ADVANCED MACHINE VISION CORPORATION
3709 Citation Way #102, Medford, Oregon 97504
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 13, 1999
The Annual Meeting of Stockholders of Advanced Machine Vision Corporation ("AMV"
or the "Company"), a California corporation, will be held at the offices of the
Company, 3709 Citation Way #102, Medford, Oregon, 97504 on May 13, 1999 at 2:00
p.m., Pacific Time, for the following purposes:
1. To elect a Board of Directors;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Your attention is directed to the accompanying proxy statement. Only
stockholders of record at the close of business on April 2, 1999, will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are requested to sign, date and complete the enclosed proxy and
return it promptly in the accompanying postage-prepaid, pre-addressed envelope
whether or not they expect to attend the meeting to ensure that their shares
will be represented. Any stockholder giving a proxy has the right to revoke it
at any time before it is voted.
By Order of the Board of Directors,
/s/ Alan R. Steel
-----------------------------------
Alan R. Steel
Vice President, Finance and
Chief Financial Officer
April 2, 1999
PLEASE SIGN AND DATE THE ENCLOSED FORM OF PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
IN ORDER TO ENSURE THAT YOUR VOTES ARE COUNTED.
<PAGE>
ADVANCED MACHINE VISION CORPORATION
3709 Citation Way #102, Medford, Oregon 97504
PROXY STATEMENT
Annual Meeting of Stockholders
May 13, 1999
-------------------
General Information
Persons Making the Solicitation
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Advanced Machine Vision Corporation (the "Company" or
"AMV") of proxies for use at the Annual Meeting of Stockholders to be held on
May 13, 1999, and at any adjournment thereof. This proxy statement is first
being mailed to stockholders on or about April 2, 1999. You are requested to
sign, date and return the enclosed proxy card in order to ensure that your
shares are represented at the meeting.
All shares of AMV Common Stock (as defined below under "Record Date")
represented by a properly completed proxy received in time for the Annual
Meeting will be voted by the proxy holders as provided therein. If no direction
is given in the proxy, it will be voted "FOR" the election of the directors
nominated.
In addition to solicitation by mail, regular employees of the Company and its
Transfer Agent may solicit proxies in person or by telephone without additional
compensation. The Company will pay persons holding shares in their names or in
the names of their nominees, but not owning such shares beneficially, for the
expenses of forwarding soliciting materials to the beneficial owners. The
Company will bear all expenses incurred in soliciting its stockholders. Such
expenses are estimated not to exceed $10,000.
Revocability of Proxy
Any proxy given by a stockholder of the Company may be revoked at any time
before it is voted at the annual meeting by a written notice to the Secretary of
the Company, or upon request if the stockholder is present at the meeting. Each
valid proxy returned which is not revoked, unless indicated otherwise on the
proxy card, will be voted in the election of directors for the nominees as
described herein.
Record Date and Stock Entitled to Vote
Only holders of record of Class A Common Stock and Class B Common Stock
(hereinafter referred to collectively as the "Common Stock") and Series B
Preferred Stock ("Preferred Stock") at the close of business on April 2, 1999,
are entitled to notice of and to vote at the meeting or any adjournment thereof.
The outstanding voting securities of the Company on that date consisted of
12,869,355 shares of Common Stock and 119,106 shares of Preferred Stock.
The Class A Common Stock and Class B Common Stock are substantially identical on
a share-for-share basis. The holders of Common Stock and Preferred Stock vote as
a single class on all matters to come before stockholders for a vote, except in
the election of directors as described below. Holders of Common Stock may
cumulate their votes in the election of directors upon giving notice as required
by law. Each share of Class B Common Stock is automatically converted into one
share of Class A Common Stock upon its sale or transfer, or the death of the
holder. The holder of the Preferred Stock is allowed ten votes per share in
matters placed before the common shareholders, except in the election of
directors, in which case the holder has the right to elect one director.
Voting Rights; Election of Directors
Holders of the Company's Common Stock are entitled to one vote for each share
held as of the above record date, except that in the election of directors each
stockholder has cumulative voting rights and is entitled to a number of votes
equal to the number of shares held by such stockholder multiplied by the number
of directors to be elected, which number is currently seven. The stockholder may
cast these votes all for a single candidate or may distribute the votes among
any or all of the candidates. No stockholder will be entitled to cumulate votes
for a candidate however, unless that candidate's name has been placed in
nomination prior to the voting and the stockholder, or any other stockholder,
has given notice at the Meeting prior to the voting of an intention to cumulate
votes. In such an event, the proxy holder may allocate among the management
nominees the votes represented by proxies in the proxy holder's sole discretion.
FMC Corporation (FMC"), by virtue of its ownership of the Company's Preferred
Stock, is entitled to one additional director (see "Certain Transactions"
below).
Quorum; Stockholder Vote
A majority of the outstanding shares of the Company must be present, in person
or by proxy, at the Annual Meeting to constitute a quorum for the transaction of
business. Shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal or proposals) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. For purposes of determining the outcome of a proposal,
shares represented by such proxies will not be treated as affirmative votes.
The affirmative vote of a plurality of the votes cast at the meeting is required
for the election of directors. A properly executed proxy marked "WITHHELD" with
respect to the election of one or more directors will not be voted with respect
to the director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum.
Election of Directors
The following table sets forth information concerning the nominees of management
for directors for the ensuing year. The term of office for all nominees listed
below will expire at the next annual meeting to be held in 2000 or when their
successors are elected and qualified.
