<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BI INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
BI INCORPORATED
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
TO BE HELD NOVEMBER 13, 1997
Boulder, Colorado
The Annual Meeting of Shareholders of BI Incorporated (the "Company") will be
held at the Raintree Plaza Hotel, 1900 Diagonal Highway 119, Longmont, Colorado,
at 10:00 a.m. local time, Thursday, November 13, 1997, for the following
purposes:
1. To elect seven (7) directors to serve until the next Annual Meeting and
until their successors have been duly elected and qualified.
2. To ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending June 30, 1998.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The minutes of the last annual shareholders' meeting and the shareholders'
list of their share eligibility to vote at the 1997 annual meeting will be open
to inspection by the shareholders at the Corporate office, 6400 Lookout Road,
Boulder, Colorado 80301.
Shareholders of record at the close of business on September 24, 1997, will
be entitled to notice of and to vote at the meeting, or any adjournment thereof.
YOUR PROXY
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
SHOULD YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE GIVEN
A PROXY. THE PROMPT RETURN OF YOUR PROXY WILL BE OF GREAT HELP IN PREPARING FOR
THE MEETING.
By Order of the Board of Directors
Mckinley C. Edwards, Jr.
Secretary
Dated: October 1, 1997
<PAGE>
BI INCORPORATED
6400 LOOKOUT ROAD
BOULDER, COLORADO 80301
----------------------------------------------
PROXY STATEMENT
----------------------------------------------
SOLICITATION, EXERCISE AND REVOCABILITY OF PROXY
The enclosed proxy is solicited by the Board of Directors of BI
Incorporated (the "Company") for use at the Annual Meeting of Shareholders to be
held Thursday, November 13, 1997, or any adjournment thereof. It is anticipated
that this Proxy Statement and the accompanying form of proxy will first be
mailed to the shareholders of the Company on or about October 1, 1997. The
Company's principal executive offices are located at 6400 Lookout Road, Boulder,
Colorado 80301, and its telephone number at those offices is (303) 218-1000.
Proxies are revocable at any time before voted by written notice to
the Company, grant of a subsequent proxy, or voting at the meeting in person.
Unless contrary instructions are indicated on the proxy, all shares represented
by valid proxies received pursuant to the solicitation (and not properly revoked
before they are voted) will be voted (i) for the election of the seven nominees
to the Board of Directors named elsewhere herein; and (ii) for the ratification
of the appointment of Price Waterhouse LLP as independent accountants for the
Company for the fiscal year ending June 30, 1998. In the event a shareholder
specifies a different choice on his proxy, his shares will be voted in
accordance with the specifications so made.
COST OF SOLICITATION
The cost of the solicitation of proxies will be borne by the Company.
The Company may reimburse brokers and other custodians, nominees or fiduciaries
for their expenses in forwarding proxy material to principals and obtaining
their proxies.
VOTING
Only shareholders of record at the close of business on September 24,
1997 will be entitled to vote at the meeting. On September 1, 1997, there were
issued and outstanding 7,417,191 shares of Common Stock of the Company, entitled
to one vote per share. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock as of the record date constitutes a
quorum and is required in order for the Company to conduct business at the
Annual Meeting. Shareholders are not entitled to cumulate their votes in the
election of Directors, which means that the holders of more than half the shares
voting for the election of the Directors can elect all the Directors if they
choose to do so. On all matters, a favorable vote consists of a simple majority
of the votes represented at a meeting at which a quorum is present. Abstentions
and broker non-votes are counted towards a quorum. Abstentions are counted in
the tabulations of the votes cast, but broker non-votes on any proposal are not
considered to be represented at the meeting as to such proposal and therefore
are not counted for purposes of determining whether a proposal has been
approved.
The Board of Directors knows of no shareholder owning more than five
percent (5%) of the outstanding voting securities of the Company, except for
Dimensional Fund Advisors, Inc. and Wellington Management, Co.
ELECTION OF DIRECTORS
The Board of Directors consists of seven incumbent members, all of
whom are to be elected at the meeting to hold office until the next meeting of
shareholders and until their successors are elected and qualified.
