CONFIDENTIAL, FOR USE
OF THE COMMISSION ONLY
PRELIMINARY COPY
INTELLIGENT CONTROLS, INC.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
April 30, 1998
Notice is hereby given that the Annual Meeting of Shareholders of Intelligent
Controls, Inc. will be held at the Sheraton Tara Hotel, 363 Maine Mall Road,
South Portland, Maine at 5:00 p.m. on Thursday, April 30, 1998, to conduct the
following business:
1. To elect the Directors;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants to the Company for the current fiscal year;
3. To amend the Articles of Incorporation to increase the authorized
common stock to 8,000,000 shares;
4. To amend the Articles of Incorporation to provide that Section 910
of the Maine Business Corporation shall not apply to the Company;
5. To approve the 1998 Employee Stock Option Plan;
6. To approve a restricted stock arrangement with Roger E. Brooks; and
7. To conduct any other business which may lawfully come before said
meeting.
A Proxy Statement describing these proposed actions accompanies this Notice of
Meeting.
Dated at Portland, Maine this 30th day of March, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
Gregory S. Fryer, Clerk
NOTE: ALL SHAREHOLDERS ARE ENCOURAGED TO VOTE, DATE, AND SIGN THE PROXY CARD
ENCLOSED WITH THIS NOTICE AND THE ACCOMPANYING PROXY STATEMENT, AND TO RETURN
THE COMPLETED PROXY CARD IN THE ENVELOPE PROVIDED.
CONFIDENTIAL, FOR USE
OF THE COMMISSION ONLY
PRELIMINARY COPY
INTELLIGENT CONTROLS, INC.
74 Industrial Park Road
P.O. Box 638
Saco, Maine 04072
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 30, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Intelligent Controls, Inc. ("INCON" or the
"Company") for use at the 1998 Annual Meeting of Shareholders. The meeting will
be held at the Radisson Eastland Hotel Portland, 157 High Street, Portland,
Maine at 5:00 p.m. on Thursday, April 30, 1998.
When properly executed and returned, the enclosed proxy will be voted in
accordance with the choices marked. If no choice is specified, the proxy will
be voted as recommended by the Board of Directors. A proxy may be revoked at
any time before it is voted. Shareholders may revoke their proxies by
delivering written notice to the Clerk of the Company prior to the vote on a
given matter, by submitting a later dated proxy at or before the Meeting, or by
voting in person at the Meeting.
The record date for determining shareholders entitled to vote at the
Meeting (and any adjournment thereof) is March 26, 1998. All shareholders of
record as of the close of business on that date will be entitled to cast one
vote per share. This Proxy Statement and the accompanying form of proxy for the
Meeting are first being mailed to shareholders on or around March 30, 1998.
A description of matters to be voted upon is set forth at pages 6-___ of
this Proxy Statement. Certain information concerning share ownership,
management, and compensation appears below.
OWNERSHIP OF COMMON STOCK
As of March 16, 1998, there were [ 3,252,406 ] outstanding shares of
Intelligent Controls, Inc. common stock, the Company's only authorized class of
stock. Set forth below, as of such date, is information concerning all persons
known to the Company to beneficially own more than five percent of the
outstanding shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
<S> <C> <C>
Alan Lukas 1,163,213 (1) 35.7%(1)
74 Industrial Park Road
Saco, Maine 04072
Paul E. Lukas 489,791 (2) 15.0%(2)
74 Industrial Park Road
Saco, Maine 04072
John D. Knight 248,240 (3) 7.1%(3)
6 Stonebrooke Road
Scarborough, ME 04074
<FN>
- -------------------
<F1> Includes 1,039,983 shares owned directly by Alan Lukas, 3,333 shares
purchasable by him under a stock option, 87,397 shares owned by his wife,
25,000 shares held by him as custodian for his child, and 7,500 shares
owned by Lukas Brothers, a general partnership of which Alan Lukas and his
brother Paul Lukas are two of the three partners.
<F2> Includes 480,624 shares owned directly by Paul E. Lukas, 1,667 shares
purchasable by him under a stock option, and 7,500 shares owned by Lukas
Brothers.
<F3> Represents shares that are the subject of certain stock options previously
granted to Mr. Knight. These stock options are the subject of a pending
dispute between the Company and Mr. Knight, in which the Company to date
has refused to consummate Mr. Knight's attempted exercise of the options
in 1996.
</FN>
</TABLE>
The following table shows, as of March 16, 1998, the number of shares of
Intelligent Controls, Inc. common stock which, to the Company's knowledge, were
beneficially owned by executive officers of the Company and by each Director
and other nominee for election as a Director. Except as otherwise indicated,
each person named owned less than one percent of the outstanding common stock
of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED (1) OF CLASS (1)
<S> <C> <C>
Alan Lukas (2) 1,163,213 35.7%
Charlton H. Ames 9,682
George E. Hissong 10,500
Paul F. Walsh 16,000
Henry M. Powers 3,000
Charles D. Yie (3) 0
Roger E. Brooks (3) 0
All Directors, nominees, and
executive officers as a group ?,???,??? ??.?%
<FN>
- -------------------
<F1> Except as otherwise noted, all shares are owned directly. Includes the
following shares that are purchasable under outstanding stock options: Mr.
Lukas, 3,333 shares; Mr. Ames, 7,000 shares; Mr. Hissong, 8,000 shares;
Mr. Walsh, 16,000 shares; and Mr. Powers, 2,000 shares.
<F2> Mr. Lukas' shares includes 1,039,883 shares owned directly by him, 3,333
shares purchasable by him under a stock option, 87,397 shares owned by his
wife, 25,000 shares held by a custodian or trustee for his child, and
7,500 shares owned by Lukas Brothers, a general partnership of which Mr.
Lukas is one of the three partners.
<F3> Nominees for election as Directors. See discussion below of certain
agreements by which Mr. Brooks and two investment funds affiliated with
Mr. Yie may purchase shares of Company common stock. These agreements are
subject to specified conditions that have not yet been satisfied.
</FN>
</TABLE>
THE BOARD OF DIRECTORS
The Directors of the Company are elected for one year terms at the Annual
Meeting of Shareholders. Set forth below is biographical information for each
of the current members of the Company's Board of Directors, and for Messrs. Yie
and Brooks who are nominees for election as a Director.
ALAN LUKAS (age 47). Alan Lukas has served as President, Chairman of the
Board, and a Director of the Company since 1978, the year in which he founded
the corporation.
CHARLTON H. AMES (age 56). Since 1985 Mr. Ames has served as President of
Morse, Payson & Noyes Capital Corporation, a private investment firm. Since
1985 he has also managed the investment portfolio of Katahdin Securities, a
venture capital firm. From 1977 to 1985, he was Vice President of Ames &
Wellman Company, a private investment firm. Mr. Ames became a Director of INCON
in 1991. He will not be standing for reelection as a Director.
GEORGE E. HISSONG (age 61). Since 1989 Mr. Hissong has been employed by
Hissong Development Corporation, where he serves as Chairman and Treasurer. He
also is the owner of Mousam River Campground. From 1978 to 1986, Mr. Hissong
was Chairman and President of Energy Sciences Inc. He is a Trustee of the
Kennebunk Light and Power District and a Trustee of Goodall Hospital. Mr.
Hissong was elected a Director of INCON in March 1996.
PAUL F. WALSH (age 48). Since February 1995, Mr. Walsh has served as
President and Chief Executive Officer of Wright Express Corporation, an
information and financial services company. From January 1990 to February 1995,
Mr. Walsh was Chairman of BancOne Investor Services Corporation, a financial
services company. He has served since 1990 as a Director of Staples, Inc., a
leading office supplies distributor. Mr. Walsh was elected a Director of INCON
in 1996.
