LANCER CORPORATION
235 West Turbo
San Antonio, Texas 78216
April 21, 1997
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders (the
Meeting) of Lancer Corporation (the Company) to be held at the Companys primary
manufacturing facility at 6655 Lancer Blvd., San Antonio, Texas (see
accompanying map for directions) on Thursday, May 22, 1997 at 9:30 a.m., local
time.
The attached Notice of Annual Meeting and Proxy Statement fully describes the
formal business to be transacted at the Meeting, which includes: electing seven
directors of the Company; approving the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the ensuing year; considering and
voting upon a proposed amendment to the Companys Articles of Incorporation which
will increase the number of authorized shares of the Companys common stock;
approving an increase in the number of shares available for awards under the
Companys 1996 Stock Incentive Plan; and transacting such other matters as may
properly come before the Meeting or any adjournments thereof.
Directors and officers of the Company, as well as a representative of the
Companys independent auditors, will be present at the annual meeting to respond
to any questions that you may have.
The Companys Board of Directors believes that a favorable vote on each of the
matters to be considered at the Meeting is in the best interest of the Company
and its shareholders and unanimously recommends a vote FOR each such matter.
Accordingly, we urge you to review the accompanying material carefully, and to
please sign, date and return the enclosed Proxy promptly. If you attend the
Meeting, you may vote in person even if you have previously mailed a Proxy.
Sincerely,
/s/George F. Schroeder
George F. Schroeder
President and Chief Executive Officer
<PAGE>
LANCER CORPORATION
235 W. Turbo
San Antonio, Texas 78216
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 22, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the Meeting) of
Lancer Corporation (the Company or Lancer) will be held at the Companys primary
manufacturing facility at 6655 Lancer Blvd., San Antonio, Texas (see
accompanying map) on Thursday, May 22, 1997 at 9:30 a.m., local time. A form of
Proxy and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of a Board of Directors consisting of seven directors for the
ensuing year;
2. The approval of the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the ensuing year;
3. The approval of a proposed amendment to the Companys Articles of
Incorporation which will increase the number of authorized shares of the
Companys common stock;
4. The amendment of the Companys 1996 Stock Incentive Plan (the 1996 Plan) to
allow for an increase in the maximum number of shares for which options may
be awarded under the Plan; and
5. Such other matters as may properly come before the Meeting or any
adjournments thereof.
The close of business on April 7, 1997 has been fixed by the Board of Directors
as the record date for determining shareholders entitled to notice of and to
vote at the Meeting or any adjournments thereof. For a period of at least 10
days prior to the Meeting, a complete list of shareholders entitled to vote at
the Meeting shall be open to the examination of any shareholder during ordinary
business hours at the Companys Corporate Headquarters, 235 West Turbo, San
Antonio, Texas 78216.
Information concerning the matters to be acted upon at the Meeting is set forth
in the accompanying Proxy Statement.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON ARE URGED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE
IN PERSON EVEN IF YOU HAVE PREVIOUSLY MAILED A PROXY.
By Order of the Board of Directors
/s/John P. Herbots
John P. Herbots
Secretary
San Antonio, Texas
April 21, 1997
<PAGE>
LANCER CORPORATION
235 W. Turbo
San Antonio, Texas 78216
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22, 1997
THE PROXY
This Proxy Statement is being furnished to shareholders of Lancer Corporation
(the Company or Lancer) in connection with the solicitation of Proxies (the
Proxies) for use at the Annual Meeting of Shareholders (the Meeting) to be held
at the Companys primary manufacturing facility at 6655 Lancer Blvd., San
Antonio, Texas (see accompanying map) on Thursday, May 22, 1997, at 9:30 a.m.,
local time, or at such other time and place to which the Meeting may be
adjourned. The enclosed Proxy is solicited by the Board of Directors of the
Company. Where a shareholder has appropriately specified how a Proxy is to be
voted, it will be voted accordingly.
The Proxy may be revoked at any time by providing written notice of such
revocation to The Bank of New York, Securities Transfer Services, 1301 Fannin,
Suite 2215, Houston, Texas 77002, Attention: Proxy Department. This notice must
be received prior to 5:00 p.m., local time on May 7, 1997. If notice of
revocation is not actually received by the Proxy Department by such date, a
shareholder may nevertheless revoke a Proxy by attending the Meeting and voting
in person.
The address of the principal executive offices of the Company is 235 W. Turbo,
San Antonio, Texas 78216. This Proxy Statement and enclosed Proxy are first
being mailed to shareholders on or about April 22, 1997.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders entitled to vote at the Meeting
is the close of business on April 7, 1997 (the Record Date), at which time the
Company had issued and outstanding 5,837,798 shares of Common Stock, par value
$.01 per share (the Common Stock), which class of stock constitutes the only
outstanding securities of the Company entitled to vote at the Meeting.
QUORUM AND VOTING
The presence at the Meeting, in person or by Proxy, of the holders of a majority
of the outstanding shares of Common Stock is necessary to constitute a quorum.
Each share of Common Stock is entitled to one vote with respect to each matter
to be voted on at the Meeting. The approval of all proposals, other than the
proposal to amend the Companys Articles of Incorporation, requires the
affirmative vote of a majority of the outstanding shares of Common Stock present
in person or by Proxy at the Meeting. The proposal to amend the Companys
Articles of Incorporation requires the favorable vote of the holders of at least
two-thirds of all the outstanding common stock of the Company, pursuant to the
requirements of the Texas Business Corporation Act. Neither the Companys
Articles of Incorporation nor Bylaws provide for cumulative voting.
Abstentions and broker non-votes will be included in determining the presence of
a quorum at the meeting. Because matters to be voted upon at the meeting must be
approved by a vote of the holders of either a majority of the shares of the
Company present at the meeting in person or by proxy or by two-thirds of all the
outstanding shares of the Companys common stock, any abstention (including
broker non-votes) on any matter will have the effect of and be counted as a no
vote.
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ACTIONS TO BE TAKEN AT THE MEETING
All shares represented by valid Proxies, unless the shareholder otherwise
specifies, will be voted FOR (i) the election of the seven persons named under
Election of Directors of the Company; (ii) the proposal to approve KPMG Peat
Marwick LLP as independent auditors for the Company for the ensuing year; (iii)
the proposal to amend the Companys Articles of Incorporation to increase the
number of authorized shares of the Companys common stock; (iv) the proposal to
amend the Companys 1996 Stock Incentive Plan to allow for an increase in the
maximum number of shares for which options may be awarded under the Plan; and
(v) at the discretion of the proxy holders, any other matter that may properly
come before the Meeting or any adjournment thereof. The Board of Directors of
the Company unanimously recommends a vote FOR each proposal described in this
Proxy.