1
<PAGE>
INFORMATION CONCERNING DIRECTORS
William E. Coleman, Mckinley C. Edwards, Jr., Beverly J. Haddon, David
J. Hunter, Perry M. Johnson, Jeremy N. Kendall, and Byam K. Stevens, Jr., were
elected by the shareholders at the last annual meeting, and have been nominated
by the Board of Directors for re-election. Frank L. Randall, Jr. has resigned
from the Board effective November 13, 1997, and will not be standing for
reelection. The Proxies cannot vote a greater number of persons than the number
of nominees named. All nominees have informed the Company that they are willing
to serve, if elected, and management has no reason to believe that any nominee
will be unavailable. In the event a nominee for directorship should become
unavailable for election, the persons named in the proxy will vote for the
election of any other person who may be recommended and nominated by the Board
for the office of director. Information regarding nominees and directors is set
forth below.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS DIRECTORS
Age Director Since
--- --------------
<S> <C> <C>
WILLIAM E. COLEMAN is Chairman of Colorado Venture Management, Inc., a 63 1984
business consulting and venture capital firm, and has been President of Cogen
Technology, Inc., developers of cogeneration projects, since August 1987. He is
also Chairman of Colorado Greenhouse, a director of Hauser, Inc. and Telemark,
Inc. Dr. Coleman has been Vice Chairman of the Board since November 1992.
MCKINLEY C. EDWARDS, JR. has been Executive Vice President and Chief 55 1990
Operating Officer since November 1996. He joined the Company in November 1983 as
Manufacturing Manager, was elected Vice President of Manufacturing in November
1984, promoted to Executive Vice President of Operations in April 1985 and was
elected as Treasurer and Secretary in June 1986.
BEVERLY J. HADDON has been Partner at CRL Associates, a business 55 1994
consulting and government lobbying firm, since April 1993. Prior to this date,
she held various positions, over 28 years with Norwest Bank, her latest being
Executive Vice President from June 30, 1991 through May 30, 1992.
DAVID J. HUNTER joined the Company in June 1981 and served as 52 1982
Operations Manager and Vice President of Operations from January 1982 to July
1982, Vice President and Chief Operating Officer from July 1982 to April 1985,
and as President and Chief Executive Officer from April 1985 to the present.
JEREMY N. KENDALL has been Chairman and Chief Executive Officer of 57 1981
Stake Technology, Ltd., a company which has developed a process for converting
biomass into chemicals and pulp, since June 1983. Mr. Kendall is also Chairman
of JEMTEC, Inc., an independent distributor of certain of the Company's
products. He is Director of Brigdon Resources, Inc., Chairman of Redauram Inc.,
Chairman of Easton Minerals, and Chairman of Logicsys, Inc. Mr. Kendall has been
Chairman of the Board since November 1992.
PERRY M. JOHNSON has served as a Corrections Consultant since April 66 1994
1988. He consults in the areas of prison overcrowding, implementation of house
arrest and halfway house programs and development of offender classification
systems. Since January 1982 he has been Adjunct Professor for the School of
Criminal Justice at Michigan State University. Prior to April 1988 Mr. Johnson
was Deputy Director, Bureau of Field Services; Director, Michigan Department of
Corrections; Warden, State Prison of Southern Michigan and Deputy Director,
Bureau of Correctional Facilities.
BYAM K. STEVENS, JR. has served as a security analyst and portfolio 67 1989
manager for the stock brokerage firm of H.G. Wellington & Co., Inc. since March
1986. From January 1973 to that time, he served in the same capacities for
Stillman, Maynard & Co. until the two firms merged.
</TABLE>
2
<PAGE>
DIRECTOR COMPENSATION
Each non-employee director was granted, on July 1, 1997, an option
pursuant to the 1996 Plan to purchase 4,500 shares of the Company's common stock
at the closing price on the date prior to the grant date for service in fiscal
1997. Non-employee Directors received $1,000 for each Board of Directors
meeting attended during the fiscal year. Non-employee directors who are members
of the Audit, Nomination and Compensation Committees received $250 for each
meeting attended during the fiscal year as stated below. On November 13, 1997,
each re-elected non-employee director will receive $5,000.