HENRY M. POWERS (age 65). Mr. Powers is former Chairman, President, and
Chief Executive Officer of C.H. Sprague & Son Company. This privately owned
company (also known as Sprague Energy) is one of New England's largest
independent distributors of oils and coal. Sprague also imports and exports a
variety of liquid and bulk commodities. Mr. Powers first joined Sprague in
1961, and presently serves as a Consultant to the company. He is a former
Director of First New Hampshire Banks, and a former Director of Seaward
Construction Company (Kittery, Maine). Mr. Powers was elected a Director of
INCON in June 1997. He will not be standing for reelection as a Director.
CHARLES D. YIE (age 39). Mr. Yie does not presently serve on the Board of
Directors but is a nominee for election at the Annual Meeting. He is a General
Partner of Ampersand Ventures, a private equity/venture capital firm, and
joined Ampersand's predecessor firm in 1985. A General Partner of all of
Ampersand's active partnerships, he has served as a director of over a dozen
companies, including Advanced Forming Technology and Everett & Jennings, and as
Chairman of Kroy Building Products and Moldflow. Mr. Yie also has several years
of systems engineering and manufacturing experience at Hewlett-Packard.
ROGER E. BROOKS (age 53). Mr. Brooks does not presently serve on the Board
of Directors but is a nominee for election at the Annual Meeting. Since April
of 1997, he has been associated with Ampersand Ventures, a private
equity/venture capital firm, as an Executive in residence. From 1984 to 1996,
Mr. Brooks served as a Director and President/Chief Executive Officer of
Dynisco, Inc., an instrumentation and equipment company. From 1977 to 1984, Mr.
Brooks was a Director, Executive Vice President/Chief Operating Officer, and
Vice President of marketing & Sales of Thermo Electric Co. Inc., a temperature
measurement and control products company. He is a Director of Nobel Systems
(UK) Ltd. and American MSI Corporation, as well as a former Director of Data
Instruments, Inc. Mr. Brooks has been working as a consultant to INCON since
February 5, 1998.
Subject to certain conditions, two investment partnerships with which Mr.
Yie is affiliated (Ampersand Specialty Materials and Chemicals III Limited
Partnership and Ampersand Specialty Materials and Chemicals III Companion Fund
Limited Partnership, hereinafter referred to collectively as "Ampersand"), Mr.
Brooks, Alan Lukas, Paul E. Lukas, and certain others have agreed to become
parties to a Stockholders Agreement, under which each will agree to vote his or
its shares of stock (i) to limit the size of the Company's Board of Directors
to five Directors and (ii) to elect as those Directors Mr. Yie, Mr. Lukas, the
Chief Executive Officer (Mr. Brooks), and one designee each of Ampersand and
Mr. Lukas. Other provisions of the Stockholders Agreement are described below.
See "Sale of Stock to Ampersand and Related Transactions" at page __.
The Company anticipates there will be changes in its director compensation
policies after the Annual Meeting, but no decision has yet been made in this
regard. During 1997 each non-employee Director of the Company received as
compensation (i) cash payments of $500 per meeting and (ii) grants of
nonqualified stock options (1,000 shares per quarter) having an exercise price
equal to 100% of the fair market value of the stock as of the date of grant. In
November 1996, Mr. Walsh received a one-time grant of a nonqualified stock
option to purchase 10,000 shares at $2.05 per share, the fair market value of
the stock as of the date of grant. All stock options to directors have been
granted pursuant to the Company's 1993 Director Stock Option Plan.
The Board of Directors has appointed a Compensation Committee, responsible
for reviewing the general compensation policies of the Company. The Committee
specifically oversees and approves the compensation of each INCON officer. In
addition, the Committee administers various employee benefit plans of the
Company. The Committee presently consists of Messrs. Ames, Hissong, and Powers.
The Committee met ___ times in 1997.
The Board of Directors has appointed an Audit Committee, which presently
consists of Messrs. Hissong and Ames. Its function is to oversee the work of
the Company's controller and external accountants and to assure the existence
of an effective accounting system. The Committee met ___ times in 1997.
The Board of Directors held a total of ____ meetings in 1997. Each
Director was present at 75% or more of the total number of Board and Committee
meetings he was eligible to attend in 1997.
EXECUTIVE COMPENSATION AND
RELATED MATTERS
Set forth below is certain information concerning the compensation of Alan
Lukas, the President and Chief Executive Officer of the Company. No executive
officer of the Company received annual compensation in excess of $100,000
during 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ALL OTHER
NAME YEAR SALARY BONUS OTHER COMPENSATION
<S> <C> <C> <C> <C> <C>
Alan Lukas 1997 $84,000 $5,000 $ 0 $ 0
1996 $84,000 $ 0 $ 0 $ 0
1995 $84,000 $6,300 $ 0 $ 0
</TABLE>
Mr. Lukas has received no grants of options under Company stock option
plans, other than an option granted April 1, 1995 to purchase 10,000 shares of
common stock at $4.45 per share (100% of market price on the date of grant),
representing 22% of the total options granted to employees in 1995. The option
expires April 1, 2005 and becomes exercisable in three equal increments on the
third, fourth, and fifth anniversary of the grant date.
EMPLOYMENT AGREEMENT WITH MR. BROOKS
The Company has agreed to hire Roger E. Brooks as its Chief Executive
Officer, effective as of the date of closing of the contemplated stock purchase
by Ampersand. Under a form of Employment Agreement approved by the INCON Board
of Directors on March ___, 1998, Mr. Brooks will receive a salary of $175,000
per year plus a $600 per month car allowance. The Company may terminate Mr.
Brooks' employment at any time, with or without cause. In the event of a
termination without cause, Mr. Brooks will be entitled to between six and
twelve months' severance compensation, at a rate equal to his then current
salary, plus continued participation in Company health insurance and other
benefits during such period. The term of the agreement runs for two years, and
will automatically renew for successive one-year terms unless either Mr. Brooks
or the Company gives notice to the contrary at least 90 days before the renewal
date. If the Company gives notice of nonrenewal prior to the third anniversary
of the agreement, Mr. Brooks will be entitled to the same severance and benefit
arrangements as for a termination without cause.
The Company has agreed to sell Mr. Brooks 486,923 shares of Common Stock,
subject however to certain restrictions. See "Approval of Restricted Stock
Arrangement with Mr. Brooks," at page ___ below.
Mr. Brooks has been employed by the Company as a consultant since February
5, 1998. The contract is terminable by either party at will. Mr. Brooks
receives a fee of $675 per day for his services under this arrangement.
EMPLOYMENT AGREEMENT WITH MR. LUKAS
Alan Lukas, who has served as Chief Executive Officer of the Company since
its founding in 1978, will be assuming the role of Chairman when Mr. Brooks
becomes Chief Executive Officer. In addition to his duties as Chairman, Mr.
Lukas will continue to be a full-time executive of the Company and serve as
Vice President-Product Development.
Under a form of Employment Agreement approved by the INCON Board of
Directors on March ___, 1998, Mr. Lukas will receive a salary of [$_________]
for his role as Chairman and [$________] as a full-time executive. The term of
the agreement runs for ___ years, and will automatically renew for successive
one-year terms unless either Mr. Lukas or the Company gives notice to the
contrary at least __ days before the renewal date. The Company may terminate
Mr. Lukas' employment at any time, with or without cause. In the event of a
termination without cause, Mr. Lukas will be entitled to __________ months'
severance compensation, at a rate equal to his then current salary, plus
continued participation in Company health insurance and other benefits during
such period.
