<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MICROTOUCH SYSTEMS, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MICROTOUCH SYSTEMS, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[LOGO OF MICROTOUCH APPEARS HERE]
Dear Fellow Shareholder:
You are cordially invited to attend the MicroTouch Annual Meeting of
Shareholders to be held at 10:00 a.m. on Thursday, June 12, 1997 at Palmer &
Dodge LLP, One Beacon Street, 23rd floor, Boston, Massachusetts.
You will be asked at the meeting to elect two directors, to amend the 1992
Equity Incentive Plan, and to ratify the selection of Arthur Andersen LLP as
MicroTouch's independent auditors for 1997.
As set forth in the accompanying Proxy Statement, which you are urged to read,
your Board of Directors recommends that you vote "FOR" the proposals.
At the meeting management will be available for a discussion period to answer
your questions, and we welcome your comments. Representatives from Arthur
Andersen will also be available to answer questions.
The Board of Directors appreciates and encourages shareholder participation in
MicroTouch's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Accordingly, we request that you
sign, date and mail the enclosed proxy in the envelope provided at your earliest
convenience.
Thank you for your cooperation.
Very truly yours,
/s/ D. Westervelt Davis
D. Westervelt Davis
President, Chief Executive Officer and
Director
<PAGE>
[LOGO OF MICROTOUCH APPEARS HERE]
NOTICE OF April 22, 1997
ANNUAL MEETING
OF SHAREHOLDERS To the Shareholders:
The Annual Meeting of Shareholders of MicroTouch Systems,
Inc. will be held on June 12, 1997 at the offices of Palmer
& Dodge LLP, One Beacon Street, 23rd Floor, Boston
Massachusetts, at 10:00 a.m., for the following purposes:
(1) To elect two Class II directors.
(2) To amend the 1992 Equity Incentive Plan.
(3) To approve Arthur Andersen LLP as independent auditors
of the Corporation for fiscal 1997.
(4) To transact such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on April
14, 1997 are entitled to vote at the meeting.
/s/ Diane Burak
Diane Burak
Clerk
<PAGE>
MicroTouch Systems, Inc.
300 Griffin Park
Methuen, Massachusetts 01844
Telephone (508) 659-9000
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 12, 1997.
The accompanying proxy is solicited by the Board of Directors, and all the
expenses of the solicitation will be borne by the Corporation. No costs of
solicitation have been incurred to date. The solicitation will be by mail, and
may also be made personally and by telephone by a presently indeterminable
number of officers and employees of the Corporation or by an independent
organization on behalf of the Corporation.
The annual report was sent with this proxy statement and accompanying proxy on
or about April 22, 1997.
VOTING
The Corporation has only one class of shares outstanding. The Board of Directors
has fixed the close of business on April 14, 1997 as the record date for
determination of shareholders entitled to notice of and to vote at the Annual
Meeting of Shareholders on June 12, 1997 (the "Annual Meeting"). As of March 21,
1997 there were outstanding 7,851,116 shares of common stock of $0.01 par value
per share (the "Common Stock"), each such share being entitled to one vote. At
any time prior to the meeting, a shareholder may revoke his or her proxy by
filing a proxy bearing a later date. If a shareholder attends the meeting, such
shareholder may revoke his or her proxy at that time and vote in person. Proxies
will be voted as directed by the shareholder. Unless otherwise directed, proxies
will be voted for the election of the nominees for director listed below, for
the amendment of the 1992 Equity Incentive Plan and for the approval of Arthur
Andersen LLP ("Arthur Andersen") as the independent auditors of the Corporation.
A majority in interest of all stock issued, outstanding and entitled to vote at
the meeting, represented at the meeting, in person or by proxy, constitutes a
quorum for the transaction of business. Signed but unmarked proxies will be
counted as favorable votes; pursuant to Massachusetts law, broker non-votes will
be counted as shares present for the purpose of determining the presence of a
quorum but will not be counted as votes properly cast and will not affect the
outcome of the voting. The favorable vote of a plurality of the shares
represented at the meeting is required for the election of the directors and the
appointment of Arthur Andersen. The favorable vote of a majority of the shares
represented at the meeting is required for the amendment of the 1992 Equity
Incentive Plan. Pursuant to the Corporation's By-Laws, no business may be
transacted at the meeting other than the business specified in the notice of the
meeting and business properly brought before the meeting at the direction of the
Board of Directors, the Chairman of the Board or the President.