COMMITTEES, ATTENDANCE, NOMINATIONS
The Company has standing Audit, Nomination and Compensation
Committees. The Company's Audit Committee during fiscal 1997 was comprised of
Messrs. Coleman, Hunter, Johnson, and Stevens. This Committee recommends
engagement of the Company's independent accountants, approves services performed
by such accountants, and reviews and evaluates the Company's accounting system
of internal controls. The Audit Committee met 4 times during fiscal year 1997.
During fiscal 1997, the Compensation Committee consisted of Messrs. Randall,
Hunter (non-voting member), Kendall, Stevens, and Ms. Haddon. This Committee
approves salaries and other compensation arrangements for the executive officers
of the Company. This Committee also approves option grants to eligible
employees under the Company's stock option plans. The Compensation Committee
met 5 times during fiscal 1997. The Nomination Committee consisting of Messrs.
Hunter, Coleman, Kendall and Johnson did not meet in fiscal 1997. This
committee was formed to develop the composition and participation guidelines of
the Board of Directors. The Company's Board of Directors met five times during
fiscal 1997. Each Director participated by personally attending during fiscal
1997 over 75% of both the Board of Directors meetings and meetings of committees
of which he or she was a member.
Any shareholder who desires to propose a candidate for Board
membership should send to the attention of the Secretary of the Company a signed
letter of recommendation containing the name and address of the proposing
shareholder and the proposed candidate (see "Shareholder Proposals") and setting
forth the complete business, professional and educational background of the
proposed candidate.
3
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of August 31, 1997 by (i) persons
known to the Company to own beneficially more than five percent (5%) of the
outstanding Common Stock of the Company, (ii) by each director, (iii) by each
named executive officer, and (iv) by all executive officers and directors as a
group. A person is deemed to be a beneficial owner of Common Stock that can be
acquired by such person within 60 days from August 31, 1997 upon the exercise of
warrants or options.
<TABLE>
<CAPTION>
Name Amount and nature Percent of Class
of beneficial ownership
----------------------------------------------------------------------------------------
<S> <C> <C>
Wellington Management, Co.
75 State Street
Boston, MA 02109 623,000 (1) 8.4%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 553,200 (1) 7.5%
Jackie A. Chamberlin 64,872 (2) *
William E. Coleman 37,000 (3) *
Mckinley C. Edwards, Jr. 133,438 (4) 1.8%
Beverly J. Haddon 23,000 (5) *
David J. Hunter 252,676 (6) 3.3%
Perry M. Johnson 25,000 (7) *
Jeremy N. Kendall 42,000 (8) *
Frank L. Randall, Jr. 47,306 (9) *
Byam K. Stevens, Jr. 79,000 (10) 1.0%
All Officers and Directors as a Group 704,292 (11) 8.9%
(9 persons)
</TABLE>
- --------------------------
* Represents less than 1%
(1) As of June 30, 1997.
(2) Includes options to purchase 57,255 shares, exercisable within sixty days.
(3) Includes options to purchase 28,000 shares and warrants owned by Colorado
Venture Management to purchase 9,000 shares, exercisable within sixty days.
Dr. Coleman is Chairman of Colorado Venture Management, Inc., which is the
general partner of Colorado Venture Management.
(4) Includes options to purchase 90,299 shares, exercisable within sixty days.
Also includes 3,000 shares owned by Mr. Edwards' children, as to which
shares Mr. Edwards disclaims beneficial ownership.
(5) Includes options to purchase 22,000 shares, exercisable within sixty days.
(6) Includes options to purchase 184,485 shares, exercisable within sixty days.
Also includes 8,536 shares owned by Mr. Hunter's two sons, as to which
shares Mr. Hunter disclaims beneficial ownership.
(7) Includes options to purchase 22,000 shares, exercisable within sixty days.
(8) Includes options to purchase 37,000 shares, exercisable within sixty days.
(9) Includes options to purchase 37,000 shares, exercisable within sixty days.