PROPOSAL I - ELECTION OF DIRECTORS
There are seven directors to be elected. It is intended that the names of the
persons indicated in the following table will be placed in nomination and that
the persons named in the Proxy will vote for their election unless otherwise
instructed. Each of the nominees has indicated his or her willingness to serve
as a member of the Board of Directors, if elected; however, in case any nominee
shall become unavailable for election to the Board of Directors for any reason
not presently known or contemplated, the proxy holders will have discretionary
authority in that instance to vote the Proxy for a substitute. To be elected, a
nominee must receive the affirmative vote of the holders of a majority of the
shares of Common Stock present, in person or by Proxy, at the Meeting. Each
nominee elected will serve as director for the ensuing year and until his or her
successor shall have been duly qualified and elected.
The nominees are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ----------------------- --------------- -------------------------------------
<S> <C> <C>
Alfred A. Schroeder (1) 60 Chairman of the Board
George F. Schroeder (1) 57 President, Chief Executive Officer
and Director
John P. Herbots 49 Vice President-Finance, Secretary,
Treasurer and Director
Walter J. Biegler (2) 55 Director
Jean M. Braley 67 Director
Charles K. Clymer (2) 61 Director
Michael E. Smith (2) 56 Director
</TABLE>
(1) Alfred A. Schroeder and George F. Schroeder are brothers. No other nominee
is related by blood, marriage or adoption to another nominee or to any
executive officer of the Company or its subsidiaries.
(2) Member of the Compensation, Audit, and Stock Option Committees.
Mr. Alfred A. Schroeder is a co-founder of the Company and has served as
Chairman of the Board of Directors of the Company since its inception in 1967.
His primary responsibilities include conceptual engineering design, new product
development and corporate planning. He is the brother of George F. Schroeder,
and is also a partner in Lancer Properties. See Compensation and Certain
Transactions.
Mr. George F. Schroeder is a co-founder of the Company and has served as its
President, Chief Executive Officer and director since 1967. His primary
responsibilities include strategic planning, marketing, overall production
management and corporate administration. He is the brother of Alfred A.
Schroeder, and is also a partner in Lancer Properties. See Compensation and
Certain Transactions.
Mr.John P. Herbots joined the Company as Vice President of Finance and
Administration in February 1995. In August 1995, Mr. Herbots was appointed Chief
Financial Officer, Treasurer and Secretary. Prior to joining Lancer,
2
<PAGE>
Mr. Herbots was Executive Vice President of MK Rail Corporation and from 1990
until 1992, served as Vice President and Chief Financial Officer for Morrison
Knudsen Corporations Rail Systems Group. Prior to that he was Vice President and
CFO of Avline Leasing Corporation for one year, of Lancer Corporation for one
year and of Fairchild Aircraft Corporation for four years. Mr. Herbots was
elected to the Board of Directors in May 1995.
Mr. Walter J. Biegler has served as a director of the Company since 1985. He has
held the position of Chief Financial Officer of Periodical Management Group,
Inc., a San Antonio, Texas concern which distributes periodicals, books and
specialty items in the United States, Mexico and the Virgin Islands, since
November 1991. Prior to November 1991, he served as the Chief Financial Officer
and Senior Vice President-Finance of La Quinta Motor Inns, Inc. of San Antonio,
Texas, a national hotel chain.
Ms. Jean M. Braley has served as a director of the Company since 1976. She
served as Secretary of the Company from 1982 to 1985. Ms. Braley is currently
and has been involved for the last ten years in personal investments as her
principal occupation. She is also a partner in Lancer Properties. See
Compensation and Certain Transactions.
Mr. Charles K. Clymer has served as a director of the Company since December
1996. Mr. Clymer retired from The Coca-Cola Company in 1993 after 31 years of
service. Managerial positions held with Coca-Cola International included Manager
of Chile, Director and Senior Vice President of Coca-Cola (Japan) Company
Limited, and Vice President of On Premise Market Development and Customer
Service for the Latin America Group.
Mr. Michael E. Smith has served as a director of the Company since 1985. Mr.
Smith is presently a principal shareholder and Vice President of Bailey-Gosling
Associates, Inc., an insurance brokerage firm. He has been employed by the same
firm since 1968. Mr. Smith has been the Company's insurance broker since 1981.
See Compensation and Certain Transactions.
Board of Directors and Committees
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a periodic basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. The Board of Directors met five times and acted by unanimous written
consent two times during the 1996 fiscal year. During such period, each member
of the Board participated in at least 75% of all Board and applicable Committee
meetings, except for Ms. Jean M. Braley, who attended three of the five
scheduled meetings of the Board of Directors.
The Board of Directors has established audit, compensation and stock option
committees to devote attention to specific subjects and to assist it in the
discharge of its responsibilities. Mr. Walter J. Biegler, Mr. Charles K. Clymer
and Mr. Michael E. Smith are the members of the audit, compensation and stock
option committees. The Audit Committee is responsible for the review of the
audited financial results and coordination of the annual audit. The Compensation
Committee is responsible for officer compensation. The Stock Option Committee is
responsible for administering the Companys stock option plans. The Compensation
Committee met once, and the Stock Option Committee met five times during the
1996 fiscal year to consider officer compensation. The Audit committee met once
during the 1996 fiscal year.
PROPOSAL II - APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP as
independent auditors to make an examination of the accounts of the Company for
the fiscal year 1997, and has directed that the appointment be submitted to the
shareholders for their approval at the Meeting. KPMG Peat Marwick LLP has
audited the Companys financial statements for a period exceeding 17 years. It
is expected that a representative of the firm will be present at the Meeting
with an opportunity to make a statement if such representative so desires and
will be available to respond to appropriate questions by shareholders. If the
shareholders do not approve this appointment, the Board of Directors will
consider the selection of other auditors.
3
<PAGE>
During the fiscal year ended December 31, 1996, KPMG Peat Marwick LLP provided
audit services to the Company consisting of the audit of the consolidated
financial statements of the Company, services related to filings with the
Securities and Exchange Commission, and tax preparation and consultation
services.
PROPOSAL III - INCREASE IN NUMBER OF AUTHORIZED COMMON SHARES
The Board of Directors has voted to amend the Companys Articles of Incorporation
to increase the number of authorized common shares to 50,000,000 nonassessable
common shares with a par value of $.01 per share. The Board of Directors is
submitting Proposal III for shareholder approval.
Proposal III proposes to amend the first paragraph of Article Four of the
Companys Articles of Incorporation to read in its entirety as follows:
The corporation shall have authority to issue two classes of shares, to be
designated respectively, preferred and common. The total number of shares
which the Corporation is authorized to issue is fifty-five million
(55,000,000) shares. The number of preferred shares authorized is five
million (5,000,000) nonassessable shares, which shares are without par
value. The number of common shares authorized is fifty million (50,000,000)
nonassessable shares and the par value of each such share is $0.01.