<TABLE>
<CAPTION>
Principal Occupation Year First
and Business Experience Elected
Name Including Service on Other Boards Age Director
- --------------------------- ---------------------------------------------------- ----- ----------
<S> <C> <C> <C>
Nominees of Management:
- -----------------------
William J. Young (C) President and Chief Executive Officer of the 56 1994
Company and Director of Lithia Automotive Group
Haig S. Bagerdjian Executive Vice President, Chief Legal Officer and 42 1997
Secretary of Syncor International Corporation, and
President and Chief Executive Officer of
Syncor Overseas Ltd.
Vikram Dutt President, Aaron, Dutt and Edwards, Inc., a 57 1997
benefits and insurance concern
James Ewan, Ph.D. President and Chief Executive Officer of 50 1996
SRC VISION, Inc., a wholly-owned subsidiary
of the Company
Robert M. Loeffler (A) (B) Attorney and Director of PaineWebber Group, Inc. 75 1997
Jack Nelson (A) (B) (C) Chairman of the Board and Chief Executive 48 1994
Officer of Caprius, Inc., a public company;
formerly a practicing attorney.
Rodger A. Van Voorhis (C) President of Ventek, Inc. a wholly-owned 41 1996
subsidiary of the Company
Nominee of FMC:
- ---------------
Marc T. Giles General Manager, Food Systems and Handling
Division, FMC FoodTech 43 1998
(A) Member of the Audit Committee
(B) Member of the Compensation and Stock Option Committees
(C) Member of the Directors Nominating Committee
</TABLE>
Meetings and Committees
The Company has standing Audit, Nominating, Compensation and Stock Option
Committees. The Audit Committee reviews and acts on reports to the Board with
respect to various auditing and accounting matters, including the selection of
the Company's independent auditors, the accounting and financial practices and
services performed for the Company by, and fees paid to, the independent
auditors. The Nominating Committee is chartered to establish criteria for
recommendations for director nominees and in connection therewith, to consider
the participation and contributions of current Directors. The Nominating
Committee will consider nominees received from the Company's stockholders. The
Compensation Committee reviews and provides recommendations to the Board of
Directors regarding executive compensation matters. The Stock Option Committee
is responsible for the administration of the Company's 1991, 1994 and 1997 Stock
Option Plans, the SRC Stock Option Plan, the 1997 Restricted Stock Plan, the
1998 Senior Management and Director Stock Purchase Plan and the Shareholder
Rights Plan. The Stock Option and Compensation Committees held two and one
formal meetings, respectively, during the fiscal year ended December 31, 1998.
In addition, these and the Audit Committee, met informally, as appropriate, in
conjunction with regular meetings of the Board of Directors.
During the fiscal year ended December 31, 1998, the Board of Directors held four
meetings. During 1998, each of the above directors attended at least 75% of the
aggregate of the total number of meetings of the Board and the total number of
meetings of committees of the Board on which he served during his respective
term as a director, except for Mr. Bagerdjian who attended 50% of the Board
Meetings.
Management
Executive Officers and Directors
The directors and executive officers of AMV are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------ ----- ----------------------------------------------------------------------------
<S> <C> <C>
William J. Young 56 President and Chief Executive Officer and Chairman of the Board of Directors
James Ewan, Ph.D. 50 President and Chief Executive Officer of SRC VISION, Inc. and Director
Alan R. Steel 54 Vice President of Finance, Chief Financial Officer and Secretary
Haig S. Bagerdjian 42 Director
Vikram Dutt 57 Director
Marc T. Giles 43 Director
Robert M. Loeffler 75 Director
Jack Nelson 48 Director
Rodger A. Van Voorhis 41 President, Ventek, Inc. and Director
</TABLE>
William J. Young became President and Chief Executive Officer of the Company
effective February 1, 1994, and Chairman of the Board in September 1994. Mr.
Young was the President and Chief Executive Officer of Volkswagen of America
from 1991 through March 1993, where he was responsible for all the company's
operations in the United States, which exceeded $2.2 billion in revenue
annually. As CEO of Volkswagen of America, Mr. Young also served as President of
V-Crest Systems, Inc., a computer services company serving 1,200 automobile
agencies, and as a Director of VCI, Inc. a $2 billion financial services
company. From January 1989 through December 1991, Mr. Young served as Vice
President of Sales and Marketing of Volkswagen United States and its 700 dealers
operating in the North American market. From 1982 through 1988, Mr. Young headed
W.J. Young and Associates, an automotive marketing consulting company. From 1979
through May 1983, Mr. Young was the General Manager of the Volkswagen Division
of Volkswagen of America, where he was responsible for implementing the sales
and marketing strategies of the Volkswagen Division and the maintenance and
financial health of the Volkswagen dealer organization of 950 dealers. Prior to
1979, Mr. Young served in the capacity of National Sales Manager, and held other
management positions in the Volkswagen organization and other companies. Mr.
Young is a director of Lithia Automotive Group, a public company.
Dr. James Ewan became President and Chief Executive Officer of the Company's SRC
VISION, Inc. ("SRC") subsidiary in May 1994 and a Director of the Company in
1996. Before joining SRC, Dr. Ewan was with Teledyne Corporation from 1985 to
1994 where he was President of Teledyne Microwave and General Manager of
Teledyne Monolithic Microwave. At Teledyne Microwave, Dr. Ewan was responsible
for restructuring the company from primarily a military electronics company to
one that derived half of revenues from commercial applications. Dr. Ewan led
Teledyne Monolithic Microwave from its start-up phase until it was eventually
merged into Teledyne Microwave as an operating division. Prior to Teledyne, Dr.
