SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
SCIENTIFIC TECHNOLOGIES INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SCIENTIFIC TECHNOLOGIES INCORPORATED
6550 Dumbarton Circle
Fremont, California 94555
(510) 608-3400
______________
Notice of Annual Meeting of Stockholders
To Be Held May 28, 1998
______________
To the Stockholders of SCIENTIFIC TECHNOLOGIES INCORPORATED:
The Annual Meeting of Stockholders of SCIENTIFIC TECHNOLOGIES
INCORPORATED, an Oregon Corporation (the "Company"), will be held at the
offices of the Company, 6550 Dumbarton Circle, Fremont, California, on
Thursday, May 28, 1998 at 4:00 p.m., for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants.
3. To consider and act upon a proposal to approve the Company's 1997
Stock Plan (the "Stock Plan") adopted by the Company's Parent,
Scientific Technology, Incorporated, a California corporation (the
"Parent"), wherein the Company will reserve for issuance an
aggregate of up to 1,000,000 shares thereunder.
4. To consider and act upon a proposal to approve the Company's 1997
Employee Stock Purchase Plan (the "ESPP"; and collectively with
the Stock Plan, the "Plans") adopted by the Parent, wherein the
Company will reserve for issuance an aggregate of up to 600,000
shares thereunder.
The Board of Directors has fixed the close of business on April 6,
1998 as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in
person. If you do not expect to attend in person, please promptly mark,
date, sign, and return the enclosed proxy. Any stockholder attending the
meeting may vote in person even if such stockholder has previously
returned a proxy.
James A. Lazzara
Secretary
April 21, 1998
SCIENTIFIC TECHNOLOGIES INCORPORATED
6550 Dumbarton Circle
Fremont, California 94555
(510) 608-3400
______________
PROXY STATEMENT
______________
Annual Meeting of Stockholders
May 28, 1998
______________
General
The accompanying proxy is solicited by and on behalf of the Board
of Directors of Scientific Technologies Incorporated, an Oregon
corporation (the "Company"), to be used at the Company's Annual Meeting
of Stockholders (the "Annual Meeting") to be held at the offices of the
Company, 6550 Dumbarton Circle, Fremont, California, on Thursday, May
28, 1998, at 4:00 p.m., and at any adjournment thereof. This proxy
statement and the accompanying proxy and annual report are being first
mailed to holders of the common stock of Scientific Technologies
Incorporated (the "Common Stock") on or about April 22, 1998.
Record Date and Outstanding Shares
Only holders of record of shares of the Common Stock at the close
of business on April 6, 1998 (the "Record Date") will be entitled to
notice of, and to vote at, the Annual Meeting. As of the Record Date,
9,634,570 shares of Common Stock were issued and outstanding.
Revocability of Proxies
When the enclosed proxy is properly executed and returned, the
shares it represents will be voted at the meeting in accordance with any
directions noted thereon, and if no directions are indicated, the shares
it represents will be voted in favor of the proposals set forth in the
notice attached hereto. Any stockholder signing and delivering a proxy
may revoke it at any time before it is voted by filing with the
Secretary of the Company a written revocation or a duly executed proxy
bearing a date later than the date of the proxy being revoked. Any
stockholder attending the meeting in person may withdraw his proxy and
vote his shares.
Quorum
A quorum for the Annual Meeting will consist of the holders,
present in person or represented by proxy, of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual
Meeting.
Voting
All shares represented by proxies will be voted in accordance with
stockholder directions. If the proxy is signed and returned without any
direction given, shares will be voted in accordance with the
recommendations of the Board of Directors. The Company is not aware, as
of the date hereof, of any matters to be voted on at the Annual Meeting
other than as stated in this Proxy Statement and the accompanying Notice
of Annual Meeting of Stockholders. If any other matters are properly
brought before the Annual Meeting, the enclosed Proxy gives
discretionary authority to the persons named therein to vote the shares
in their best judgment.
Each share of Common Stock outstanding on the Record Date will be
entitled to one vote at the Annual Meeting. Under applicable law and in
accordance with the Company's Restated Articles of Incorporation and
Restated Bylaws, if a quorum exists at the Annual Meeting: (i) the six
nominees for election of directors who receive the greatest number of
votes cast for the election of directors by the shares present in person
or by proxy and entitled to vote shall be elected directors; (ii) the
proposal to ratify the selection of Price Waterhouse LLP as independent
accountants of the Company will be approved if the number of votes cast
in favor of such proposal exceeds the number of votes cast against it;
(iii) the proposal to ratify the Stock Plan will be approved if the
number of votes cast in favor of such proposal exceeds the number of
votes cast against it; and (iv) the proposal to ratify the ESPP will be
approved if the number of votes cast in favor of such proposal exceeds
the number of votes cast against it. An abstention with respect to the
election of directors will be counted neither in favor of nor against
the nominees. In addition, abstentions will have no effect on the other
proposals presented for stockholder approval as they will neither count
as votes for nor votes against such proposal.
Brokers who hold shares for the accounts of their clients may vote
such shares either as directed by their clients or in their own
discretion if permitted by the stock exchange or other organization of
which they are members. Certain proposals other than the election of
directors are "non-discretionary" and brokers who have received no
instructions from their clients do not have discretion to vote on those
items. When brokers vote proxies on some but not all of the proposals at
a meeting, the missing votes are referred to as "broker non-votes."