As of the Record Date, there were 10,000,000 common shares authorized, 5,837,798
common shares outstanding, and approximately 541,543 common shares reserved for
future issuance pursuant to outstanding options granted under the Companys stock
option plans. No preferred shares were outstanding as of the Record Date, and
the proposed amendment does not increase the number of authorized preferred
shares. If the amendment to the Certificate of Incorporation is approved, the
Board of Directors will have the authority to issue 44,162,202 additional common
shares, and 5,000,000 preferred shares, without further stockholder approval,
except as otherwise required by the applicable rules of the American Stock
Exchange or applicable laws or regulations.
The Board of Directors believes the authorized number of shares of common stock
should be increased to provide sufficient shares for such appropriate purposes
as may be determined by the Board of Directors to be necessary or desirable. The
purposes may include, without limitation: facilitating broader ownership of the
Companys common stock by effecting stock splits or issuing stock dividends;
raising capital through the sale of common stock; attracting and retaining
valuable employees by the issuance of additional stock options, including
additional shares reserved for future option grants under the Companys existing
stock plans; and acquiring other businesses in exchange for shares of the
Companys Common Stock. The Board of Directors considers the authorization of
additional shares of Common Stock advisable to ensure prompt availability of
shares for issuance should the occasion arise.
The Company has no pending arrangements to issue any of the additional shares of
Common Stock that would be authorized as a result of the proposed amendment to
the Companys Articles of Incorporation. Since the shareholders of the Company
have no preemptive rights, the issuance of Common Stock on other than a pro rata
basis may reduce each shareholders proportionate voting power in relation to
that of the shareholders as a whole.
The issuance of additional shares of Common Stock could have the effect of
diluting earnings per share and book value per share, which could adversely
affect the Companys existing stockholders. In addition, the Companys authorized
but unissued shares of Common Stock could be used to make a change in control of
the Company more difficult or costly. Issuing additional shares of Common Stock
could have the effect of diluting stock ownership of the person seeking to
obtain control of the Company. The Company is not aware, however, of any pending
or threatened efforts to obtain control of the Company, and the Board of
Directors has no current intention to use the additional shares of Common Stock
in order to impede a takeover attempt.
4
<PAGE>
PROPOSAL IV - INCREASE IN THE NUMBER OF SHARES FOR WHICH OPTIONS MAY BE AWARDED
UNDER THE 1996 STOCK INCENTIVE PLAN.
The Board of Directors has approved an amendment to the 1996 Stock Incentive
Plan to increase from 150,000 to 400,000 the number of shares for which options
may be granted. The Board of Directors is submitting Proposal IV for shareholder
approval.
Proposal IV proposes to amend the first sentence of Section 4(a) of the
Companys 1996 Stock Incentive Plan to read in its entirety as follows:
Subject to adjustment by the operation of Section 4(b) hereof, the
maximum number of shares with respect to which Awards may be made under
the Plan is 400,000.
The Companys 1996 Stock Incentive Plan (the 1996 Plan) was adopted by
shareholders at the Annual Meeting of Shareholders held on May 23, 1996. The
purpose of the 1996 Plan is to promote the long-term interests of the Company
and its shareholders by providing officers and other key employees of the
Company and its Affiliates and other key individuals (including non-employees)
with an additional incentive to promote the financial success of the Company and
its Affiliates. As of the date of this Proxy Statement, options on 21,750 shares
remained available for grant out of a total of 225,000 initially approved (both
figures are adjusted for the three-for-two stock dividend effective July 9,
1996). The 1996 Plan provides that shareholder approval is required to increase
the number of shares with respect to which awards may be made under the Plan.
The Board of Directors believes it is in the best interest of the Company and
its shareholders to increase the number of shares on which options can be
awarded under the 1996 Plan from 150,000 to 400,000, or from 225,000 to 600,000
to give effect to a three-for-two stock dividend paid July 9, 1996, so that the
Company can continue to grant stock options to key personnel. See Description of
the 1996 Plan, Option Grants During the 1996 Fiscal Year, and Options Exercised
During the 1996 Fiscal Year and Fiscal Year End Option Values.
Description of the 1996 Plan
The 1996 Plan provides for the granting of incentive stock options (as defined
in Section 422A of the Internal Revenue Code of 1954, as amended) (ISOs) and
options which do not qualify as ISOs (non-qualified stock options, or NQSOs),
and is intended to promote the long-term interests of the Company and its
shareholders by providing officers and other key employees of the Company and
its Affiliates and other key individuals (including non-employees) with an
additional incentive to promote the financial success of the Company and its
Affiliates. Options will be granted on such terms and prices as determined by
the Stock Option Committee of the Board of Directors in its sole discretion;
provided, however, that the per share exercise price of incentive stock options
may not be less than the fair market value of the Common Stock on the date of
grant. Each option will be exercisable after the period or periods specified in
the option agreement, but no option shall be exercisable after the expiration of
10 years from the date of grant. A committee composed of three members of the
Board of Directors, none of whom is eligible to receive options under the 1996
Plan, will administer and interpret the 1996 Plan. The committee has authority
to grant options under the 1996 Plan to all eligible employees of the Company,
including officers and directors of the Company who are also employees.
Unless sooner terminated by action of the Board, the 1996 Plan will terminate on
February 28, 2007 and no options may thereafter be granted under the 1996 Plan.
The 1996 Plan may be amended, altered or discontinued by the Board without the
approval of the shareholders, except that the Board does not have the power of
authority to increase the maximum number of shares for which options may be
granted under the 1996 Plan (except for certain adjustments) either in the
aggregate or as to any individual employee; change the minimum purchase prices
which may be established under the 1996 Plan (except for certain adjustments);
extend the period or periods during which options may be granted or exercised;
change the provisions relating to the determination of employees to whom options
shall be granted and the number of shares to be covered by such options or
change the provisions relating to adjustments to be made upon changes in
capitalization. However, the Stock Option Committee may make appropriate
adjustments in the number of shares covered by the 1996 Plan and the outstanding
options, and in the option prices, to reflect any stock dividend, stock split,
share combination or other recapitalization, and, with respect to outstanding
options and option prices, to reflect any merger, consolidation, reorganization,
liquidation or the like, of or by the Company.
5
<PAGE>
Options will be granted only to persons who are key employees of the Company
which include directors, officers, supervisory personnel, as well as other
employees of the Company or a subsidiary corporation of the Company as
determined by the Stock Option Committee. The number of other key employees who
might be eligible is not determinable at this time. Options may be granted to
persons to whom options have previously been granted under the 1987 and 1992
Plans. The aggregate fair market value (determined at the time of the grant) of
the Common Stock with respect to which options under the 1996 Plan are
exercisable for the first time by a grantee of an option during any calendar
year shall not exceed $100,000. Other than this restriction, there is no
restriction in the 1996 Plan on the maximum or minimum number of shares of
Common Stock covered by options that may be granted to any person or that may be
made purchasable by exercise by any person at any time.
