<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
WEGENER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
WEGENER CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, JANUARY 21, 1997
To the Stockholders:
The Annual Meeting of Stockholders of WEGENER CORPORATION, a Delaware
corporation, will be held at its home office at 11350 Technology Circle, Duluth,
Georgia 30155, on Tuesday, January 21, 1997 at 7:00 p.m., Eastern Standard Time,
for the following purposes:
(a) To elect one director to hold office until the 2000 Annual Meeting of
Stockholders or until his successor shall have been elected and
qualified;
(b) To amend the Certificate of Incorporation to increase the number of
authorized shares of common stock from 10,000,000 to 20,000,000;
(c) To amend the Certificate of Incorporation to create a class of
preferred stock;
(d) To amend the 1988 Incentive Plan to increase the number of shares
available for grants and awards under the Plan from 500,000 shares to
750,000 shares;
(e) To consider ratification of the appointment of BDO Seidman as auditors
for fiscal year 1997; and
(f) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed December 9, 1996 as the record date for
the determination of stockholders entitled to vote at the Annual Meeting of
Stockholders. Only stockholders of record at the close of business on that date
will be entitled to notice of and to vote at the meeting. The stock transfer
book of Wegener Corporation will not be closed.
A proxy statement and a proxy solicited by the Board of Directors, together
with a copy of the 1996 Annual Report to Stockholders are enclosed herewith.
Stockholders are cordially invited to attend the Annual Meeting. Whether or not
you expect to attend the meeting in person, you are requested to sign and date
the enclosed proxy and return it as promptly as possible in the accompanying
envelope. If you attend the meeting, you may, if you wish, withdraw your proxy
and vote in person.
By Order of the Board of Directors
J. Elaine Miller
Secretary
Duluth, Georgia
December 17, 1996
PLEASE PROMPTLY COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
WEGENER CORPORATION
11350 TECHNOLOGY CIRCLE
DULUTH, GEORGIA 30155
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
OF WEGENER CORPORATION
TO BE HELD ON JANUARY 21, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies to be voted at the Annual Meeting of Stockholders of Wegener Corporation
(the "Company") to be held on Tuesday, January 21, 1997. This Proxy Statement
is first being mailed to stockholders on or about December 17, 1996.
The enclosed proxy is solicited by the Board of Directors of the Company
and will be voted at the Annual Meeting and any adjournment of the meeting. The
proxy may be revoked at any time before it is exercised by delivering a written
revocation to the Secretary of the Company or by voting at the meeting in person
or by delivering to the Secretary of the Company a new proxy properly executed
and bearing a later date. The items enumerated herein constitute the only
business which the Board of Directors intends to present or knows will be
presented at the meeting. However, the proxy confers discretionary authority
upon the persons named therein, or their substitutes, with respect to any other
business which may properly come before the meeting. Abstentions and broker
non-votes will not be counted as votes either in favor of or against the matter
with respect to which the abstention or broker non-vote relates; however, with
respect to any matter other than the election of directors, an abstention or
broker non-vote would have the effect of a vote against the proposal in
question.
The record date for the determination of stockholders entitled to vote at
the Annual Meeting has been set at December 9, 1996. As of November 19, 1996,
the Company had outstanding 9,014,937 shares of common stock, $.01 par value.
Each share is entitled to one vote. A majority of the shares of common stock
outstanding must be present, in person or by proxy, to constitute a quorum.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 19, 1996
with respect to ownership of the outstanding common stock of the Company by (i)
all persons known to the Company to own beneficially more than five percent (5%)
of the outstanding common stock of the Company, including their address, (ii)
each director and executive officer of the Company, and (iii) all directors and
executive officers of the Company as a group:
<PAGE>
AMOUNT
AND
NATURE OF PERCENT
DIRECTOR BENEFICIAL OF
NAME SINCE OWNERSHIP CLASS
--------------------- ------------ ------------- -----
Robert A. Placek 1987 2,005,323(1) 22.2%
Heinz W. Wegener N/A 626,643(2) 7.0%
James H. Morgan, Jr. 1987 61,000(3) *
C. Troy Woodbury, Jr. 1989 27,729(4) *
Joe K. Parks 1992 9,000(5) *
James T. Traicoff N/A 7,312(6) *
All executive officers and
directors as a group
(5 persons) 2,110,364(7) 23.4%
- ---------------------
*Less than 1%
(1) Includes 6,473 shares held in a 401(k) plan, stock options to purchase
153,000 shares, and 120,000 shares over which Mr. Placek has sole voting
power but as to which Mr. Placek disclaims any other beneficial interest.
Mr. Placek's business address is 11350 Technology Circle, Duluth, Georgia
30136.
(2) Mr. Wegener's wife beneficially owns 231,750 shares, and 96,156 shares are
held in a custodial account for her children, with respect to which Mrs.
Wegener disclaims beneficial ownership. Mr. Wegener disclaims any
beneficial ownership interest in Mrs. Wegener's shares and in the shares of
their children, neither of which are included in the table above. Mr.
Wegener's business address is 3100-E Northwoods Place, Norcross, Georgia
30071.
(3) Includes stock options to purchase 14,000 shares.
(4) Includes 1,229 shares held in a 401(k) plan and 26,500 shares subject to
currently exercisable stock options.
(5) Includes stock options to purchase 8,000 shares.
(6) Includes 5,062 shares held in a 401(k) plan and 1,500 shares subject to
currently exercisable stock options.
(7) Includes 12,764 shares held in a 401(k) plan and 203,000 shares subject to
currently exercisable stock options.
-2-
<PAGE>
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of four directors,
elected to staggered three-year terms.
The term of Robert A. Placek will expire at the Annual Meeting of
Stockholders. The Board of Directors has nominated Mr. Placek for re-election
as a director of the Company. Unless otherwise directed, the proxies will be
voted at the meeting for the election of the nominee or, in the event of an
unforeseen contingency, for a different person as a substitute. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE NOMINEE.
ROBERT A. PLACEK, age 58, has served as Chairman of the Board of Directors
since May 1994 and as President and Chief Executive Officer of the Company since
August 1987. Mr. Placek has been President and a director of Wegener
Communications, Inc. ("WCI"), a subsidiary of the Company, since 1979.
JAMES H. MORGAN, JR., age 56, was an attorney and shareholder of
O'Callaghan, Saunders & Stumm, P.A., Atlanta, Georgia, from 1985 to
October 1990, at which time he joined the firm of Smith, Gambrell & Russell,
LLP, Atlanta, Georgia, as a partner. Smith, Gambrell & Russell, LLP currently
acts as general counsel to the Company and receives fees for services rendered.
Mr. Morgan has served as a director of WCI since 1983. His term of office
expires in 1998.
C. TROY WOODBURY, JR., age 49, has served as Treasurer and Chief Financial
Officer of the Company since June 1988. He also has served as Treasurer and
Chief Operating Officer of WCI since September 1992 and as Executive Vice
President of WCI since July 1995. Prior to joining the Company in 1988,
Mr. Woodbury served as Group Controller for Scientific-Atlanta, Inc. from March
1975 to June 1988. His term of office expires in 1999.
