Thermwood Corporation
P. O. Box 436
Old Buffaloville Road
Dale, Indiana 47523
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, December 12, 1996 at 9:00 A.M. (Dale, Indiana Time)
To the Stockholders:
The Annual Meeting of Stockholders of Thermwood
Corporation will be held at the Corporation's offices on
Thursday, December 12, 1996 at 9:00 A.M., Dale, Indiana
time, for the following purposes:
1.To elect five (5) directors for the ensuing one year term;
2.To act upon the ratification of the selection by the
Board of Directors of KPMG Peat Marwick LLP as
independent auditors;
3.To transact any other business which properly may be
brought before the meeting.
All stockholders are cordially invited to attend,
although only stockholders of record at the close of
business on November 12, 1996 will be entitled to vote at
the meeting.
By order of the Board of Directors,
Linda S. Susnjara
Secretary
Dale, Indiana
November 18, 1996
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly
return the accompanying form of proxy, so
that if you
are unable to attend the meeting your shares
may nevertheless be voted.
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors
of Thermwood Corporation (the "Corporation" or
"Thermwood") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") on December 12,
1996.
The Corporation's principal executive office is located
at Old Buffaloville Road, Dale, Indiana 47523. The
approximate date on which this Proxy Statement is first
being sent to stockholders is November 19, 1996.
You may revoke this proxy at any time prior to its use
by delivering a written notice to the Secretary of
the Corporation, by executing a later-dated proxy
or by attending the meeting and voting in person.
Proxies in the form enclosed, unless previously revoked,
will be voted at the meeting in accordance with the
specifications made by you thereon, or, in the absence
of such specifications, forthe election of directors nominated
herein and to ratify the selection of KPMG Peat Marwick LLP
as independent auditors for the fiscal year ending July 31, 1997.
Holders of record of Shares of Common Stock, without par
value per share ("Common Stock") of the Corporation at the
close of business on November 12, 1996, will be entitled to
vote at the Annual Meeting. Each share of Common Stock will
be entitled to one vote. The Common Stock will be voted
together as one class. On November 12, 1996, there were
6,548,546 outstanding shares of Common Stock of the
Corporation. There are no other voting securities
outstanding.
ELECTION OF DIRECTORS
At the annual meeting, five directors are to be elected to
serve for a term of one year and until their successors
shall have been elected and qualified. It is intended that
proxies will be voted for the nominees set forth herein.
Although it is expected that all candidates will be able to
serve, if one or more is unable to do so, the proxy holders
will vote the proxies for the remaining nominees and for
substitute nominees chosen by the Board of Directors unless
it reduces the number of directors to be elected.
The table below presents information as of November 4, 1996
on the nominees for election as directors of the Corporation
for a one-year term expiring in 1997:
<TABLE>
Principal Occupation Director Other
Name Business Experience Age Since Directorships
- ------------------- ---------------------- --- ----------- ----------------
<S> <C> <C> <C> <C>
Kenneth J. Susnjara President and Chairman 49 1969 Automation
(1) of Board since 1971 Associates, Inc.
Linda S. Susnjara President of Automation 47 1986 Automation
(l) Associates, Inc. Associates, Inc.
since 1985
Peter N. Lalos Engaged in the private 62 1989
practice of law since
1961 and senior partner,
Lalos & Keegan
Edgar Mulzer Chairman of the Board 78 1974 Dale State Bank
of Dale State Bank
(Retired)
Lee Ray Olinger Chairman of the Board 69 1989 First Bank of
of First Bank of Huntingburg
Huntingburg
</TABLE>
(1) Linda S. Susnjara and Kenneth J. Susnjara are husband and wife.