Unless, as otherwise provided in the 1996 Plan, the option holders employment
terminates as a result of death, disability or retirement; or is terminated for
cause, all rights to exercise options terminate 90 days from the date the option
holder ceases to be an employee of the Company or a subsidiary of the Company.
Options may not be transferred other than by will or the laws of descent and
distribution and, during the lifetime of the optionee, may be exercised only by
him. The 1996 Plan provides that, if an option holder dies while in the Companys
employment, any unexercisable options may be exercised by the employees
executor, administrator, heir or devisee within one year following the employees
death, without regard to any limitation imposed on the number of shares then
subject to exercise. If an option expires or terminates before it is exercised
in full by reason of the death or severance of employment of optionee, the
surrender of the option, or any other cause, the shares of stock allocable to
the unexercised portion of such option become available for the granting of new
options.
A person may exercise his options by giving written notice to the Company
specifying the number of shares to be purchased and delivering to the Company
payment of the full purchase price in cash, certified bank check, shares of the
Companys Common Stock, or any combination of the forms of payment mentioned.
Tax Status of Options
ISOs. ISOs granted under the 1996 Plan are intended to qualify under Section
422A of the Internal Revenue Code, as amended, for incentive stock option
treatment. To receive incentive stock option treatment, an optionee must not
dispose of the acquired stock within two years after the option is granted or
within one year after exercise. In addition, the individual must have been
continuously employed by the Company from the date of granting of the option
until three months (one year if the employee is disabled) before the date of the
exercise. The requirement that the individual be an employee and the two-year
and one-year holding periods are waived in the case of death of the employee. If
all such requirements are met, no tax will be imposed upon exercise of the
option. Any gains upon sale of the stock will be capital gain. The employees
gain on exercise (the excess of the fair market value at the time of exercise
over the exercise price) of an incentive stock option is a tax preference item
and, accordingly, is included in the computation of alternative minimum taxable
income.
If the two-year and one-year holding requirements are not met, but all other
requirements are met, the employee will recognize, at the time of disposition of
the stock, ordinary income in an amount equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock subject
to the option on the date of exercise or (ii) the amount realized by the
employee on the disposition of the stock; provided that, for (ii) to be
applicable, the disposition must be a transaction with respect to which a loss,
if sustained, would be recognized. If the amount realized on the disposition of
the stock exceeds the fair market value of the stock subject to the option on
the date of exercise, the excess will be either long-term or short-term capital
gain depending on the employee's holding period for such stock.
The Company will not be entitled to any tax deduction with respect to the grant
or exercise of an incentive stock option unless there is a disposition of the
stock before the holding periods are satisfied. In such event, the Company would
be entitled to a tax deduction equal to the amount of ordinary income recognized
by the employee.
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<PAGE>
The foregoing statements are based upon present federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
NQSOs. An NQSO granted under the 1996 Plan is taxed in accordance with Section
83 of the Internal Revenue Code and the regulations thereunder. The following is
a discussion of the general rules which are applicable to holders of such NQSOs
and to the Company for federal income tax purposes under existing law, and is
based upon the assumptions that (i) the NQSOs do not have a readily
ascertainable fair market value at the date of grant and (ii) the Common Stock
acquired by exercising an NQSO is either transferable or not subject to a
substantial risk of forfeiture (as defined in regulations under Section 83 of
the Code).
The holder of an NQSO will not realize any taxable income upon the grant of the
NQSO, and the Company is not allowed a business expense deduction by reason of
such grant. The option holder will recognize ordinary compensation income at the
time of exercise of an NQSO in an amount equal to the excess, if any, of the
fair market value of the shares on the date of exercise over the exercise price.
When an option holder sells shares which are acquired pursuant to an NQSO, the
option holder will recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the sale of the shares and the
option holders basis in the shares. If an option holder holds the shares for
longer than one year, the gain or loss will be a long-term capital gain or loss.
In general, the Company will be entitled to a business expense tax deduction in
an amount equal to the compensation income which is recognized by the option
holder at the time of the exercise of the option. The Company will be entitled
to take this deduction in the year in which compensation income is recognized by
the option holder.
Other Incentive Stock Option Plans of the Company
1992 Stock Option Plan. On December 18, 1991, the Board of Directors adopted the
1992 Non-statutory Stock Option Plan (the 1992 Plan) under which options may be
granted to key management employees of the Company, which include officers and
directors of the Company who are also employees. The 1992 Plan is intended to
encourage stock ownership by key management employees of the Company and its
subsidiaries, to provide additional incentive for such employees to expand and
improve the profitability of the Company and to attract and retain key
personnel.
The 1992 Plan provided for the issuance of up to 258,750 shares of common stock
after giving effect to three-for-two stock dividends paid in July 1996 and July
1995 , all of which had been granted as of December 31, 1996. The Stock Option
Committee of the Board of Directors administers and interprets the 1992 Plan.
Options are granted on such terms and prices as determined by the Committee in
its sole discretion; provided, however, that the per share exercise price of the
options granted may not be less than the fair market value of the Common Stock
on the date of grant. Options were exercisable after six months had elapsed from
date of grant.
As of the date of this Proxy Statement, options to purchase an aggregate of
170,775 shares of Common Stock are outstanding under the 1992 Plan exercisable
at an average exercise price of $1.94 per share. Options granted to officers
include 74,250 shares to each of Alfred A. Schroeder and George F. Schroeder,
14,850 shares to James R. Sprinkle and 14,850 shares to Samuel Durham, all of
whom are executive officers of the Company. No options under this plan were
exercised during 1996.
1987 Stock Option Plan. On April 14, 1987, the Board of Directors adopted and on
May 29, 1987, the Shareholders approved the 1987 Stock Option Plan (the 1987
Plan) under which options may be granted to key employees of the Company, which
include officers and directors of the Company who are also employees,
supervisory personnel and other employees of the Company or a subsidiary
corporation of the Company. The 1987 Plan is intended to advance the interests
of the Company by providing officers and other key employees who have
substantial responsibility for the direction and management of the Company with
additional incentive and increase their proprietary interest in the success of
the Company. The 1987 Plan provides for the issuance of up to 225,000 shares of
common stock after giving effect to three-for-two stock dividends paid in July
1996 and July 1995, and options granted thereunder are exercisable in
incremental amounts up to five years from date of grant. Shares by reason of the
expiration of an option that are no longer subject to purchase pursuant to an
option granted under the 1987 Plan may be issued in connection with new options
granted thereunder. All options granted under the 1987 Plan are intended to
qualify under Section 422A of the Internal Revenue Code, as amended, for
incentive stock option treatment.