Broker non-votes are included in determining the presence of a quorum at
the meeting, but they are not considered "shares present" for voting
purposes and have no impact on the outcome of such proposals other than
to reduce the number of favorable votes necessary to approve the
proposal. Brokers do not have discretion to vote on Proposals 2, 3 and 4
accordingly, there will be no broker non-votes on this proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Only stockholders of record at the close of business on the Record
Date will be entitled to vote at the 1998 Annual Meeting. On that date,
there were 9,634,570 shares of Common Stock outstanding and entitled to
vote. Each stockholder is entitled to one vote for each share of Common
Stock entitled to vote at the meeting, including for the election of
Directors.
The following table indicates the number of shares of Common Stock
beneficially owned as of April 6, 1998 by each person known to the
Company to own more than 5% of the Company's outstanding Common Stock,
by each of the Named Executive Officers (as defined below) and by all
officers and directors as a group.
The address of the individuals named is the address of the
Company.
<TABLE>
<CAPTION>
Amount and Nature
Of Beneficial Percent
Title of Class Name of Beneficial Owner Ownership of Class
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common $.001 Par Value Anthony R. Lazzara 5,322,811 Indirect (1) 55 (1)
Common $.001 Par Value Joseph J. Lazzara 869,635 Indirect (1) 9 (1)
Common $.001 Par Value James A. Lazzara 949,202 Indirect (1) 10 (1)
Common $.001 Par Value James A. Ashford 755,631 Indirect (1) 8 (1)
Common $.001 Par Value All Officers and 7,897,279 Indirect (1) 82 (1)
Directors as a Group 43,376 Indirect (2) - (2)
</TABLE>
(1)Scientific Technology Incorporated (the "Parent") was the stockholder
of record of 8,348,075 shares of the Company (87%) as of the Record
Date. As of such date, the stockholders of the Parent were as follows:
Anthony R. Lazzara (64%); Joseph J. Lazzara (10%); James A. Lazzara
(11%); James A Ashford (9%); and other members of the Lazzara family
(6%). As a result of such share holdings, the individuals named in the
table may be deemed to indirectly own the number and percentage of
shares set forth opposite their respective names.
(2)Includes shares issuable pursuant to options held by Messrs. Stroup,
Vella, Webster, Frei, Ploshay and Faria.
ELECTION OF DIRECTORS
(Proposal No. 1)
Directors and Nominees
Six Directors are to be elected at the Annual Meeting. Each
elected director will serve until the 1998 Annual Meeting or until his
respective successor has been elected and qualified.
In the absence of instructions to the contrary, the shares
represented by a proxy delivered to the Board of Directors will be voted
for the six nominees named below. All nominees are anticipated to be
available for election and able to serve. However, if any such nominee
should decline or become unable to serve as a director for any reason,
votes will be cast instead for a substitute nominee, if any, designated
by the Board of Directors or, if none is so designated, votes will be
cast according to the judgment in such matters of the person or persons
voting the proxy.
The following nominees are all presently members of the Board of
Directors. The address of each nominee is the address of the Company.
Nominees
The names of the nominees, and certain information about them, are set
forth below:
Nominees
The names of the nominees, and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
Held Position
Name Position With Company Since Age
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Anthony R. Lazzara Chairman of the Board September 1984 67
Joseph J. Lazzara Director September 1984 46
President June 1989
Chief Executive Officer June 1993
and Treeasurer September 1984
James A. Lazzara Director and Secretary September 1984 41
Senior Vice-President June 1989
James A. Ashford Director September 1988 46
Vice-President, Operations June 1989
Carl H. Frei Director September 1988 64
Bernard J. Ploshay Director September 1988 76
</TABLE>
Business Experience of Directors
Anthony R. Lazzara has been Chairman of the Board of Directors of
the Company since September 20, 1984. He also served as the Company's
Chief Executive Officer from September 20, 1984 to June 17, 1993, and
President from September 20, 1984 until June 22, 1989. He is the founder
and principal stockholder of Scientific Technology Incorporated (the
"Parent"), and has been its Chairman of the Board and President since
1971. He received an L.L.B. and an honorary Juris Doctorate from DePaul
University.
Joseph J. Lazzara has been the Company's Chief Executive Officer
since June 17, 1993, President since June 22, 1989, and Treasurer and a
director of the Company since September 21, 1984. He served as Vice
President of the Company from September 21, 1984 until June 22, 1989. He
also has served as Treasurer and a director of the Parent since August
1981. Prior to 1981, he was employed by Hewlett-Packard Company in
Process and Engineering Management. Mr. Lazzara received a Bachelor of
Science in Engineering from Purdue University and a Masters in Business
Administration from Santa Clara University. He is a son of Anthony R.
Lazzara.
James A. Lazzara has been the Senior Vice President of the Company
since June 22, 1989, and has been the Secretary and a director of the
Company since September 21, 1984. He served as Vice President of the
Company from 1987 to June 22, 1989. He is the Secretary, Vice President
and a director of the Parent, having joined the Company in November
1979. Mr. Lazzara received a Bachelor of Science from California
Polytechnic State University. He is a son of Anthony R. Lazzara.