Information on the executive officers of the Company is
contained in the following table:
<TABLE>
Executive
Principal Occupation Officer
Name Business Experience Age Since Prior Position(s)
- ------------------- ---------------------- --- ---------- -----------------
<S> <C> <C> <C> <C>
Michael P. Hardesty Vice President of 42 1980 Project Engineer,
Hardesty Engineering since 1988 Project Manager,
Vice President of
Machining
since 1975
Rebecca F. Fuller Treasurer since 1993 46 1993 Controller;
Accounting
Manager since
1981
David J. Hildenbrand Vice President of Sales 39 1988 Sales Manager;
since 1988 Technical Manager
since 1977
Richard Kasten Vice President of 44 1993 Applications
Technical Services Manager since
since 1993 1990
</TABLE>
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
During 1996 the Board of Directors held 4 meetings and each
incumbent director attended at least 75% of the aggregate of
all Board of Directors' meetings and all meetings
of committees of the Board of Directors that he or she
served on.
All directors hold office until the next Annual Meeting
of shareholders of Thermwood or until their successors
shall have been elected and qualified. Directors
receive compensation in the amount of $500 for attending
directors' meetings, and are reimbursed for all related
expenses.
The Audit Committee, consisting of Lee Ray Olinger,
Edgar Mulzer and Peter N. Lalos, met once during
1996. This committee's function is to review the
scope of the Corporation's audit and generally to
supervise the financial affairs of Thermwood.
The Nominating Committee, consisting of Mr. Olinger,
Mr. Mulzer and Mr. Lalos, met once in 1996. The Nominating
Committee reviews officer performance and corporate
needs and proposes to the Board of Directors certain
directions and changes in titles, positions and
responsibilities.
The Stock Option Committee, consisting of Mr. Olinger,
Mr. Mulzer and Mr. Lalos, met once in 1996. This committee
makes awards to Thermwood employees of stock options
under its incentive stock option plan and non-
qualified stock option plan.
The Compensation Committee, consisting of Mr. Olinger,
Mr. Mulzer and Mr. Lalos met once during 1996. The
Compensation Committee reviews salaries and other
compensation paid to the Corporation's officers and
makes recommendations to the Board of Directors regarding
such items.
It is expected that Mr. Olinger, Mr. Mulzer and Mr. Lalos
will be reappointed to the foregoing committees.
EXECUTIVE COMPENSATION
The following table sets forth the annual remuneration
paid through July 31, 1996 to or accrued for the account
of (i) each of the most highly compensated executive
officers or directors of the Corporation whose total
cash and cashequivalent remuneration exceeded $100,000
and (ii) all directors and officers as a group:
<TABLE>
Summary Compensation Table
Annual compensation Long-term compensation
------------------------------ -----------------------------------
Other Awards Payouts
annual -------------------- ------- ------
Name and Year Salary Bonus compen- All
principal sation Restricted Options/ LTIP other
position (1) stock SARs payouts compen-
award(s) (#) sation
- ------------ ---- --------- ------- ------- --------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth J. 1996 $63,000 $83,242 $2,000 0 650,000 0 0
Susnjara,
Chairman of 1995 63,000 94,739 2,000 0 0 0 0
the Board,
President 1994 74,250 0 2,000 0 0 0 0
and director
Michael
Hardesty
Vice- 1996 48,000 58,269 0 0 0 0 0
president
Engineering 1995 48,000 66,317 0 0 0 0 0
David
Hildenbrand
Vice- 1996 45,000 56,818 0 0 12,000 0 0
president
Sales 1995 45,000 73,964 0 0 0 0 0
All other 1996 80,000 76,369 0 0 0 0 0
officers as
a group (2) 1995 80,000 77,618 0 0 0 0 0
persons
All other 0 0 0 0 0
officers as
a group (4) 1994 170,116 4,237 0 0 0 0 0
persons
</TABLE>
(1) Other annual compensation represents directors' fees
paid to Mr. Susnjara.