1
<PAGE>
NOMINATION AND ELECTION OF DIRECTORS
The Corporation's Board of Directors is divided into three classes. The Board is
comprised of two Class I directors, two Class II directors and one Class III
director. At each Annual Meeting of Shareholders, a class of directors is
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. The terms of the current Class II directors, Class III
director and Class I directors, respectively, will expire upon the election and
qualification of directors at the Annual Meeting of Shareholders held in 1997,
1998 and 1999.
Pursuant to the provisions of the By-Laws of the Corporation, two Class II
directors are to be elected at the Annual Meeting. The nominees for the Board of
Directors are Edward J. Stewart III and Ronald Fisher. The persons elected as
directors to a specific class will serve until the expiration of such directors'
three-year terms, and in each case until the particular director's successor has
been elected and qualified. The board recommends a vote FOR the nominees.
Messrs. Stewart and Fisher are currently serving as Directors of the
Corporation. If for any reason any nominee should not be a candidate for
election at the time of the Annual Meeting, the proxies may be voted, in the
discretion of those named as proxies, for a substitute nominee.
Following are summaries of the background and business experience and
descriptions of the principal occupations of the Directors and the nominees for
election to the Board of Directors.
James D. Logan Age: 44
- -------------------
Mr. Logan founded MicroTouch in 1983. He has served as Chairman of the Board
(Class III) since April 1992. In April 1996, he stepped down as President and
Chief Executive Officer, roles he had held since 1983 and 1992, respectively, to
pursue other business interests. He continues to serve as Chairman of the Board.
Prior to founding the Corporation, he was employed by Chemical Banking
Corporation from 1979 to 1981. Mr. Logan received an M.B.A. from the Amos Tuck
School of Business Administration at Dartmouth College, where he was an Edward
Tuck Scholar, and a B.A. from Hamilton College.
D. Westervelt Davis Age: 49
- ------------------------
Since April 1996, Mr. Davis has served as President and Chief Executive Officer
of the Corporation and has been a director of the Corporation (Class I) since
1991. Previously, Mr. Davis was the President of Lasertron, a Division of Oak
Industries, a manufacturer of semiconductor components for fiber optic
communications, from November 1994 to March 1996. From April 1992 to November
1994 Mr. Davis was a principal with Rand Griffin, a strategy consulting firm.
From April 1989 to April 1992 Mr. Davis was President and Chief Executive
Officer of Autographix, a privately held software developer and system
integrator for the presentation graphics market. On November 3, 1993 Autographix
filed a petition of bankruptcy. From January 1984 to September 1988 he was
President of General Scanning, at the time a privately held manufacturer of
laser scanners and oscillographic recorders. Mr. Davis received an M.B.A. from
the Harvard Graduate School of Business Administration and a B.S.E. from
Princeton University.
2
<PAGE>
Ronald Fisher Age: 49 (Nominee for re-election as a Class II Director)
- -------------------
Mr. Fisher has been a director of the Corporation since 1991. Mr. Fisher has
been Vice Chairman of SOFTBANK Holdings, Inc., a global technology
infrastructure provider, since October 1995. Mr. Fisher was President, Chief
Executive Officer and a member of the Board of Directors of Phoenix
Technologies, Ltd., a developer and marketer of system software products for
personal computers and printers, from January 1990 to February 1996; and he
continues to serve as Chairman of Phoenix Technologies, Ltd. From 1984 to 1990
he was the Chief Operating Officer and then President and Chief Executive
Officer of Interactive Systems Corp., a software corporation. Mr. Fisher is also
a director of the following publicly held companies; Black Box Company, Xionics
Document Technologies and Segue Software. Mr. Fisher received an M.B.A. from
Columbia University and a Bachelor of Commerce from the University of
Witwatersrand, South Africa.
Edward J. Stewart, III Age: 51 (Nominee for re-election as a Class II Director)
- ----------------------------
Mr. Stewart has been a director of the Corporation since 1983. Mr. Stewart has
been General Partner of Kestrel Venture Management, a venture capital firm, and
its predecessor, and a series of affiliated venture capital partnerships since
September 1983. Mr. Stewart is a director of nine privately held companies. Mr.