JOE K. PARKS, age 61, retired, served as Laboratory Director, Threat
Systems Development Laboratory of the Georgia Tech Research Institute, a
department of the Georgia Institute of Technology, from 1980 to July 1996. The
principal business of the Threat Systems Development Laboratory is to design and
manufacture radar systems which simulate enemy threats. His term of office
expires in 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Executive Compensation, and
Incentive Plan Committees. The Audit Committee is composed of Messrs. Placek,
Parks and Morgan and held one meeting and acted one time (by unanimous written
consent) during the fiscal year ended August 30, 1996. The function of the
Audit Committee is to consult with the auditors regarding the plan of audit, the
results of the audit and audit controls, and the adequacy of internal accounting
controls. The Audit Committee considers the scope, approach, effectiveness and
recommendations of the audit performed by the independent accountants;
determines and prescribes limits upon the types of non-audit professional
services that may be provided by the independent accountants without adverse
effect on the independence of such accountants; recommends the appointment of
independent accountants; and considers significant accounting methods adopted or
proposed to be adopted.
The Executive Compensation Committee is composed of Messrs. Placek and
Morgan and held two meetings during the fiscal year ended August 30, 1996. The
function of the Executive Compensation
-3-
<PAGE>
Committee is to recommend to the full Board compensation arrangements for the
Company's senior management and the adoption of any benefit plans in which
officers and directors are eligible to participate.
The 1988 Incentive Plan Committee is composed of Messrs. Morgan and Parks
and held one meeting and acted one time (by unanimous written consent) during
the fiscal year ended August 30, 1996. The 1988 Incentive Plan Committee is
responsible for determining the key employees who will receive awards under the
1988 Incentive Plan, the amount or number of shares of stock to be granted, and
the terms and conditions of each award.
The 1989 Directors' Incentive Plan Committee is comprised of Messrs. Morgan
and Parks and held one meeting and acted one time (by unanimous written
consent) during the fiscal year ended August 30, 1996. The 1989 Directors'
Incentive Plan Committee is responsible for determining which of the
participating directors of the Company will receive awards under the 1989
Directors' Incentive Plan, the form or forms of awards to be granted to any
participating director, the amount or number of shares of stock to be granted,
and the terms and conditions of each award.
The Board of Directors does not have a standing nominating committee.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held one meeting and acted five times
by unanimous written consent during the fiscal year ended August 30, 1996.
During fiscal 1996, each director attended all meetings of the Board of
Directors and Committee(s) on which he served.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons who own more than 10% of the outstanding
common stock of the Company to file with the Securities and Exchange Commission
reports of changes in ownership of the common stock of the Company held by such
persons. Officers, directors and greater than 10% stockholders are also
required to furnish the Company with copies of all forms they file under this
regulation. To the Company's knowledge, based solely on a review of copies of
such reports furnished to the Company and representations that no other reports
were required, during fiscal 1996, all Section 16(a) filing requirements
applicable to its officers and directors were complied with.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each other executive officer whose total annual
salary and bonus exceeded $100,000 (the "Named Executive Officers") for the
fiscal years ended August 30, 1996, September 1, 1995, and September 2, 1994.
-4-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation -----------------------
Awards
- -----------------------------------------------------------------------------------------------------------------------------------
Name Other Restricted All
and Fiscal Annual Stock Options/ Other
Principal Year Salary Bonus Compensation Award(s) SARs Compensation
Position ($) ($) ($) ($) (#) ($)(b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Placek 1996 167,623 -0- -0- 0 0 19,264
Chairman of the Board, 1995 143,875 -0- -0- 0 153,000 19,304
President and Chief 1994 136,375 -0- -0- 0 0 19,324
Executive Officer; Director
C. Troy Woodbury, Jr. 1996 122,533 -0- 15,216(a) 0 0 1,154
Treasurer and Chief 1995 99,020 -0- -0- 0 0 521
Financial Officer; 1994 91,520 -0- -0- 0 0 419
Director
</TABLE>
- ------------------------
(a) Represents a tax reimbursement of $15,216 due to the exercise of options
under the 1989 Director's Incentive Plan.
(b) Represents amounts contributed by the Company pursuant to the Company's
401(k) plan and life insurance premiums paid by the Company, as follows:
Insurance
Name Fiscal Year Premiums 401(k) Contributions
---- ----------- --------- --------------------
Robert A. Placek 1996 $17,055 $2,209
1995 17,055 2,249
1994 17,055 2,269
C. Troy Woodbury, Jr. 1996 $ 0 $1,154
1995 0 521
1994 0 419
STOCK OPTION PLAN
No options were granted to the Named Executive Officers during the
fiscal year ended August 30, 1996.
-5-
<PAGE>
The following table provides certain information concerning each
exercise of stock options under the Company's Incentive Plans during the fiscal
year ended August 30, 1996, by the Named Executive Officers and the fiscal year
end value of unexercised options held by such person:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at Fiscal
Fiscal Year End Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable(1)
---- --------------- ------------ ---------------------- ---------------------
<S> <C> <C> <C> <C>
Robert A. Placek 0 $0 153,000/0 $459,000/$0
C. Troy Woodbury, Jr. 8,500 $88,250 21,500/35,000 $82,875/$93,750
</TABLE>
- -----------------
(1) The market value of the Company's common stock on August 30, 1996 was $6.00
per share. The actual value, if any, an executive may realize will depend
upon the amount by which the market price of the Company's common stock
exceeds the exercise price when the options are exercised.
COMPENSATION OF DIRECTORS
The compensation currently payable to each non-employee director of the
Company is $300 per meeting attended. However, Mr. Morgan presently does not
receive director's fees. The law firm of which Mr. Morgan is a partner receives
legal fees for services rendered to the Company. Pursuant to the 1989
Directors' Incentive Plan (the "Directors' Plan"), each non-employee director
receives an option to purchase 2,000 shares of common stock on the last day of
December of each year at an exercise price equal to the fair market value on
such date. Pursuant to the Directors' Plan, during fiscal 1996 Messrs. Morgan
and Parks each were granted an option to purchase 2,000 shares at an exercise
price of $12.13.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The law firm of Smith, Gambrell & Russell, LLP, of which James H. Morgan is
a partner, received legal fees from the Company for services rendered during
fiscal 1996. Mr. Morgan is a director of the Company, and served as a member of
the Executive Compensation Committee during fiscal 1996. The Executive
Compensation Committee is comprised of Mr. Morgan and Robert A. Placek, Chairman
of the Board, President and Chief Executive Officer. This Committee met two
times during fiscal 1996. See "Report of Board of Directors on Executive
Compensation."
The Company believes that the above described transactions are on terms no
less favorable to the Company than could be obtained from non-affiliated
parties.
-6-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" which describes certain business relationships between
the Company and certain of its directors.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION AND THE STOCKHOLDER RETURN
PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company has an Executive Compensation Committee comprised of the Chief
Executive Officer and one non-employee director of the Company. However, this
report is being made by the full Board of Directors, which authorized and
approved all components of executive compensation.