4
<PAGE>
(10) Includes 24,000 shares owned by Mr. Stevens' relatives, as to which shares
he disclaims beneficial ownership. Also includes options to purchase 37,000
shares, exercisable within sixty days.
(11) Includes options or warrants to purchase 524,039 shares, exercisable within
sixty days.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Named Executive Officers, (Messrs. Hunter, Edwards, and Ms.
Chamberlin) have employment agreements with the Company. These agreements
assure continuity of management in the event of any actual or threatened change
in control as defined in these agreements. The Company agrees to continue the
employ of the executive for one year from the effective date of the change in
control. The executive will receive annual salary and benefits of not less than
his or her current rate, and will be eligible to participate in bonus and other
incentive compensation plans on the same basis he or she was participating
before the change in control. If the executive is terminated as a result of the
change in control (as defined in the agreement) he or she will receive salary
and benefits as if he or she were an employee through the end of his or her
employment contract period.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
With respect to fiscal 1997 executive compensation, the Compensation
Committee (the "Committee") administered: the compensation for the corporate
officers and Board of Directors, the 1991 Stock Option Plan, the 1996 Stock
Option Plan, the Key Employee and Director Non-Qualified Stock Option Plan and
the Employee Non-Qualified Stock Option Plan. The Committee also annually
establishes and reviews the bonus program for corporate officers. The
Committee's policy in administering these plans and programs is to provide a
strong and direct link among shareholder value, company performance and
executive compensation as well as to structure sound compensation programs that
will attract and retain high quality people.
Officer Compensation Policy. The Committee retained the services of
----------------------------
a professional executive compensation consultant to help establish the corporate
officer compensation policy. This consultant reviewed all aspects of the short-
and long-term compensation of corporate officers. The Committee directed the
consultant to research companies with characteristics similar to those of the
Company. Such characteristics included size, stature, industry similarities,
growth and investment patterns, earnings comparisons and various ratio analyses.
Additionally, the Committee's policy is to assure that the officers are
compensated annually at an average to similar positions at these other
companies, and over the long term at an above average level to assure ample
incentive for the growth and viability of the Company over time. The Board of
Directors, after reviewing the recommendations of the consultant, have chosen to
use the recommendations as a guideline when considering future corporate officer
compensation matters. Both the Committee and the Board regularly review
national executive compensation surveys to assure the parity and appropriateness
of BI's officer compensation policy.
The Committee's corporate officer compensation policy is founded on
principles that guide the Company in establishing compensation programs at all
levels of the organization. These compensation programs are designed to treat
all employees fairly and to be cost-effective. To that end, all programs,
including those for corporate officers, have the following characteristics:
Compensation is based on the level of job responsibility, the
individual's level of performance, and Company performance. Corporate officers
have a greater portion of their pay based on Company performance than do other
management employees. Compensation also takes into consideration the value of
the job in the marketplace. To retain its highly skilled work force, the
Company strives to remain competitive with the pay of employers of a similar
stature who compete with the Company for talent.
Through its stock option and stock purchase plans, the Company offers
the opportunity for equity ownership to all of its employees. In addition, the
Company provides corporate officers and other key employees the opportunity to
build more substantial equity ownership through its Option Plans.
5
<PAGE>
Reviews are conducted at the first Compensation Committee meeting
after the end of each fiscal year. At these reviews both short- and long-term
compensation matters are considered based upon previous year-end results and the
new plan for the future.
Fiscal 1997's revenue and cash flow were at record levels. Revenue
was up 23% over the level of fiscal 1996. Cash flow from operations was
$9,052,000, an increase of 37% over fiscal 1996. Net income however declined
36% from $2.9 million in fiscal 1996 to $1.8 million in fiscal 1997. During the
period, the Company invested heavily in activities related to new product
development and market expansion in both its electronic monitoring and
information systems businesses. Additionally, the Company invested in the
development of a new community correctional services business by means of an
acquisition and growth strategy. It is Management's belief that such
investments are essential to the progress of the Company over the long-term.