An additional 135,000 stock options, including 12,000 to
David Hildenbrand, were issued under the Qualified Stock
Option Plan in fiscal year 1996. Also under the Qualified
Stock Option Plan, 52,000 options were exercised and 50,000
expired. A total of 30,000 options under the Non-Qualified
Stock Option Plan were exercised during fiscal year July 31,
1996. At July 31, 1996 the exercise price of some of the
unexercised options were less than the market price of the
Company's Common Stock. On September 6, 1994, registration
statements on Form S-8 were filed with the Securities and
Exchange Commission under the Securities Act of 1933 in
connection with the registration of shares of the Company's
Common Stock under the Company's Employee Incentive Stock
Option Plan and Non-Qualified Stock Option Plan.
In 1985 the Board of Directors appointed Mr. Susnjara to the
position of President and Chief Executive Officer. In this
position, he is to receive a bonus based on the pre-tax
profits of the Company as set forth below. See "Profit
Sharing Plan" below.
Certain other officers may be entitled to participate in the
Company's profit sharing plan. See "Profit Sharing Plan"
below.
Profit Sharing Plan.
In 1985, the Company instituted a management profit sharing
plan. This plan has been operative since fiscal 1987, and
was continued in an amended form for fiscal 1996. Covered
under the plan are the Chairman of its Board of Directors,
the President, Vice President of Engineering, Vice President
of Sales, Vice President of Technical Services, the
Treasurer and various departmental managers.
Under the plan, the Chairman is entitled to 5% of corporate
operating income. The Vice President of Sales and Vice
President of Technical Services each are entitled to 5% of
the divisional operating income and the Treasurer is
entitled to 3% of the Corporate operating income. Any
divisional losses are to be subtracted from these amounts so
that the total bonus paid does not exceed 25% of operating
income.
Department managers are entitled to various bonuses based
upon productivity of their departments. Payments due under
the plan accrue for each six-month period and are thereafter
paid in six monthly installments. Vesting of rights under
the plan requires eligible participants to be continually
employed through the payment dates. Divisional losses of
the fiscal year must be recouped in the succeeding year, or
years, in order to be eligible for profit sharing earnings
in the succeeding year(s).
Incentive Stock Option Plan.
Under the Company's Incentive Stock Option Qualified Plan
(the "Qualified Plan"), options to purchase a maximum of
400,000 shares of its Common Stock may be granted to
officers and other key employees of Thermwood. Options
granted under the Qualified Plan are intended to qualify as
incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1954, as amended by the Tax Reform
Act of 1986.
The Qualified Plan is administered by the Board of Directors
and a Committee currently consisting of three members of the
Board which determines which persons are to receive options,
the number of shares that may be purchased under each option
and the exercise process. In the event an optionee
voluntarily terminates his employment with the Company, he
has the right to exercise his accrued options within 5
days prior to such termination. However, the Company may
redeem any accrued options held by each optionee by
paying him the difference between the option price and the
then fair market value. If an optionee's employment
is involuntarily terminated, other than because of
death, he also has the right to exercise his accrued
options within 30 days of termination. Upon death, his
estate or heirs have one year to exercise his accrued
options. The maximum term of any option is ten years
and the option price per share may not be less than the
fair market value of Thermwood's shares on the date the
option is granted. However, options granted to persons
owning more than 10% of the voting shares of the
Company may not have a term in excess of five years and
the option price per share may not be less than 110% of
fair market value at the date the option is granted.
The aggregate fair market value of the shares of
Common Stock (determined at the time the options are
granted) with respect to which incentive stock options
are exercisable for the first time by such optionee
during any calendar year (under all such plans) shall
not exceed $100,000. Options must be granted within ten
years from the effective date of this Qualified Plan.
Options granted under the Qualified Plan are not
transferable other than by will or the laws of descent
and distribution. Options granted under the Qualified
Plan are protected by anti-dilution provisions increasing
the number of shares issuable thereunder and reducing
the exercise price of such options, under certain
conditions. During fiscal year 1996, the life term of
the Qualified Plan was extended from December 3, 1995
to December 3, 2000, or on such earlier date as the
Board of Directors may determine. Any option outstanding
at the termination date will remain outstanding at the
termination date until it expires or is exercised in
full, whichever occurs first.