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The Stock Option Committee of the Board of Directors administers and interprets
the 1987 Plan. Options are granted on such terms and prices as determined by the
Committee in its sole discretion; provided, however, that the per share exercise
price of the options granted to less than 10% shareholders may not be less than
the fair market value of the Common Stock on the date of grant. The exercise
price of options granted to 10% shareholders may not be less than 110% of the
fair market value of the Common stock on the date of grant. On April 13, 1997,
the Board of Directors authority to grant options under 1987 Plan terminated. No
more options will be granted under the 1987 Plan.
Each option is exercisable after the period or periods specified in the option
agreement but no option is exercisable after the expiration of ten years from
date of grant. Options are not transferable other than by will or the laws of
descent and distribution without the consent of the Board. The aggregate fair
market value (determined at the time of the grant) of the Common Stock with
respect to which options under the 1987 Plan are exercisable for the first time
by a grantee of an option in any calendar year shall not exceed $100,000. Other
than this restriction, there is no restriction in the 1987 Plan on the maximum
or minimum number of shares of Common Stock covered by options that may be
granted to any person or that may be made purchasable by exercise by any person
at any time.
As of the date of this Proxy Statement, options to purchase 165,170 shares of
Common Stock are outstanding under the 1987 Plan exercisable at an average
exercise price of $4.56 per share. There are no options available for grant.
Options granted to executive officers include 51,075 shares to each of Alfred A.
Schroeder and George F. Schroeder, 12,894 shares to John P. Herbots, 9,385
shares to Michael U. Raymondi, 6,750 to Robert W. Abbott, 10,125 shares to James
R. Sprinkle and 10,215 shares to Samuel Durham. Options for 9,896 shares under
this plan were exercised during 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 20, 1997, regarding the
beneficial ownership of common stock of Lancer by each person known by Lancer to
own 5% or more of the outstanding shares of each class of Lancer's Common Stock,
each director of Lancer, each executive officer of the Company named in the
Summary Compensation Table set forth in this proxy, and the directors and
executive officers of Lancer as a group. The persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
owned by them, unless otherwise noted. The number of shares beneficially owned
reflects a three-for-two stock dividend effective July 9, 1996.
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner and Number of Common Stock Percent of
of Persons in Group Beneficially Owned Class
- ------------------------------------------ ----- ---- -------------- ---- ----------------
<S> <C> <C>
Alfred A. Schroeder (1)(2)(7) 855,222 13.7
George F. Schroeder (1)(3)(7) 951,031 15.2
John P. Herbots (4) 17,663 *
Walter J. Biegler 4,500 *
Jean M. Braley (1)(5) 324,518 5.2
Charles K. Clymer 0 *
Michael E. Smith 5,100 *
Samuel Durham (6) 32,690 *
Michael U. Raymondi (7) 11,104 *
Robert W. Abbott (8) 11,550 *
GHS Management, Inc. (9) 546,300 8.7
Greenbriar Partners, Ltd. (10) 366,150 5.9
All directors and executive officers
as a group (fourteen persons) (11) 2,225,968 35.6
*Less than 1%
</TABLE>
8
<PAGE>
(1) The mailing address for Mr. Alfred A. Schroeder, Mr. George F. Schroeder
and Mrs. Jean M. Braley is 235 West Turbo, San Antonio, Texas 78216.
(2) Includes 125,325 shares purchasable pursuant to options which are
exercisable within the next 60 days, but excludes 135,730 shares held of
record by Mr. Alfred A. Schroeders two adult children.
(3) Includes 298,350 shares held by trusts for the children of Mr. George F.
Schroeder, of which Mr. George F. Schroeder is the trustee, and includes
125,325 shares purchasable pursuant to options which are exercisable within
the next 60 days. Excludes 10,125 shares held by Mr. George F. Schroeders
three adult children.
(4) Includes 12,813 shares purchasable pursuant to options which are
exercisable within the next 60 days.
(5) Includes 176,879 shares held by the Estate of William V. Braley for which
Mrs. Braley serves as sole independent executrix.
(6) Includes 28,765 shares purchasable pursuant to options which are
exercisable within the next 60 days.
(7) Shares purchasable pursuant to options which are exercisable within the
next 60 days.
(8) Includes 9,150 shares purchasable pursuant to options which are exercisable
within the next 60 days.
(9) GHS Management, Inc. is a Dallas-based investment firm whose mailing
address is 8235 Douglas Avenue, Suite 420, Dallas, Texas 75225.
(10) Greenbriar Partners, Ltd. is a Dallas-based investment firm whose mailing
address is 1901 N. Akard, Dallas, Texas 75201. Includes 9,000 shares held
by Rowe Family Partnership, Ltd.
(11) Includes 323,532 shares purchasable pursuant to options which are
exercisable within the next 60 days.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
Name Age Position with the Company
- -------------------------- ------ ---------------------------------------
<S> <C> <C>
Alfred A. Schroeder 60 Chairman of the Board
George F. Schroeder 57 President and CEO
John P. Herbots 49 Vice President Finance, Secretary,
Treasurer and CFO
Charles W. Thomas 43 Vice President of Marketing
Robert W. Abbott 58 Vice President - Asia
Jose A. Canales, Jr. 51 Vice President - Latin America
Robert E. Gehl 35 Vice President - Europe
James R. Sprinkle 49 Vice President - Domestic Sales
Samuel Durham 48 Vice President of Engineering
Michael U. Raymondi 49 Vice President of Operations
</TABLE>
Mr. Alfred A. Schroeder is a co-founder of the Company and has served as
Chairman of the Board of Directors of the Company since its inception in 1967.
His primary responsibilities include conceptual engineering design, new product
development and corporate planning. He is the brother of George F. Schroeder,
and is also a partner in Lancer Properties. See Compensation and Certain
Transactions.
Mr. George F. Schroeder is a co-founder of the Company and has served as
President, Chief Executive Officer and director since 1967. His primary
9
<PAGE>
responsibilities include strategic planning, marketing, overall production
management and corporate administration. He is the brother of Alfred A.
Schroeder, and is also a partner in Lancer Properties. See Compensation and
Certain Transactions.
Mr. John P. Herbots joined the Company as Vice President of Finance and
Administration in February 1995. In August 1995, Mr. Herbots was appointed Chief
Financial Officer, Treasurer and Secretary. Prior to joining Lancer, Mr. Herbots
was Executive Vice President of MK Rail Corporation and from 1990 until 1992,
served as Vice President and Chief Financial Officer for Morrison Knudsen
Corporation's Rail Systems Group. Prior to that he was Vice President and CFO of
Avline Leasing Corporation for one year, of Lancer Corporation for one year and
of Fairchild Aircraft Corporation for four years. Mr. Herbots was elected to the
Board of Directors in May 1995.