Ewan was Section Manager of the Gallium-Arsenide Microelectronics Center of The
Aerospace Corporation from 1980 to 1985. While at Aerospace, Dr. Ewan was
responsible for the development of a range of state-of-the-art compound
semiconductor technology, device and circuit processing and digital and analog
circuit design.
Alan R. Steel became Vice President of Finance and Chief Financial Officer on
March 14, 1994. Mr. Steel was the Vice President and Chief Financial Officer of
DDL Electronics, Inc. ("DDL"), a New York Stock Exchange listed company, since
1983. From 1980 to 1983, he served as Controller for DDL. While at DDL, Mr.
Steel was responsible for handling New York Stock Exchange compliance, financial
and SEC reporting, public and private equity offerings and shareholder
relations. From 1975 to 1980, he served as financial manager for ARCO
Transportation Company, a subsidiary of Atlantic Richfield Company. From 1974 to
1975 he was the Director of Internal Control at Atlantic Richfield Company. From
1967 to 1974, Mr. Steel was a certified public accountant with Arthur Andersen &
Company.
Rodger Van Voorhis joined the Company's Ventek, Inc. ("Ventek") subsidiary in
1992 as Vice President of Operations and became President in 1996 and a director
of the Company in 1996. Mr. Van Voorhis was previously an Assistant Vice
President of Marketing for United Financial Systems, and held various management
positions at Morvue Electronics, Inc., a designer and manufacturer of wood
veneer defect scanning systems. On July 24, 1996, Mr. Van Voorhis entered into a
five-year employment agreement with Ventek that provides for an annual base
salary of $150,000 and a $375 monthly automobile allowance. The contract
provides that if Mr. Van Voorhis is terminated other than for cause before July
24, 1999, he shall be paid his base salary until that date. Effective February
1, 1999, Mr. Van Voorhis' base salary was changed to $175,000.
Haig S. Bagerdjian is currently Executive Vice President, Chief Legal Officer
and Secretary of Syncor International Corporation, and President and Chief
Executive Officer of Syncor Overseas Ltd. Syncor is a Woodland Hills,
California-based operator of domestic and international nuclear pharmacy service
centers, at which he has been employed since 1991. From 1987 to 1991, he served
in several executive level positions at Calmark Holding Corporation. He also was
General Counsel for American Adventure, Inc., which was a subsidiary of Calmark
Holding. Mr. Bagerdjian received a J.D. from Harvard Law School and is admitted
to the State Bar of California.
Since 1983, Vikram Dutt has been the President of Aaron, Dutt and Edwards,
Inc., a Chicago, Illinois consulting firm specializing in consulting and
administration of pension and profit sharing plans. Mr. Dutt received a B.S. in
Chemical Engineering and an M.B.A. from the University of Illinois.
Marc T. Giles became director of the Company in October 1998 concurrent with
FMC's investment in the Company's Preferred Stock. Mr. Giles has been General
Manager of FMC Corporation's FoodTech Food Systems and Handling Division of FMC
FoodTech since January 1997. Mr. Giles joined FMC in January 1988 as director of
marketing and sales for SeparaSystems, FMC's joint venture with DuPont. From
March 1992 to May 1994, he was with FMC's Citrus Systems as marketing manager.
From 1994, Mr. Giles had been director of business development for FMC FoodTech
until named General Manager. Before joining FMC, Mr. Giles was with Norton
Company in a variety of sales and marketing positions. Mr. Giles earned a
Bachelor of Arts degree in economics from Union College in New York.
Since 1978, Robert Loeffler has been a Director, Chairman of the Audit Committee
and member of the Executive Committee and Compensation Committee at PaineWebber
Group, Inc. From 1987 to 1991, Mr. Loeffler was attorney of counsel to Wyman,
Bautzer, Kuchel & Silbert in Los Angeles, California. Prior to that, he spent
ten years as Partner and Managing Partner at Jones, Day, Reavis & Pogue in Los
Angeles prior to his retirement from the firm. From 1965 to 1973, Mr. Loeffler
served in a variety of positions at the asset management company, Investors
Diversified Services, Inc. (IDS), including Chief Legal Officer. Mr. Loeffler
received an LL.B., magna cum laude from Harvard Law School. He is admitted to
the state bars of New York, California, Minnesota and Oklahoma.
Jack Nelson, Esq. has served as the Chairman of the Board, Chief Executive
Officer and Treasurer of Caprius, Inc. (or its predecessor companies), a public
company, since June 1991, and was Vice Chairman from 1990 until June 1991.
Caprius is a designer and manufacturer of breast imaging equipment used to
detect breast cancer. From January 1986 to December 1993, Mr. Nelson was an
attorney at the firm of Zaslowsky, Marx & Nelson.
Compensation of Directors
The Company currently compensates directors who are not also officers or
employees of the Company ("outside" directors) for attending Board meetings and
committee meetings in the form of stock options. Generally, outside directors
will be granted options to purchase 100,000 shares of Class A Common Stock at
the closing price determined on the date such person becomes a director of AMV.
The options vest 25% upon becoming a director, with the remaining 75% vesting
25% per year over the next three years, subject to service as a director.
Members of the Stock Option, Audit, and Compensation Committees receive $400 per
meeting not held in conjunction with a regularly scheduled board meeting.