RELATED-PARTY TRANSACTIONS
The Company leases a 13,000 square foot facility from a corporation owned
in part by Alan Lukas. This facility is used for corporate office space and
presently contains no manufacturing operations. The lease expires August 15,
1998 and is renewable, at the Company's option, for one additional five-year
term. The Company also has the right to purchase this facility in 1998 at its
then fair market value, subject to a specified minimum price of $550,000. The
current rent is approximately $62,700 per year (exclusive of utilities, taxes,
and insurance) and is subject to an automatic increase of 5% per year. The
Company believes that the rent under this lease is reasonable in relation to
prevailing rents for comparable industrial or commercial space. The Company has
not yet made any decision on renewal of the lease or exercise of the purchase
option. Presently, the rental payments on the building exceed the landlord
corporation's monthly payments on its underlying mortgage loan; Alan Lukas'
profits from this arrangement currently amount to less than $1,250 per year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, certain
persons associated with the Company (Directors, executive officers and
beneficial owners of more than 10% of the outstanding Common Stock) are
required to file with the Securities and Exchange Commission and the Company
various reports disclosing their ownership of Company securities and changes in
such ownership. To the Company's knowledge, all requisite reports for 1997 were
filed in a timely manner, except the Form 3 report of initial beneficial
ownership for Henry M. Powers following his election to the Board of Directors
in June 1997, Form 4 reports for Alan Lukas for two transactions in December
1996 and June 1997, and Form 4 reports for Kenneth J. Burek for two
transactions in January and June 1997. Each of these reports has since been
filed.
SALE OF STOCK TO AMPERSAND
AND RELATED TRANSACTIONS
INVESTMENT AGREEMENT. On March __, 1998 the Company entered into an
Investment Agreement with Ampersand Specialty Materials and Chemicals III
Limited Partnership and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership, two affiliated venture capital funds
located at 55 William Street, Suite 240, Wellesley, Massachusetts 02181-4003
("Ampersand"). Ampersand has agreed to purchase 1,538,462 shares of INCON
common stock from the Company at a price of $3.25 per share (an aggregate
purchase price of $5,000,001). The Investment Agreement also contemplates that
the Company will purchase common stock from existing shareholders through a
Company tender offer at $3.25 per share and that Roger E. Brooks will purchase
common stock from the Company at $3.25 per share through a restricted stock
arrangement, as further described below.
Ampersand's purchase of stock through this transaction is subject to
certain conditions, including without limitation the condition that INCON
shareholders at the Meeting (a) elect the designated slate of five Director
nominees, (b) approve the proposed amendment to the Articles of Incorporation
to increase the authorized common stock to 8,000,000 shares, (c) approve the
proposed amendment to the Articles of Incorporation to provide that Section 910
of the Maine Business Corporation Act will no longer apply to the Company, (d)
approve the proposed 1998 Employee Stock Option Plan, and (e) approve the
proposed restricted stock arrangement with Mr. Brooks. These matters are
described below under "Summary of Actions to be Taken," at pages _____.
Pursuant to the Investment Agreement, the Company has agreed to grant
Ampersand and Mr. Brooks certain registration rights covering any shares of
INCON stock owned by them. Ampersand and Mr. Brooks will have two "demand"
registration rights, by which the Company will file registration statements
covering their resale of shares in an underwritten public offering meeting
certain standards. In addition, Ampersand and Mr. Brooks will have an unlimited
number of "piggyback" registration rights, by which the Company will allow
Ampersand and Mr. Brooks to include their shares in registration statements
covering resales by other shareholders or covering (with certain exceptions)
offerings of stock by the Company itself.
The Investment Agreement provides Ampersand a right of first refusal on
INCON's future sales of capital stock to third parties. Such provision contains
exceptions for (i) the grant of stock options to INCON employees or consultants
pursuant to plans approved by the Company's Board of Directors, or the issuance
of common stock upon the exercise of such options, (ii) the sale by the Company
of shares of common stock in a public offering, and (iii) the issuance of
shares of capital stock upon conversion or exercise of any securities as to
which Ampersand was previously offered a right of first refusal under this
provision.
The Company has also agreed to grant Ampersand and Mr. Brooks a right (the
"put" right) to require the Company to repurchase their shares. This right is
triggered if (i) the Company receives a bona fide offer from an unaffiliated
third party to acquire INCON in a transaction that values the common stock at
more than $10 per share and (ii) Ampersand endorses the offer but the INCON
Board declines to accept the offer. The Company would thereafter be required to
purchase the stock of Ampersand and Mr. Brooks at a price equivalent to the
third party's offer.
Prior to closing of Ampersand's stock purchase, the Company has agreed
that neither it nor its officers or directors will, directly or indirectly,
solicit or respond to any offers for the acquisition of all or any material
portion of INCON's assets or stock, or negotiate with respect to any
unsolicited offer or indication of interest. Provided, however, that the
Company and its Board may negotiate with a third party in connection with an
unsolicited acquisition proposal, to the extent that the Board determines in
good faith upon advice of its counsel that such action is necessary to comply
with its fiduciary duties to the Company under applicable law.
Under the Investment Agreement, the Company has made certain
representations and warranties to Ampersand, and has entered into miscellaneous
covenants with Ampersand, on terms that the Company considers to be customary
for agreements of this type.
Following consummation of its stock purchase pursuant to the Investment
Agreement, Ampersand will own stock representing approximately ___% of the then
outstanding shares of common stock. Ampersand has represented to the Company
that it has sufficient financial resources to purchase the stock, and will not
be borrowing funds for this purpose.
STOCKHOLDERS AGREEMENT. As a condition to consummation of Ampersand's
stock purchase under the Investment Agreement, the Company, Ampersand, Mr.
Brooks, Alan Lukas, Paul E. Lukas, and certain related parties would enter into
a Stockholders Agreement restricting the voting and transfer of shares of INCON
common stock owned by each. At the time of entering into this agreement, the
shares owned by these stockholders will represent at least ___% of the
outstanding shares of INCON common stock.
As noted above, the stockholders who are parties to the Stockholders
Agreement will agree to vote their stock (i) to limit the size of the Company's
Board of Directors to five Directors and (ii) to elect as those Directors Mr.
Yie, Alan Lukas, the Chief Executive Officer (Mr. Brooks), and one designee
each of Ampersand and Alan Lukas <F1>. These stockholders will also agree to
vote their shares in such a way that Ampersand will be able to block certain
significant transactions opposed by it, such as financing transactions
exceeding $5 million or a merger or other sale of the Company. In the event the
"put" right of Ampersand and Mr. Brooks is triggered as described above, these
stockholders will agree to vote their shares in such a way as to require the
Company to consummate its repurchase obligation. Moreover, for a period of five
years, these stockholders will agree not to make open-market purchases of INCON
common stock and not to initiate or assist in proxy solicitations, except with
prior written consent from INCON's Board of Directors.
- -------------------
<F1> These two nominees of Mr. Lukas and Ampersand may not be otherwise
affiliated with them or the Company. Ampersand may at any time designate
someone other than Mr. Yie for election to the Board, which person may be
an affiliate of Ampersand.
The stockholders who are parties to the Stockholders Agreement will agree
to grant each other certain rights of first refusal to purchase shares that a
stockholder proposes to sell to a third party; to grant each other certain
co-sale rights to participate in selling stock to a third party;
COMPANY TENDER OFFER. The INCON Board of Directors has authorized the
Company to conduct a tender offer for [475,000] shares of its common stock at a
price of $3.25 per share (an aggregate purchase price of [$1,543,750]). The
tender offer will be funded from proceeds of the contemplated sale of stock to
Ampersand, and is subject to timely completion of the Ampersand transaction and
certain other conditions. The tender offer will remain open to shareholders at
least until [May 1], 1998.
A more detailed description of the Company's tender offer appears in a
Schedule 13E-4 Issuer Tender Offer Statement, copies of which are enclosed with
this Proxy Statement.
RESTRICTED STOCK ARRANGEMENT. The restricted stock arrangement with Mr.
Brooks is subject to shareholder approval and is further described at pages ___
below.
SUMMARY OF ACTIONS TO BE TAKEN
Set forth below is a summary of matters to be voted upon by shareholders
at the Meeting. The Company has been advised that Alan Lukas, each of the other
Directors of the Company, and Paul E. Lukas intend to vote their shares in
favor of these matters, in which case each matter will receive a vote
sufficient to assure its approval.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for a Board of Directors
of not fewer than three nor more than nine members, as from time to time
determined by resolution of the Board of Directors or by the shareholders.
Directors are elected at each Annual Meeting of Shareholders for one year
terms.