Mr. Charles W. Thomas joined the Company as Vice President of Marketing in
February 1996. Prior to joining Lancer, Mr. Thomas was employed for 15 years by
what is now The Minute Maid Company, a division of The Coca-Cola Company. While
at The Minute Maid Company, Mr. Thomas held positions including Director of
Marketing, Director of Field Sales and Director of Technical Development.
Mr. Robert W. Abbott has been employed by the Company since 1974. Mr. Abbott
became Vice President - Asia in 1997. From 1976 until January 1997, he has held
various senior sales positions, including Vice President - International Sales.
Prior to his employment with Lancer, Mr. Abbott was employed by The Coca-Cola
Company.
Mr. Jose A. Canales, Jr., joined the Company as Vice President - Latin America
in August 1995. Prior to joining Lancer, Mr. Canales was the International Sales
Manager for Pioneer Flour Mills in San Antonio, Texas. From 1982 to 1993 he held
various management positions within the Latin American steel industry with Trade
Arbed of Luxembourg, Fundidora in Mexico and Huntco Steel in the United States.
From 1972 to 1982, he represented W.W. Grainger in Mexico and Latin America.
Mr. Robert E. Gehl joined the Company in February 1997 as Vice President -
Europe. Before coming to Lancer, Mr. Gehl was Managing Director of Europe for
Multiplex GmbH for five years, and was Director of Sales and Marketing of
Jetspray London, Ltd. for two years.
Mr. James R. Sprinkle joined the Company in April 1984 as Director of National
Accounts. Mr. Sprinkle assumed the responsibilities of Vice President - Domestic
Sales in May 1993. Prior to his employment with Lancer, Mr. Sprinkle was
employed by The Coca-Cola Company.
Mr. Samuel Durham joined the Company in June 1979 and has held the position of
Vice President of Engineering since May 1993. He is primarily responsible for
coordinating new product design through its introduction into the market and
works directly with the engineering department of the Companys largest customer.
Before joining the Company, Mr. Durham was employed by Polyvend, a manufacturer
of vending equipment.
Mr. Michael U. Raymondi joined the Company as Vice President of Operations in
August 1994. Prior to joining Lancer, Mr. Raymondi was employed by Minnesota
Rubber, a rubber and plastics products company, as General Manager for three
years. Prior to that, Mr. Raymondi was employed by National O-Ring as Plant
Manager for five years.
COMPENSATION AND CERTAIN TRANSACTIONS
Executive Compensation
The Company believes that compensation of its executive officers and others
should be directly and materially linked to operating performance. For fiscal
1996, the executive compensation program consisted of base salary and a bonus
plan based on Company profitability and individual performance. The compensation
levels of all executives were based primarily on the achievement of a 38%
increase in net earnings per share over 1995, and to qualitative goals set at
the beginning of the period.
10
<PAGE>
Compensation and Stock Option Committees' Report
The Compensation and the Stock Option Committees (the Committees) of the Board
of Directors, which usually meet once a year, determine the Companys executive
compensation. An incentive bonus pool and awards to be made under stock option
plans at the end of the ensuing year are approved at the Committees meeting in
the first quarter with respect to that fiscal year. Compensation for a
newly-hired executive may be established by the Committees at a special meeting.
The Committees believe that compensation of the Companys key executives should
be sufficient to attract and retain highly qualified personnel and also provide
meaningful incentives for measurably superior performance. They also believe
that compensation should be directly and materially linked to operating
performance and net earnings per share. As a result, the Company places special
emphasis on long and short-term performance goals as measured by improvements in
net earnings and net earnings per share. During 1996, net income increased to
$5,732,500 from $4,091,117 for the previous year. Net earnings per share were
$0.94 in 1996 compared to $0.68 in 1995. The Companys performance goals were set
in part by an evaluation of its level of operational complexity and competitive
environment. Special awards are contemplated to compensate for the achievement
of superior goals in specific departments, such as research and development,
production and sales.
During 1996, executive compensation included, in addition to a base salary, a
cash bonus based on the achievement of 38% net earnings per share growth
compared to targeted growth of 20% as set forth at the beginning of the year.
Based on available data, the Committees believe the base salaries and cash
bonuses of its executives were set below the levels of comparable companies as
measured by market capitalization.
During 1996, Mr. George F. Schroeder, the Companys CEO, received a base salary
of $199,992 and a bonus of $28,782 as determined by the Compensation Committee
and approved by the Board of Directors. As a co-founder of the Company, Mr.
George F. Schroeder has the entrepreneurial drive, strategic focus and long-term
experience necessary to provide effective leadership to a complex manufacturing
company with a worldwide presence. Although, as noted above, executive
compensation was primarily contingent on a specific net earnings per share
growth objective, Mr. Schroeders performance was also measured based on a
subjective evaluation of his success at building a strong management team and
aggressively pursuing new areas for growth.
The 1996 fiscal year was a good year for the Company, as reflected by the growth
in net earnings per share and a 118% increase in the stock price after adjusting
for a three-for-two stock dividend effective July 9, 1996. These factors will be
taken into consideration in determining future stock bonus and short-term cash
awards.
Internal Revenue Code Section 162(m) precludes a public corporation from taking
a deduction for compensation in excess of $1 million for its chief executive
officer or any of its four other highest-paid officers. Certain
performance-based compensation, however, is specifically exempt from the
deduction limit. Since the vesting of options under the 1992 Plan is not subject
to the attainment of performance objectives, it is possible that awards to named
executive officers under this plan, when taken in conjunction with their annual
compensation, could become subject to the limitations of Section 162(m). Awards
made under the 1992 Plan to two of the named executive officers will expire if
not exercised by January 12, 2002. Therefore, it is likely that these options
will be exercised by January 12, 2002. When added to other compensation likely
to be paid to such officers in 2002, compensation related to these awards is
likely to be partially non-deductible to the Company under Section 162(m). The
committee believes the compensation of its executive officers cannot always be
based upon fixed formulas and that the prudent use of discretion in determining
compensation is in the best interest of the Company and its shareholders. In
some cases, the Committee, in the exercise of such discretion, may approve
executive compensation that is not fully deductible. However, the Company does
not expect the limitations on deductibility to have a material impact on its
financial condition.
Compensation and Stock Option Committees
Walter J. Biegler, Chairman
Charles K. Clymer
Michael E. Smith
11
<PAGE>
Compensation of Directors
Directors who are also employees of the Company receive no compensation for
serving as a director. Directors who are not employees of the Company receive a
fee of $2,000 per quarter.
Compensation Committee Interlocks and Insider Participation
Mr. Michael E. Smith is a member of the Companys Compensation and Stock Option
Committees. Mr. Smith is a principal shareholder and Vice President of the
insurance brokerage firm of Bailey-Gosling Associates, Inc. The Company paid
approximately $305,000, $313,000 and $264,000 in premiums in 1996, 1995 and
1994, respectively, for various insurance policies placed by or through
Bailey-Gosling Associates, Inc.