From September 1991 to May 1995, there were no increases in base salary to
the President and Chief Executive Officer, the Chairman of the Board or the
Chief Financial Officer, and no bonuses have been paid to any executive officer,
including the Chief Executive Officer, during the past three fiscal years. In
June 1995, the Chief Executive Officer and the Chief Financial Officer received
a 22% and 32.8% base salary increase, respectively, and in July 1996, the Chief
Executive Officer and the Chief Financial Officer received a 4.5% and 5.0% base
salary increase, respectively. The Controller, who is the only other executive
officer of the Company, received a modest salary increase in 1993, a 12%
increase in 1995 and a 7% increase in 1996. The Executive Compensation
Committee and the full Board of Directors reviews the performance of the Chief
Executive Officer as well as the other executive officers of the Company, and
the full Board of Directors has historically authorized and approved increases
in salary or other cash compensation awards. The performance of the Chief
Executive Officer and the other executive officers of the Company is reviewed in
light of the performance of the Company and the Company's working capital
position and prospects. The Board of Directors does not assign relative weights
to the factors considered by the Board in setting compensation, but rather
considers all factors as a whole. In determining compensation levels, the Board
of Directors has not set specific performance targets for officers to attain in
order to earn any specific component of compensation.
The Executive Compensation Committee and the Board of Directors also
considers other companies in the telecommunications industry and reviews, to the
extent such information is available, the compensation paid to the Chief
Executive Officers and other executive officers of those companies. During
fiscal 1996, the Board of Directors utilized the 1995 salary survey of the
American Electronics Association, comprised of technology companies which are
grouped by size and by geographic region. The surveyed companies do not
necessarily correspond to the Nasdaq Telecommunications Stocks Index utilized by
the Company in preparing its Stockholder Return Performance Graph included in
the Company's Proxy Statement. However, the salary survey does include a number
of technology companies which the Board of Directors believes is an appropriate
source of comparative data. As a result of the review of such salary survey,
the Board of Directors has concluded that the compensation levels of the
Company's Chief Executive Officer and other executive officers are in the lower
range of compensation paid by the surveyed companies. The Board of Directors,
in reviewing the salary survey, considered the competitiveness of the entire
compensation package to its officers and not only certain items of compensation.
-7-
<PAGE>
At the present time, the Company has an Incentive Plan for employees and a
Directors' Incentive Plan for the purpose of awarding options to its directors,
executive officers and other key employees, which plans are administered by the
two non-employee directors of the Company, Mr. Parks and Mr. Morgan. The
Company's future compensation policies will be developed in light of the
Company's profitability and with the goal of rewarding members of management for
their contributions to the Company's success.
Robert A. Placek James H. Morgan, Jr.
C. Troy Woodbury, Jr. Joe K. Parks
-8-
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock against
the cumulative total return of the NASDAQ Stock Market (U.S. Companies) and the
Index for the NASDAQ Telecommunications Stocks for the period of five fiscal
years commencing August 31, 1991 and ending August 30, 1996. The graph assumes
that the value of the investment in the Company's common stock and each index
was $100 on August 31, 1991.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG WEGENER COMMUNICATIONS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
<TABLE>
<CAPTION>
WEGENER COMMUNICATIONS, INC. NASDAQ STOCK MARKET-US NASDAQ TELECOMMUNICATIONS
<S> <C> <C> <C>
8/31/91 100 100 100
8/28/92 143 109 109
8/27/93 100 141 193
9/02/94 186 148 184
9/01/95 1229 200 201
8/30/96 686 230 222
</TABLE>
*$100 INVESTED ON 8/31/91 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
-9-
<PAGE>
AGENDA ITEM TWO
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
At a meeting of the Board of Directors of the Company on October 23, 1996,
the directors approved an amendment to Article 4 of the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation") to increase the
number of authorized shares of common stock of the Company from 10,000,000 to
20,000,000 shares. In connection therewith, the following resolution will be
introduced at the Annual Meeting:
RESOLVED: That the Certificate of Incorporation is amended by amending
Article Four thereof (entitled "FOURTH: AUTHORIZED SHARES") to read, in part,
as follows:
A. COMMON STOCK.
One class shall consist of Twenty Million (20,000,000)
shares of common stock having a par value of $.01 per share,
designated "Common Stock." The holders of Common Stock
shall be entitled to elect all the members of the Board of
Directors of the Corporation, and such holders shall be
entitled to vote as a class on all matters required or
permitted to be submitted to the shareholders of the
Corporation.
As is discussed in Agenda Item 3 to this Proxy Statement, it is proposed to
further amend Article Four of the Certificate of Incorporation to create a class
of preferred stock. A copy of the proposed amendment to Article Four of the
Certificate of Incorporation, in its entirety, is attached to this Proxy
Statement as Exhibit A. The proposed amendments to the Certificate of
Incorporation to increase the number of authorized shares of common stock and
create a class of preferred stock are separate proposals and each proposal will
be voted on and must be approved separately by the stockholders of the Company.
The Board of Directors recommends that stockholders approve the proposed
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of common stock because it considers the proposal to be in
the best long-term and short-term interests of the Company, its stockholders and
its other constituencies. The proposed increase in the number of shares of
authorized common stock will ensure that additional shares of common stock will
be available, if needed, for issuance in connection with any possible future
transactions approved by the Board of Directors, including, among others, stock
splits, stock dividends, acquisitions, financings and other corporate purposes.
The Board of Directors believes that the availability of the additional
shares of common stock for such purposes without delay or the necessity for a
special stockholders' meeting, except as may be required by applicable law or
regulatory authorities (or by the rules of any stock exchange on which the
Company's securities may then be listed) will be beneficial to the Company by
providing it with the flexibility required to consider and respond to future
business opportunities and needs as they arise. The availability of additional
authorized shares of common stock will also enable the Company to act promptly
when the Board of Directors determines that the issuance of additional shares of
common stock is advisable. It is possible that shares of common stock may be
issued at a time and under circumstances that may dilute the voting power of
existing stockholders, increase or decrease earnings per share and increase or
decrease the book value per share of shares presently held.
-10-
<PAGE>
The Company does not have any immediate agreements, arrangements,
commitments or understandings with respect to the issuance of any of the
additional shares of common stock which would be authorized by the proposal to
increase the number of authorized shares. On November 19, 1996, 9,014,937
shares of common stock were issued and outstanding.
It should be noted that the availability of additional shares could render
more difficult or discourage a takeover attempt. For example, additional shares
of common stock could be issued and sold to purchasers who oppose a takeover bid
which is not in the best long-term and short-term interests of the Company, its
stockholders and its other constituencies or could be issued to increase the
aggregate number of outstanding shares of common stock and thereby dilute the
interest of parties attempting to obtain control of the Company. In connection
with any issuance of shares of common stock, the Board of Directors considers
such factors as whether such issuance would be in the best long-term and short-
term interests of the Company, its stockholders and its other constituencies.
The Board of Directors is presently unaware of any specific effort to accumulate
the shares of common stock of the Company or obtain control of the Company.
Adoption of the proposed amendment to the Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
common stock of the Company. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS APPROVE THE PROPOSED AMENDMENT TO THE ARTICLES OF
INCORPORATION.