James A. Ashford has been the Vice President of Operations of the
Company since June 22, 1989 and has been a Director of the Company since
September 27, 1988. He has also served as Vice President and General
Manager of the Optical Sensor and Datricon Divisions of the Company
since March 1986. From 1980 to March 1986, Mr. Ashford was employed by
Smith-Kline Beckman, a medical instrumentation manufacturer, most
recently as Marketing Administration Manager and, prior to that, as
Materials Manager. He holds a Bachelor of Science from San Diego State
University. Mr. Ashford is a son-in-law of Anthony R. Lazzara.
Carl H. Frei has been a director of the Company since September
27, 1988. From 1970 to March 1989 he was employed by Sonoco Fibre Drum
Co., a manufacturer of packaging products, as Regional General Manager,
after which time he retired. He is presently employed as a sales
executive by Greif Bros. Corporation., a manufacturer of packaging
products.
Bernard J. Ploshay has been a director of the Company since
September 27, 1988. He has been retired since 1981. From 1973 to 1981,
Mr. Ploshay was employed by the Parent as its Vice President of
Manufacturing.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997, there were four
meetings of the Board of Directors. No director attended fewer than 75%
of the meetings of the Board of Directors. The Board of Directors has
three committees: the Audit Committee, the Executive Committee and the
Compensation Committee.
The Audit Committee, comprised of directors Bernard L. Ploshay and
Carl H. Frei, is authorized to conduct appropriate reviews of all
related-party transactions and report to the Board its findings
regarding any potential conflict of interests of the Company and related
parties; to review the independent audits of the financial condition of
the Company for the purpose of recommending, if necessary, changes in
accounting procedures and practices; to conduct appropriate reviews and
audits as ordered or directed by the Board of Directors; and to perform
such other activities as are designated by the Board. The Audit
Committee held one meeting in 1997.
The Compensation Committee, comprised of directors Anthony R.
Lazzara, Bernard J. Ploshay and Carl H. Frei, is authorized to recommend
the amount and nature of compensation to be paid to the Company's
officers and directors and to recommend stock options to be granted to
Company employees and consultants by the Board of Directors. The
Compensation Committee held one meeting in 1997.
The Executive Committee, comprised of Directors Anthony R.
Lazzara, Joseph J. Lazzara, James A. Lazzara and James Ashford, is
authorized to represent and act on behalf of the full Board of Directors
in all business matters, except: amending the Company's Restated
Articles of Incorporation; adopting a plan of merger or consolidation;
recommending to the stockholders the sale, lease, exchange, mortgage,
pledge or other disposition of all or substantially all the property and
assets of the corporation other than in the usual and regular course of
its business; recommending to the stockholders a voluntary dissolution
of the corporation or a revocation thereof; amending the Company's
Restated By-laws; or taking any other action prohibited by the Oregon
Business Corporation Act. The Executive Committee held one meeting in
1997.
Compensation of Directors
Members of the Board who are not also officers or employees of the
Company are paid a fee of $750 per meeting for services as director.
Directors receive no additional compensation for committee participation
or attendance at committee meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Term as Held
Name Position With Company Director Position Since Age
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anthony R. Lazzara Chairman of the Board One Year September 1984 67
Joseph J. Lazzara Director One Year September 1984 46
President June 1989
Chief Executive Officer June 1993
and Treeasurer September 1984
James A. Lazzara Director and Secretary One Year September 1984 41
Senior Vice-President June 1989
James A. Ashford Director One Year September 1988 46
Vice-President, Operations June 1989
Carl H. Frei Director One Year September 1988 64
Bernard J. Ploshay Director One Year September 1988 76
Frank Webster Vice President, Engineering March 1991 54
Richard O. Faria Vice President, Finance and March 1991 58
Administration
John S. Stroup Vice President, Marketing January 1998 31
James M. Vella Controller and March 1991 41
Assistant Secretary May 1997
</TABLE>
Each officer named above is expected to be reappointed at the
Board of Directors Meeting to be held on May 28, 1998 following the
Annual Meeting.
For the biographical summary of Anthony R. Lazzara , Joseph J.
Lazzara, James A. Lazzara and James A. Ashford, see "Election of
Directors - Business Experience of Directors".
Frank Webster joined the Parent as Corporate Engineering Manager
in 1985. He has been the Parent's Vice President, Engineering since
1986. On March 22, 1991, he was elected Vice President, Engineering of
the Company. He has a Bachelor of Science in Engineering, and a Masters
of Science in Computer Science, from the University of California at Los
Angeles.
Richard O. Faria joined the Parent as Corporate Controller in
April 1987. He has been the Controller of the Parent since that time. He
was elected Vice President and Controller of the Company on March 22,
1991, and was appointed Vice President, Finance and Administration in
March 1996. Prior to 1987, Mr. Faria was Corporate Controller of Kevex
Corporation, an analytical instrument manufacturer, for seven years. He
holds a Bachelor of Arts in Business Administration from Golden Gate
University.
James M. Vella joined the Company as Accounting Manager of the
Optical Sensor Division in June 1986. In June 1987, he was appointed
Controller of that division. He was appointed Controller of the Company
in March 1996. In May of 1997, he was elected Assistant Secretary. Prior
to 1986, Mr. Vella held several positions with Smith-Kline Beckman, a
medical instrumentation manufacturer. He holds a Bachelor of Science in
Business Administration from California Polytechnic University in San
Luis Obispo.