Summary Compensation Table
The following table sets forth the compensation paid or to be paid by the
Company to the Chairman of the Board, the Chief Executive Officer, and the named
executive officers for services rendered in all capacities for the years ended
December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Other Securities
Annual Underlying All Other
Year Salary Bonus Compensation(1) Options (2) Compensation (3)
Name/Title ($) ($) ($) (#) ($)
- ----------------------------- -------- --- ---------- -- ---------- ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Alfred A. Schroeder 1996 199,992 47,693 4,441 - 60,385
Chairman of the 1995 199,992 21,462 4,500 - 60,311
Board 1994 101,296 65,000 3,679 - 52,005
George F. Schroeder 1996 199,992 28,782 4,441 - 31,314
President & CEO 1995 199,992 - 4,500 - 32,436
1994 101,296 65,000 3,679 - 33,197
Samuel Durham 1996 118,922 25,600 3,484 22,500 1,013
Vice President of 1995 111,821 4,795 3,500 - 1,267
Engineering 1994 91,254 26,886 2,898 - 2,179
John P. Herbots 1996 110,345 9,600 2,792 16,980 377
Vice President Finance 1995 80,395 13,654 - 10,914 8,934
& CFO (4)
Michael U. Raymondi 1996 105,490 10,687 - 15,000 377
Vice President of 1995 95,014 15,630 - 2,636 249
Operations (5) 1994 40,198 7,626 6,750 2,649
Robert W. Abbott 1996 100,020 20,100 3,208 18,750 1,518
Vice President - Asia 1995 99,278 8,332 3,000 - 2,260
1994 89,728 13,514 2,532 6,750 2,393
</TABLE>
(1) These amounts reflect Company contributions to its profit sharing plan for
the benefit of the named officers for the years indicated.
12
<PAGE>
(2) Adjusted for three-for-two stock dividends in July 1996 and July 1995.
(3) These amounts include insurance premiums paid for the benefit of the named
officers and certain other taxable fringe benefits.
(4) John P. Herbots joined the Company in February, 1995.
(5) Michael U. Raymondi joined the Company in August, 1994.
Options Grants During the 1996 Fiscal Year
The following table discloses, for John P. Herbots, Vice President Finance and
Chief Financial Officer, Samuel Durham, Vice President of Engineering, Michael
U. Raymondi, Vice President of Operations, and Robert W. Abbott, Vice President
- - Asia, information on Common Stock options of the Company (Options) granted
during the 1996 fiscal year. There are no other named executive officers who
received options during 1996.
<TABLE>
<CAPTION>
Individual Grants Option Value
------------------------------------------------------ -----------------------------
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term
-----------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration 5% 10%
Name/Title Granted in Fiscal ($/Sh) Date (2) (2)
(1) Yr
- -------------------------- -- -- ----------- ------------ -------- ------------- -- -------- -- ----------
<S> <C> <C> <C> <C> <C> <C>
John P. Herbots 15,000 7.7% $10.83 3/31/2001 $44,850 $99,150
Vice President Finance, 1,980 1.0% $11.09 2/19/2001 $ 6,059 $13,405
Chief Financial Officer
Samuel Durham 22,500 11.5% $10.83 3/31/2001 $67,275 $148,725
Vice President of
Engineering
Michael U. Raymondi 15,000 7.7% $10.83 3/31/2001 $44,850 $99,150
Vice President of
Operations
Robert W. Abbott 18,750 9.6% $10.83 3/31/2001 $56,063 $123,938
Vice President - Asia
</TABLE>
(1) The recipients of all the option grants listed in the table above are 40%
vested in the grants as of the date of this Proxy Statement. All options
are exercisable to the extent vested. The options are not transferable,
other than by will or the laws of decent and distribution or pursuant to a
qualified domestic relations order.
(2) The information in these columns illustrates the value that might be
realized upon exercise of the options granted during fiscal year 1996
assuming the specified compound rates of appreciation of the Companys
Common Stock over the term of the options. The potential realizable value
columns of the foregoing table do not take into account certain provisions
of the options providing for termination of the option following
termination of employment or nontransferability.
13
<PAGE>
Options Exercised During the 1996 Fiscal Year and Fiscal Year End Option Values
The following table discloses, for the Chairman of the Board, the Chief
Executive Officer, and the named executive officers, information concerning
options exercised during the fiscal year ended December 31, 1996, and the number
and value of the options held at the end of fiscal year 1996 based upon the
closing price of $20.375 per share of Common Stock on December 31, 1996. Amounts
are adjusted for the three-for-two stock dividends paid in July 1996 and in July
1995.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In Money
Shares Options at FY-End Options at FY-End
Acquired Value Exercisable/ Exercisable/
Name/Title on Exercise Realized Unexercisable Unexercisable
- ------------------------- -- ----------- -- ------------- --------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Alfred A. Schroeder 0 0 115,110/ $2,041,559/
Chairman of the 10,215 $168,190
Board
George F. Schroeder 0 0 115,110/ $2,041,559/
President & CEO 10,215 $168,190
John P. Herbots 0 0 7,761/ $86,854/
Vice President Finance 20,133 $211,077
and CFO
Samuel Durham 0 0 22,222/ $365,005/
Vice President of 20,043 $206,163
Engineering
Michael U. Raymondi 0 0 8,104/ $92,568/
Vice President of 16,282 $166,795
Operations
Robert W. Abbott 900 $6,950 7,260/ $81,196/
Vice President - Asia 17,340 $173,443
</TABLE>
14
<PAGE>
Company Performance
The performance graph shows a comparison of cumulative total returns for the
Company, the Standard & Poors SmallCap 600 Index, and the Standard & Poors
Specialized Manufacturing (SPSM) Index for the five-year period ended December
31, 1996.
The total cumulative return on investment (change in the year end stock price
plus reinvested dividends) for each year for the Company, the Standard & Poors
SmallCap 600 Index, and the SPSM Index is based on the stock price or composite
index on December 31 of each year presented. The comparison assumes that $100
was invested in the Companys Common Stock and in each of the other two indices.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lancer Corporation $ 100.00 $ 168.62 $ 322.94 $ 420.11 $ 480.09 $ 1,048.10
Standard & Poors SmallCap 600 $ 100.00 $ 121.04 $ 143.78 $ 136.92 $ 177.94 $ 215.88
S & P Specialized Manufacturing $ 100.00 $ 138.96 $ 151.09 $ 139.83 $ 214.42 $ 219.91
</TABLE>
Profit Sharing Plan
In 1991 the Company amended the non-contributory profit sharing plan it
originally adopted in 1985 to comply with changes in the law. The amount of
annual contributions made by the Company is at the discretion of the Board of
Directors but may not exceed an amount equal to fifteen percent of the
compensation paid or accrued during the year to all participating employees.