AGENDA ITEM THREE
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO CREATE CLASS OF PREFERRED STOCK
At a meeting of the Board of Directors of the Company on October 23, 1996,
the directors approved an amendment to Article 4 of the Company's Certificate of
Incorporation to create a class of preferred stock (the "Preferred Stock"). The
proposed amendment authorizes the Board of Directors of the Company, without
further stockholder action, to issue from time to time, up to 1,000,000 shares
of Preferred Stock. In connection therewith, the following resolution will be
introduced at the Annual Meeting:
RESOLVED: That the Certificate of Incorporation is amended by amending
Article Four thereof (entitled "FOURTH: AUTHORIZED SHARES") to read, in part,
as follows:
B. PREFERRED STOCK.
One class shall consist of One Million (1,000,000) shares of
preferred stock having a par value of $.01 per share,
designated "Preferred Stock." The Board of Directors of the
Corporation shall be empowered to divide any and all shares
of the Preferred Stock into series and to fix and to
determine the relative rights and preferences of the shares
of any series so established. Before any shares of
Preferred Stock of any particular series shall be issued,
the Board of Directors shall fix and determine, and is
hereby expressly empowered to fix and determine, in the
manner provided by law, the following provisions of the
shares of such series: (i) the distinctive designation of
such shares and the number of shares which shall constitute
such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like
action of the Board of Directors; (ii) the annual rate of
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<PAGE>
dividends payable on shares of such series, whether dividends shall be
cumulative and conditions upon which and the date when such dividends
shall be accumulated on all shares of such series issued prior to the
record date for the first dividend of such series; (iii) the time or
times when and the price or prices at which shares of such series
shall be redeemable at the option of the holder or of the Corporation
and the sinking fund provisions, if any, for the purchase or
redemption of such shares; (iv) the amount payable on shares of such
series in the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether all or a portion is paid
before any amount is paid on the Common Stock; (v) the rights, if any,
of the holders of shares of such series to convert such shares into,
or exchange such shares for, shares of Common Stock or shares of any
other series of Preferred Stock and the terms and conditions of such
conversion or exchange; and (vi) whether the shares of such series
have voting rights and the extent of such voting rights, if any.
The Board of Directors shall have the power to classify
unissued shares of any series of Preferred Stock and fixing
and determining the provisions thereof is hereby ratified
and approved.
As is discussed in Agenda Item 3 to this Proxy Statement, it is proposed to
further amend Article Four of the Certificate of Incorporation to increase the
number of authorized shares of common stock of the Company to 20,000,000 shares.
A copy of the proposed amendment to Article Four of the Certificate of
Incorporation, in its entirety, is attached to this Proxy Statement as
Exhibit A. The proposed amendments to the Certificate of Incorporation to
increase the number of authorized shares of common stock and create a class of
Preferred Stock are separate proposals and each proposal will be voted on and
must be approved separately by the stockholders of the Company.
The proposed amendment to the Certificate of Incorporation empowers the
Board of Directors to divide any and all of the shares of the Preferred Stock
into series and to fix and determine the relative rights and preferences of the
shares of any series so established, including: (i) the distinctive designation
of such series and the number of shares which shall constitute such series, (ii)
the annual rate of dividends payable on shares of such series, whether dividends
shall be cumulative and conditions upon which and the date when such dividends
shall be accumulated on all shares of such series issued prior to the record
date for the first dividend of such series; (iii) the time or times when and the
price or prices at which shares of such series shall be redeemable at the option
of the holder or of the Company and the sinking fund provision, if any, for the
purchase or redemption of such shares; (iv) the amount payable on shares of such
series in the event of any liquidation, dissolution or winding up of the affairs
of the Company, whether all or a portion is paid before any amount is paid on
the common stock; (v) the rights, if any, of the holders of shares of such
series to convert such shares into, or exchange such shares for, shares of
common stock or shares of any other series of Preferred Stock and the terms and
conditions of such conversion or exchange; and (vi) whether the shares of such
series have voting rights and the extent of such voting rights, if any.
The Board of Directors recommends that stockholders approve the proposed
amendment to the Company's Certificate of Incorporation because it considers the
proposal to be in the best long-term and short-term interests of the Company,
its stockholders and its other constituencies. The proposed creation of
Preferred Stock provides the Company with flexibility of action for possible
future financing transactions approved by the Board of Directors, including,
among others, acquisitions, employee benefit plans and other corporate purposes.
The Board of Directors believes that the availability of Preferred Stock
will be particularly useful since the Board would have the authority to choose
the exact terms of the class or series at the time of
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issuance to respond to investor preferences, developments in types of preferred
stock, market conditions, and the nature of the specific transaction. In
addition, it may be advantageous in some cases to pay certain investors
dividends on equity instead of interest on debt. Preferred stock allows a
corporation to offer equity that is potentially far less dilutive of the
relative equity value of the holders of its common stock than would be the case
if additional shares of its common stock were issued. Preferred stock typically
does not enjoy dividend growth corresponding to growth in a company's earnings.
In addition, preferred stock can be subject to redemption, also limiting
dilution. Because future developments in this area cannot be foreseen, the
Company believes that it will be able to benefit directly from these and other
uses of Preferred Stock created in the future.
Opportunities may arise that require prompt action, such as properties or
businesses becoming available for acquisition or favorable market conditions
existing for the sale of a particular type of preferred stock. The Board of
Directors believes that the availability of Preferred Stock eliminates the delay
and expense of seeking stockholder approval at the time of the issuance of such
stock, thereby enabling the Company and its stockholders to effectively benefit
from such an opportunity.
The Company does not have any immediate agreements, arrangements,
commitments or understandings with respect to the issuance of any of the shares
of Preferred Stock which would be authorized by the proposal to create a class
of Preferred Stock.
The existence of the Preferred Stock does not, by itself, have any effect
on the rights of holders of the Company's common stock. It should be noted,
however, that the issuance of one or more series of Preferred Stock in the
future could affect the holders of common stock in a number of respects,
including the following: the issuance of Preferred Stock would probably
subordinate the common stock to the Preferred Stock in terms of dividend and
liquidation rights, since Preferred Stock typically entitles its holder to
satisfaction in full of specified dividend and liquidation rights before any
payment of dividends or distribution of assets on liquidation is made on the
common stock; if voting or conversion rights are granted to the holders of
Preferred Stock, the voting power of the common stock (including stock held by
any persons who may be seeking to obtain control of the Company) would be
diluted; the issuance of Preferred Stock may result in a dilution of earnings
per share of the present common stock and certain fundamental matters requiring
stockholder approval (such as mergers, consolidations, sales of assets and
future amendments to the Certificate of Incorporation) may require approval by
the separate vote of each class, including the additional class (or in some
cases each series of that class) before action can be taken by the Company.
Issuance of the Preferred Stock could, under certain circumstances,
discourage or make more difficult an attempt by a person or organization to gain
control of the Company by tender offer or proxy contest, or to consummate a
merger or consolidation with the Company after acquiring control, and to remove
incumbent management, even if such transactions were favorable to the Company's
stockholders. Thus, it could benefit present management by helping them to
retain their positions. For example, shares of Preferred Stock could be issued
and sold which possess voting or conversion rights which would make it more
difficult for a person or organization to gain control of the Company,
especially if the shares were issued in a private placement to a party or
parties sympathetic to management and opposed to any attempt to gain control of
the Company. In connection with any issuance of shares of Preferred Stock, the
Board of Directors considers such factors as whether such issuance would be in
the best long-term and short-term interests of the Company, its stockholders and
its other constituencies The Board of Directors is presently unaware of any
specific effort to obtain control of the Company or remove incumbent management.