John S. Stroup was appointed Vice President, Marketing in January
1998. From 1996 to 1998 he was Vice President and General Manager of the
Rockwell Automation Motion Control Business. Prior to joining Rockwell,
he held various positions at Parker Hannifin Compumotor division,
including Marketing Manager, Product Planning Manager and Field
Application Engineer from 1988 to 1996. He holds a Bachelor of Science
in Mechanical Engineering from Northwestern University and a Masters of
Business Administration in Finance and Marketing from the University of
California at Berkeley.
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth compensation
paid by the Company for services rendered during the fiscal years 1997,
1996 and 1995 by the Chief Executive Officer and four other most highly
compensated executive officers of the Company, whose aggregate salary
and bonus exceeded $100,000 in 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Salary Bonus
Name and Paid by Paid by
Principal Position Year Company Parent
- ---------------------------------------------------------
<S> <C> <C> <C>
Anthony R. Lazzara 1997 $412,670 None
Chairman 1996 $434,204 $50,000
1995 $389,444 $50,000
Joseph J. Lazzara 1997 $218,791 None
President, CEO 1996 $209,231 $50,000
1995 $186,735 $50,000
James A. Lazzara 1997 $206,343 None
Vice-President 1996 $233,153 $50,000
1995 $202,310 $50,000
James A. Ashford 1997 $248,395 None
Vice-President 1996 $257,895 $50,000
1995 $172,704 $50,000
Frank Webster 1997 $174,818 None
Vice-President 1996 $127,661 None
1995 $138,381 None
</TABLE>
The columns entitled "Bonus Paid by Company", "Other Annual
Compensation", the caption "Long-Term Compensation", and the columns
entitled "Restricted Stock Awards", "Securities Underlying
Options/SARs", "LTIP Payouts" and "All Other Compensation" were omitted
because no such compensation was paid or awarded during the relevant
periods.
Option/SAR Grants in Last Fiscal Year
In June 1997, Frank Webster was granted an option to purchase 5,000
shares of STI common stock. These shares vest at the rate of 25% per
year in 1998, 1999, 2000 and 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
None
Long-Term Incentive Plans - Awards in Last Fiscal Year
None
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
None
Compensation Committee Interlocks and Insider Participation
Anthony R. Lazzara, the Company's Chairman of the Board of
Directors, is a member of the Compensation Committee.
COMPENSATION COMMITTEE REPORT
During 1997, the Compensation Committee of the Board of Directors
(the "Committee") included Anthony R. Lazzara, Carl H. Frei and Bernard
J. Ploshay. The Committee is responsible for administering the Company's
compensation and employee benefit plans. In addition to setting policies
regarding compensation of all employees, the Committee reviews and
approves compensation for the executive officers. Decisions made by the
Compensation Committee relating to compensation of executive officers
are reviewed by the full Board of Directors.
The Company's executive compensation policies have been developed
to meet the following objectives:
1. Attract and retain executives critical to the Company's long-
term success;
2. Reward key executives for their contributions to the
development and successful execution of strategies
relevant to their functional responsibilities; and
3. Motivate key executives to make decisions and take actions that
achieve the Company's
strategic performance goals and increase the long-term value
of the Common Stock.
Base salaries for all executives are reviewed annually. In
evaluating executive salaries, the Committee considers relevant American
Electronics Association Executive Compensation surveys of compensation
paid at companies of similar size and geographic location to the
Company. The Committee also considers an executive's individual
performance during the prior year. Factors that affect an executive's
performance rating focus on the executive's success in contributing to
the Company's short- and long-term objectives. Short-term objectives
include sales growth from new and existing products and levels of gross
profit and gross margin, operating income and operating income margin,
and net earnings and net earnings margin. Long-term objectives include
the timely development of new products, enhancements and improvements to
existing products, identification of new markets for the Company's
products, development and execution of plans to address identified
market opportunities, adequate control over and the efficiencies of the
Company's assets, and share price appreciation. The Company does not set
relative weights to the factors it considers in establishing base
salaries. In establishing the Chief Executive Officer's compensation,
the Committee pursues the same objectives and policies that apply to the
Company's other executive officers.
Compensation Committee
Anthony R. Lazzara
Carl H. Frei
Bernard J. Ploshay
PERFORMANCE GRAPH
The following graph compares the cumulative total return to
stockholders of the Common Stock with the cumulative total return of
the NASDAQ National Market and the Index of NASDAQ Non-Financial Stocks
for the period beginning on December 31, 1992 and ending on December 31,
1997.
Compares 5-Year Cumulative Return
Among Scientific Technologies Inc.,
NASDAQ Non Financial Stocks Index and the NASDAQ National Market
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- ------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Scientific Technologies Inc. $100.00 $331.03 $234.48 $634.48 $413.79 $531.03
NASDAQ National Market $100.00 $114.79 $112.21 $158.68 $195.19 $239.63
NASDAQ Non_Financial Stocks $100.00 $115.45 $111.02 $154.71 $187.97 $220.77
</TABLE>
Assumes $100 invested on December 31, 1992 in the Common Stock,
the NASDAQ National Market and the NASDAQ Non-Financial stocks, with all
dividends reinvested. Stock price performance shown above for the Common
Stock is historical and not necessarily indicative future price
performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Scientific Technology Incorporated (the "Parent") provides certain
management, marketing and sales services to the Company. The costs are
allocated to the Company based on the percentage of the Company's sales
to total sales of the Parent and its subsidiaries. The amount allocated
to the Company for 1997 was $824,000.
