<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:
/ / 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
SI TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE>
[LETTERHEAD]
December 22, 1998
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of SI
Technologies, Inc. which will be held at the Mayflower Park Hotel, at Fourth
and Olive Way, Seattle, Washington, on January 21, 1999, at 2:00 p.m. I look
forward to greeting as many of our shareholders as possible.
Details of the business to be conducted at the annual meeting are given in
the attached Notice of Annual Meeting and Proxy statement.
Whether or not you attend the annual meeting it is important that your shares
be represented and voted at the meeting. Therefore, I urge you to sign, date,
and promptly return the enclosed proxy.
On behalf of the Board of Directors, I would like to express our appreciation
for your continued interest in the affairs of the Company.
Sincerely,
Rick A. Beets
President & CEO
<PAGE>
[LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1999
To the shareholders of SI TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of SI
Technologies, Inc. (the "Company"), a Delaware corporation, will be held on
Thursday, January 21, 1999, at 2:00 p.m. local time, at the Mayflower Park
Hotel, Fourth and Olive Way, Seattle, Washington for the following purposes:
1. To elect a board of six directors.
2. To consider and act upon a proposal to amend the Company's 1994
Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on December 22, 1998 will be
entitled to a vote at the annual meeting and at any adjournment thereof.
By Order of the Board of Directors
Rick A. Beets
President, CEO and Director
Seattle, Washington
December 22, 1998
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YOUR VOTE IS IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date, and
return the enclosed Proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING
THE PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. Sending in your Proxy will not prevent you from voting your
stock at the meeting if you desire to do so, as your Proxy is revocable at
your option.
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Page 1 of 11
<PAGE>
[LETTERHEAD]
4611 SOUTH 134TH PLACE
SEATTLE, WASHINGTON 98168
(206) 244-6100
PROXY STATEMENT
SOLICITATION OF PROXIES
The Board of Directors of SI Technologies, Inc. (the "Company"), is
soliciting the enclosed proxy for use at the Annual Meeting of Shareholders
of the Company to be held on Thursday, January 21, 1999, at 2:00 p.m. local
time, at the Mayflower Park Hotel, Fourth and Olive Way, Seattle, Washington.
Whether or not you plan to attend the meeting, you are requested to date,
sign and return the proxy to the Company as promptly as possible. The shares
represented by proxies will be voted in accordance with the Board of
Directors' recommendations unless the proxy indicates otherwise. Any
shareholders giving a proxy may revoke it at any time prior to its use by
filing with the Secretary of the Company a written revocation of a proxy
bearing a later date, or by voting in person at the meeting. The costs of the
solicitation will be paid by the Company. In addition to the solicitation of
proxies by the use of the mail, directors, officers and employees of the
company may solicit proxies personally, or by other appropriate means. The
Company may also request banks, brokerage houses, and other custodians,
nominees or fiduciaries holding stock in their names for others, to send
proxy materials and to obtain proxies from their principals, and the Company
will reimburse them for their expenses in doing so.
The approximate date on which this proxy statement and the form of proxy is
first being sent or given to the shareholders is December 22, 1998.
The Company's Annual Report for the fiscal year ended July 31, 1998 (the
"Annual Report"), is being mailed concurrently with this proxy statement.
Brokerage houses, custodians, nominees, and others may obtain additional
copies of the Annual Report or this proxy statement by request to the Company.
VOTING RIGHTS
As of December 22, 1998, there were 3,547,123 shares of the Company's common
stock outstanding. The Company has only one class of equity security
outstanding. Each share is entitled to one vote. The Board of Directors has
set the close of business on December 22, 1998, as the record date for
determining those shareholders entitled to vote at the annual meeting.
Each share of the Company's Common Stock outstanding on the record date is
entitled to one vote per share at the 1998 annual meeting of stockholders.