Because of the decline of Company earnings in fiscal 1997, no cash
bonuses were paid as set forth in the fiscal 1997 Officer Bonus Guideline
established in August 1996.
Long-term incentive compensation in the form of stock options is an
important element of the performance-based compensation of executive officers as
well as other managers and employees within the Company. The grant of stock
options continues the Company's long-standing practice of increasing
management's equity ownership in order to ensure that their interests remain
closely aligned with those of the Company's shareholders. Stock options and
equity ownership in the Company provide a direct link between executive
compensation and shareholder value and serve as an incentive because the
exercise price is equal to the fair market value on grant date; thus, executive
officers will receive future gains from these options only to the extent the
price of the Company's stock increases. Stock options, in addition to providing
the Company's key employees an opportunity for increased equity ownership also
create an incentive to remain with the Company for the long term. This is
particularly important to the success of the five year plan.
Accordingly, in July 1997, the Committee reviewed the status of each
officer's stock options and concluded that option levels were appropriate at
this time. No additional officer options were granted by the Board.
In view of the progress made both in revenue growth and cash flow, and
in view of the officers' steadfast belief that near-term investments will result
in long-term growth and increased profitability, the Committee recommended and
the Board approved a 4% increase in each of the officers' salaries effective
July 1, 1997. The Committee also recommended and the Board approved a net car
allowance of $500 per month for each of the officers.
Chief Executive Officer Compensation. The Committee reviews all
-------------------------------------
compensation matters relative to the CEO after the close of each fiscal year at
June 30. At the first Compensation Committee meeting of fiscal 1997, the
Committee recommended and the Board approved an annual salary of $200,000 for
Mr. Hunter effective July 1, 1996. This salary was $30,000 more than the
previous year, and brought him in line with the previously mentioned survey
guidelines.
The Committee conducted a written and oral evaluation of Mr. Hunter,
the Company's President and Chief Executive Officer, in July 1997.
In accordance with the Fiscal 1997 Officer Bonus Guideline, Mr. Hunter
was eligible to receive a bonus of 50% of his base salary if the Company had met
its planned net income target for fiscal 1997. Since this target was not met,
the bonus was not paid. However, as stated above, in view of the progress made
both in revenue growth and cash flow, and in view of Mr. Hunter's belief that
the investments made in fiscal 1997 will result in long-term growth and
increased profitability, the Committee recommended and the Board approved a 4%
increase in Mr. Hunter's salary effective July 1, 1997. The Committee also
recommended and the Board approved a net car allowance of $500 per month. As
stated above, no additional options were recommended.
The Committee will continue to review all aspects of Mr. Hunter's
compensation annually in July to establish goals for the ensuing fiscal year
against which his performance and adjustments in compensation will be evaluated.
Compensation Committee: Frank L. Randall, Jr., Chairman; Beverly J.
Haddon; Jeremy N. Kendall: Byam K. Stevens, Jr.; David J. Hunter (non-voting
member)
6
<PAGE>
The following table sets forth the compensation paid each of the last three
fiscal years ended June 30, 1997, 1996 and 1995 to the Company's Chief Executive
Officer and each Executive Officer who received compensation in excess of
$100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term Compensation
-------------------------
Awards Payouts
-------------------------
Number of
Name and title Annual Compensation Restricted Option
- -------------- ---------------------------------- Stock Shares LTIP* All Other
Year Salary Bonus Awards Granted Payouts Compensation
---- -------- ------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. Hunter 1997 $197,500 $ 0 0 100,000(b) 0 $8,450
President 1996 169,167 85,000 0 100,000(b) 0 4,592
Chief Executive Officer 1995 149,968 75,000 0 75,000 0 4,332
Mckinley C. Edwards, Jr. 1997 $163,750 $ 0 0 75,000(b) 0 $7,369
Executive Vice President, 1996 149,375 60,000 0 75,000(b) 0 1,224
Chief Operating Officer 1995 134,439 54,000 0 37,500 0 3,866
Jackie A. Chamberlin 1997 $109,167 $ 0 0 50,000(b) 0 $4,987
Vice President, Finance 1996 99,583 30,000 0 50,000(b) 0 2,791
Chief Financial Officer 1995 89,663 27,000 0 22,500 0 1,797
</TABLE>
* Long-term Incentive Plan
(a) Represents the matching contribution made pursuant to the Company's 401k
retirement savings plan as follows: Mr. Hunter $1,410; Mr. Edwards $1,481;
and Ms. Chamberlin $1108. In addition, the Company has a policy to pay
employees annually for earned but unused vacation hours up to 40 hours.