A resolution will be offered at the Meeting to establish the number of
Directors at five and to elect the following five persons as Directors:
Alan Lukas, George E. Hissong, Paul F. Walsh,
Charles D. Yie, and Roger E. Brooks
The foregoing individuals have each consented to be named as nominees and to
serve as Directors if elected. Biographical information concerning these
individuals appears at pages 2-3 above.
The Company's Articles of Incorporation allow for cumulative voting in the
election of Directors. A shareholder may require cumulative voting by giving
the Company notice of his or her intention to do so. Notice must be received
prior to voting on Directors. Under cumulative voting, each holder has the
right to as many votes as equals the number of Directors to be elected,
multiplied by the number of shares owned by such holder. The effect of
cumulative voting would be to ensure that the holders of more than one-sixth of
the outstanding shares could (by cumulating their votes) elect at least one of
five Directors of the Company.
Regardless of whether votes are to be cumulated, each Director position
will be filled by plurality vote. Abstentions and broker non-votes will not
affect the tally of votes cast in the election. (A broker non-vote occurs when
a broker, or other fiduciary, votes on at least one matter but lacks authority
to vote on another matter.) Election of the proposed slate of Directors is a
condition to Ampersand's obligation to consummate its purchase of stock from
the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
RATIFICATION OF ACCOUNTANTS
The shareholders will be asked to ratify the appointment of Coopers &
Lybrand L.L.P., who were the Company's auditors in 1997, as the Company's
independent accountants for the fiscal year ending December 26, 1998. Coopers &
Lybrand is one of the largest accounting firms in the United States and has
substantial experience in auditing financial statements of public companies.
One or more representatives of Coopers & Lybrand will be present at the
Meeting, will have an opportunity to make a statement to the Meeting if they
desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P.
AMENDMENTS TO ARTICLES OF INCORPORATION
The Company is proposing two amendments to its Articles of Incorporation.
The first is to increase the number of authorized shares of common stock. The
second is to provide that Section 910 of the Maine Business Corporation Act is
no longer applicable to the Company.
INCREASE IN AUTHORIZED STOCK. The Company's authorized stock presently
consists of 5,000,000 shares of common stock, no par value. As of March 12,
1998, there were [ 3,252,406 ] shares of common stock outstanding and an
additional [ 500,000 ] shares reserved for issuance under outstanding stock
options. Moreover, the Company has entered into agreements (described elsewhere
in this Proxy Statement) under which it would issue up to 1,615,385 additional
shares of common stock to Ampersand and Mr. Brooks <F2>. An increase in the
number of authorized shares will be necessary in order to consummate these
transactions.
- -------------------
<F2> The Company would sell Mr. Brooks 486,923 shares of common stock through
a proposed restricted stock arrangement. The Company intends to use
treasury shares (acquired through the contemplated Company tender offer
for [475,000] shares) as the source for at least 410,000 of the shares
being purchased by Mr. Brooks.
Subject to shareholder approval, the Board of Directors has voted
unanimously to increase the authorized common stock to 8,000,000 shares. The
additional shares authorized under the proposed amendment would be available
for any proper corporate purpose, including future business acquisitions or
stock offerings. The Board of Directors would have authority to issue such
shares from time to time on such terms and conditions as it determines, without
the necessity of further approval of the shareholders unless such approval were
otherwise required by applicable laws and regulations or by the rules of the
American Stock Exchange.
Except for the contemplated sales of stock to Ampersand and Mr. Brooks and
except for routine issuances pursuant to INCON stock option plans, the Company
presently has no specific plans to issue additional shares. Nevertheless, the
Board believes that the increase in authorized shares is desirable in order to
maintain the Company's flexibility to issue shares from time to time without
the delays that could result if such shares had not been previously authorized
by the shareholders.
Shareholders currently have no preemptive rights with respect to the
Company's shares. As described above, however, the Investment Agreement
provides Ampersand certain rights of first refusal on future sales of common
stock to third parties. See discussion at page __ above.
Given the terms of the contemplated Stockholders Agreement among
stockholders who will own a majority of the outstanding common shares, the
Company does not expect that the authorization of additional shares would have
any material effect on the likelihood or timing of any future change in control
of the Company. By virtue of their collective voting power, those stockholders
generally would be in a position to block a change in control not favored by
them.
The form of resolution for adoption of the proposed amendment is as
follows:
RESOLVED: THAT THE ARTICLES OF INCORPORATION OF INTELLIGENT
CONTROLS, INC. BE AMENDED TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK, NO PAR VALUE, FROM 5,000,000 SHARES TO
8,000,000 SHARES.
The affirmative vote of a majority of the outstanding shares of common stock is
necessary to adopt this amendment. (For these purposes, abstentions and broker
non-votes will have the same effect as a vote against this amendment.)
Shareholder approval of the amendment is a condition to both Ampersand's and
the Company's obligation to consummate the sale of stock to Ampersand, and a
condition of the Company's tender offer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THIS PROPOSED AMENDMENT OF THE ARTICLES OF INCORPORATION.
SECTION 910. Section 910 provides special appraisal and sale rights to
minority shareholders of publicly held Maine corporations that are the subject
of a "control transaction." Under this statute, a person or group that acquires
voting power over more than a specified percentage of the outstanding voting
stock of a corporation is deemed a "controlling person." In general, the voting
power threshold for triggering controlling person status is 25% of the
outstanding voting stock <F3>. When a person or group exceeds the statutory
threshold, the controlling person must notify all shareholders that a control
transaction has occurred. Each shareholder is then entitled to demand that the
controlling person purchase his or her shares for a cash price equal to the
"fair value" of the stock. If the controlling person and the shareholder are
unable to agree on fair value, a court may determine the value. These appraisal
and sale rights are similar in scope and procedure to those available to
shareholders who dissent from a merger or sale of substantially all of the
assets of a corporation.
- -------------------
<F3> A person whose voting power exceeded 25% as of September 19, 1985 (the
effective date of the statute) will not be deemed a controlling
shareholder unless he subsequently increases his percentage voting power
above that level. Alan Lukas, for example, is grandfathered at his
September 19, 1985 ownership level, which is substantially greater than
his current ownership level.
Section 910 may have the effect of discouraging large purchases of stock
that could affect control of a corporation, particularly open-market
transactions where the purchaser is unable or unwilling to offer to buy all of
the outstanding shares. However, a corporation may choose to "opt out" of
Section 910, by amending its articles of incorporation to provide that Section
910 will not apply to the corporation. Such an amendment requires the
affirmative vote of holders of a majority of the outstanding voting stock.
As described above, the Company has entered into an Investment Agreement
whereby two related investment funds (Ampersand) would purchase up to 1,538,462
shares of INCON common stock, representing an estimated ??.?% of the
outstanding voting stock. Moreover, Ampersand upon consummation of that stock
purchase will enter into a Stockholders Agreement with Alan Lukas, Paul E.
Lukas, Roger E. Brooks, and certain other parties, under which such
stockholders will agree to vote their shares to elect specified directors and
to block certain significant transactions opposed by Ampersand. The collective
voting control of these parties will exceed the statutory 25% threshold under
Section 910.
The Board of Directors has determined that the purchase of stock by
Ampersand is in the best interests of the Company, if effected on the terms set
forth in the Investment Agreement and the Stockholders Agreement. Those
agreements provide for a corporate governance structure under which the Board
of Directors consists of five Directors, of whom at least two are otherwise
unaffiliated with the Company <F4>. Moreover, the Stockholders Agreement
contains certain rights of first refusal and co-sale rights among the parties,
the effect of which is to limit the ability of those stockholders to sell large
blocks of stock to any one person or group. Accordingly, the Board is of the
opinion that the minority shareholder protections of Section 910 are no longer
necessary and, in this case, would prevent the Company from obtaining new
capital on favorable terms.
- -------------------
<F4> Under the Stockholders Agreement, the Directors would consist of the
Chief Executive Officer (contemplated to be Mr. Brooks), Mr. Lukas and
one nominee of his, and two nominees of Ampersand. Mr. Lukas' nominee and
at least one Ampersand nominee must be unaffiliated with them or the
Company.