Under Delaware law and the Company's certificate of incorporation, if a
quorum is present at the meeting, the six (6) nominees for election as
directors who receive the greatest number of votes cast for the election of
directors at the meeting by the shares present in person or represented by
proxy at the meeting and entitled to vote shall be elected directors. In the
election of directors, any action other than a vote for a nominee will have
the practical effect of voting against the nominee. Abstention from voting
will have the practical effect of voting against any other matter submitted
to a vote at the meeting since it is one less vote for approval. Broker
nonvotes on one or more matters will have no impact on such matters since
they are not considered "shares present" for voting purposes.
Page 2 of 11
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of the close of business on November 24, 1998, there were 3,547,123 shares
of common stock of the Company outstanding. The following table sets forth
certain information regarding the Company's common stock beneficially owned
on November 24, 1998 by (i) each person who is known by the Company to own
beneficially more than 5% of the Company's common stock, (ii) each director,
(iii) each executive officer, and (iv) all directors and executive officers
as a group:
<TABLE>
<CAPTION>
Number of Shares of Percent of
Common Stock Beneficial
Name and Address of Beneficial Owner Beneficially Owned(1) Ownership
- ------------------------------------ --------------------- ----------
<S> <C> <C>
RALPH E. CRUMP(2) 433,124(3)(4) 11.6%
Chairman of the Board, Treasurer, Director
RICK A. BEETS(2) 345,584(5) 9.2%
President & CEO, Director
EDWARD A. ALKIRE(2) 318,400(3)(6) 8.5%
Secretary, Director
S. SCOTT CRUMP(2),(7) 238,624(3)(8) 6.4%
Director
D. DEAN SPATZ(2) 109,500(3)(9) 2.9%
Director
HEINZ ZWEIPFENNIG(2) 93,000(3) 2.5%
Director
PAUL V. CAVANAUGH(2) 25,962(10) 0.7%
Vice President Finance & CFO
ALL DIRECTORS AND OFFICERS AS A GROUP (7 PERSONS) 1,559,594(2)(3)(4)(5)(6)
(7)(8)(9)(10) 41.8%
THE CUTTYHUNK FUND LIMITED 399,840(11)(13) 10.7%
TONGA PARTNERS, L.P. 399,840(12)(13) 10.7%
</TABLE>
(1) Information with respect to beneficial ownership is based upon the
Company's stock records and data supplied to the Company by the holders.
Subject to applicable community property and similar statutes, and
except as otherwise indicated, the persons listed as beneficial owners
of the shares have sole voting and investment power with respect to such
shares.
(2) The address of each executive officer and director is c/o SI
Technologies, Inc., 4611 S. 134th Place, Seattle, WA 98168.
(3) Includes 18,000 shares subject to currently exercisable options.
(4) Includes 207,562 shares held of record by Mr. Crump's wife, Marjorie L.
Crump. Mr. Crump has shared voting and investment power with respect to
such shares.
(5) Includes 100,000 shares subject to currently exercisable options.
Includes 40,000 shares of record held by Mr. Beets' wife, Mara J. Beets
and children. Mr. Beets has shared voting and investment power with
respect to such shares. Does not include 3,998 shares issuable upon
exercise of warrants to purchase Common Stock at a price of $8.00 per
share and does not include 57,000 unvested option shares granted in 1998.
(6) Includes 2,000 shares held of record by Mr. Alkire's children for whom
he acts as custodian.
(7) S. Scott Crump is the son of Ralph E. Crump.
(8) Includes 109,562 shares held of record by Mr. Crump's wife, Lisa Crump.
Mr. Crump has shared voting and investment power with respect to such
shares.
(9) Includes 750 shares held of record by Mr. Spatz's wife, Ruth Carol
Spatz. Mr. Spatz has shared voting and investment power with respect to
such shares.
(10) Includes 1,000 shares subject to currently exercisable options. Does
not include 4,000 unvested option shares granted in 1997 and 10,000
unvested option shares granted in 1998.
(11) Does not include 80,000 shares issuable upon exercise of warrants to
purchase Common Stock at a price of $8.00 per share.The stated
business address for The Cuttyhunk Fund Limited is 73 Front Street,
Hamilton 4M12, Bermuda.