The Company leases approximately 85,000 square feet in a 95,000
square foot facility owned by an affiliate of the Parent. The lease term
is for ten years. Overhead costs are allocated primarily on the basis of
square footage utilized.
Additionally, the Parent manages the Company's cash. The Company
utilizes a payable to or receivable from Parent account to record
activity including cash received, cash disbursed and amounts owed to the
Parent for allocated charges and dividends. The net effect of
transactions with the Parent resulted in a zero balance at December 31,
1997. The Company pays interest on payables to Parent at the Company's
average interest rate on bank borrowings. Interest expense amounted to
$34,000 in 1997.
Certain of the Company's officers are employed by the Parent. In
addition, the Company employs certain officers directly.
PROPOSAL FOR THE RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal 2)
Unless instructed to the contrary, shares represented by a duly
executed proxy in the form accompanying this Proxy Statement will be
voted for the ratification of the appointment of Price Waterhouse LLP as
independent accountants of the Company for 1998. Price Waterhouse has
audited the accounts of the Company since 1984. In the event this
ratification of the appointment of Price Waterhouse LLP is not approved
by a majority of the votes cast, the selection of other auditors will be
considered and determined by the Board of Directors. The Board of
Directors has unanimously approved the appointment of Price Waterhouse
LLP as independent accountants of the Company and its subsidiaries.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
PROPOSAL TO APPROVE THE 1997 STOCK PLAN
(Proposal 3)
On August 14, 1997, the Board of Directors of the Parent, and the
Board of Directors of the Company adopted the 1997 Stock Plan (the
"Plan") and reserved 1,000,000 shares of Common Stock of the Company,
including any reserved but unissued or any forfeited shares under the
1987 Stock Option Plan for issuance thereunder subject to stockholder
approval of the Parent's and the Company's stockholders. As of April
13, 1998, options or rights to purchase 16,000 shares of Common Stock
had been granted pursuant to the Stock Plan, no options had been
exercised and 682,758 shares remained available for grants.
At the annual meeting, the Company's stockholders are being asked
to approve the Stock Plan and the reservation of shares thereunder.
Summary of the 1997 Stock Plan
General. The purpose of the Stock Plan is to attract and retain
the best available personnel for positions of substantial responsibility
with the Company and the Parent (collectively the "Company"), to provide
additional incentive to the employees, directors and consultants of the
Company and to promote the success of the Company's business. Options
and stock purchase rights may be granted under the Stock Plan. Options
granted under the Stock Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or nonstatutory stock options.
Administration. The Stock Plan may generally be administered by
the Board of Directors of the Parent (for purposes of this Proposal 3,
the "Board") or the Committee appointed by the Board (as applicable, the
"Administrator"). The Administrator may make any determinations deemed
necessary or advisable for the Stock Plan.
Eligibility. Nonstatutory stock options and stock purchase rights
may be granted under the Stock Plan to employees, directors and
consultants of the Company, the Parent or any subsidiary of the Company.
Incentive stock options may be granted only to employees. The
Administrator, in its discretion, selects the employees, directors and
consultants to whom options and stock purchase rights may be granted,
the time or times at which such options and stock purchase rights shall
be granted, and the number of shares subject to each such grant.
Limitations. Section 162(m) of the Code places limits on the
deductibility for federal income tax purposes of compensation paid to
certain executive officers of the Company. In order to preserve the
Company's ability to deduct the compensation income associated with
options and stock purchase rights granted to such persons, the Stock
Plan provides that no employee, director or consultant may be granted,
in any fiscal year of the Company, options and stock purchase rights to
purchase more than 250,000 shares of Common Stock. Notwithstanding this
limit, however, in connection with such individual's initial employment
with the Company, he or she may be granted options or stock purchase
rights to purchase up to an additional 250,000 shares of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a
stock option agreement between the Parent and the optionee, and is
subject to the following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise
price of options at the time the options are granted. The exercise
price of an incentive stock option may not be less than 100% of the fair
market value of the Common Stock on the date such option is granted;
provided, however, the exercise price of an incentive stock option
granted to a 10% Stockholder may not be less than 110% of the fair
market value of the Common Stock on the date such option is granted.
The fair market value of the Common Stock is generally determined with
reference to the closing sale price for the Common Stock (or the closing
bid if no sales were reported) on the last market trading day prior to
the date the option is granted.
(b) Exercise of Option; Form of Consideration. The
Administrator determines when options become exercisable, and may in its
discretion, accelerate the vesting of any outstanding option. The means
of payment for shares issued upon exercise of an option is specified in
each option agreement. The Stock Plan permits payment to be made by
cash, check, promissory note, other shares of Common Stock of the
Company (with some restrictions), cashless exercises, a reduction in the
amount of any Company liability to the optionee, any other form of
consideration permitted by applicable law, or any combination thereof.
(c) Term of Option. The term of an incentive stock option may
be no more than ten (10) years from the date of grant; provided that in
the case of an incentive stock option granted to a 10% Stockholder, the
term of the option may be no more than five (5) years from the date of
grant. No option may be exercised after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (including death or
disability), then all options held by the optionee under the Plan expire
on the earlier of (i) the date set forth in his or her notice of grant
or (ii) the expiration date of such option. The Stock Plan and the
option agreement may provide for a longer period of time for the option
to be exercised after the optionee's death or disability than for other
terminations. To the extent the option is exercisable at the time of
such termination, the optionee (or the optionee's estate or the person
who acquires the right to exercise the option by bequest or inheritance)
may exercise all or part of his or her option at any time before
termination.