The form of resolution for adoption of the proposed amendment is as
follows:
RESOLVED: THAT THE ARTICLES OF INCORPORATION OF INTELLIGENT
CONTROLS, INC. BE AMENDED TO PROVIDE THAT SECTION 910 OF THE
MAINE BUSINESS CORPORATION ACT SHALL BE INAPPLICABLE TO THE
CORPORATION.
Shareholder approval of the amendment is a condition to both Ampersand's and
the Company's obligation to consummate the sale of stock to Ampersand, and a
condition of the Company's tender offer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THIS PROPOSED AMENDMENT OF THE ARTICLES OF INCORPORATION.
1998 EMPLOYEE STOCK OPTION PLAN
Subject to shareholder approval, the Board of Directors of the Company has
adopted the Intelligent Controls, Inc. 1998 Employee Stock Option Plan. The
purpose of the Plan is to provide key employees of the Company with incentives
to increase their equity ownership in the Company and to aid the Company in
attracting and retaining qualified employees. The 1998 Plan is intended to
replace the Company's existing Employee Stock Option Plan, which was originally
adopted in 1984 and last approved by INCON shareholders in 1994.
Like the predecessor plan, the 1998 Plan authorizes the INCON Compensation
Committee to grant incentive stock options and nonqualified stock options.
Unlike the predecessor plan, the 1998 Plan also gives the Committee discretion
to award stock appreciation rights ("SARs"). The Committee will determine which
employees of the Company will be granted options or SARs, and will have broad
discretion to set the terms of each award of options or SARs. The Plan further
provides that the Committee may cancel an award in the event of an employee's
misconduct or failure to comply with the terms of the award. The following is a
brief description of different types of awards under the Plan:
OPTIONS. Incentive stock options and nonqualified stock options are rights
to purchase shares of common stock at a specified option price. These options
may be granted under the Plan at an option price not less that 100% of the fair
market value per share on the date of grant. The terms of each option shall be
set forth in an option agreement, and no option may have an expiration date
later than ten years from the date of grant. Payment to the Company upon
exercise of an option may be made by check, Company stock, or a combination
thereof.
If a participant ceases to be an employee of the Company other than by
reason or death or disability, any incentive stock options which were
exercisable by the participant on the date of termination of employment may be
exercised at any time before their expiration date or within three months after
the date of termination, whichever is earlier, but only to the extent that the
options were exercisable when employment ceased. If a participant's employment
terminates because of disability, incentive stock options which were
exercisable on the date of termination may be exercised any time before their
expiration date, or within one year after the date of termination of
employment, whichever is earlier, but only to the extent that the options were
exercisable when employment ceased. The three- and twelve-month periods
described above satisfy requirements in the Internal Revenue Code for incentive
stock options.
Unless an option qualifies as an incentive stock option, the holder of an
option generally will have ordinary income for federal income tax purposes at
the time of exercise of the option, and the Company generally will then have a
corresponding deduction for compensation expense. The income or deduction will
equal the difference between the option exercise price and the then fair market
value of the underlying shares. In contrast, the holder of an incentive stock
option generally will not be taxed on the option at the time of exercise. If
certain holding periods and other conditions are met, the holder will instead
have capital gain or loss at the time of resale of the underlying shares, equal
to the difference between the resale price and the exercise price; the Company
will have no corresponding tax deduction.
In the event of a participant's death while employed by the Company, the
participant's estate, or any person to whom an incentive or nonqualified stock
option passes by will or by the laws of descent and distribution, may exercise
the option within one year after the date of death, to the extent the option
was exercisable by the participant prior to his or her death.
STOCK APPRECIATION RIGHTS. SARs are the right to receive a payment, the
amount of which is a function of changes in the per share value of the
Company's stock. These rights may be granted under the Plan at a grant price of
at least 100% of the fair market value of a share on the date of grant.
Generally, the amount payable equals the difference between the fair market
value of a share on the date of exercise and the grant price. Payments may be
made in cash, Company stock, or a combination thereof. SARs may be granted in
tandem with stock options.
The new Plan authorizes the issuance of up to [ 300,000 ] shares of common
stock through the Plan. If a participant delivers shares in full or partial
payment of the exercise price for an option, only the net number of shares
issued to the participant will be counted against this limit. (In no event,
however, will more than [ 300,000 ]shares be issued pursuant to incentive stock
options; shares delivered in payment of the exercise price of an incentive
stock option will not be credited against this special limit.)
Awards for 1998 under the new Plan have not yet been made by the
Compensation Committee and are not currently determinable. Pursuant to SEC
requirements, the following table illustrates the type of benefits available
under the Plan, by describing stock options awarded during 1997 under the
predecessor plan.
NEW PLAN BENEFITS
1998 EMPLOYEE STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE ($) IF STOCK
APPRECIATES FOR 10 YEARS AT NO. OF
0%/YR. 5%/YR. 10%/YR. UNITS
<S> <C> <C> <C> <C>
Alan Lukas 0 0 0 0
All executive officers as a group 0 ??,??? ??,??? ?,???
All non-executive directors as a group N/A N/A N/A N/A
All non-executive officers as a group 0 ??,??? ??,??? ?,???
All employees as a group 0 ??,??? ??,??? ?,???
</TABLE>
A copy of the proposed Plan is attached as Exhibit A to this Proxy
Statement. The affirmative vote of a majority of the outstanding shares of
common stock is needed to approve the Plan. (For these purposes, abstentions
and broker non-votes will have the same effect as a vote against the Plan.)
Shareholder approval of the Plan is a condition to Ampersand's obligation to
consummate its purchase of stock from the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE 1998 EMPLOYEE STOCK OPTION PLAN.
RESTRICTED STOCK TO MR. BROOKS
Subject to receipt of shareholder approval, the Company has agreed to sell
Roger E. Brooks 486,923 shares of INCON common stock at a price of $3.25 per
share. Mr. Brooks will pay for these shares by delivering a promissory note for
$1,332,500 and cash in the amount of $250,000. A portion of the shares will be
subject to a repurchase right in favor of the Company, exercisable at his
original purchase price of $3.25 per share.
The promissory note from Mr. Brooks will bear interest at the "applicable
federal rate" (approximately __% per annum). Principal and interest under the
note will become payable in four years, except that Mr. Brooks' payment
obligation may be accelerated if his employment with the Company terminates for
any reason. In such event, the note becomes due within either 90 days or one
year, depending on the reason for the termination of employment. The purchased
shares will serve as collateral for the note, and will be pledged to the
Company. In the event of a default, the Company may foreclose on such
collateral (reducing the outstanding indebtedness by the then current fair
market value of such shares). The Company can also seek to collect up to an
additional $200,000 from Mr. Brooks. Other than this $200,000 amount, Mr.
Brooks will not have any personal liability on the note over and above the
value of the stock that serves as collateral for the note.
The Company will have the right (but not the obligation) to repurchase
some of the shares from Mr. Brooks at the initial purchase price of $3.25 per
share. Initially, the repurchase right will extend to all of the shares except
76,923 (representing the number of shares for which Mr. Brooks is paying cash
at the time of the purchase). Thereafter, the repurchase right will lapse as to
25,625 shares for each three months of continued employment (representing
1/16th of the remaining shares); if Mr. Brooks is still employed by the Company
in four years, the repurchase right will have lapsed entirely. In addition, the
repurchase right will lapse as to 102,500 shares if the Company were to
terminate Mr. Brooks' employment without cause (as defined under his Employment
Agreement). Finally, the repurchase right will lapse in its entirety in the
event of a "change in control" of the Company (as defined).
From the standpoint of the Company, the effect of this so-called
restricted stock arrangement is that Mr. Brooks will own all 486,923 shares,
but will be subject to a risk of forfeiture of at least a portion of the shares
if he remains employed by the Company for less than four years. Moreover, Mr.
Brooks will forfeit shares if and to the extent that he is fails to pay the
full purchase price for the stock (plus all accrued interest) when the note
becomes due.