As of July 31, 1996, options to acquire 208,000 shares
of the Company's common stock for ten years at exercise
prices of $1.00 to $2.00 per share had been granted
under the Qualified Plan to 19 employees of the Company.
Options for the purchase of 208,000 shares were
exercisable as of July 31, 1996.
Non-qualified Stock Option Plan.
Under Thermwood's Non-qualified Stock Option Plan
("NSO Plan"), options to purchase a maximum of 350,000
shares of its Common Stock may be granted to officers,
directors, and other key employees.
The NSO Plan is administered by the Board of Directors and
a committee of three members of the Board which
determines which persons are to receive such options,
the number of shares that may be purchased under the
option, the exercise prices, the time and manner of
exercise and other related matters.
In the event an optionee voluntarily terminates his
employment or tenure with the Company's consent or
his employment or tenure is terminated by Thermwood
without cause, he generally has the right to exercise
his accrued options within 30 days after such termination
unless the Committee elects other time periods. In all
other cases of termination of the optionee's employment
or tenure other than death, said options shall cease immediately.
Upon death, his estate or heirs have one year to exercise
his accrued options.
The Committee may grant an optionee the right to surrender
all or a portion of his accrued options to the Company and
receive from it the difference between the option price and
the then fair market value. Options become exercisable in
25% installments each year beginning in the second year through
the fifth year. Options are generally not transferable and
are conditioned upon the optionee remaining in the Company's
employ for at least one year from the date of its grant.
Under the NSO Plan, no option may be granted after January 1,
2005 and the exercise price of such options may not be less than
the then fair market value. It is within the Committee's
discretion to grant anti-dilution provisions to each
optionee. Under present federal income tax law, an
employee, officer or director who is granted an option
will not have any income upon the grant of an option and
the Company will not be entitled to any deduction at the
time. When an optionee exercises his option, ordinary
income will be realized by him, measured by the excess
of the fair market value of the shares over the price
paid for the shares. The Company will be entitled to a
deduction equal to the amount of income realized by the
holder of the option. If the optionee surrenders all
or part of his option for a cash or common stock
payment, he will realize ordinary income in the amount
of cash or fair market value of stock received. The
Company will be entitled to a deduction equal to the
amount of income realized by the optionee.
As of July 31, 1996 options to acquire 200,000 shares of
the Company's common stock at exercise prices ranging
from $1.125 to $2.00 per share have been granted under
the NSO Plan to four directors and officers of
Thermwood, all of which are presently exercisable.
Other options.
Other options to purchase 650,000 shares have been
granted by the Board of Directors, all of which were
exercisable as of July 31, 1996. An option to purchase
600,000 of these shares was granted to the President of
the Company. The option extends through October 18, 1997
and permits the purchase of 300,000 shares at $3.00 per share
and 300,000 at $6.00 per share. The current options
replace cancelled options of 200,000 at $5.00 per share,
200,000 at $7.50 per share and 200,000 at $10.00 per
share. An option for 30,000 shares was granted to the
law firm of Lalos & Keegan at $1.00 per share, and was
exercised during fiscal year ended July 31, 1996. A 30,000
share option was granted to an employee at $1.00 per share and is
exercisable through October 1997. An additional 20,000
shares at $1.6875 per share were granted during fiscal
year ended July 31, 1996 to R. Jerry Falkner, a principal
in a public relations firm for the Company. The option
is currently exercisable and extends through February, 2006.
Section 401(k) Plan
The Company adopted a tax-qualified cash savings plan
(the "401(k) Plan") which became effective in October
1989. This Plan covers all employees who have completed 12
months of continuous service prior to a plan entry date.