William J. Young, James Ewan and Rodger Van Voorhis receive no compensation as
directors. All directors are reimbursed for expenses incurred in attending board
and committee meetings.
Executive Compensation
The following table sets forth the compensation for the Chief Executive Officer
("CEO") and each executive officer who received over $100,000 in cash
compensation for the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation ------------------------------
--------------------------------- Restricted Stock
Name and Principal Positions Year Salary Bonus Other Options-# Awards-#(2)(3)
- ---------------------------- ---- ------ ----- ----- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Young 1998 $ 257,000 $ -- $ -- -- --
President & Chief Executive 1997 250,000 75,000 -- -- 107,500
Officer 1996 235,000 40,000 30,000 (1) -- --
James Ewan 1998 $ 241,000 $ -- $ 32,500 (4) -- --
President of SRC VISION, Inc. 1997 225,000 75,000 23,500 (4) -- 69,500
1996 200,000 40,000 30,000 (1) -- --
Alan R. Steel 1998 $ 147,000 $ -- $ -- -- --
Vice President, Finance and 1997 143,000 35,000 -- -- 55,500
Chief Financial Officer 1996 135,000 20,000 15,000 (1) -- --
(1) Amounts represent sign-on bonuses.
(2) Restricted stock awards are comprised of the following:
</TABLE>
<TABLE>
<CAPTION>
Mr. Young Dr. Ewan Mr. Steel
---------- --------- -----------
<S> <C> <C> <C>
Shares granted January 1997 952,000 572,000 476,000
Shares donated back to the Company in 1997 (857,000) (515,000) (428,000)
---------- --------- ----------
Remaining from January 1997 grant 95,000 (a) 57,000 (a) 48,000 (a)
Restricted bonus shares 12,500 (b) 12,500 (b) 7,500 (b)
---------- --------- ----------
Net restricted shares 107,500 69,500 55,500
========== ========= ==========
(a) These restricted shares cannot be traded or transferred unless (i) the
executive remains in the employ of the Company until January 10, 2000,
and (ii) a payment of $1.80 per share is made by the employee to the
Company. If either of these conditions is not met, the shares of stock
will be forfeited and returned to the Company. On December 31, 1998,
there was no value to the named executives for the restricted shares
since the market value per share was less than the $1.80 required
payment.
(b) These restricted shares were granted in addition to each executive's
cash bonus for 1997. The shares became unrestricted on January 1, 1999.
The value (as determined by independent valuation) of the restricted
shares on the date of issuance (January 1, 1998) was $13,375, $13,375
and $8,025 for Messrs. Young, Ewan and Steel, respectively.
(3) The restricted shares have the same voting and dividend rights as all other
Class A Common Stock.
(4) In 1996, the Company authorized a 7.5%, $100,000 loan to Dr. Ewan, which
loan was funded in 1997. The loan is secured by real property. The loan,
including interest thereon, is due on February 20, 2002. However, if Dr.
Ewan ceases to be an employee of the Company, its parent, its subsidiary or
an affiliated entity before February 20, 2002, Dr. Ewan shall pay to the
Company, on his termination date, in full payment of the Note and accrued
interest thereon, an amount equal to (i) the unpaid principal balance
("Principal"), less (ii) the Principal multiplied by a fraction, the
numerator of which shall be the number of days from February 20, 1997 that
Dr. Ewan was an employee, and the denominator of which is 1,825 (five years
times 365 days). All Principal and accrued interest will be forgiven on
February 20, 2002 if Dr. Ewan is an employee on that date. The amount shown
represents the amount of Principal and interest forgiveness attributable to
1998 and 1997.
</TABLE>
Employment Agreements
Effective January 1, 1998, Messrs. Young, Ewan and Steel entered into individual
two-year employment agreements providing for annual salaries of $262,500,
$250,000 and $150,150, respectively. The agreements shall be automatically
renewed for one additional year for each year subsequent to 1999 unless the
Executive or the Company gives notice to the other, in writing, at least 30 days
prior to the expiration of 1998 or, thereafter, 13 months prior to the
expiration of the agreements, of its or his desire to terminate the agreements
or modify their terms. Except for salary and defined duties (see the above
table), the terms of each Executive's separate employment agreement with the
Company are the same. Each employment agreement provides that if the Executive
is terminated by the Company at any time other than for cause, he is entitled to
severance equal to 2.99 times base salary (excluding bonuses). Additionally, the
Company provides each Executive with the use of a car.
Limitation of Liability and Indemnification Matters
The Company's Restated Articles of Incorporation limit the liability of its
directors. As permitted by amendments to the California General Corporation Law
enacted in 1987, directors will not be liable to AMV for monetary damages
arising from a breach of their fiduciary duty as directors in certain
circumstances. Such limitation does not affect liability for any breach of a
director's duty to AMV or its stockholders (i) with respect to approval by the
director of any transaction from which he derives an improper personal benefit,
(ii) with respect to acts or omissions involving an absence of good faith, that
he believes to be contrary to the best interest of AMV or its stockholders, that
involve intentional misconduct or a knowing and culpable violation of law, that
constitute an unexcused pattern or inattention that amounts to an abdication of
his duty to AMV or its stockholders, or that show a reckless disregard for his
duty to AMV or its stockholders in circumstances in which he was, or should have
been aware, in the ordinary course of performing his duties, of a risk of
serious injury to AMV or its stockholders, or (iii) based on transactions
between AMV and its directors or another corporation with interrelated directors
or on improper distributions, loans or guarantees under applicable sections of
the California General Corporation Law. Such limitation of liability also does
not affect the availability of equitable remedies such as injunctive relief or
rescission. AMV has been informed that in the opinion of the Securities and
Exchange Commission, indemnification provisions, such as those contained in
AMV's Restated Articles of Incorporation, are unenforceable with respect to
claims arising under federal securities laws and, therefore, do not eliminate
monetary liability of directors.