Mr. Brooks has advised the Company that he intends to treat this
transaction as a completed sale of the stock at fair market value for purposes
of Section 83(b) of the Internal Revenue Code and that such treatment is proper
for tax purposes. As such, he would be entitled to capital gain or loss at the
time of resale of the underlying shares (generally equal to the net resale
price minus $3.25 per share) and he would not have taxable income -- nor would
the Company have any deductible compensation expense -- by virtue of any lapse
of the Company's repurchase rights or any payment against the promissory note.
NEW PLAN BENEFITS
RESTRICTED STOCK ARRANGEMENT
<TABLE>
<CAPTION>
DOLLAR VALUE ($) IF STOCK
APPRECIATES FOR 10 YEARS AT NO. OF
0%/YR. 5%/YR. 10%/YR. UNITS
<S> <C> <C> <C> <C>
Roger E. Brooks 0 995,225 2,522,097 486,923
</TABLE>
The proposed Employee Restricted Stock Purchase Agreement with Mr. Brooks
and the related form of promissory note and pledge agreement are filed with the
Securities and Exchange Commission as exhibits to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 26, 1997.
Due to the size and nature of this restricted stock arrangement, the Board
of Directors has decided to seek the same vote of shareholders as would have
been required under Maine law for a grant of employee stock options. The
affirmative vote of a majority of the outstanding shares of common stock is
needed for approval. (For these purposes, abstentions and broker non-votes will
have the same effect as a vote against the proposal.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE RESTRICTED STOCK ARRANGEMENT.
OTHER MATTERS
All expenses of this solicitation will be borne by the Company. No person
will receive any additional compensation for soliciting proxies from any
shareholder. In addition to use of the mails, proxies may be solicited
directly, or by telephone or other means, by Company employees. The Company
will reimburse brokerage firms, custodians, nominees, and fiduciaries in
accordance with American Stock Exchange rules for the reasonable expenses of
forwarding proxy materials to beneficial owners
At the date of this Proxy Statement, Management knows of no other matters
that are to be brought before the Meeting. However, if any matters other than
those set forth in the accompanying Notice should properly come before the
Meeting, the persons named in the enclosed proxy will vote the proxies on such
matters in their discretion.
To be eligible for inclusion in the proxy materials for the 1999 Annual
Meeting, a shareholder proposal must be received by the Company in proper
written form by November 30, 1998. Any such proposals should be addressed to
the attention of the Board of Directors.
BY ORDER OF THE BOARD OF DIRECTORS
Gregory S. Fryer, Clerk
INTELLIGENT CONTROLS, INC.
1998 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1998 Employee Stock Option Plan is to provide
Employees of Intelligent Controls, Inc. with additional incentives to
contribute to the success of the Company and to attract, reward and retain
Employees of outstanding ability.
2. DEFINITIONS. As used in this Plan, the following words and phrases
wherever capitalized shall have the following meanings, unless the context
clearly indicates that a different meaning is intended:
(a) "Award" shall mean any Option or Stock Appreciation Right granted
pursuant to the Plan.
(b) "Award Agreement" shall mean an Option Agreement or SAR Agreement,
which specifies the terms, conditions and restrictions of an Award,
incorporates the applicable provisions of the Plan, and includes such
additional provisions not inconsistent therewith as the Committee shall
determine.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as from time to
time amended.
(e) "Committee" shall mean the committee described in Section 3, which
shall have the authority to control and manage the administration of the Plan.
(f) "Common Stock" shall mean common stock, no par value, of the
Company.
(g) "Company" shall mean Intelligent Controls, Inc. and any Subsidiary
thereof.
(h) "Disability" shall mean an Employee's inability to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve (12) months. An Employee shall not be considered disabled unless he or
she furnishes proof of the existence of such Disability in such form and
manner, and at such times, as the Committee may require.
(i) "Employee" shall mean any person who is employed by the Company or
any Parent or Subsidiary.
(j) "Fair Market Value" shall mean, with respect to Shares, the closing
price of the Shares (or the average of the last-quoted bid and ask price, as
the case may be) on the principal stock exchange or over-the-counter market on
which the Shares are traded; provided, however, that the Committee in its
discretion may instead use the average closing price (or bid-ask price) over
the past five (5) trading days as the Fair Market Value on the last of such
days; and provided further, however, that the Fair Market Value of the Shares
to be issued under any Incentive Stock Option shall in any event be determined
by the Committee in a manner that complies with the applicable requirements of
subsections 422(b)(4) and (c)(7) of the Code and the regulations issued
thereunder.
(k) "Incentive Stock Option" shall mean an option granted to an individual
for any reason connected with his or her employment by a corporation, if
granted by the employer corporation or its Parent or Subsidiary corporation, to
purchase stock of any of such corporations, but only if such option meets the
requirements of Section 422 of the Code.
(l) "Nonqualified Stock Option" shall mean an Option granted under the
Plan that is not an Incentive Stock Option.
(m) "Option" shall mean a right granted under the Plan to purchase
Shares.
(n) "Optionee" shall mean an Employee who is granted an Option.
(o) "Parent" shall mean, for purposes of the Incentive Stock Option
provisions of the Plan, a parent company within the meaning of subsections
424(e) and (g) of the Code.
(p) "Plan" shall mean the 1998 Employee Stock Option Plan.
(q) "Share" shall mean a share of Common Stock of the Company, as adjusted
in accordance with subsection 4(b).
(r) "Stock Appreciation Right" shall mean a right granted under Section 8
to receive a payment, the amount of which shall be determined by reference to
the value of a Share.
(s) "Subsidiary" shall mean, for purposes of the Incentive Stock Option
provisions of the Plan, a subsidiary company within the meaning of subsections
424(f) and (g) of the Code, and for all other purposes of the Plan, a company
of which Intelligent Controls, Inc. owns directly or indirectly at least fifty
percent (50%) of the total combined voting power of all classes of stock
entitled to vote.
3. ADMINISTRATION.
(a) COMMITTEE MEMBERS. The Plan shall be administered by the members of
the Compensation Committee of the Board. Although not a requirement of the
Plan, it is contemplated that the Committee will consist solely or primarily of
persons who are not employees of the Company or any Parent or Subsidiary and
who otherwise qualify as "non-employee directors" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, and as "outside
directors" within the meaning of Code Section 162(m), as amended, and the
regulations thereunder. A majority of the members of the Committee shall
constitute a quorum, and the action of a majority of the members present at any
meeting at which a quorum is present shall be deemed the action of the
Committee. Any member may participate in a meeting of the Committee by means of
a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Further, any
action of the Committee may be taken without a meeting if all of the members of
the Committee sign written consents, setting forth the action taken or to be
taken, at any time before or after the intended effective date of such action.
(b) POWERS. The Committee shall have the complete authority and discretion
to administer the Plan, including the following powers which shall be exercised
in accordance with the terms of the Plan:
(1) to determine the Employees to whom Awards shall be granted;
(2) to determine the time or times at which Awards shall be
granted;
(3) to determine the type or types of Awards to be granted;
(4) to determine the terms, conditions and restrictions of each
Award;
(5) to make adjustments in accordance with subsection 4(b);
(6) to prescribe, amend and rescind rules and regulations relating
to the Plan;
(7) to interpret the Plan and make all other determinations deemed
necessary or advisable for the administration of the Plan; and
(8) to delegate to any officer of the Company the authority to act
for the Committee in such matters as the Committee may specify.
Each determination, interpretation or other action taken pursuant to the
Plan by the Committee (or an officer of the Company acting under a delegation
of authority by the Committee) shall be final and conclusive for all purposes
and binding upon all persons, including the Company, the Board, the Committee,
the Employees and their respective successors in interest.
(c) SIGNATURES. The Committee may authorize any member thereof to execute
all instruments required in the administration of the Plan, and such
instruments may be executed by facsimile signature.
4. STOCK SUBJECT TO THE PLAN.
(a) LIMITATIONS. Subject to the provisions of subsection (b), a
maximum of 300,000 Shares will be available for grant under the Plan.
