLP
are expected to attend the 1998 Annual Meeting of Shareholders of the
Corporation and will be afforded an opportunity to make a statement and to
respond to appropriate questions.
On September 10, 1997, the Corporation engaged Arthur Andersen LLP,
independent certified public accountants, as the Corporation's principal
accountant to audit the Corporation's financial statements for the year ending
December 31, 1997. Such new accounting firm was engaged in replacement of
Ernst & Young LLP, independent auditors, who had previously been engaged for
the same purpose, and whose dismissal was effective the same date. The
decision to change accountants was approved by the Audit Committee of
Corporation's Board of Directors.
The reports of Ernst & Young LLP on the Corporation's financial statements
for the 1996 and 1995 fiscal years did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audits of the
Corporation's financial statements for each of the two fiscal years ended
December 31, 1996, and in the subsequent interim period, there were no
disagreements with Ernst & Young LLP on any matters of accounting principles
or practices, financial statement disclosure or auditing scope and procedures,
which, if not resolved to the satisfaction of and Ernst & Young LLP, would
have caused Ernst & Young LLP to make a reference to the matter in their
report.
13
<PAGE>
SOLICITATION OF PROXIES
Proxies may be solicited by directors, officers and a small number of
regular employees of the Corporation personally or by mail, telephone,
telegraph or otherwise, but such persons will not be specially compensated for
such service. Banks and brokers will be requested to solicit proxies from
their customers, where appropriate, and the Corporation will reimburse them
for their reasonable expenses. The cost of such solicitation will be borne by
the Corporation.
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
meeting other than the election of directors and does not intend to bring any
other matters before the meeting. However, if other matters properly come
before the meeting, it is intended that the holders of proxies solicited
hereby will vote thereon in their discretion.
By Order of the Board of Directors
Joan Carter
Secretary
Medway, Massachusetts
April 3, 1998
14
<PAGE>
REVOCABLE PROXY
CYBEX INTERNATIONAL, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1998 ANNUAL MEETING OF SHAREHOLDERS
PROXY FOR HOLDERS OF COMMON STOCK
Proxy Solicited on Behalf of The Board of Directors
The undersigned hereby appoints PETER C. HAINES, WILLIAM S. HURLEY and JAMES
H. CARLL, or any of them, with full power of substitution, the proxy of the
undersigned to represent the undersigned at the Annual Meeting of Shareholders
of CYBEX International, Inc. to be held on May 5, 1998, or at any adjournment or
postponement thereof, and to vote the number of shares of the Common Stock of
CYBEX International, Inc. which the undersigned would be entitled to vote if
personally present.
COMMON
Please be sure to sign and date Date___________________
this Proxy in the box below.
______________________________________________________________________________
______________________________________________________________________________
Shareholder sign above Co-holder (if any) sign above
With- For All
For hold Except
1. The election as directors of all nomi-
nees listed (except as marked to the [ ] [ ] [ ]
contrary below):
James H. Carll Peter C. Haines Arthur W. Hicks, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominees, mark
"For All Except" and write that nominee's name in the space provided below.
________________________________________________________________________________
2. In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, shares of the Common
Stock represented by this proxy will be voted FOR the election of the nominees
listed above. This proxy may be revoked at any time prior to the time it is
voted.
When signing the proxy, please date it and take care to have the signature
conform to the shareholder's name as it appears on this proxy. If shares are
registered in the names of two or more persons, each person should sign.
Executors, administrators, trustees and guardians should so indicate when
signing.
You are urged to sign and return your proxy without delay in the return
envelope provided for that purpose which requires no postage if mailed in the
United States.
________________________________________________________________________________
Detach above card, sign, date and mail in postage paid envelope provided.
CYBEX INTERNATIONAL, INC.
________________________________________________________________________________
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
________________________________________________________________________________
<PAGE>
REVOCABLE PROXY
CYBEX INTERNATIONAL, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1998 ANNUAL MEETING OF SHAREHOLDERS
PROXY FOR HOLDERS OF COMMON STOCK
Proxy Solicited on Behalf of The Board of Directors
The undersigned hereby appoints PETER C. HAINES, WILLIAM S. HURLEY and JAMES
H. CARLL, or any of them, with full power of substitution, the proxy of the
undersigned to represent the undersigned at the Annual Meeting of Shareholders
of CYBEX International, Inc. to be held on May 5, 1998, or at any adjournment or
postponement thereof, and to vote the number of shares of the Common Stock of
CYBEX International, Inc. which the undersigned would be entitled to vote if
personally present.
ESOP
Please be sure to sign and date Date___________________
this Proxy in the box below.
______________________________________________________________________________
______________________________________________________________________________
Shareholder sign above Co-holder (if any) sign above
With- For All
For hold Except
1. The election as directors of all nomi-
nees listed (except as marked to the [ ] [ ] [ ]
contrary below):
James H. Carll Peter C. Haines Arthur W. Hicks, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominees, mark
"For All Except" and write that nominee's name in the space provided below.
________________________________________________________________________________
2. In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, shares of the Common
Stock represented by this proxy will be voted FOR the election of the nominees
listed above. This proxy may be revoked at any time prior to the time it is
voted.
When signing the proxy, please date it and take care to have the signature
conform to the shareholder's name as it appears on this proxy. If shares are
registered in the names of two or more persons, each person should sign.
Executors, administrators, trustees and guardians should so indicate when
signing.
You are urged to sign and return your proxy without delay in the return
envelope provided for that purpose which requires no postage if mailed in the
United States.
________________________________________________________________________________
Detach above card, sign, date and mail in postage paid envelope provided.
CYBEX INTERNATIONAL, INC.
________________________________________________________________________________
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
________________________________________________________________________________