Substantially all United States employees are eligible to participate. The
Companys consolidated statements of income for the years ended December 31,
1996, 1995, and 1994 include provisions of $520,000, $359,000, and $270,000,
respectively, attributable to the plan.
15
<PAGE>
Certain Transactions
Michael E. Smith, a principal shareholder and Vice President of the insurance
brokerage firm of Bailey-Gosling Associates, Inc., has been the Companys
insurance broker since 1981. The Company paid approximately $305,000, $313,000
and $264,000 in premiums for various insurance policies placed by or through
Bailey-Gosling Associates, Inc. in 1996, 1995 and 1994, respectively, for which
Mr. Smiths services were used in connection therewith.
Lancer Properties is a Texas general partnership that owns the land and building
at 235 West Turbo in San Antonio, Texas where the Companys administrative
facilities and a portion of its production operations are located. Lancer
Properties leased the premises to the Company for a term of 21 years beginning
June 1, 1977 at a rental of $6,600 per month. The Company also leases adjoining
operating facilities at 257R West Turbo, from Lancer Properties on a
month-to-month basis for $800 per month. The Company pays all maintenance
expenses, property taxes, assessments and insurance premiums on these
facilities. In conjunction with a debt refinancing in 1992, the Company advanced
$220,000 to this partnership. Repayment of this advance will be made through a
reduction of lease payments otherwise due between the Company and the
partnership and includes an interest charge at a rate of 9.25% per annum.
Included in other assets and prepaid expenses in the Company's consolidated
balance sheet at December 31, 1996 is $5,000 remaining due from the partnership
for this advance. Improvements to these properties paid by the Company are
recorded as an offset against the lease payments. Alfred A. Schroeder, George F.
Schroeder and Jean M. Braley, all of whom were directors of the Company during
1996, own 13.33%, 13.33% and 15%, respectively, of Lancer Properties. The Estate
of William V. Braley, for which Mrs. Braley serves as sole independent
executrix, also holds a 15% interest in the partnership.
As of December 31, 1996, Alfred A. Schroeder and George F. Schroeder were
indebted to the Company for approximately $290,000 for cash advances received
from the company prior to and during 1996. The obligation to repay this
indebtedness is evidenced by promissory notes due on or before December 31,
1999, and payable to the company in four equal annual installments, beginning on
or before January 10, 1997, together with interest at the AFR rate, as published
by the Internal Revenue Service.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys
executive officers and directors, and persons who own more than ten percent of
the Companys Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and the American Stock Exchange.
Based solely on reports and other information submitted by executive officers
and directors, the Company believes that during the year ended December 31, 1996
each of its executive officers, directors and persons who own more than ten
percent of the Companys Common Stock filed all reports required by Section
16(a), except for two late filings by Mrs. Jean M. Braley pursuant to stock
transactions involving a total of 5,400 shares, and one late filing for Mr.
Michael E. Smith pursuant to a stock transaction involving a total of 1,500
shares. The number of shares noted in the preceding sentence relating to the
transactions by Mrs. Braley and Mr. Smith have been adjusted for the
three-for-two stock dividend paid in July, 1996.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for shareholder action
at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended. For such
proposals to be considered for inclusion in the Proxy Statement and Proxy
relating to the 1998 Annual Meeting of Shareholders, such proposals must be
received by the Company no later than December 23, 1997. Such proposals should
be directed to Lancer Corporation, 235 W. Turbo, San Antonio, Texas 78216, Attn:
Chief Financial Officer.
16
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no matter other than those described herein that
will be presented for consideration at the Meeting. However, should any other
matters properly come before the Meeting or any adjournment thereof, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their best judgment in the interest of the Company.
MISCELLANEOUS
The expenses of preparing, printing and mailing this notice of meeting and proxy
material and all other expenses of soliciting proxies will be borne by the
Company. Georgeson & Company Inc., New York, New York, will distribute proxy
soliciting material to brokers, banks, and institutional holders and will
request such parties to forward soliciting material to the beneficial owners of
the Common Stock held of record by such persons. The Company will pay Georgeson
& Company Inc. a minimum fee of $600, not to exceed $2,500, covering its
services and will reimburse Georgeson & Company Inc. for payments made to
brokers and other nominees for their expenses in forwarding soliciting material.
The Companys Annual Report to Shareholders for the fiscal year ended December
31, 1996 accompanies this Proxy statement. The Annual Report is not deemed to be
part of this Proxy Statement.
By order of the Board of Directors
/s/ John P. Herbots
John P. Herbots
Secretary
San Antonio, Texas
April 21, 1997
<PAGE>
LANCER CORPORATION
1997 ANNUAL MEETING OF SHAREHOLDERS - MAY 22, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of LANCER CORPORATION, a Texas corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated April 21, 1997 and hereby appoints George F. Schroeder and
Alfred A. Schroeder or either of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1997 Annual Meeting of Shareholders of Lancer
Corporation to be held May 22, 1997 at 9:30 a.m., local time, at the Companys
facility at 6655 Lancer Blvd., San Antonio, Texas, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side hereof and in their discretion, upon
such other matter or matters which may properly come before the meeting or any
adjournment or adjournments thereof.
This Proxy will be voted as directed or, if no contrary direction is indicated,
will be voted FOR the election of all listed directors, FOR the ratification of
the appointment of KPMG Peat Marwick as independent auditors, FOR approval of
the proposed amendment of the Companys Articles of Incorporation which will
increase the number of authorized shares of the Companys Common Stock, FOR
approval of the proposal to amend the Companys 1996 Stock Incentive Plan to
increase the number of shares for which options may be granted, and as said
proxies deem advisable on such other matters as may come before the meeting.
(Continued, and to be signed and dated, on the reverse side.)
LANCER CORPORATION
PO BOX 11214
NEW YORK, NY 10203-0214
<PAGE>
1. ELECTION OF DIRECTORS
FOR all nominees listed below / /
WITHHOLD AUTHORITY to vote for all nominee listed below / /
EXCEPTIONS / /
Nominees: Alfred A. Schroeder; George F. Schroeder; Walter J. Biegler;
Jean M. Braley; Charles K. Clymer; Michael E. Smith; John P.
Herbots (INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the Exceptions box and strike a line
through that nominees name.)
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 1997
FOR / / AGAINST / / ABSTAIN / /
3. PROPOSED AMENDMENT OF THE COMPANYS ARTICLES OF INCORPORATION WHICH WILL
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANYS COMMON STOCK
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4. PROPOSAL TO AMEND THE COMPANYS 1996 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES FOR WHICH OPTIONS MAY BE GRANTED
FOR / / AGAINST / / ABSTAIN / /
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Dated_______________________________________________________, 1997
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