In the event that any Shares subject to an Award are forfeited, such
Shares shall, unless the Plan has been terminated, become available again for
grant and shall not be counted again for purposes of the foregoing share
limitation. In the event that any Option granted under the Plan expires or
terminates without the issuance of Shares or payment of other consideration in
lieu of such Shares, the unissued Shares subject to such Option shall, unless
the Plan has been terminated, become available for other Awards, including
other Options.
In the event that an Employee transfers stock issued by the Company in
full or partial payment of the option price of an Option granted under the
Plan, only the difference between (i) the number of Shares issued upon exercise
of the Option and (ii) the number of Shares transferred in payment of the
option price shall be counted for purposes of the foregoing limitation on the
maximum number of Shares available for grant under the Plan. Notwithstanding
the foregoing, in no event shall more than 300,000 Shares be issued pursuant to
the exercise of Incentive Stock Options under this Plan; Shares delivered in
payment for Incentive Stock Options shall not be credited against this special
limitation on the number of Shares issued pursuant to Incentive Stock Options.
(b) ADJUSTMENTS. If the number of Shares outstanding changes as a result
of a stock split or stock dividend, the Committee shall proportionately adjust:
(i) the maximum number of Shares available for grant and the maximum aggregate
number of Shares which may be issued under Incentive Stock Options; (ii) the
number of Shares to be issued under Awards; (iii) the option price with respect
to Shares subject to Options; and (iv) the grant price with respect to Stock
Appreciation Rights.
In the event of a merger or consolidation in which the Company is the
surviving company, or the acquisition by the Company of property or stock of
another company, or any reorganization, the Committee shall appropriately
adjust: (i) the number and class of Shares to be issued under Awards; (ii) the
option price of Shares subject to Options; and (iii) the grant price with
respect to Stock Appreciation Rights. Any adjustments under this subsection (b)
affecting Incentive Stock Options shall be made so as to comply with the
applicable provisions of Sections 422 and 424 of the Code.
5. ELIGIBILITY.
The Committee may, from time to time, designate Employees to whom Options
or Stock Appreciation Rights may be granted in accordance with the terms of the
Plan.
6. GRANTING OF AWARDS.
The Committee may grant more than one Award and more than one type of
Award to any Employee; provided that no Incentive Stock Option shall be granted
to any Employee who, at the time the Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Parent or Subsidiary. For purposes of applying
the percentage limitation of the preceding sentence, the ownership principles
of subsection 424(d) of the Code shall apply. The terms and conditions of
Awards need not be the same with respect to each Employee. An Employee who has
been granted an Award may, if he or she is otherwise eligible, be granted
additional Awards before the exercising of such prior Award.
The Committee may condition the grant of an Award and the exercise of an
Option or Stock Appreciation Right on the attainment of performance goals.
Performance goals may be expressed in terms of earnings per Share, stock price,
total shareholder return, return on equity, or any similar quantifiable
measures.
7. OPTIONS.
(a) OPTION AGREEMENT. Each Option granted by the Committee shall be
evidenced by an agreement (the "Option Agreement"), specifying the Option
price, the number of Shares subject to the Option and such other terms,
conditions and restrictions as the Committee shall determine. Each Option shall
be clearly identified as either an Incentive Stock Option or a Nonqualified
Stock Option.
(b) TERM OF OPTION. The term of each Option shall be set forth in the
Option Agreement, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the date such Option is granted.
(c) OPTION PRICE. The option price for Shares to be issued under any
Option shall not be less than one hundred percent (100%) of the Fair Market
Value of such Shares on the date the Option is granted.
(d) NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner, other than by
will or by the laws of descent and distribution, and may be exercised during
the lifetime of the Optionee only by such Optionee. Notwithstanding the
preceding sentence to the contrary, the Committee may permit the transfer of
Nonqualified Stock Options to family members or family trusts (and exercise by
the transferee) to the extent Rule 16b-3 under the Securities Exchange Act of
1934 permits such transfers.
(e) MANNER OF EXERCISE. An Option granted under the Plan shall be
exercisable at such times and under such circumstances as shall be permissible
under the terms of the Plan and of the Option Agreement. An Option shall be
deemed to be exercised when the Optionee gives written notice of such exercise
to the Company in accordance with the terms of the Option Agreement and the
Company receives full payment for the Shares with respect to which the Option
is exercised. Payment shall be made by check payable to the Company, delivery
of stock issued by the Company or a combination thereof, subject to the terms
of the Option Agreement, or in such other manner as the Committee shall
approve.
Stock transferred to the Company in full or partial payment for Shares
shall be valued at Fair Market Value on the date that such transfer is recorded
upon the books of the Company, following actual or constructive delivery of
such stock to the Company in a form suitable for transfer.
(f) TERMINATION OF EMPLOYMENT. In the event an Optionee ceases to be
employed by the Company or any Parent or Subsidiary, and is no longer employed
by any of them, for any reason other than death or Disability, such Optionee
may, subject to the terms of the Option Agreement, exercise an Option at any
time prior to the expiration date of such Option (or, in the case of an
Incentive Stock Option, within three (3) months after the date the Optionee's
employment ceases, whichever is earlier), but only to the extent the Optionee
had the right to exercise such Option at the date his or her employment ceased.
An Optionee's employment with a Parent or Subsidiary of the Company shall be
deemed terminated on the date such Optionee's employer ceases to be a Parent or
Subsidiary.
(g) DISABLED OPTIONEE. In the event an Optionee who is disabled ceases to
be employed by the Company or any Parent or Subsidiary by reason of such
Disability, and is no longer employed by any of them, such Optionee may,
subject to the terms of the Option Agreement, exercise an Option at any time
prior to the expiration date of such Option (or, in the case of an Incentive
Stock Option, within one (1) year after the date such Optionee's employment
ceases, whichever is earlier), but only to the extent the Optionee had the
right to exercise such Option at the date his or her employment ceased.
(h) DEATH OF OPTIONEE. In the event an Optionee dies while in the employ
of the Company or any Parent or Subsidiary, then to the extent that the
Optionee would have been entitled to exercise an Option immediately prior to
his or her death, such Option may be exercised by the estate of such Optionee
or by such person or persons to whom such Optionee's rights pass by will or by
the laws of descent and distribution at any time prior to the expiration date
of such Option or within one (1) year after the death of the Optionee,
whichever is earlier.
8. STOCK APPRECIATION RIGHTS.
(a) SAR AGREEMENT. Any Stock Appreciation Rights granted by the Committee
shall be evidenced by an agreement (the "SAR Agreement"), specifying the grant
price, the number of such rights, and such other terms, conditions and
restrictions as the Committee shall determine; provided, however, that the
terms of a Stock Appreciation Right that relates to an Option may instead be
set forth in the Option Agreement or any amendment thereto.
(b) TERM. The term of each Stock Appreciation Right shall be set forth in
the SAR Agreement, but in no event shall a Stock Appreciation Right be
exercisable after the expiration of ten (10) years from the date such right is
granted.
(c) AMOUNT OF PAYMENT. An Employee to whom a Stock Appreciation Right has
been granted shall be entitled to receive payment of an amount equal to the
excess of (i) the Fair Market Value of one (1) Share on the date of exercise of
such right over (ii) the grant price of the right; provided that the Fair
Market Value of one (1) share with respect to a Stock Appreciation Right that
is not related to an Incentive Stock Option may be determined at any time
during a period before the date of exercise if so specified in the SAR
Agreement.
(d) GRANT PRICE. The grant price of a Stock Appreciation Right shall not
be less than one hundred percent (100%) of the Fair Market Value of one (1)
Share on the date that the Stock Appreciation Right is granted.
(e) NONTRANSFERABILITY OF RIGHTS. Stock Appreciation Rights may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner, other than by will or by the laws of descent and distribution, and may
be exercised during the lifetime of the Employee only by such Employee.