AMV's Amended and Restated Bylaws provide that AMV shall indemnify its directors
and officers to the full extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law, and AMV has entered into indemnity agreements with its directors
and officers providing such indemnity.
Stock Options
There were no AMV stock options granted to the named executive officers in 1998;
nor were any options exercised by such executives. The following table sets
forth information concerning options held by each of the named executive
officers, and the value of options held at December 31, 1998:
Number of Shares
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options at
December 31, 1998 December 31, 1998 (1)
------------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- ------------------------- -------------------------
William J. Young 500,000/0 $95,000/$0
James Ewan 300,000/0 $57,000/$0
Alan R. Steel 250,000/0 $47,500/$0
(1) Amounts are shown as the difference between exercise price and fair market
value (based on a December 31, 1998 closing price of $1.19 per share).
1991, 1994 and 1997 Stock Option Plans
The Company has adopted three stock option plans, the 1991 Stock Option Plan
(the "1991 Plan"), the 1994 Stock Option Plan (the "1994 Plan") and the 1997
Nonqualified Stock Option Plan (the "1997 Plan" adopted by the Company's Board
of Directors on September 23, 1997) (collectively the "Plans"), covering
1,000,000, 2,000,000 and 500,000 shares, respectively, of Class A Common Stock,
pursuant to which officers, non-employee directors and employees of the Company,
as well as other persons who render services to or are otherwise associated with
the Company, are eligible to receive incentive and/or nonqualified stock
options.
The terms of the Plans are substantially the same, except that incentive stock
options are not permitted under the 1997 Plan. The 1991 Plan expires in December
2001. The 1994 Plan expires in November 2004. The 1997 Plan expires in September
2007. The Plans are administered by the Stock Option Committee of the Board of
Directors, currently consisting of Jack Nelson and Robert M. Loeffler. The
selection of participants, allotments of shares, determination of price and
other conditions of purchase of options will be determined by the Board or the
Stock Option Committee at its sole discretion in order to attract and retain
persons instrumental to the success of the Company. Incentive stock options
granted under the 1991 and 1994 Plans are exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the
fair market value of the Class A Common Stock on the date of the grant, except
that the term of an incentive stock option granted under the Plans to a
shareholder owning more than 10% of the voting power of the Company on the date
of grant may not exceed five years and its exercise price may not be less than
110% of the fair market value of the Class A Common Stock on the date of the
grant. Non-qualified options granted under the Plans may be granted at less than
the fair market value of the Class A Common Stock on the date of grant.
As of December 31, 1998, options to purchase 429,000 shares of Common Stock were
available for future grant under the Plans.
SRC Stock Option Plan
During the year ended December 31, 1997, the Board of Directors approved the
adoption of the SRC VISION, Inc. 1997 Stock Option Plan (the "SRC Plan")
covering 396,000 shares of SRC's common stock, pursuant to which officers,
directors, employees and other persons providing significant services to SRC are
eligible to receive incentive and/or non-qualified stock options. The SRC Plan,
which expires in August 2007, is administered by the Stock Option Committee of
SRC's Board of Directors. The selection of participants, allotments of shares,
determination of price and other conditions of purchase of options will be
determined by SRC's Board or the Stock Option Committee at its sole discretion
in order to attract and retain persons instrumental to the success of SRC.
Incentive stock options granted under the SRC Plan are exercisable for a period
of up to ten years from the date of grant at an exercise price which is not less
than the fair market value of SRC's common stock on the date of the grant,
except that the term of an incentive stock option granted under the SRC Plan to
a shareholder owning more than 10% of the voting power of SRC on the date of
grant may not exceed five years and its exercise price may not be less than 110%
of the fair market value of the SRC common stock on the date of the grant.
Non-qualified options granted under the SRC Plan may be granted at less than the
fair market value of the SRC common Stock on the date of grant.
The SRC Plan was established in contemplation of a possible future initial
public offering ("IPO") of SRC common stock to raise long-term growth capital
for SRC. While the Company has no current specific plans to effect such an
offering, the Company's Board of Directors determined that it would be in the
best interest of AMV, as the only stockholder of SRC, to "incentivize" key
directors and employees of SRC prior to an IPO in order to retain the services
of such individuals.
The following table sets forth information with respect to SRC options granted
to the named AMV executive officers during the year ended December 31, 1997. No
SRC options were granted during 1998.
<TABLE>
<CAPTION>
Exercise
Name and Number of Price
Relationship to SRC Options Granted ($/Share)(1) Expiration Vesting
- ------------------------------ --------------- ------------ ---------- --------------------
<S> <C> <C> <C> <C>
William J. Young, 42,660 $ 1.86 01/09/07 100% on 01/10/06 (2)
Chairman of the Board
James Ewan, President 152,300 $ 1.86 01/09/07 100% on 01/10/06 (2)
and Chief Executive Officer
and Director
Alan R. Steel, Chief Financial 25,005 $ 1.86 01/09/07 100% on 01/10/06 (2)
Officer and Director
(1) The exercise price represents fair market value on the grant date as determined by independent valuation.
(2) Upon completion of an IPO, vesting will accelerate to 100% on the third anniversary date of the IPO.