(12) Does not include 80,000 shares issuable upon exercise of warrants to
purchase Common Stock at a price of $8.00 per share. The stated
business address for Tonga Partners, L.P. is c/o Cannell Capital
Management 750 Battery Street, San Francisco, CA 94111.
(13) J. Carlo Cannell, dba Cannell Capital Management, is the General Partner
of Tonga Parnters, L.P. and has sole voting and disposition powers over
the referenced shares and is the investment advisor to The Cuttyhunk
Fund Limited, and shares voting and investment control with such fund
over the shares held by such fund.
Page 3 of 11
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Edward A. Alkire 45 Secretary, Director
Rick A. Beets 45 President & CEO, Director
Paul Cavanaugh 49 Vice President Finance & CFO
Ralph E. Crump 75 Chairman of the Board, Treasurer, Director
S. Scott Crump 45 Director
D. Dean Spatz 54 Director
Heinz Zweipfennig 67 Director
</TABLE>
CERTAIN INFORMATION CONCERNING EXECUTIVE OFFICERS AND NOMINEES FOR DIRECTORS
EDWARD A. ALKIRE - Director since 1990, Chief Operating and Financial Officer
from 1989 to 1993. Mr. Alkire is currently employed at Holman & Associates,
Inc., P.S., a certified public accounting firm. Prior to joining SI
Technologies, Inc. in 1989, Mr. Alkire was a Senior Manager at Touche Ross &
Co., a certified public accounting firm, where he provided business and tax
consulting services to closely-held and emerging businesses. Mr. Alkire is a
Certified Public Accountant and is a graduate of Evergreen State College.
RICK A. BEETS - Chief Executive Officer since August 1993, President since
December 1993 and a Director since 1997. Prior to joining SI, Mr. Beets
served as a Division Manager for the Machinery and Equipment Group of
Chicago-based FMC Corporation from 1988-1993. Prior to FMC (from 1977-1988),
he worked with Colt Industries, Inc., in a number of increasingly responsible
positions with the Fairbanks Morse Pump Division and the company's France
Compressor Products Division. Mr. Beets holds a BS degree in Industrial
Management and a MA degree in Business Administration.
PAUL V. CAVANAUGH - VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER
since 1998. Mr. Cavanaugh joined the Company in 1995 and from that time until
his appointment as CFO served as Director of Finance and Administration. From
1994 to 1995 he served as controller for Carver Corporation. Prior to 1994
Mr. Cavanaugh was employed for over fifteen years by Unisys Corporation in a
variety of domestic and international financial management positions. He
holds a B.B.A. degree from the University of Notre Dame and a Master of
Management from the Kellogg Graduate School of Management, Northwestern
University.
RALPH E. CRUMP - Director since 1981, Treasurer since 1983, and Chairman of
the Board since November 1988. Mr. Crump is President of Crump Industrial
Group, an investment firm located in Trumbull, Connecticut. Mr. Crump is also
a co-founder and director of Osmonics, Inc. (NYSE), Stratasys, Inc. (NASDAQ),
Imtec, Inc. (NASDAQ) and Mity-Lite, Inc. (NASDAQ) and ex-chairman of Med-Chem
Products, Inc., (AMEX), and Ivy Medical, Inc. (formerly NASDAQ). Prior to
November 1986, Mr. Crump was Chairman, President, and Director of
Frigitronics, Inc., a manufacturer of eye care products, which he co-founded
in 1962. Frigitronics' common stock was listed on the New York Stock Exchange
until its acquisition by Revlon in November, 1986. Mr. Crump is a Trustee of
the Alumni Foundation of the
Page 4 of 11
<PAGE>
University of California at Los Angeles and a member of the Board of
Overseers for the Thayer Engineering School at Dartmouth College.
S. SCOTT CRUMP - Director since 1981. Mr. Crump joined the Company as its
Vice President-Marketing and was an Executive Vice President until June 1988.
He is the Chairman and President of Stratasys Inc., (NASDAQ), a manufacturer
of equipment for the product design industry using prototyping
technology. From 1988 until 1989 he was Chief Operating Officer of Ivy
Medical, Inc., (formerly NASDAQ) a manufacturer of equipment for the health
care industry. He holds a BS in Mechanical Engineering and is a registered
professional engineer.