(e) Nontransferability of Options: Unless otherwise determined
by the Administrator, options granted under the Stock Plan are not
transferable other than by will or the laws of descent and distribution,
and may be exercised during the optionee's lifetime only by the
optionee.
(f) Other Provisions: The stock option agreement may contain
other terms, provisions and conditions not inconsistent with the Stock
Plan as may be determined by the Administrator.
Stock Purchase Rights. In the case of stock purchase rights,
unless the Administrator determines otherwise, the Restricted Stock
Purchase Agreement shall grant the Parent a repurchase option
exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company or the Parent for any reason
(including death or disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be
the original price paid by the purchaser and may be paid by cancellation
of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
Adjustments Upon Changes in Capitalization. In the event that the
stock of the Company changes by reason of any stock split, reverse stock
split, stock dividend, combination, reclassification or other similar
change in the capital structure of the Company effected without the
receipt of consideration, appropriate adjustments shall be made in the
number and class of shares of stock subject to the Stock Plan, the
number and class of shares of stock subject to any option or stock
purchase right outstanding under the Stock Plan, and the exercise price
of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised
options or stock purchase rights will terminate. The Administrator may,
in its discretion provide that each optionee shall have the right to
exercise all of the optionee's options and stock purchase rights,
including those not otherwise exercisable, until the date ten (10) days
prior to the consummation of the liquidation or dissolution.
In connection with any merger, or asset sale of Parent, each
outstanding option or stock purchase right shall be assumed or an
equivalent option or right substituted by the successor corporation. If
the successor corporation refuses to assume the options and stock
purchase rights or to substitute substantially equivalent options and
stock purchase rights, the optionee shall have the right to exercise the
option or stock purchase right as to all the optioned stock, including
shares not otherwise exercisable. In such event, the Administrator
shall notify the optionee that the option or stock purchase right is
fully exercisable for fifteen (15) days from the date of such notice and
that the option or stock purchase right terminates upon expiration of
such period.
Amendment and Termination of the Stock Plan. The Board may amend,
alter, suspend or terminate the Stock Plan, or any part thereof, at any
time and for any reason. However, the Company shall obtain Stockholder
approval for any amendment to the Stock Plan to the extent necessary and
desirable to comply with applicable law. No such action by the Board or
stockholders may alter or impair any option or stock purchase right
previously granted under the Stock Plan without the written consent of
the optionee. Unless terminated earlier, the Stock Plan shall terminate
ten years from the date of its approval by the Stockholders of the
Company.
Federal Income Tax Consequences
Incentive Stock Options. An optionee who is granted an incentive
stock option does not recognize taxable income at the time the option is
granted or upon its exercise, although the exercise is an adjustment
item for alternative minimum tax purposes and may subject the optionee
to the alternative minimum tax. Upon a disposition of the shares more
than two years after grant of the option and one year after exercise of
the option, any gain or loss is treated as long-term capital gain or
loss. Net capital gains on shares held between 12 and 18 months may be
taxed at a maximum federal rate of 28%, while net capital gains on
shares held for more than 18 months may be taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains
and up to $3,000 against other income. If these holding periods are not
satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the
option exercise or (ii) the sale price of the shares. Any gain or loss
recognized on such a premature disposition of the shares in excess of
the amount treated as ordinary income is treated as long-term or short-
term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may
apply if the optionee is also an officer, director, or 10% stockholder
of the Company. Unless limited by Section 162(m) of the Code, the
Company is entitled to a deduction in the same amount as the ordinary
income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any
taxable income at the time he or she is granted a nonstatutory stock
option. Upon exercise, the optionee recognizes taxable income generally
measured by the excess of the then fair market value of the shares over
the exercise price. Any taxable income recognized in connection with an
option exercise by an employee of the Company is subject to tax
withholding by the Company. Unless limited by Section 162(m) of the
Code, the Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Upon a disposition of such
shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital
gain or loss, depending on the holding period. Net capital gains on
shares held between 12 and 18 months may be taxed at a maximum federal
rate of 28%, while net capital gains on shares held for more than 18
months may be taxed at a maximum federal rate of 20%. Capital losses are
allowed in full against capital gains and up to $3,000 against other
income.
Stock Purchase Rights. Stock purchase rights will generally be
taxed in the same manner as nonstatutory stock options. However,
restricted stock is generally purchased upon the exercise of a stock
purchase right. At the time of purchase, restricted stock is subject to
a "substantial risk of forfeiture" within the meaning of Section 83 of
the Code, because the Company may repurchase the stock when the
purchaser ceases to provide services to the Company. As a result of
this substantial risk of forfeiture, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will
recognize ordinary income on the dates when the stock is no longer
subject to a substantial risk of forfeiture (i.e., when the Company's
right of repurchase lapses). The purchaser's ordinary income is
measured as the difference between the purchase price and the fair
market value of the stock on the date the stock is no longer subject to
right of repurchase.
The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and begin his or her capital
gains holding period by timely filing, (i.e., within thirty days of the
purchase), an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the
stock on the date of purchase, and the capital gain holding period
commences on such date. The ordinary income recognized by a purchaser
who is an employee will be subject to tax withholding by the Company.