Adoption of the proposed amendment to the Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
common stock of the Company. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS APPROVE THE PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION.
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AGENDA ITEM FOUR
PROPOSAL TO AMEND 1988 INCENTIVE PLAN
In 1988, the Company adopted its 1988 Incentive Plan (the "Plan") and
reserved 500,000 shares of the Company's Common stock to cover incentive awards
(the "Awards") to be granted under the Plan during its ten year term. The Plan
was amended in 1989 and in November of 1996 for the purpose of changing the name
of the Plan and making certain minor changes to the administrative provisions of
the Plan. The Plan provides for the granting of Awards to key employees of the
Company and its subsidiaries whose responsibilities and decisions directly
affect the performance of the Company and its subsidiaries. The Plan is
intended to attract and retain persons of ability, motivate and reward good
performance, encourage key employees to continue to exert their best efforts on
behalf of the Company and its subsidiaries and provide opportunities for stock
ownership by such employees in order to increase their proprietary interests in
the Company.
THE PROPOSED AMENDMENT
On January 16, 1996, the Board of Directors approved, subject to
stockholder approval at the 1997 Annual Meeting of Stockholders, an amendment to
the Plan to increase the number of shares available for issuance under the Plan
by 250,000 shares, from 500,000 shares to 750,000 shares. As of November 19,
1996, there remained 246,715 shares available under the Plan to be issued upon
exercise of Awards to be granted under the Plan. The Board of Directors
believes it to be in the best interest of the Company and its stockholders to
increase the number of shares authorized and available for issuance pursuant to
the terms of the Plan. A copy of the proposed amendment to the Plan is attached
to this Proxy Statement as Exhibit B and incorporated herein by reference.
The Board of Directors of the Company recommends the stockholders vote FOR
the proposed amendment. Approval of the amendment to the Plan requires the
affirmative vote of a majority of all stockholders entitled to vote on this
matter.
GENERAL DESCRIPTION OF THE PLAN
EFFECTIVE DATE. The effective date of the Plan is December 1, 1988.
Awards may be granted pursuant to the Plan from time to time, but no later than
ten years from the effective date, unless otherwise approved by a majority of
the Company's stockholders.
ADMINISTRATION OF THE PLAN. The Plan is administered by the Incentive Plan
Committee of the Board of Directors (the "Committee"), which Committee shall
consist of not less than two "non-employee directors" as defined by Rule 16b-3
under the Securities and Exchange Act of 1934, as amended (the "1934 Act").
Subject to the provisions of the Plan, the Committee has sole authority to
select the officers and other key employees to whom grants of Awards may be
made, to determine the type of Award to be granted to the eligible employee, the
number of shares of stock to be covered by each Award, and the terms and
conditions of Awards granted under the Plan.
SHARES SUBJECT TO THE PLAN. Prior to the recent amendments to the Plan,
the maximum number of shares of common stock reserved and available for
distribution under the Plan was 500,000. The Committee, in its discretion, may
award other securities issued by the Company that are convertible into common
stock or make other securities subject to purchase pursuant to the exercise of
an option. Shares reserved for issuance under the Plan may consist in whole or
in part of authorized and unissued shares
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of common stock or treasury shares. Shares underlying lapsed, forfeited or
canceled Awards will be restored to the status of authorized shares available
for distribution under the Plan.
PERSONS ELIGIBLE TO PARTICIPATE IN THE PLAN. The Plan authorizes, at the
discretion of the Committee, Awards to be granted to officers and key employees
of the Company or any participating subsidiary of the Company, who is not also a
director of the Company and who, in the judgment of the Committee, is
responsible for or contributes to the management, growth or profitability of the
business of the Company or any participating subsidiary of the Company. There
are currently approximately 134 employees eligible for participation in the
Plan. As of November 19, 1996, the fair market value of the common stock of the
Company currently subject to outstanding Awards was approximately $873,906.
AWARDS. The Plan authorizes the Committee to grant (i) incentive and
nonqualified stock options, (ii) stock appreciation rights, (iii) performance
units, (iv) restricted stock, (v) deferred stock, or any combination of the
foregoing, as more fully described below:
1. STOCK OPTIONS. Stock options may be granted either alone or in
conjunction with other Awards under the Plan. Stock options granted under the
Plan may be either incentive stock options as defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or nonqualified stock
options. To the extent that any stock option fails to qualify as an incentive
stock option, it shall constitute a nonqualified stock option.
No stock option may be granted after the expiration of ten years from the
effective date of the Plan and the aggregate fair market value (determined as of
the date an option is granted) of common stock for which incentive stock options
granted to any eligible employee may first become exercisable in any calendar
year may not exceed $100,000.
Stock options granted pursuant to the Plan are nontransferable. Incentive
stock options must be exercised within ten years from the date of grant at an
exercise price of not less than 100% of the fair market value of the stock on
the date of grant. With respect to options granted to a 10% stockholder, the
option must be exercised within five years from the date of grant at an exercise
price of not less than 110% of the fair market value of the stock on such date.
In the case of nonqualified stock options, the term may not exceed ten years and
one day from the date of grant and the exercise price may not be less than 75%
of the fair market value on the date of grant.
No directors are eligible to participate in the Plan. As of November 19,
1996, stock options had been granted as follows: 9,000 shares to all executive
officers as a group and 244,285 shares to all non-executive employees as a
group.
2. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") may be
granted under the Plan alone, in conjunction with incentive or nonqualified
stock options or in tandem with nonqualified stock options granted under the
Plan.
Upon exercise of an SAR, an employee is entitled, subject to such terms and
conditions as the Committee may specify, to receive an amount in cash or shares
of common stock equal in value to the excess of the fair market value of one
share of stock over the exercise price per share specified in the related option
or SAR, multiplied by the number of shares in respect of which the SAR is
exercised. No SARs have been granted under the Plan.
3. PERFORMANCE UNITS. The Plan provides for the Award of "performance
units." In granting performance units, the Committee shall determine a
"performance period" of one or more years
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and shall determine the performance objectives for grants of performance units.
Performance objectives may vary from employee to employee and between groups of
employees and may be based upon such criteria or combination of factors as the
Committee may deem appropriate.
At the beginning of a performance period, the Committee shall determine for
each employee eligible for performance units the range of dollar values, if any,
which shall be paid to an employee as an Award if the relevant measure of
performance for the performance period is met. No performance units have been
granted.
4. RESTRICTED STOCK. Restricted stock may be received by an employee
either as an Award or as the result of an exercise of an option or SAR or as
payment for a performance unit. Restricted stock granted under the Plan shall
be subject to a "restriction period" (after which restrictions shall lapse)
commencing on the date of grant of the Award and ending on such date or upon the
achievement of such performance or other criteria as the Committee shall
determine.
Except as otherwise provided in the Plan, no shares of restricted stock may
be sold, exchanged, transferred, pledged, or otherwise disposed of during the
restriction period. The Committee may require certificates for restricted stock
delivered under the Plan to be held in custody by a bank or other institution or
by the Company itself until the restriction period expires or the restrictions
thereon otherwise lapse. In addition, the Committee may require the employee to
deliver a stock power of attorney endorsed in blank relating to the restricted
stock as a condition of receipt of restricted stock.