Other compensation includes $3,846 for Mr. Hunter, $3,173 for Mr. Edwards
and $896 for Ms. Chamberlin for unused vacation hours.
The Company pays the life insurance premiums in connection with a policy
purchased as part of a deferred compensation arrangement for certain key
executives. Other compensation includes $3,194 for insurance premiums paid
for Mr. Hunter, $2,715 for Mr. Edwards and $2,983 for Ms. Chamberlin.
(b) These options were originally granted on August 15, 1996, for fiscal 1996
performance and repriced on January 21, 1997 by the Board of Directors. The
vesting schedules and termination dates, of repriced options remain
unchanged.
7
<PAGE>
STOCK OPTION GRANTS
The following table shows the stock options granted to the Named
Executive Officers during 1997 and the potential realizable value of those
grants (on a pre-tax basis) determined in accordance with SEC rules. The
information in this table shows how much the Named Executive Officers may
eventually realize in future dollars if the stock gains 5% or 10% in value per
year, compounded over the life of the options. These amounts represent assumed
rates of appreciation, and are not intended to forecast future appreciation of
the Company's Common Stock.
The options described in this table have exercise prices equal to the
fair market value of a share of Common Stock on the date they were granted or
repriced.
<TABLE>
<CAPTION>
OPTION SHARES GRANTED IN FISCAL 1997
Individual Grants
-----------------------------------------------------------------
% of Total Potential Realizable
Number of Option Shares Value at Assumed
Option Granted to Exercise Annual Rates of
Shares Employees in Price Per Expiration Stock Price Appreciation (b)
Name Granted Fiscal Year Share Date 5% 10%
- ------------------------ ------- ----------- --------- ----------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
David J. Hunter 100,000(a) 12.3% $7.00 8/14/06 $440,000 $1,116,000
Mckinley C. Edwards, Jr. 75,000(a) 9.2% $7.00 8/14/06 $330,000 $ 837,000
Jackie A. Chamberlin 50,000(a) 6.2% $7.00 8/14/06 $220,000 $ 558,000
</TABLE>
(a) Originally granted August 15, 1996, for fiscal 1996 performance and
repriced on January 21, 1997 by the Board of Directors. The vesting
schedules and termination dates of repriced options remain unchanged.
(b) Calculated over ten-year period, representing the life of the option.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table shows information concerning the exercise of stock
options by each of the Named Executive Officers during fiscal 1997, and the
value of all remaining unexercised options at June 30, 1997, on a pre-tax basis.
<TABLE>
<CAPTION>
AGGREGATE OPTION SHARES EXERCISED IN FISCAL 1997 AND JUNE 30, 1997 OPTION VALUES
Number of Unexercised Value of Unexercised, In-the-
Shares Options at 6/30/97 Money Options at 6/30/97(b)
Acquired on Net Value ------------------------ ----------------------------
Name Exercise Realized(a) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Hunter 0 $0 145,735 130,000 $302,648 $118,906
Mckinley C. Edwards, Jr. 0 0 65,924 85,000 125,518 69,453
Jackie A. Chamberlin 0 0 41,630 60,125 81,523 53,804
</TABLE>
(a) The net value realized on exercise of stock options is calculated by
subtracting the exercise price from the market value of the Company's
common stock as of the exercise date.
(b) The value of unexercised in-the-money options is equal to the market value
of the common stock at June 30, 1997 ($7.50 per share) less the per share
option price, multiplied by the number of exercisable or unexercisable
options.
8
<PAGE>
STOCK OPTION REPRICING
The following table shows information concerning the repricing of
options for each executive officer of the Company for the ten year period July
1, 1987 to June 30, 1997.