D. DEAN SPATZ - Director since 1983. Mr. Spatz is the Chairman and President
of Osmonics, Inc. (NYSE), which designs, develops, manufactures and markets
membrane systems for use in water purification and waste treatment equipment.
Mr. Spatz is also a director of Signa Aldrich Corp. (NASDAQ). He holds a B.A.
from Dartmouth College and a Master of Engineering degree from the Thayer
School of Engineering, Dartmouth College.
HEINZ ZWEIPFENNIG - Director since 1979. Mr. Zweipfennig served, from 1984
until his retirement, as President of Zweipfennig Management Consultants, an
international consulting company. He also served as a member of the board of
directors of the Software Management Services Corporation. From 1979 to
1984, he was co-founder and director of Scientific Data Systems, Inc., a Los
Angeles, California based computer systems manufacturing company. Prior to
1979, he held senior management positions with Perkin-Elmer, Macro Data and
Xerox Corporation.
PROPOSAL 1 --- ELECTION OF DIRECTORS
At the Annual Meeting six directors, constituting the entire Board of
Directors, are to be elected to hold office until the next Annual Meeting and
until their successors are duly elected and qualified. Messrs. R. Crump, E.
Alkire, R. Beets, S. Crump, D. Spatz and H. Zweipfennig are the current
directors of the company and have been nominated to continue as directors.
Unless otherwise directed, the proxy holders will vote all proxies with a
view toward the election of these nominees. If, due to circumstances not at
present foreseen, any of such nominees shall not be available for election,
the proxy will be voted for such other person or persons as the Board of
Directors may recommend.
PROPOSAL 2 --- AMENDMENT TO THE 1994 STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "Plan") was originally adopted by
the Board of Directors in October 1994, and was approved by the Company's
shareholders in January 1995. The Plan provides for the grant of incentive
and nonqualified options to purchase up to an aggregate of 300,000 shares of
Common Stock to employees, officers, directors, consultants and independent
contractors of the Company or any of its affiliates. The Board of Directors
has adopted a resolution recommending that the shareholders approve an
amendment to the Plan that would increase by 300,000 the number of shares
that may be issued under the Plan. The proposed amendment must be approved by
a majority of shares voting on the matter. The purpose of the Plan is to retain
the services of valued key employees and directors of the Company and to
encourage a greater proprietary interest in the Company. The Board believes
that the number of shares remaining available for issuance will be
insufficient to achieve the purpose of the Plan over the term of such plan
unless the additional shares are authorized. A copy of the proposed Plan, as
amended, may be obtained upon written request to the Company at the address
listed on page 2 of this Proxy Statement.
DESCRIPTION OF THE PLAN
The following is a summary of the principal provisions of the Plan, and is
subject to and qualified by reference to the Plan.
PURPOSE. The purposes of the Plan are to retain the services of valued key
employees and directors of the Company and such other persons as the Plan
Administrator shall select, to encourage such persons
Page 5 of 11
<PAGE>
to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders
of the Company, and to serve as an aid and inducement in the hiring of new
employees and attracting new directors.
ADMINISTRATION. The Plan is administered by the Board of Directors or by a
committee of the Board of Directors. All members of the committee serve at the
discretion of the Board of Directors. The Board of Directors or any committee
thereof appointed to administer the Plan shall be referred to as the "Plan
Administrator." The Plan Administrator is authorized to administer and
interpret the Plan, subject to its express provisions, and to make all
determinations necessary or advisable for the administration of the Plan.