5. DEFERRED STOCK. Deferred stock may be credited to an employee either
as an Award, or as the result of an exercise of an option or SAR or as payment
for a performance unit. Deferred stock granted under the Plan will be subject
to a "deferral period" commencing on the date the Deferred stock is granted and
ending on such date or upon the achievement of such performance or other
criteria as the Committee may determine.
Except as otherwise provided in the Plan, no deferred stock credited to an
employee may be sold, exchanged, transferred, pledged, or otherwise disposed of
during the deferral period. At the expiration of the deferral period, an
employee will be entitled to receive a certificate for the number of shares of
stock equal to the number of shares of deferred stock credited to such employee.
No deferred stock has been granted.
REORGANIZATION AND RECAPITALIZATION. In the event of any recapitalization,
reclassification, split up or consolidation of shares of stock, merger or
consolidation of the Company or sale by the Company of all or a substantial
portion of its assets, the Committee may make such appropriate adjustments in
the stock subject to Awards, including stock subject to purchase by an option,
or the terms, conditions or restrictions on stock or Awards as the Committee
deems equitable; provided, however, that no such adjustments shall be made on or
after the occurrence of a change in control without the affected employee's
consent.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of the
Company may at any time amend or terminate the Plan. The Plan may also be
amended by the Committee, provided that all such amendments are reported to the
Board. No amendment may, without approval of a majority of the Company's
stockholders, (1) alter the group of persons eligible to participate in the
Plan, (2) materially increase the benefits provided under the Plan to the extent
that stockholder approval would then be required pursuant to Rule 16b-3 under
the 1934 Act or any successor rule or regulation, (3) increase the maximum
number of shares of stock which are available for Awards under the Plan,
(4) affect the
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<PAGE>
authority of the Committee to administer the Plan, or (5) extend the period
during which Awards may be granted under the Plan beyond the expiration of ten
years from the effective date of the Plan. No amendment or termination shall
retroactively impair the rights of any person with respect to an Award. On or
after the occurrence of a change in control, the Plan may not be amended or
terminated until all payments required under the Plan are made.
FEDERAL INCOME TAX CONSEQUENCES
Under the Code and Treasury Regulations currently in effect, a participant
in the Plan generally will not recognize taxable income or gain upon the grant
under the Plan of an incentive stock option, a nonqualified stock option (other
than such an option having a readily ascertainable fair market value),
restricted stock or deferred stock, an SAR or a right to a payment with respect
to a performance unit. Instead, the recognition of taxable income generally
will be triggered by a future event such as the lapse of a restriction on
transferability, the disposition of shares obtained through an incentive stock
option, the exercise of a nonqualified option or SAR or the receipt of the
payment with respect to a performance unit.
INCENTIVE STOCK OPTIONS. All incentive stock options granted or to be
granted under the Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Code.
Under the provisions of Section 422 of the Code, neither the holder of an
incentive stock option nor the Company will recognize income, gain, deduction or
loss upon the grant or exercise of an incentive stock option. An optionee will
be taxed only when the stock acquired upon exercise of his or her incentive
stock option is sold or otherwise disposed of in a taxable transaction. If at
the time of such sale or disposition the optionee has held the shares for the
required holding period (two years from the date the option was granted and one
year from the date of the transfer of the shares to the optionee), the optionee
will recognize long-term capital gain or loss, as the case may be, based upon
the difference between his or her exercise price and the net proceeds of the
sale. However, if the optionee disposes of the shares before the end of such
holding period, the optionee will recognize ordinary income on such disposition
in an amount equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the date of
exercise exceeded the option exercise price, with any excess gain being capital
gain, long-term or short-term, depending on whether or not the shares had
previously been held for more than one year on the date of sale or other taxable
disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition
of ordinary income to the optionee will also result in a corresponding income
tax deduction for the Company.
The Plan permits an optionee to pay all or part of the purchase price for
shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's common stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
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whole or in part by transferring to the Company shares of the Company's common
stock will recognize no gain or loss upon such exercise. The optionee's basis
in the shares so acquired will be equal to the optionee's cost basis in the
shares surrendered (plus, in the case of payment of the purchase price in a
combination of cash and surrendered shares, the amount of any cash paid).
Section 424(c)(3) of the Code provides that if "statutory option stock" is
transferred in connection with the exercise of an incentive stock option, and if
the holding period requirements under Section 422(a)(1) of the Code are not met
with respect to such statutory option stock before such transfer, then ordinary
income will be recognized as a result of the transfer of statutory option stock.
However, the incentive stock option stock acquired through the exchange of
statutory option stock will still qualify for favorable tax treatment under
Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and
(2) the deferral of recognition of gain until disposition of the stock acquired
upon the exercise of the option.
At present, the maximum tax rate on capital gains is 28%, while the maximum
tax rate on ordinary income is 39.6%. Thus, the conversion of ordinary income
into capital gain produces some tax benefit for certain taxpayers. However, the
benefit of income deferral generally provided by incentive stock options is
reduced for some taxpayers since the excess of the fair market value of shares
acquired through the exercise of an incentive stock option over the exercise
price is taken into account in computing an individual taxpayer's alternative
minimum taxable income. Thus, the exercise of an incentive stock option could
result in the imposition of an alternative minimum tax liability.
In general, an option granted under the Plan which is designated as an
incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a nonqualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a nonqualified stock option.
NONQUALIFIED STOCK OPTIONS. All options granted or to be granted under the
Plan which do not qualify as incentive stock options are non-statutory options
not entitled to special tax treatment under Section 422 of the Code.
A participant in the Plan will recognize taxable income upon the grant of a
nonqualified stock option only if such option has a readily ascertainable fair
market value as of the date of the grant. In such a case, the recipient will
recognize taxable ordinary income in an amount equal to the excess of the fair
market value of the option as of such date over the price, if any, paid for such
option. No income would then be recognized on the exercise of the option, and
when the shares obtained through the exercise of the option are disposed of in a
taxable transaction, the resulting gain or loss would be capital gain or loss
(assuming the shares are a capital asset in the hands of the optionee).
However, under the applicable Treasury Regulations, the nonqualified stock
options issued under the Plan will not have a readily ascertainable fair market
value unless at the time such options are granted similar options of the Company
are actively traded on an established market. The Company presently has no such
actively traded options.
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Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The Plan permits the Committee to allow an optionee to pay all or part of
the purchase price for shares acquired pursuant to an exercise of a non-
statutory option by transferring to the Company other shares of the Company's
common stock owned by the optionee. If an optionee exchanges previously
acquired common stock pursuant to the exercise of a nonqualified stock option,
the Internal Revenue Service has ruled that the optionee will not be taxed on
the unrealized appreciation of the shares surrendered in the exchange. In other
words, the optionee is not taxed on the difference between his or her cost basis
for the old shares and their fair market value on the date of the exchange, even
though the previously acquired shares are valued at the current market price for
purposes of paying all or part of the option price.
SARS AND PERFORMANCE UNITS. On the exercise of an SAR or the receipt by a
Plan participant of a payment with respect to a performance unit, the
participant generally will recognize taxable ordinary income in an amount equal
to the sum of the cash and the fair market value of the stock (determined as of
the date of exercise of the SAR, or the date of receipt of a payment with
respect to the performance unit, whichever is applicable), if any, received.