Pursuant to the 401(k) Plan, eligible employees may make salary
deferral (before tax) contributions of up to 12% of
their total compensation per plan year up to a
specified maximum contribution as determined by the
Internal Revenue Service. The Company also makes
matching contributions equal to 25% of the employee's
contribution up to a maximum of 3% of the employee's
annual compensation. The 401(k) Plan also
includes provisions which authorize the Company to
make discretionary contributions. Such contributions, if
made, are allocated among all eligible employees as
determined under the 401(k) Plan. The trustee under the
401(k) Plan is Merrill Lynch of Evansville, Indiana.
It invests the assets of each participant's account
in funds at the direction of such participant.
OWNERSHIP OF EQUITY SECURITIES OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Ownership
The following table sets forth certain information
regarding the Company's Common Stock, including shares
underlying the convertible debentures and exercisable
Common Stock warrants and options owned as of September
30, 1996 by (i) each person known by the Company to
own beneficially more than 5% of its outstanding Common
Stock, (ii) each director, and (iii) all officers and
directors as a group:
<TABLE>
Shares Owned
Including Those
Underlying
Exercisable
Percentage Options, Percentage
Names and Addresses Shares of Total Warrants and of Total
of Beneficial Owners Owned at Outstanding Convertible Outstanding
July 31, 1996 Shares Owned Securities Shares Owned
(1) (2)
- -------------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Kenneth J. Susnjara 1,330,000 20.3 2,130,000(5) 25.0(5)
(3,4)
Edgar Mulzer 940,562 14.4 990,562(6) 11.6(6)
401 10th Street
Tell City, Indiana 47586
Peter N. Lalos 25,000 0.4 95,000(7) 1.1(7)
14312 Darnstown Road
Gaithersburg, Maryland 20878
Linda S. Susnjara 0 0 50,000(8) .6(8)
(3,4)
Lee Ray Olinger 0 0 0 0
c/o First Bank of Huntingburg
4th and Main Street
Huntingburg, IN 47542
All Officers and Directors
as a Group (9 persons) 2,356,562 35.6 3,376,562 39.7
(5,6,7,8) (5,6,7,8)
</TABLE>
(1) Except as indicated in (4), all shares are
beneficially owned and the sole voting and investment
power is held by the person indicated.
(2) Excludes (i) an aggregate of 763,000 shares of
Common Stock reserved for issuance upon conversion of
debentures; (ii) 400,000 shares reserved for issuance under
the Company's Qualified Stock Option Plan of which options
to purchase 208,000 shares have been granted and options to
purchase 208,000 shares are currently exercisable;
(iii) 350,000 shares reserved for issuance under the
Company's NonQualified Stock Option Plan of which options
to purchase 200,000 shares have been granted and
are currently exercisable; (iv) 600,000 shares reserved
for issuance upon exercise of options granted to Mr. Susnjara,
all of which are currently exercisable; (v) 20,000 shares
reserved for issuance of options granted to R. Jerry
Falkner, all of which are currently exercisable; and
(vi) 30,000 shares reserved for issuance upon exercise of
options granted to an employee, all of which are currently
exercisable. See Item 11. "Executive Compensation" and
Item 13. "Certain Relationships and Related Transactions."
(3) The address of this person is c/o the Company.
(4) Mr. and Mrs. Susnjara may each be deemed to be a
beneficial owner of the Company's securities owned by
the other because of their marital relationship.
(5) Includes (i) an aggregate of 50,000 shares issuable
upon conversion of debentures owned by Mr. Susnjara;
(ii) 50,000 shares issuable upon the exercise of options
granted to Mr. Susnjara under the Company's Non-Qualified
Stock Option Plan; and (iii) 600,000 shares issuable upon
the exercise of other options granted to him.
(6) Includes 50,000 shares issuable upon the exercise of
options granted to Mr. Mulzer under the Company's Non-
Qualified Stock Option Plan.
(7) Includes (i) an aggregate of 20,000 shares issuable
upon conversion of debentures owned by Mr. Lalos; and
(ii) 50,000 shares issuable upon the exercise of options
granted to Mr. Lalos under the Company's Non-Qualified
Stock Option Plan.