The Plan Administrator shall have sole authority, in its absolute discretion,
to (a) construe and interpret the Plan; (b) define the terms used in the
Plan; (c) prescribe, amend and rescind rules and regulations relating to the
Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in the Plan; (e) determine the individuals to whom Options
shall be granted under the Plan and whether the Option is an Incentive Stock
Option or a Non-Qualified Stock Option; (f) determine the time or times at
which Options shall be granted under this Plan; (g) determine the number of
shares of Common Stock subject to each Option, the exercise price of each
Option, the duration of each Option and the times at which each Option shall
become exercisable; (h) determine all other terms and conditions of Options;
and (i) make all other determinations necessary or advisable for the
administration of this Plan The Plan provides that the Plan Administrator
may delegate to an officer of the Company the authority to grant options to
acquire shares of common stock of the Company ("Options") and otherwise
administer the Plan solely with respect to persons who are not Insiders (as
defined in the Plan.)
SHARES SUBJECT TO THE PLAN. The number of shares of Common Stock subject to
the Plan as of November 1, 1998 (assuming the increase of 300,000 shares) was
600,000 shares. Any unpurchased shares of Common Stock subject to Options
granted under the Plan that expire or terminate without shares of Common
Stock having been issued in connection therewith may be used for subsequent
grants under the Plan. As of November 1, 1998, 271,500 shares of Common Stock
were issuable pursuant to stock options outstanding under the Plan and 28,500
shares of Common Stock were available for stock option grants.
LIMITATIONS. Subject to adjustment from time to time, the aggregate fair
market value of the stock with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee (as defined in the Plan) during
any calendar year shall not exceed $100,000. Any Option which exceeds the
annual limit shall not be void but rather shall be a Non-Qualified Stock
Option.
PERSONS WHO MAY PARTICIPATE. Options may be granted under the Plan to any
individual who, at the time the Option is granted, is an employee of director
of the Company or any Related Corporation (as defined in the Plan.) Options
may also be granted in substitution for outstanding Options of another
corporation in connection with a merger, consolidation, acquisition of
property or stock or other reorganization between such other corporation and
the Company.
TYPES OF OPTIONS. Options granted under the Plan may be incentive stock
options ("ISOs") that are intended to meet all of the requirements of an
"Incentive Stock Option" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or nonqualified stock options ("NSOs").
Each Option granted under the Plan must be evidenced by a written agreement
approved by the Plan Administrator (an "Agreement"). Each Agreement will
comply with and be subject to the terms and conditions of the Plan. Any
Agreement may contain such additional not inconsistent with the Plan as the
Plan Administrator may deem advisable.
TERMS AND CONDITIONS OF OPTIONS. The price at which shares may be purchased
upon exercise of an Option shall be fixed by the Plan Administrator in good
faith and may not be less than the fair market value of the Common Stock as
of the date the Option is granted; provided, however, that (a) the purchase
price of an ISO shall be at least 110% of the fair market value as of the
date of the grant of the Common Stock subject thereto, if the ISO is being
granted to a shareholder who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of capital stock of
the Company; and (b)
Page 6 of 11
<PAGE>
the Options granted in substitution for outstanding options of another
corporation in connection with a merger, consolidation, acquisition of
property or stock or other reorganization involving such other corporation
and the Company may be granted with an exercise price equal to the exercise
price for the substituted option of the other corporation. The Option term
and vesting schedule, if any, will be fixed by the Plan Administrator.
Options generally will be exercisable for one year after termination of
services as a result of disability or death and for three months after all
other terminations. An Option will not be exercisable if the Optionee's
services are terminated for cause. Unvested Options shall terminate
immediately upon termination of employment of the Optionee by the Company for
whatever reason, including death or disability. The method or methods of
payment of the purchase price for the shares to be purchased upon exercise of
an Option shall be determined by the Plan Administrator and may consist of
(i) cash, (ii) certified or cashier's check, (iii) shares of Common Stock
already owned by the Option holder, or (iv) any other payment mechanism
approved by the Plan Administrator from time to time. Shares will not be
issued with respect to an Option unless the exercise of such Option and the
issuance and delivery of such shares shall comply with all relevant
provisions of law. The Optionee must make arrangements as the Plan
Administrator may require for the satisfaction of all applicable withholding
taxes upon exercise of the Option as a condition to receiving the stock
certificates. The grant of an Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital structure or to merge, consolidate or dissolve all
or any part of its business or assets.