However, the amount of ordinary income recognized and the timing of the
recognition of that income may be different if the Plan participant receives
stock with respect to which there is a substantial risk of forfeiture (such as
restricted stock or deferred stock) in connection with the exercise of an SAR or
a payment with respect to a performance unit. The computation of the ordinary
income to be recognized and the timing of the income recognition with respect to
the receipt of stock with a substantial risk of forfeiture is discussed below in
connection with restricted stock and deferred stock. A plan participant will
not recognize a loss on the termination of an unexercised SAR received under the
Plan.
RESTRICTED STOCK AND DEFERRED STOCK. Generally, and except as noted below,
the grant of restricted stock or deferred stock is not taxable at the time of
the grant. Instead, at the time restricted stock or deferred stock vests or
becomes transferable, an employee will recognize ordinary income equal to (i)
the excess of the fair market value of such restricted stock or deferred stock,
as applicable, on the date the shares vest over (ii) the price, if any, paid for
such restricted stock or deferred stock, whichever is applicable. An employee
may, however, elect to recognize income as of the date of grant of the
restricted stock or deferred stock, in an amount equal to (i) the excess of the
fair market value of the restricted stock or deferred stock, whichever is
applicable, on the date of grant over (ii) the price, if any, paid for the
restricted stock or deferred stock, whichever is applicable. If such an election
is made, no additional income will be recognized at the time the stock vests or
becomes transferable. In the event of a subsequent forfeiture of the shares, an
employee making such an election may be able to recognize a capital loss with
respect to the amount, if any, paid for such restricted stock or deferred stock,
but only to the extent such amount exceeds the amount realized by such employee
on such forfeiture. The employee will not be able to recognize a loss for tax
purposes with respect to the excess of fair market value over the purchase price
which was previously included in income. The use of restricted stock or deferred
stock as all or a portion of the exercise price of a nonqualified stock option
will not result in gain or loss to the optionee to the extent that such optionee
receives through the exercise of such option shares of stock having restrictions
and conditions substantially similar to those applicable to such restricted
stock or deferred stock. Dividends paid on the shares of restricted stock or
deferred stock
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before they vest will be taxed to the employee either as additional compensation
or, if the employee has made the election described above, as dividend income.
In most cases, the basis in shares acquired upon exercise of a nonqualified
option or SAR, upon an award of restricted stock or deferred stock or upon
payment with respect to a performance unit, will be equal to the fair market
value of the shares on the employee's income recognition date, and the holding
period for determining gains and losses on a subsequent disposition of such
shares will begin on such date. However, if shares of restricted stock or
deferred stock are surrendered to pay the exercise price of a nonqualified stock
option, the basis of the shares received in exchange therefor which bear
comparable restrictions and conditions will be equal to the basis of such shares
of restricted stock or deferred stock. In the case of an incentive stock option,
the basis of the shares acquired on exercise of the option will be equal to the
option's exercise price, and the holding period of the shares will begin on the
date the incentive stock option is exercised.
As a general rule, the Company will be entitled to a deduction for federal
income tax purposes at the same time and in the same amount that an employee
recognizes ordinary income from Awards granted under the Plan (including the
recognition of ordinary income as the result of a holder of stock obtained
through exercise of an incentive stock option disposing of such stock prior to
the expiration of the required holding period), to the extent such income is
considered reasonable compensation under the Code and generally provided that
the Company withholds the applicable amount with respect to the ordinary income
recognized by the employee. The Company will not, however, be entitled to a
deduction with respect to payments to employees which are contingent upon a
change of control if such payments are deemed to constitute "excess parachute
payments" pursuant to Section 280G of the Code and do not qualify as reasonable
compensation pursuant to that Section. In addition, such payment will subject
the recipient to a 20% excise tax. The Company also may not be entitled to a
deduction with respect to payments to certain employees of the Company to the
extent that the total remuneration of such employee is found to be excessive
under Section 162(m) of the Code.
GENERAL. The Plan is not qualified under Section 401(a) of the Code and is
not subject to the provisions of the Employee Retirement Income Securities Act
of 1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Prospectus, which are subject to change, and upon an
interpretation of the statutory provisions of the Code, its legislative history
and the income tax regulations which interpret provisions of the Code.
Furthermore, the foregoing is only a general discussion of the federal income
tax consequences of the Plan and does not purport to be a complete description
of all federal income tax aspects of the Plan. Award holders may also be
subject to state and local taxes in connection with the grant or exercise of
options granted under the Plan and the sale or other disposition of shares
acquired upon exercise of an Award. Each employee receiving an Award should
consult with his or her personal tax advisor regarding federal, state or local
tax consequences of participating in the Plan.
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AGENDA ITEM FIVE
APPOINTMENT OF AUDITORS
The firm of BDO Seidman, independent certified public accountants, audited
the financial statements of the Company for the fiscal year ended August 30,
1996. The Board of Directors has selected this same firm to audit the accounts
and records of the Company for the current fiscal year and proposes that the
stockholders ratify this selection at the Annual Meeting. Neither such firm nor
any of its members or associates has or has had during the past year any
financial interest in the Company, direct or indirect, or any relationship with
the Company other than in connection with their duties as auditors and income
tax preparers.
Stockholder ratification of this appointment is not required. Management
has submitted this matter to the stockholders because it believes the
stockholders' views on the matter should be considered, and if the proposal is
not approved, management may reconsider the appointment. Representatives of BDO
Seidman are expected to be present at the Annual Meeting to respond to
stockholders' questions and will have an opportunity to make any statements they
consider appropriate.
ANNUAL REPORT TO SHAREHOLDERS AND REPORT ON FORM 10-K
Additional information concerning the Company, including financial
statements of the Company, is provided in the Company's 1996 Annual Report to
Stockholders that accompanies this proxy statement. The Company's Annual Report
on Form 10-K for the year ended August 30, 1996, as filed with the Securities
and Exchange Commission, is available to shareholders who make a written request
therefor to Mr. James T. Traicoff, at the offices of the Company, 11350
Technology Circle, Duluth, Georgia 30155. Copies of exhibits filed with that
report or referenced therein will be furnished to stockholders of record upon
request and payment of the Company's expenses in furnishing such documents.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders may submit proposals appropriate for stockholder action at the
Company's Annual Meeting consistent with the regulations of the Securities and
Exchange Commission. Proposals by stockholders intended to be presented at the
1998 Annual Meeting must be received by the Company no later than August 20,
1997 in order to be included in the Company's proxy materials for that meeting.
Such proposals should be directed to Wegener Corporation, Attention: Corporate
Secretary, 11350 Technology Circle, Duluth, Georgia 30155.
GENERAL
The cost of this proxy solicitation will be paid by the Company.
Solicitations will be made by mail but in some cases may also be made by
telephone or personal call of officers, directors or regular employees of the
Company who will not be specially compensated for such solicitation. The
Company will also pay the cost of supplying necessary additional copies of the
solicitation material and the Company's Annual Report to Stockholders for
beneficial owners of shares held of record by brokers, dealers, banks and voting
trustees and their nominees, and upon request, the Company will pay the
reasonable expenses of record holders for mailing such materials to the
beneficial owners.
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Management knows of no other matters to be acted upon at the meeting.