(8) Includes 50,000 shares issuable upon the exercise of
options granted to Mrs. Susnjara under the Company's Non-
Qualified Stock Option Plan.
Certain Relationships and Related Transactions
Bank Loans from Affiliated Parties:
Thermwood had an agreement, which expired on September
25, 1992, to borrow up to $1,500,000 from the Dale State
Bank (the "Dale Bank") in the form of a line of credit.
Mr. Mulzer was Chairman of the Board and the principal
shareholder of the Dale Bank during the period that
this loan was made. He is also a director and
principal shareholder of the Company. The loan bore
interest at the annual rate of prime plus 2.5%, payable
quarterly, and was secured by all of the Company's
assets. Thermwood replaced this loan, as of September 25,
1992, with a term loan in the amount of $1,500,000 from the
Dale Bank, also secured by all of the Company's assets. The
principal of the term loan, together with interest at the
annual rate of prime plus 2.75%, was due on March 24, 1993,
at which time it was assumed by Mr. Mulzer, who had agreed
to collect only interest, payable quarterly, until
August 1, 1994, at which time amortization was to have
begun. Interest expense on the Company's loans from the
Bank and Mr. Mulzer totaled $41,117, and $127,000, and for
fiscal years 1994 and 1993. There was no interest expense
on this loan during fiscal 1995 and 1996. The balance of
this loan in the amount of $1,499,800, along with accrued
interest in the amount of $23,011, was converted to Series A
Preferred Stock (the "Preferred Stock") on November 18, 1993.
Other Loans from Affiliated Party:
On March 26, 1986, the Company borrowed $250,000 from
Mr. Mulzer under a promissory note bearing annual interest at
the rate 10.5%. In March 1991 the note was converted into
a self amortizing five-year term loan, payable in
monthly installments of principal and interest of $5,373
through March 1996. On November 18, 1994, the balance of this
note in the amount of $169,218 along with accrued interest in
the amount of $13,971 was converted to Preferred Stock.
Interest expense on this loan was $9,256 in 1994. There was
no interest expense on this loan in 1995 and 1996.
Sale and Lease Back of Company's Facilities with Affiliated Party:
In February 1987 the Company purchased its premises from
an independent third party for $1,000,636 and simultaneously
resold it to Mr. Mulzer for $1,800,000. At the same time the Company
leased the premises back from Mr. Mulzer for a 20-year period at a
monthly rental of $19,353 or approximately $232,000 on an annual basis.
Total lease payments and accrued interest were $138,579 for fiscal
year 1994. There were no lease payments or interest expense for
fiscal years 1995 and 1996.
The lease agreement, which is treated as a capitalized
lease for financial reporting purposes, also obligates the
Company to pay all maintenance, taxes, assessments, insurance
premiums and utilities incurred in connection with
the operation of the premises. Pursuant to a related
agreement, the Company has an option to repurchase the
premises from Mr. Mulzer, exercisable through 2006, at
prices descending on an annual basis from $1,786,781 in
1987 to $240,000 in the last year.
On November 18, 1993, this lease payment obligation in
the amount of $1,608,629, together with accrued interest
in the amount of $122,491 was converted to Preferred
Stock. Upon the issuance of the Preferred Stock, the
Company no longer has any lease payments. The liability
for all accrued and future lease payments was converted to
Preferred Stock.
Conversion by Affiliated Party of Debt to Preferred Stock:
As previously noted, an aggregate of $3,437,120 owed to
Mr. Mulzer was converted to an aggregate of 1,000,000
shares of Preferred Stock on November 18, 1993. The holders
of the Preferred Stock are entitled to receive cumulative
cash dividends out of the net profits of the Company at
the rate of thirty-four cents ($0.34) per share per
annum, payable monthly in equal installments within the
first fifteen days of each month for the preceding month
as directed by the Board of Directors of the Company. The
Company has the right in its sole discretion to redeem the stock
at any time at $3.40 per share. The Company redeemed
100,000 shares of the preferred stock for a total of
$340,000 during fiscal year 1996. Dividends were paid in the
amount of $330,055 for the fiscal year 1996.