(f) MANNER OF EXERCISE. A Stock Appreciation Right granted under the Plan
shall be exercisable at such times and under such circumstances as shall be
permissible under the terms of the Plan and of the SAR Agreement. A Stock
Appreciation Right shall be deemed exercised when an Employee gives written
notice of such exercise to the Company in accordance with the terms of the SAR
Agreement.
(g) FORM OF PAYMENT. Payment with respect to the exercise of a Stock
Appreciation Right may be made in cash, Shares or a combination thereof,
subject to the terms of the SAR Agreement, or in such other manner as the
Committee shall approve. To the extent that such payment is made in Shares, the
Shares shall be valued at Fair Market Value on the date of payment.
(h) RELATED OPTIONS. A Stock Appreciation Right may, but need not, relate
to an Option granted under Section 7. A Stock Appreciation Right related to a
Nonqualified Stock Option may be granted simultaneously with the granting of
such Option or at any time thereafter before the exercise or termination of
such Option. A Stock Appreciation Right related to an Incentive Stock Option
shall be granted at the same time such Option is granted.
A Stock Appreciation Right related to the full number of Shares subject to
an Option shall terminate upon exercise or termination of the Option to the
extent such Option is exercised or terminated. A Stock Appreciation Right
related to less than the full number of Shares subject to an Option shall not
be affected by the exercise or termination of the Option until such exercise or
termination exceeds the number of Shares not related to the Stock Appreciation
Right; thereafter such right shall terminate to the extent such Option is
further exercised or terminated.
To the extent that a Stock Appreciation Right related to an Option has
been exercised, such Option shall no longer be exercisable.
9. DEFERRED SHARES. An Employee may elect, in such manner and subject to such
terms and conditions as the Committee may prescribe, to defer the receipt of
Profit Shares purchased by transferring previously acquired Shares upon the
exercise of a Nonqualified Stock Option. For purposes of the Plan, "Profit
Shares" shall mean Shares representing the difference between the number of
previously acquired Shares transferred and the number of Shares purchased.
10. CANCELLATION OF AWARDS. Notwithstanding any provision of the Plan to the
contrary, the Committee may cancel any award, whether vested or not, if at any
time an Employee is not in compliance with the applicable terms of the Award
Agreement or in the event of a serious breach of conduct, including but not
limited to failure to comply with the terms of an agreement not to compete with
the Company or a failure to maintain the confidentiality of Company trade
secrets or proprietary or confidential information.
11. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Committee, without further approval of the shareholders
of the Company, may amend the Plan from time to time in such respects as the
Committee deems advisable, provided that no amendment shall become effective
prior to ratification by the Board if such amendment:
(i) increases the maximum aggregate number of shares which may be
issued under the Plan or that may be issued hereunder pursuant to Incentive
Stock Options; or
(ii) expands the classes of persons eligible to receive Awards
under the Plan.
(b) TERMINATION. The Board, without further approval of the
shareholders of the Company, may at any time terminate the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any amendment or termination of
the Plan shall not adversely affect Awards already granted without the written
consent of the affected individual, and such Awards shall remain in full force
and effect as if the Plan had not been amended or terminated.
13. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its approval
by the shareholders of the Company.
14. TERM OF PLAN. No Award shall be granted pursuant to the Plan after ten (10)
years from the date the Plan is approved by shareholders. Awards granted prior
to the end of such period may extend beyond such period, except as otherwise
provided herein or in the Award Agreement.
15. ARBITRATION. Arbitration as hereinafter provided shall be the
exclusive remedy for resolving any claim or dispute arising under the Plan.
(a) Any arbitration under the Plan, and any related judicial proceeding,
shall be initiated and shall proceed pursuant to the provisions of the Maine
Uniform Arbitration Act (the "Act") and, to the extent consistent with the Act,
the then prevailing rules of the American Arbitration Association (the
"Association") for labor and employment contracts. To initiate arbitration,
demand shall be given in writing to the Association and the other party no
later than one year after the claim arises. Any claim for which such demand is
not made in writing within one year after the claim arises shall be barred and
discharged absolutely.
(b) Any arbitration under the Plan shall occur in Portland, Maine (or such
other location as the parties consent to in writing) before a single
arbitrator. An award in such arbitration may include only damages that the
arbitrator determines to be due under the express provisions of the Plan and
applicable Award Agreement. The arbitrator shall have no authority to award any
other damages, including without limitation, consequential and exemplary
damages. Each award shall set forth briefly in writing the rationale of the
decision and those facts considered by the arbitrator to be material to such
decision. Any award in arbitration shall be subject to enforcement and appeal
pursuant to the Act.
(c) The Company and the Employee shall share equally all costs and fees
charged by the Association or the arbitrator.
16. MISCELLANEOUS.
(a) AWARD AGREEMENT. Upon executing an Award Agreement, an Employee
shall be bound by such Agreement and by the applicable provisions of the
Plan.
(b) EMPLOYMENT. The granting of an Award to an Employee shall not give the
Employee any right to be retained in the employ of the Company or any Parent or
Subsidiary, nor shall the existence of the Plan impair the right of the Company
or any Parent or Subsidiary to discharge or otherwise deal with an Employee.
(c) TAX WITHHOLDING. The Company shall be authorized to withhold from any
Award granted, or payment due, under the Plan the amount of any taxes required
by law to be withheld because of such Award or payment and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
(d) GOVERNING LAW. The Plan is established under and shall be
construed according to the laws of the State of Maine.
(e) HEADINGS. Paragraph headings are included solely for convenience and
shall in no event affect, or be used in connection with, the interpretation of
the Plan.
(f) 1984 PLAN. The Employee Stock Option Plan of the Company, as adopted
in 1984 and amended and restated in 1994, shall terminate as of the effective
date of the 1998 Employee Stock Option Plan. Termination of the Employee Stock
Option Plan shall not adversely affect awards previously granted under such
plan or the authority of the Board or Committee to make determinations with
regard to such prior awards.
[PROXY CARD]
PRELIMINARY COPY
INTELLIGENT CONTROLS, INC.
PROXY
(Solicited by the Board of Directors)
The undersigned appoints Alan Lukas and Andrew B. Clement, or either of them,
proxies with full power of substitution, to represent and vote all shares of
Common Stock of Intelligent Controls, Inc. held by the undersigned, at the
Annual Meeting of Shareholders to be held April 30, 1998, or any adjournment
thereof.
1. TO FIX THE NUMBER OF DIRECTORS AT FIVE AND TO ELECT THE FOLLOWING
NOMINEES TO THE BOARD OF DIRECTORS:
Alan Lukas, George E. Hissong, Paul F. Walsh,
Charles D. Yie, and Roger E. Brooks
(To withhold authority for one or more nominees, cross out his name
or their names)
2. TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS TO THE COMPANY FOR THE YEAR ENDING DECEMBER 26,
1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED
COMMON STOCK TO 8,000,000 SHARES
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO AMEND THE ARTICLES OF INCORPORATION TO PROVIDE THAT SECTION 910
OF THE MAINE BUSINESS CORPORATION SHALL NOT APPLY TO THE COMPANY
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE THE PROPOSED 1998 EMPLOYEE STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. TO APPROVE THE PROPOSED RESTRICTED STOCK ARRANGEMENT WITH ROGER E.
BROOKS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. In their discretion, upon such other matters as may properly come
before the Meeting.
This proxy, when properly executed, will be voted in the manner directed hereby
by the undersigned shareholder. If no direction is made, this proxy will be
voted "FOR" the nominated directors and "FOR" proposals 2, 3, 4, 5, and 6. The
undersigned hereby revokes any proxy previously given and acknowledges receipt
of the Notice of, and Proxy Statement for, the aforesaid Meeting.
Dated: ____________________________________, 1998
-------------------------------------------------
Signature
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Signature
Personal representatives, custodians, trustees,
partners, corporate officers, and
attorneys-in-fact should add their titles as such.
PLEASE VOTE AND DATE THIS PROXY, SIGNING IT AS YOUR NAME APPEARS ABOVE AND
RETURN THE PROXY IN THE ENVELOPE PROVIDED.