Different rules may apply if the purchaser is also an officer, director,
or 10% stockholder of the Company.
The foregoing is only a summary of the effect of federal income
taxation upon optionees, holders of stock purchase rights, and the
Company with respect to the grant and exercise of options and stock
purchase rights under the Stock Plan. It does not purport to be
complete, and does not discuss the tax consequences of the employee's or
consultant's death or the provisions of the income tax laws of any
municipality, state or foreign country in which the employee or
consultant may reside.
Vote Required and Recommendation
At the Annual Meeting, the stockholders are being asked to approve
the adoption of the Stock Plan. The affirmative vote of the holders of
a majority of the shares who vote at the Annual Meeting will be required
to approve the adoption of the Stock Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE COMPANY'S 1997 STOCK PLAN.
APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
(Proposal 4)
On August 14, 1997, the Board of Directors of the Company and the
Board of Directors of Parent adopted the 1997 Employee Stock Purchase
Plan (the "ESPP") and reserved 600,000 shares of Common Stock, plus any
shares available under the 1987 Employee Stock Purchase Plan (the "1987
Plan") as of the 1987 Plan's termination for issuance thereunder subject
to stockholder approval.
At the annual meeting, the stockholders are being asked to approve
the ESPP and the reservation of shares thereunder.
Summary of the 1997 Employee Stock Purchase Plan
General. The purpose of the ESPP is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll
deductions.
Administration. The ESPP may be administered by the Board of
Directors of the Parent (for purposes of this Proposal 3, (the "Board")
or a committee appointed by the Board. All questions of interpretation
or application of the ESPP are determined by the Board or its appointed
committee, and its decisions are final, conclusive and binding upon all
participants.
Eligibility. Each employee of the Company and the Parent
(collectively, the "Company") (including officers), whose customary
employment with the Company is at least twenty (20) hours per week and
more than five (5) months in any calendar year and who has been
continuously employed by the Company for at least six (6) consecutive
months, is eligible to participate in the ESPP; provided, however, that
no employee shall be granted an option under the ESPP (i) to the extent
that, immediately after the grant, such employee would own 5% of either
the voting power or value of the stock of the Company, or (ii) to the
extent that his or her rights to purchase stock under all employee stock
purchase plans of the Company accrues at a rate which exceeds $25,000
worth of stock (determined at the fair market value of the shares at the
time such option is granted) for each calendar year.
Offering Period. The ESPP is implemented by offering periods
lasting approximately three months in duration with a new offering
period commencing every three months. The first offering period is
scheduled to begin on the last trading day on or before July 1, 1998. To
participate in the ESPP, each eligible employee must authorize payroll
deductions pursuant to the ESPP. Such payroll deductions may not exceed
15% of a participant's compensation. Once an employee becomes a
participant in the ESPP, Common Stock will automatically will
automatically be purchased under the ESPP at the end of each offering
period, unless the participant withdraws or terminates employment
earlier and, the employee will automatically participate in each
successive offering period until such time as the employee withdraws
from the ESPP or the employee's employment with the Company terminates.
Purchase Price. The purchase price per share at which shares will
be sold in an offering under the ESPP is the lower of (i) 85% of the
fair market value of a share of Common Stock on the first day of an
offering period or (ii) 85% of the fair market value of a share of
Common Stock on the last day of each offering period. The fair market
value of the Common Stock on a given date is generally the closing sale
price of the Common Stock as reported on the NASDAQ National Market for
such date.
Payment of Purchase Price; Payroll Deductions. The purchase price
of the shares is accumulated by payroll deductions throughout the
offering period. The number of shares of Common Stock a participant may
purchase in each offering period is determined by dividing the total
amount of payroll deductions withheld from the participant's
compensation during that offering period by the purchase price;
provided, however, that a participant may not purchase more than 10,000
shares for each offering period. During the offering period, a
participant may discontinue his or her participation in the ESPP, and
may decrease or increase the rate of payroll deductions in an offering
period within limits set by the Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the ESPP, are withheld in whole percentages
only and are included with the general funds of the Company. Funds
received by the Company pursuant to exercises under the ESPP are also
used for general corporate purposes. A participant may not make any
additional payments into his or her account.
Withdrawal. A participant may terminate his or her participation
in the ESPP at any time by giving the Company a written notice of
withdrawal. In such event, the payroll deductions credited to the
participant's account will be returned, without interest, to such
participant. Payroll deductions will not resume unless a new
subscription agreement is delivered in connection with a subsequent
offering period.
Termination of Employment. Termination of a participant's
employment for any reason, including death, cancels his or her
participation in the ESPP immediately. In such event the payroll
deductions credited to the participant's account will be returned
without interest to such participant, his or her designated
beneficiaries or the executors or administrators of his or her estate.
Adjustments Upon Changes in Capitalization. In the event of any
changes in the capitalization of the Company effected without receipt of
consideration by the Company, such as a stock split, stock dividend,
combination or reclassification of the Common Stock, resulting in an
increase or decrease in the number of shares of Common Stock,
proportionate adjustments will be made by the Board in the shares
subject to purchase and in the price per share under the ESPP. In the
event of liquidation or dissolution of the Parent, the offering periods
then in progress will terminate immediately prior to the consummation of
such event unless otherwise provided by the Board. In the event of a
sale of all or substantially all of the assets of the Parent, or the
merger of the Parent with or into another corporation, each option under
the ESPP shall be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary of such
successor corporation. If the successor corporation refuses to assume
or substitute for the outstanding options, the offering period then in
progress will be shortened and a new exercise date will be set.