However, if any other matter is lawfully brought before the meeting, the shares
covered by your proxy will be voted thereon in accordance with the best judgment
of the persons acting under such proxy.
In order that your shares may be represented if you do not plan to attend
the meeting, and in order to assure a required quorum, please sign, date and
return your proxy promptly. In the event you are able to attend, we will, if
you request, cancel the proxy.
By Order of the Board of Directors,
J. Elaine Miller
Secretary
December 17, 1996
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EXHIBIT A
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
WEGENER CORPORATION
WHEREAS, the Board of Directors of Wegener Corporation (the "Company")
deems it desirable to amend the Company's Certificate of Incorporation, as
amended (the "Certificate of Incorporation") to increase the number of
authorized shares of common stock to 20,000,000 and to create a class of
preferred stock;
NOW, THEREFORE, the Certificate of Incorporation is amended by deleting
Section four thereof in its entirety and substituting the following new Section
four therefor:
"FOURTH: AUTHORIZED SHARES. The Corporation shall have authority to issue
Twenty One Million (21,000,000) shares of capital stock, which shall be divided
into classes and shall have the following designations, preferences, limitations
and relative rights:
A. COMMON STOCK.
One class shall consist of Twenty Million (20,000,000)
shares of common stock having a par value of $.01 per share,
designated "Common Stock." The holders of Common Stock
shall be entitled to elect all the members of the Board of
Directors of the Corporation, and such holders shall be
entitled to vote as a class on all matters required or
permitted to be submitted to the stockholders of the
Corporation.
B. PREFERRED STOCK.
One class shall consist of One Million (1,000,000) shares of
preferred stock having a par value of $.01 per share,
designated "Preferred Stock." The Board of Directors of the
Corporation shall be empowered to divide any and all shares
of the Preferred Stock into series and to fix and to
determine the relative rights and preferences of the shares
of any series so established. Before any shares of
Preferred Stock of any particular series shall be issued,
the Board of Directors shall fix and determine, and is
hereby expressly empowered to fix and determine, in the
manner provided by law, the following provisions of the
shares of such series: (i) the distinctive designation of
such shares and the number of shares which shall constitute
such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like
action of the Board of Directors; (ii) the annual rate of
dividends payable on shares of such series, whether
dividends shall be cumulative and conditions upon which and
the date when such dividends shall be accumulated on all
shares of such series issued prior to the record date for
the first dividend of such series; (iii) the time or times
when and the price or prices at which shares of such series
shall be redeemable at the option of the holder or of the
Corporation and the sinking fund provisions, if any, for the
purchase or redemption of such shares; (iv) the amount
payable on shares of such series in the event of any
liquidation, dissolution or winding up of the affairs of the
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Corporation, whether all or a portion is paid before any amount is
paid on the Common Stock; (v) the rights, if any, of the holders of
shares of such series to convert such shares into, or exchange such
shares for, shares of Common Stock or shares of any other series of
Preferred Stock and the terms and conditions of such conversion or
exchange; and (vi) whether the shares of such series have voting
rights and the extent of such voting rights, if any.
The Board of Directors shall have the power to classify
unissued shares of any series of Preferred Stock and fixing
and determining the provisions thereof is hereby ratified
and approved."
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EXHIBIT B
AMENDMENT NO. 3
1988 INCENTIVE PLAN
WEGENER CORPORATION
WHEREAS, the Board of Directors of Wegener Corporation (the "Company") has
previously adopted, as amended, and the stockholders of the Company have
approved, the 1988 Incentive Plan (the "Plan") pursuant to which incentive
awards may be granted to eligible officers and key employees of the Company; and
WHEREAS, the Board of Directors of the Company deems it desirable to
further amend the Plan as provided herein;
NOW, THEREFORE, the Plan is amended upon the terms, and subject to the
conditions, set forth herein:
ARTICLE I
AMENDMENT TO PLAN
1.1 Section 3 of the Plan shall be amended by deleting the first sentence
thereof in its entirety and substituting the following new sentence therefor:
"The aggregate number of shares of Stock which may be awarded
under the Plan or subject to purchase by exercising an Option
shall not exceed 750,000 shares."
ARTICLE II
EFFECTIVE DATE OF AMENDMENT
2.1 The amendment effected hereby shall be effective for awards granted
under the Plan on or after the date this amendment is approved by the Board of
Directors of the Company, but subject to approval of a majority of the
stockholders of the Company entitled to vote thereon. In the event stockholder
approval of adoption of this amendment is not obtained within twelve months of
the date this amendment is approved by the Board of Directors of the Company,
then any award granted in the intervening period to eligible employees shall be
void.
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WEGENER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
1997 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 21, 1997 AT 7:00 P.M.,
EASTERN STANDARD TIME.
The undersigned hereby appoints Robert A. Placek and C. Troy Woodbury, Jr.
and each of them, attorneys and proxies with full power to each of substitution,
to vote in the name of and as proxy for the undersigned at the Annual Meeting of
Stockholders of Wegener Corporation (the "Company") to be held on Tuesday,
January 21, 1997 at 7:00 p.m. at the offices of the Company, 11350 Technology
Circle, Duluth, Georgia 30155, and at any adjournment thereof, according to the
number of votes that the undersigned would be entitled to cast if personally
present.
(1) To elect the following nominee as director to serve until the 2000 Annual
Meeting of Stockholders and until his successor is elected and qualified:
Robert A. Placek
<TABLE>
<S> <C> <C>
/ / FOR the nominee listed above / / WITHHOLD AUTHORITY to vote for the nominee
(except as indicated to the contrary
below)
</TABLE>
(To withhold authority to vote for any individual nominee(s), write that
nominee's name(s) on the line below:)
- --------------------------------------------------------------------------------
(2) To amend the Certificate of Incorporation as set forth in Exhibit A to the
Proxy Statement dated December 17, 1996 to increase the number of authorized
shares of common stock from 10,000,000 to 20,000,000;
/ / FOR / / AGAINST / / ABSTAIN
(3) To amend the Certificate of Incorporation as set forth in Exhibit A to the
Proxy Statement dated December 17, 1996 to create a class of Preferred
Stock;
/ / FOR / / AGAINST / / ABSTAIN
(4) To amend the 1988 Incentive Plan to increase the number of shares available
for grants and awards under the Plan from 500,000 shares to 750,000 shares;
/ / FOR / / AGAINST / / ABSTAIN
(5) To ratify the appointment of BDO Seidman as auditors for the Company and its
subsidiaries for the fiscal year 1997.
/ / FOR / / AGAINST / / ABSTAIN
(6) To transact such other business as may properly come before the meeting or
any adjournment thereof.
(CONTINUED ON REVERSE SIDE)
<PAGE>
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED FOR THE
NOMINEE REFERRED TO IN PARAGRAPH (1) AND FOR THE PROPOSITIONS REFERRED TO IN
PARAGRAPHS (2), (3), (4), AND (5).
The undersigned revokes and prior proxies
to vote the shares covered by this proxy.
____________________________________________
Signature
____________________________________________
Signature
Date: _____________________________, 199_
(When signing as attorney, executor,
administrator, trustee or guardian,
please give title as such. If stockholder
is a corporation, corporate name should
be signed by an authorized officer and
the corporate seal affixed. For joint
accounts, each joint owner should sign.)
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED REPLY ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