AMENDMENT. The Board of Directors of the Company may modify, amend or
terminate the Plan at any time and in any manner subject to the following:
(i) any such amendment shall comply with all applicable laws and stock
exchange listing requirements; (ii) no recipient of any award may, without
his or her consent, have his or her rights adversely affected in any material
way as a result of the amendment or termination; and (iii) if any rule or
regulation promulgated by the Securities and Exchange Commission, the
Internal Revenue Service, other applicable law, or any national securities
exchange or quotation system upon which any of the Company's securities are
listed requires that the amendment be approved by the Company's shareholders,
then the amendment will not be effective until it has been approved by the
Company's shareholders.
ADJUSTMENTS. If the Company declares a dividend payable in its Common Stock,
subdivides its outstanding shares of Common Stock into a greater number of
shares of Common Stock or combines its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or any other event with
substantially the same effect shall occur, the Plan Administrator shall, with
respect to each outstanding Option, proportionately adjust the number of
shares of Common Stock and/or the exercise price per share so as to preserve
the rights of the Optionee substantially proportionate to the rights of the
Optionee prior to such event. To the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under the Plan shall
automatically be increased or decreased, as the case may be, proportionately,
without further action on the part of the Plan Administrator, the Company or
the shareholders.
NONTRANSFERABILITY. Unless the Plan Administrator determines otherwise, an
Option shall not be transferable other than by will or the laws of descent
and distribution. Options may be exercised during the lifetime of the Option
holder only by such Option holder (or his or her court appointed legal
representative).
ACCELERATION. The vesting of one or more outstanding Options may be
accelerated by the Plan Administrator at such times and in such amounts as it
shall determine in its sole discretion. If the Company is liquidated or
dissolved, the Plan Administrator may allow the holders of any outstanding
Options to exercise all or any part of the unvested portion of the options
held by them; provided, however, that such Options must be exercised prior to
the effective date of such liquidation or dissolution. If the Option holders
do not exercise their Options prior to such effective date, each outstanding
Option shall terminate as of the effective date of the liquidation or
dissolution. In the event of a merger or consolidation in which the Company
is not the surviving corporation, the date of exercisability of each
outstanding Option shall automatically be accelerated to a date prior to such
merger or consolidation, unless the
Page 7 of 11
<PAGE>
agreement of merger or consolidation provides for the assumption of the
Option by the successor to the Company.
FEDERAL TAX CONSEQUENCES. The federal income tax consequences to the Company
and to any person granted an Option under the Plan under the applicable
provisions of the Code and the regulations thereunder are substantially as
follows:
NSOs. No income will be recognized by an Option recipient upon the grant of
an NSO. On the exercise of an NSO, the optionee will generally have ordinary
income in an amount equal to the excess of the fair market value of the
shares acquired over the exercise price. The income recognized by an optionee
who is also an employee of the Company will be subject to tax withholding.
Upon a later sale of such shares, the optionee will have capital gain or loss
in an amount equal to the difference between the amount realized on such sale
and the tax basis of the shares sold.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired
upon exercise of an NSO.
ISOs. No income will be recognized by an Option recipient upon the grant of
an ISO. Also, the optionee will recognize no income at the time of exercise
(although the optionee will have income for alternative minimum income tax
purposes at that time as if the option were an NSO) and no deduction will be
allowed to the Company for federal income tax purposes in connection with the
grant or exercise of the option. If the acquired shares are sold or exchanged
after the later of (a) one year from the date of exercise of the options and
(b) two years from the date of grant of the option, the difference between
the amount realized by the optionee on that sale or exchange and the option
price will be taxed to the optionee as a capital gain or loss. If the shares
are disposed of before such holding period requirements are satisfied, then
the optionee will have ordinary income in the year of disposition equal to
the difference between the exercise price and the lower of the fair market
value of the stock at the date of the Option exercise or the sale of the
stock and the optionee will have capital gain or loss in an amount equal to
the difference between (i) the amount realized by the optionee upon that
disposition of the shares and (ii) the option price paid by the optionee
increased by the amount of ordinary income, if any, so recognized by the
optionee. The Company will be entitled to a deduction in the same amount as
the ordinary income recognized by the optionee if the shareholder fails to
satisfy the ISO holding period requirements.