Equipment Leases with Affiliated Party:
Thermwood has entered into agreements with a company
owned by Mr. Mulzer pursuant to which it has leased
certain computer, demonstration and manufacturing
equipment with a right to purchase this equipment at
the end of the term of each agreement for nominal
consideration. Lease payments under these agreements
were $27,037 for the 1996 fiscal year. These
leases terminated in fiscal year 1996.
Product Sales Through and Lease Agreement With Affiliated Dealer:
Mr. and Mrs. Susnjara are the owners of Automation
Associates Incorporated ("AAI"), a dealer of the
Company's industrial products. The agreement between the
Company and AAI contains the same terms and
conditions as do the Company's agreements with its
other dealers. The Company sold no products to AAI
during fiscal year 1995, but paid AAI $349,584 in commissions
during the year for assisting in effecting sales of approximately
$1,900,000. This amount represents approximately 14% of the Company's
gross sales for fiscal year 1996. AAI also leases space from the
Company at what management believes is a fair market rate.
Rental payments were $7,200 during the 1996 fiscal year.
Payment of Legal Fees to Affiliated Party:
Lalos & Keegan, a law firm in which Mr. Lalos is the
senior partner, accrued fees of $103,000, $94,000, and
$102,000 for the fiscal years 1996, 1995, and 1994,
respectively. During fiscal year 1996 the Company paid this
firm an aggregate of $131,000, of which $28,000 represented
previously accrued fees. Accordingly, as of July 31, 1996 the
Company carried no balance for Lalos & Keegan. This firm
performs patent, trademark, general corporate and litigation
services for the Company.
Fairness of Transactions with Affiliated Parties:
Management believes that the terms of the
transactions between the Company and its affiliated
parties as described in this section are as fair as those
which the Company would have obtained if these
transactions had been effected with independent third
parties. Each transaction was approved by a majority of
the disinterested directors. In the future, all such
transactions will continue to be approved by a majority
of the disinterested directors.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Based upon the recommendation of its Audit Committee,
the Board of Directors has selected the firm of KPMG
Peat Marwick LLP as the independent auditors of the
Corporation for the fiscal year ending July 31, 1997.
KPMG Peat Marwick LLP has acted for the Corporation in
such capacity since August 1993. The Board proposes
that the stockholders ratify such selection at the
Annual Meeting.
If the stockholders do not ratify the selection of KPMG
Peat Marwick LLP by the affirmative vote of a majority
of the votes cast at the Annual Meeting on this
proposal, the selection of independent auditors will be
reconsidered by the Board of Directors.
Representatives of KPMG Peat Marwick LLP are expected to
be present at the Annual Meeting and will be afforded
the opportunity to make a statement if they so desire
and to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to
come before the meeting. Should any unanticipated
business properly come before the meeting, the persons
named in the enclosed form of proxy will vote in
accordance with their best judgment.
The cost of preparing and mailing this Proxy Statement
and the accompanying proxy and the cost of
solicitation of proxies on behalf of the Board of
Directors will be borne by the Corporation. Solicitation
will be made by mail. Such costs are estimated to be
less than $25,000. Some personal solicitation may be
made by directors, officers and employees without special
compensation, other than reimbursement for expenses.
Proposals which stockholders wish to include in the
Corporation's proxy materials relating to the 1997
Annual Meeting of Stockholders must be received by the
Corporation no later than September 15, 1997.
It is important that proxies be returned promptly.
Stockholders are urged to sign and date the enclosed
proxy and return it promptly in the accompanying envelope.
By order of the Board of Directors,
Linda S. Susnjara
Secretary
Dale, Indiana
November 18, 1996