</TABLE>
As of December 31, 1998, options to purchase 79,000 shares of SRC common stock
are available for future grant under the SRC Plan.
1997 Restricted Stock Plan
In January 1997, the Board of Directors adopted the 1997 Restricted Stock Plan
to compensate for past performance, and to retain the services of, selected
officers and directors of the Company and its subsidiaries. A maximum of
2,000,000 shares of Class A Common Stock may be issued under the 1997 Restricted
Stock Plan, which is administered by the Board of Directors. Subject to the
provisions of the 1997 Restricted Stock Plan, the Board may interpret the
provisions of, and adopt amendments to, the plan. Stock awards under the 1997
Restricted Stock Plan are subject to terms and conditions as determined by the
Board. As of December 31, 1998, 200,000 shares of restricted stock were
outstanding pursuant to the 1997 Restricted Stock Plan.
On February 9, 1999, 350,000 restricted shares of Class A Common Stock were
issued from the 1997 Restricted Stock Plan to Veneer Technology, Inc., a company
owned equally by the four former owners of Ventek, including Mr. Van Voorhis,
all of whom are currently key employees of Ventek. The shares cannot be
transferred or traded unless a payment of $1.25 per share is made to AMV after
February 1, 2000 but before January 31, 2001. If payment is not made by January
31, 2001, the shares will be forfeited and returned to the Company.
1998 Senior Management and Director Stock Purchase Plan
On December 22, 1998, the Board of Directors approved the adoption of the 1998
Senior Management and Director Stock Purchase Plan (the "1998 Plan") to advanced
the interests of the Company by providing stock ownership opportunities for
senior management. The 1998 Plan provided that the Company would loan up to an
aggregate of $100,000 to Messrs. Young, Ewan, Van Voorhis and Steel to purchase
Common Stock on the open market. The 1998 Plan provided that purchases must be
made by March 22, 1999 (the period from December 22, 1998 to March 22, 1999
being the "Plan Period") and that any amounts advanced under the 1998 Plan would
be secured by stock purchased from loan proceeds. During the Plan Period, Mr.
Young borrowed $25,000 to purchase 22,222 shares of Common Stock. The 1998 Plan
terminated on March 22, 1999.
Shareholder Rights Plan
In February 1998, the Company implemented a stock rights program. The Rights
Plan is designed to protect the Company's shareholders against abusive takeover
tactics and to ensure that each shareholder is treated fairly in any transaction
involving an acquisition of control of the Company, such as partial or
two-tiered tender offers that do not treat all shareholders fairly and equally.
The Rights do not affect any takeover proposal, which the Board believes is in
the best interests of the Company's shareholders. The overriding objective of
the Board in adopting the Rights Plan is to preserve and maximize the Company's
value for all shareholders.
Pursuant to the program, stockholders of record on February 27, 1998 received a
dividend of one right to purchase for $15.00 one one-hundredth of a share of a
newly created Series A Junior Participating Preferred Stock. The Rights are
attached to AMV's Class A and Class B Common Stock ("Common Stock") and will
also become attached to shares issued in the future. The Rights will not be
traded separately until the occurrence of a triggering event, defined as an
accumulation by a single person or group of 20% or more of AMV's Common Stock.
The Rights will expire on February 26, 2008 and are redeemable at $.0001 per
Right.
After a triggering event, the Rights will detach from the Common Stock. If AMV
is then merged into, or is acquired by, another corporation, the Company has the
opportunity to either (i) redeem the Rights for a nominal price, or (ii) permit
the Rights holder to receive in the merger stock of AMV or the acquiring company
equal to two times the exercise price of the Right (i.e., $30). In the latter
instance, the Rights attached to AMV Common Stock owned by the acquirer will
become null and void. The effect of the Rights program is to make a potential
acquisition of the Company more expensive for the acquirer if, in the opinion of
AMV's Board of Directors, the offer is inadequate.
In December 1998, the Rights Plan was amended to permit FMC to acquire up to
1,600,000 shares on the open market without causing a triggering event.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1998, the Company had a Compensation
Committee of the Board of Directors (the "Committee") consisting of directors
Jack Nelson and Robert M. Loeffler. The compensation of the executive officers
of the Company, including those of the executive officers named in the Executive
Compensation table above, is determined by the Committee.
The Company's executive compensation programs are designed to:
* provide competitive levels of base compensation in order to attract,
retain and motivate high quality employees;
* tie individual total compensation to individual performance and the
success of the Company; and
* align the interests of the Company's executive officers with those of its
stockholders.
In the last several years, the Company has been transformed from a single
business entity founded in 1987 to a holding company with two operating
subsidiaries. Past and current compensation programs reflect the change in
business organization. In view of the relatively brief evolution of the
executive management team, the Company's executive compensation program has a
limited history, with focus being upon base salary and stock-based compensation,
such as grants of stock options and restricted stock.
Base Compensation
In determining base compensation for the Company's executive officers, the
Committee assesses the relative contribution of each executive officer to the
Company, the background and skills of each individual and the particular
opportunities and problems which the individual confronts in his position with
the Company. These factors are then assessed in the context of competitive
market factors, including competitive opportunities with other companies. The
Committee may also supplement base compensation through discretionary bonuses
and/or grants of stock-based compensation in the course of its ongoing
assessments of the performance of the Company's executive officers. In making
its assessments of the Company's executive officers, other than Mr. Young, the
Committee gives significant consideration to the views of Mr. Young including
with respect to awards of stock options.