The foregoing is only a summary of the effects of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
Options under the Plan, such summary does not purport to be complete and
references should be made to the applicable provisions of the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1994 STOCK OPTION PLAN.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
During the last fiscal year of the Company, the Board of Directors had five
meetings. Except for an audit committee and the committee for the
administration of the 1994 Stock Option Plan, the Board of Directors has no
compensation, nominating or other committee to carry out all or part of its
management functions. The members of the audit committee are Messrs. Ralph E.
Crump, D. Dean Spatz, and Heinz Zweipfennig.
During fiscal year 1998, each director attended 100 percent of the aggregate
number of meetings of the Board of Directors and the committees on which each
Director serves. During fiscal year 1998 one meeting was held by the Audit
Committee. Members of the Board do not receive cash compensation for their
service on the Company's Board of Directors or any committee thereof but are
reimbursed for business expenses incurred in attending meetings.
Page 8 of 11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid
or accrued during the years ended July 31, 1998, 1997 and 1996 for the Chief
Executive Officer and Chief Financial Officer. No other officers of the
company received compensation exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
-------
Options
Name & Principal Position Fiscal Year Annual Salary Bonus (Shares)
- ------------------------- ----------- ------------- -------- --------
<S> <C> <C> <C> <C>
Rick A. Beets 1998 $150,000 $150,000 57,000(1)
President & CEO, 1997 $130,000 $ 20,000 --
Director 1996 $128,461 $ 50,000 --
Paul Cavanaugh(2) 1998 $ 70,000 $ 54,000 10,000(3)
Vice President Finance & CFO
</TABLE>
(1) Consists of an option to acquire 50,000 shares at an exercise price of
$4.625 and an option to acquire 7,000 shares at an exercise price of
$4.125 issued under the Company's 1994 Stock Option Plan.
(2) Mr. Cavanaugh was appointed Chief Financial Officer in May, 1998. Prior
to Mr. Cavanaugh's appointment, Mr. Beets held the position of Chief
Financial Officer. Mr. Cavanaugh had been Director of Finance and
Administration for the Company.
(3) Consists of an option to acquire 10,000 shares at an exercise price of
$5.875 issued under the Company's 1994 Stock Option Plan.
The following table sets forth information about stock option grants during
1998 to the named executives.
<TABLE>
<CAPTION>
Percentage
of Total Potential Realized
Options Value at Assumed
Granted to Annual Rates of Stock
Options Employees in Exercise Expiration Price Appreciation for
Name Granted 1998 Price Date(1) Option Term(2)
- ---- ------- ------------ -------- ---------- -----------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Rick A. Beets 50,000 74.6% $4.625 1/22/08 $145,250 $368,750
7,000 10.5% $4.125 10/5/08 $ 18,165 $ 46,025
Paul Cavanaugh 10,000 14.9% $5.875 5/7/08 $ 36,950 $ 93,650
</TABLE>
(1) The options were granted for terms of ten years, subject to earlier
termination in certain events related to termination of employment. The
options vest over five years from the date of grant.
(2) Potential values stated are the result of using the Securities and
Exchange Commission method of calculations of 5% and 10% appreciation in
value from the date of grant to the end of the option term. Such assumed
rates of appreciation and potential realizable values are not necessarily
indicative of the appreciation, if any, which may be realized in future
periods.
Page 9 of 11
<PAGE>
The following table shows information concerning the number and value of
unexercised options held by Mr. Beets and Mr. Cavanaugh at the end of fiscal
1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-
Unexercised Options at FY-End money Options at FY-End
Name Exercisable/Unexercisable(1) Exercisable/Unexercisable
- ---- ------------------------------- ----------------------------
<S> <C> <C>
Rick A. Beets 100,000/57,000 $493,750/$110,375(2)
Paul Cavanaugh 1,000/14,000 $ 4,625/$ 24,750(2)
</TABLE>
(1) No options were exercised by Mr. Beets or Mr. Cavanaugh during fiscal
year 1998.