<TABLE>
<CAPTION>
TEN-YEAR OPTION/SAR REPRICINGS
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of Market Price of Exercise Price Length of Original
Options/SARs Stock at Time At Time of New Option Term Remaining
Repriced or of Repricing or Repricing or Exercise at Date of Repricing
Amended Amendment Amendment Price or Amendment
Name Date (#) ($) ($) ($) (in months)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David J. Hunter 1/21/97 100,000 $ 7.00 $ 12.83 $ 7.00 115
Chief Executive Officer 4/18/94 40,000 4.88 5.875 5.13 9 (1)
4/18/94 10,000 4.88 7.50 5.13 20
4/18/94 20,000 4.88 7.375 5.13 57
4/18/94 52,455 4.88 7.625 5.13 63
4/18/94 28,280 4.88 7.625 5.13 63
1/28/92 10,000 7.50 10.75 7.50 47
10/20/87 15,000 3.563 5.625 3.563 54
- ------------------------------------------------------------------------------------------------------------------------------------
Mckinley C. Edwards, Jr. 1/21/97 75,000 7.00 12.38 7.00 115
Executive Vice President, 4/18/94 35,000 4.88 5.875 5.13 9 (1)
Chief Operating Officer 4/18/94 10,000 4.88 7.50 5.13 20
4/18/94 15,000 4.88 7.375 5.13 57
4/18/94 23,424 4.88 7.625 5.13 63
1/28/92 10,000 7.50 10.75 7.50 47
10/20/87 10,000 3.563 5.625 3.563 54
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Jackie A. Chamberlin 1/21/97 50,000 7.00 12.38 7.00 115
Chief Financial Officer 4/18/94 10,000 4.88 7.50 5.13 12
Vice President Finance 4/18/94 2,500 4.88 7.00 5.13 27
4/18/94 7,000 4.88 8.25 5.13 55
4/18/94 11,255 4.88 7.625 5.13 63
1/28/92 10,000 7.50 9.9375 7.50 39
10/20/87 1,268 3.563 4.93 3.563 59
10/20/87 6,499 3.563 4.93 3.563 59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) While this reflects the length of the original option term remaining at the
--------
date of repricing, the actual length of the option term remaining was 33
months, because the termination date for these options was extended from
January 1995 to January 1997 at the time they were repriced.
Compensation Committee: Frank L. Randall, Jr., Chairman, Beverly J. Haddon,
Byam K. Stevens, Jr., Jeremy Kendall, David J. Hunter (non-voting member).
9
<PAGE>
RELATED PARTY TRANSACTIONS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Mr. Hunter, the Company's CEO, served as a non-voting member of the
Company's compensation committee during fiscal 1997, but did not participate in
discussions involving his compensation.
During fiscal 1997 the Company sold home arrest equipment and services to
JEMTEC, Inc. in the amount of $551,000. Mr. Kendall, the Chairman of the
Company, is Chairman of JEMTEC, Inc.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1997, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with, except that one report of a single
transaction was filed late by each of Mr. Coleman, Mr. Randall, and Mr. Stevens.
10
<PAGE>
PERFORMANCE GRAPH
The following indexed graph indicates the Company's total return to its
stockholders from June 30, 1992 to June 30, 1997 as compared to total return for
the NASDAQ Stock Market (U.S. companies) Index and a self-determined Peer Group
Index selected by the Company, assuming a common starting point of $100 and that
all dividends were reinvested. The information contained in this graph is not
necessarily indicative of future Company performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG BI INCORPORATED, THE
NASDAQ STOCK MARKET (U.S. COMPANIES) INDEX AND A PEER GROUP
Measurement Period NASDAQ
(Fiscal Year Covered) BI Inc Peer Group Composite (U.S.)
Measurement PT
6/30/92 $100.00 $100.00 $100.00
FYE 6/30/93 $104.76 $168.68 $125.76
FYE 6/30/94 $60.31 $148.35 $126.96
FYE 6/30/95 $84.12 $125.43 $169.47
FYE 6/30/96 $168.25 $225.24 $217.57
FYE 6/30/97 $95.24 $179.83 $396.39
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472. Data from
Bloomberg Financial Markets, and CRSP.