Stock Options
The Committee believes that the Company, its shareholders and its executive
officers and other employees are well served by stock-based compensation.
Accordingly, the Committee views options granted under the 1991 and the 1994
Plans, the SRC Plan and the restricted stock grants under the 1997 Restricted
Stock Plan and for bonus purposes, as important to an effective executive
compensation policy. The same rationale is also applicable to the Company's
outside directors, pursuant to which awards are granted to new directors meeting
specified criteria.
Chairman of the Board, President and Chief Executive Officer
In determining the compensation of the Chairman of the Board, President and
Chief Executive Officer, the Committee focused upon the programs described
above.
Mr. Young, the Company's Chairman, President and Chief Executive Officer, was
hired in February 1994. Mr. Young receives a base salary and has been
granted stock options and restricted stock. The Committee believes that
stock-based compensation granted to Mr. Young closely aligns his interests with
those of the Company's stockholders.
The Committee believes that the factors described in this report are significant
for determining the Company's performance, and consequently, compensation of
officers; but stockholders should be aware that these are not the only factors
which influence Company stock value or overall performance, and that the same
factor may not be the most significant in any succeeding period. Also, the
achievement of targeted objectives by the Company in any period may not be
solely indicative of the Company's future performance.
Compensation Committee
Robert M. Loeffler
Jack Nelson
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1998, AMV's Board of Directors had a
Compensation Committee consisting of two directors--Jack Nelson and Robert M.
Loeffler. There are no interlocks between the Company and other entities
involving the Company's executive officers and board members who serve as
executive officers or board members of other entities.
COMPARATIVE STOCK PERFORMANCE
The chart below sets forth a line graph comparing the performance of the
Company's Class A Common Stock against the Nasdaq Stock Market - US Index and a
peer group index (Nasdaq Non-Financial Stock Index) for the five years ended
December 31, 1998. During the period prior to December 31, 1993, the Company was
primarily engaged in the design, manufacture, and marketing of laser diode
devices. The Company purchased SRC and Ventek, Inc., manufacturers of vision
systems used in defect identification and machine sorting and defect removal
equipment, in 1994 and 1996. As most of the Company's competitors in this
business are privately held, a directly comparable peer group index is not
available. Therefore, the Nasdaq Non-Financial Stock Index was selected as the
peer group index.
The indices assume that the value of the investment in Advanced Machine Vision
Corporation Class A Common Stock and each index was $100 on December 31, 1993,
and that dividends, if any, were reinvested. The performance graph is provided
as required under federal proxy rules.
{GRAPHIC OMITTED}
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Advanced Machine
Vision Corporation $ 100.00 $ 15.30 $ 36.80 $ 31.00 $ 38.50 $ 21.80
Nasdaq Stock Market-
US Index 100.00 97.80 138.30 170.00 208.60 293.20
Nasdaq Non-Financial
Stocks 100.00 96.20 134.00 162.80 191.00 279.80
</TABLE>
CERTAIN TRANSACTIONS
Concurrent with the Company's July 1996 acquisition of the assets, operations
and name of Ventek, Inc. (the remaining business being renamed Veneer
Technology, Inc. ("Veneer")), Rodger A. Van Voorhis was appointed a director of
the Company. Mr. Van Voorhis remains a stockholder of Veneer, a private company
engaged in real estate and other business.
In connection with the acquisition, AMV issued the following notes due July 23,
1999 to Veneer: (i) a 6.75% $1,000,000 note; (ii) a 6.75% $2,250,000 note
convertible into the Company's Class A Common Stock at $2.25 per share; and
(iii) a note and stock appreciation rights payable (a) by issuance of up to
1,800,000 shares of Class A Common Stock or at the Company's option, in cash, or
(b) solely in cash in the event AMV Common Stock is delisted from the Nasdaq
Stock Market. The $2,250,000 note also contains a provision giving Veneer the
right to sell back to AMV up to 1,000,000 shares of AMV Class A Common Stock
received upon conversion for consideration consisting of SRC common stock owned
by AMV, but only if an IPO of SRC common stock is completed before the maturity
date of the note. The number of shares of SRC common stock to be paid shall be
determined by dividing the total market value (as defined) of the shares of AMV
Class A Common Stock to be sold by 70% of the IPO price of SRC's common stock.
The Company also issued a warrant to purchase 1,000,000 shares (subsequently
reduced to 250,000 shares) of Class A Common Stock at $2.25 per share which is
fully vested.
In February 1999, the Ventek notes were restructured. $750,000 of the $1,000,000
note was prepaid, and the maturity date of the remaining $250,000 was extended
to July 23, 2000. The maturity date of the $2,250,000 note was extended to July
23, 2000. The $1,125,000 note was paid in full by delivery of 1,800,000
restricted shares, and the stock appreciation rights were canceled. In addition,
the remaining 250,000 Class I Warrants were canceled.
In September 1998, Ventek entered into a one-year lease for 8,000 square feet of
manufacturing and office space. The lessor is TEV, LLC ("TEV"), which is 50%
owned by Whamdyne LLC ("Whamdyne"). Mr. Van Voorhis is a 25% owner of Whamdyne.
During 1998, Ventek paid $8,640 of rent to TEV ($2,880 per month).