(2) The values shown equal the difference between the exercise price of
unexercised in-the-money options and the closing price of the underlying
common stock at July 31, 1998. Options are in-the-money if the fair market
value of the Common Stock exceeds the exercise price of the options.
DESCRIPTION OF THE COMPANY'S STOCK OPTION PLANS
The Company has options outstanding under two Stock Option Plans, the amended
and restated 1984-85 Stock Option Plan and the 1994 Stock Option Plan (the
"1994 Plan"). The 1984-1985 Plan has expired and no further options may be
granted under that plan. The 1994 Plan provides for the grant of statutory
stock options and non-qualified stock options to purchase an aggregate of
300,000 shares of common stock. The Plan is administered by two or more
members of the board of directors. Statutory options may not be granted at
an exercise price less than fair market value of the common stock on the date
of grant. Unless otherwise specified, the options granted under the 1994 Plan
expire up to ten years from the date of grant. Generally, if an optionee
ceases to be an employee or director for any reason other than death or
disability, the option expires 90 days after the date of termination.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent (10%)
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Officers, directors, and greater than ten percent (10%) shareholders
are required by SEC regulation to furnish the Company with copies of all
section 16(a) reports.
To the Company's knowledge, based solely on review of such reports furnished
to the Company, during the fiscal year ended July 31, 1998, all Section 16(a)
filing requirements applicable to its officers and directors were filed on a
timely basis.
The Cuttyhunk Fund Limited and Tonga Partners, L.P., each beneficial owners
of 10.7% of outstanding Common Stock of the Company filed late with the SEC
required Form 3's reporting their respective ownership holdings.
Page 10 of 11
<PAGE>
SHAREHOLDER PROPOSAL
Proposals of shareholders to be presented at the 1999 Annual Meeting of
Shareholders must be received by the Company at its principal executive
offices, no later than August 22, 1999, in order to be included in the proxy
statement and form of proxy relating to that meeting.
FORM 10-KSB
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO ANY
SHAREHOLDER UPON WRITTEN REQUEST TO THE PRESIDENT OF SI TECHNOLOGIES, INC.,
4611 SOUTH 134TH PLACE, SEATTLE, WASHINGTON, 98168, ATTN: RICK A. BEETS,
PRESIDENT & CEO.
OTHER BUSINESS
The Board of Directors knows of no business that will be presented for
consideration at the annual meeting other than as stated in the Notice of
Annual Meeting. If, however, other matters are properly brought before the
meeting, shares represented by proxies will be voted in accordance with the
best judgment of the proxy holders or their substitutes.
Page 11 of 11
<PAGE>
SI TECHNOLOGIES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD of
Directors for the Annual Meeting of Shareholders to
be held on January 21, 1999. The undersigned hereby
constitutes and appoints Rick A. Beets and Ralph E.
Crump and each of them, with full power of substitution,
attorneys and proxies of the undersigned, to represent
the undersigned and vote as if personally present at
the Annual Meeting of Shareholders to be held at the
Mayflower Park Hotel, Fourth and Olive Way, Seattle,
Washington at 2:00p.m. local time and at any adjournment
thereof, in the following manner:
1. ELECTION OF DIRECTORS: MANAGEMENT NOMINATES THE FOLLOWING DIRECTORS
Edward A. Alkire Rick A. Beets
Ralph E. Crump S. Scott Crump
D. Dean Spatz Heinz Zweipfennig
/ / FOR all nominees listed above (except as marked
contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
/ / ABSTAIN
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
_________________________ ________________________ ________________________
_________________________ ________________________ ________________________
2. AMENDMENT TO THE 1994 STOCK OPTION PLAN FOR THE PURPOSE OF INCREASING THE
AMOUNT OF AUTHORIZED SHARES
/ / FOR
/ / AGAINST
/ / ABSTAIN
DATED:____________________________________
Signature:________________________________
Signature:________________________________
PLEASE COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY.