Self-determined peer group consists of six companies which are as follows:
American Medical Alert Corp, Checkpoint Systems, Inc., Response USA, Inc.,
Amtech Corp, Destron Fearing Corp and Lifeline Systems, Inc. Four of these
companies have a standard industrial classification code of 366 to 369. Two
companies provide personal emergency response monitoring.
11
<PAGE>
PROPOSALS FOR VOTING
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR the
election of the seven directors, as discussed under "Election of Directors."
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends that the shareholders ratify the
appointment of Price Waterhouse LLP, independent accountants, to audit the
financial statements of the Company for the fiscal year ending June 30, 1998.
Price Waterhouse LLP has been the Company's independent accountant for over ten
years. A representative of Price Waterhouse LLP will be present at the annual
meeting and will have an opportunity to make a statement if he so desires. This
individual will also be available to respond to appropriate questions. An
adverse vote will be considered as a direction to the Board of Directors to
select other independent accountants for the fiscal year ending June 30, 1999.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting other than those described above. However, if
any other matters properly come before the meeting it is intended that the
person named in the enclosed proxy will vote on such matters in accordance with
his or her best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting must be received by the Company, attention of the Secretary, 6400
Lookout Road, Boulder, Colorado 80301 by June 3, 1998, and must be made in
compliance with federal securities laws.
ANNUAL REPORT - FINANCIAL STATEMENTS
A copy of the Annual Report to Shareholders, including financial
statements for each of the three years in the period ended June 30, 1997, is
being mailed to all shareholders herewith. The Annual Report is not to be
regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
By Order of the Board of Directors
Mckinley C. Edwards, Jr.
Secretary
Dated: October 1, 1997
12
<PAGE>
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF BI INCORPORATED
FOR ANNUAL MEETING ON NOVEMBER 13, 1997
The undersigned hereby appoints David J. Hunter and Mckinley C.
Edwards, Jr., or either of them, attorneys and proxies for the undersigned, with
full power of substitution, to vote all shares of capital stock of BI
Incorporated (the "Company") held of record by the undersigned on September 24,
1997, at the Annual Meeting of Stockholders of BI Incorporated to be held at the
Raintree Plaza Hotel, 1900 Diagonal Highway 119, Longmont, Colorado on Thursday,
November 13, 1997, 10:00 a.m., M.S.T., and at any adjournment thereof. The
undersigned hereby revokes any proxy or proxies heretofore given in respect to
the same shares of stock.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BELOW
BY THE UNDERSIGNED WITH RESPECT TO PROPOSALS 1, AND 2. IF NO DIRECTION IS
GIVEN, SUCH SHARES WILL BE VOTED FOR SUCH PROPOSALS AND SUCH SHARES WILL BE
VOTED IN EITHER OR BOTH OF THE PROXIES' DISCRETION UPON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
TO ENSURE A QUORUM, YOU ARE URGED TO DATE AND SIGN THIS PROXY ON THE
LINE BELOW AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
THE DIRECTORS RECOMMEND A VOTE FOR THESE TWO PROPOSALS:
1. Election of Directors.
_____ FOR (except as _____ WITHHOLD AUTHORITY to vote for all
(listed below) nominees listed below
Nominees: William E. Coleman, Mckinley C. Edwards, Jr., Beverly
J. Haddon, David J. Hunter, Jeremy N. Kendall, Perry M.
Johnson and Byam K. Stevens, Jr.
If you desire to withhold authority to vote for any individual
nominee, please write the nominee's name on the space provided:
--------------------------------------------
2. Ratification of Price Waterhouse LLP as independent accountants.
_____ FOR _____ AGAINST _____ ABSTAIN
In their discretion, the above-named proxies are authorized to
vote upon such other business as may properly come before the
meeting or any adjournment hereof.
Dated:__________________________________, 19 _____
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Signature
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Signature if held jointly
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