In October 1998, the Company sold 119,106 shares of Series B Preferred Stock to
FMC for $2,620,000. The preferred stock is convertible into 1,191,000 shares of
Class A Common Stock, which, if converted, represented a 10% ownership position
based on the number of common shares outstanding on the transaction date. Each
share of preferred stock is allowed ten votes in matters placed before the
common shareholders except in the election of directors, in which case FMC has
the right to elect one director. The preferred stock pays no dividends. The
preferred stock has a $22-per-share liquidation preference. FMC also has a
five-year option to purchase a number of shares of common stock equal to 15% of
the shares outstanding on the exercise date at a price equal to the greater of
the then-current market value of the AMV common stock or $2.20 per share. If FMC
exercises its 15% option, it will be entitled to elect one additional director.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Class A Common Stock as of March 10, 1999, by (i) each person who
is known by AMV to own beneficially more than 5% of outstanding Class A Common
Stock; (ii) each of AMV's directors and named executive officers; and (iii) all
executive officers and directors of AMV as a group:
<TABLE>
<CAPTION>
Shares Acquirable Pursuant to: (2)
----------------------------------
Shares Owned Conversion Approximate
---------------------------- of Debt or Percent of
Name and Address Unrestricted Restricted (1) Options Preferred Stock Total Ownership
- ------------------------ ------------ -------------- --------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
FMC Corporation -- -- 1,598,282 1,191,060 2,789,342 26.0%
200 East Randolph Drive
Chicago, IL 60601 (5)
Wellington Management 1,025,000 -- -- -- 1,025,000 9.6%
Company, LLP
75 State Street
Boston, MA 02109 (3)
Ashford Capital
Management, Inc. (6) 735,000 -- -- -- 735,000 6.9%
P. O. Box 4172
Wilmington, DE 19807
William J. Young 277,378 117,222 500,000 -- 894,600 6.7%
3709 Citation Way #102
Medford, OR 97504
Rodger A. Van Voorhis 74,000 2,150,000 -- 333,333 2,557,333 19.4%
4217 W Fifth Avenue
Eugene, OR 97402 (4)
Dr. James Ewan 18,700 57,000 300,000 -- 375,700 2.9%
2067 Commerce Drive
Medford, OR 97504
Alan R. Steel 31,500 48,000 250,000 -- 310,500 2.5%
3709 Citation Way #102
Medford, OR 97504
Jack Nelson, Esq. -- -- 100,000 -- 100,000 *
2 Executive Drive #755
Fort Lee, NJ 07024-3308
Vikram Dutt -- -- 75,000 -- 75,000 *
309 W Washington St. #1250
Chicago, IL 60606
Robert M. Loeffler -- -- 75,000 -- 75,000 *
10701 Wilshire Blvd. #1401
Los Angeles, CA 90024
Haig S. Bagerdjian -- -- 75,000 -- 75,000 *
6464 Canoga Avenue
Woodland Hills, CA 91367
All executive officers and 4,482,133 30.6%
directors as a group
(ten persons)
* Less than 1%.
(1) Reference is made to Note 2 of the Executive Compensation table in this Proxy Statement for a description of restrictions.
(2) Represents shares acquirable as of December 31, 1998 and 60 days thereafter.
(3) Pursuant to Schedule 13G, filed with the Securities and Exchange Commission on January 24, 1999.
(4) 25,000 of the unrestricted shares are owned by Whamdyne. 2,150,000 restricted shares are owned by Veneer. The shares
acquirable upon conversion relate to convertible debt issued to Veneer. Mr. Van Voorhis is a 25% owner of both Whamdyne LLC
and Veneer Technology, Inc. and is, therefore, deemed to be a beneficial owner of such shares. See also "Certain
Transactions."
(5) Pursuant to Schedule 13G, filed with the Securities and Exchange Commission on October 22, 1998.
(6) Pursuant to Schedule 13G, filed with the Securities and Exchange Commission on February 9, 1999.
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Under the federal securities laws, the Company's directors, executive officers,
and any person holding beneficially more than 10% of the Company's common stock
are required to report their ownership of the Company's securities and any
changes in that ownership to the Securities and Exchange Commission. Specific
due dates for these reports have been established, and the Company is required
to report in this Proxy Statement any failures to file by these dates during the
last fiscal year. The Company knows of no instances of persons who have failed
to file or have delinquently filed Section 16(a) reports within the most
recently completed fiscal year.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP has examined, as independent auditors, the financial
statements of the Company for the year ended December 31, 1998. The Board of
Directors has selected PricewaterhouseCoopers LLP as the independent auditors
for the current year.
STOCKHOLDER PROPOSALS AT THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
The next Annual Meeting of stockholders is expected to be held by June 15, 2000.
Stockholders of the Company who intend to submit proposals to the Company's
stockholders at the next annual meeting of stockholders must submit such
proposals to the Company no later than January 15, 2000, in order to be included
in the proxy materials. Stockholder proposals should be submitted to the
Corporate Secretary, Advanced Machine Vision Corporation, 3709 Citation Way
#102, Medford, Oregon 97504.
OTHER MATTERS
If any matters not referred to in this proxy statement should properly come
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment. The management is not
aware of any such matters that may be presented for action at the meeting.
Matters incident to the conduct of the meeting may be voted upon pursuant to the
proxies.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge a copy of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, as filed with the Securities and
Exchange Commission, to any stockholder desiring a copy.
Stockholders may write to the Company at:
Advanced Machine Vision Corporation
Attn: Corporate Secretary
3709 Citation Way #102
Medford, Oregon 97504
By Order of the Board of Directors,
/s/ Alan R. Steel
-----------------------------------
Alan R. Steel
Vice President, Finance and
Chief Financial Officer
April 2, 1999