Amendment and Termination. The Board may at any time and for any
reason amend or terminate the ESPP, except that no such termination
shall affect options previously granted and no amendment shall make any
change in an option granted prior thereto which adversely affects the
rights of any participant. Stockholder approval for amendments to the
ESPP shall be obtained in such a manner and to such a degree as required
to comply with all applicable laws or regulations. The Plan will
terminate in 2007, unless terminated earlier by the Board in accordance
with the ESPP.
Certain Federal Income Tax Information. The following brief
summary of the effect of federal income taxation upon the participant
and the Company with respect to the shares purchased under the ESPP does
not purport to be complete, and does not discuss the tax consequences of
a participant's death or the income tax laws of any state or foreign
country in which the participant may reside.
The ESPP, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421
and 423 of the Code. Under these provisions, no income will be taxable
to a participant until the shares purchased under the ESPP are sold or
otherwise disposed of. Upon sale or other disposition of the shares,
the participant will generally be subject to tax in an amount that
depends upon the holding period. If the shares are sold or otherwise
disposed of more than two years from the first day of the applicable
offering period and one year from the applicable date of purchase, the
participant will recognize ordinary income measured as the lesser of
(a) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (b) an amount equal
to 15% of the fair market value of the shares as of the first day of the
applicable offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of
before the expiration of these holding periods, the participant will
recognize ordinary income generally measured as the excess of the fair
market value of the shares on the date the shares are purchased over the
purchase price. Any additional gain or loss on such sale or disposition
will be long-term or short-term capital gain or loss, depending on the
holding period. The Company generally is not entitled to a deduction
for amounts taxed as ordinary income or capital gain to a participant
except to the extent of ordinary income recognized by participants upon
a sale or disposition of shares prior to the expiration of the holding
periods described above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE
PLAN.
The Company's next Annual Meeting of Stockholders is Scheduled for May
28, 1999. An eligible stockholder who desires to have a qualified
proposal considered for presentation at that annual meeting of
stockholders and for inclusion in the Company's Proxy Statement for that
annual meeting must submit the proposal in writing at its principal
executive offices no later than December 19, 1998.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the
Board of Directors. Proxies may be solicited by directors, executive
officers and regular supervisory and executive employees of the Company,
none of whom will receive any additional compensation for their
services. Such solicitations may be made personally or by mail,
telephone, telegraph, facsimile transmission or messenger. The Company
will reimburse persons holding shares of Common Stock in their names or
in the names of nominees, but not owning such shares beneficially, such
as brokerage houses, banks and other fiduciaries, for their reasonable
expenses in forwarding soliciting materials to their principals. All
costs of solicitation of proxies will be paid by the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
does not intend to present, and has not been informed that any other
person intends to present, any matters for action at the Annual Meeting
other than those specifically referred to in this Proxy Statement. If
other matters properly come before the Annual Meeting, the holders of
the proxies will act in respect thereto in accordance with their best
judgment.
Copies of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 are being mailed to stockholders,
together with this Proxy Statement, the Proxy and the Notice of Annual
Meeting of Stockholders. Additional copies may be obtained from the
Secretary of the Company, 6550 Dumbarton Circle, Fremont, California
94555.
BY ORDER OF THE BOARD OF DIRECTORS
James A. Lazzara
Secretary
Fremont, California
April 21, 1998
PROXY
Annual Meeting of Stockholders - May 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Scientific Technologies
Incorporated (the "Company") hereby appoints James A. Lazzara and Joseph
J. Lazzara, and each of them, proxies with full power of substitution to
vote all shares which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on May 28, 1998 at 4:00 p.m., or at
any adjournment(s) thereof, with all the power the undersigned would
possess if personally present, with respect to the following:
The Board of Directors recommends a vote FOR each of the following:
1. Election of Directors
Nominees: Anthony R. Lazzara, Joseph J. Lazzara, James A. Lazzara,
James A. Ashford, Carl H. Frei, Bernard J. Ploshay
[__] FOR all nominees listed above (except authority to vote
is withheld for the names crossed off above (if any))
[__] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. Ratification of the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the current fiscal year
ending December 31, 1998.
___ FOR ___ AGAINST ___ ABSTAIN
3 Approval of the 1997 Stock Plan.
___ FOR ___ AGAINST ___ ABSTAIN
4. Approval of the 1997 Employee Stock Purchase Plan.
___ FOR ___ AGAINST ___ ABSTAIN
5. In their discretion the Proxies are authorized to vote on such
other business as may properly come before the meeting.
This Proxy will be voted as directed, or if no direction is
indicated, will be voted "FOR" all nominees in item 1 and "FOR" item 2 .
(Continued and to be signed on the other side)
(Continued from other side)
The undersigned acknowledges receipt with this proxy of a copy of
the Notice of Annual Meeting of Stockholders, Proxy Statement dated
April 21, 1998, and the Company's 1997 Annual Report. The undersigned
hereby revokes any proxy or proxies heretofore given.
Date:________________________, 1998
Signature of Stockholder(s)
___________________________________
___________________________________
___________________________________
Please date and sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title. If more than one trustee, all should sign. All joint owners
must sign.
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