Stewart received an M.B.A. from the Harvard Graduate School of Business
Administration and a B.S. from Yale University.
Frank Manning Age: 48
- -------------------
Mr. Manning has been a director of the Corporation (Class I) since 1993. He is
President, Chief Executive Officer and Chairman of the Board of Zoom
Telephonics, Inc., a publicly held manufacturer of computer modems and other
data communication products which he co-founded in 1977. Mr. Manning received
his B.S., M.S., and Ph.D. in Electrical Engineering from the Massachusetts
Institute of Technology, where he was a National Science Foundation fellow.
Six meetings of the Board of Directors were held during 1996. The Board has two
committees: Compensation, which met once during 1996; and Audit, which met two
times during 1996. The Corporation does not have a nominating committee. Each
incumbent director had an attendance record of 100% at meetings, including
meetings of committees on which he served, except for Messrs. Fisher and
Manning, who each missed one meeting.
The Audit Committee, currently consisting of Messrs. Stewart and Manning,
nominates the Corporation's independent auditing firm, reviews the scope of the
audit, and approves in advance reviews by the independent auditors, their
activities and recommendations regarding internal control, and meets with the
independent auditors and management, both of which had direct and open access to
the Audit Committee. The Compensation Committee, which consists of Messrs.
Fisher and Stewart, determines the compensation of officers other than employee
directors (as to whom the Committee makes recommendations to the Board of
Directors which then determines their compensation). See "Compensation Committee
Report to Shareholders" below.
Directors receive a fee of $750 for each board or Committee meeting attended.
Additionally, upon election to the Board of Directors, each new non-employee
director shall receive options to purchase 10,000 shares of Common Stock.
Immediately following the Annual Shareholders' Meeting each year, each
non-employee director shall automatically receive options to purchase
3
<PAGE>
an additional 5,000 shares of Common Stock. The options have a term of 10 years
and are priced at the last sale price of the Corporation's Common Stock for the
day previous to the date of the grant.
SECURITY OWNERSHIP
No person or group, to the knowledge of the Corporation, owns as much as five
percent of the Common Stock, except as set forth below.
The following table sets forth information as of March 21, 1997 with respect to
the amount of Common Stock held by each director, nominee for director,
executive officer, holder of 5% or more of the Corporation's Common Stock and
all directors and executive officers as a group (in each case, the beneficial
owner of the shares shown has sole voting and sole investment power):
4
<PAGE>
<TABLE>
<CAPTION>
Common Shares Beneficially Held
-------------------------------
Common Shares Percentage
------------- ----------
Name Owned Owned
- ---- ----- -----
<S> <C> <C>
James D. Logan (1) 465,098 5.9%
c/o MicroTouch Systems, Inc.
300 Griffin Park
Methuen, MA 01844
Nicholas-Applegate Capital Management 389,100 5.0%
600 W. Broadway, 29th Fl.
San Diego, CA 92101
Geoffrey P. Clear (2) 59,550 0.8%
D. Westervelt Davis (3) 72,000 0.9%
Ronald D. Fisher (4) 20,833 0.3%
Bernard O. Geaghan (5) 55,443 0.7%
Frank Manning (6) 15,000 0.2%
Joel M. Blenner (7) 11,250 0.1%
Robert J. Senior (8) 26,320 0.3%
Edward J. Stewart, III (9) 16,833 0.2%
Thomas Ermolovich (10) 6,147 0.1%
Directors and Executive Officers as a group 748,474 9.2%
(10 individuals)
</TABLE>
(1) Consists of 425,098 shares owned directly by Mr. Logan and options to
acquire 40,000 shares which vest prior to 6/20/97.
(2) Consists of 550 shares owned directly by Mr. Clear and options to acquire
59,000 shares which vest prior to 6/20/97.
(3) Consists of 7,000 shares owned directly by Mr. Davis and options to acquire
65,000 shares which vest prior to 6/20/97.
(4) Consists of options to acquire 20,833 shares which vest prior to 6/20/97.
(5) Consists of 45,943 shares owned directly by Mr. Geaghan, 6,500 shares
beneficially under his control, and options to acquire 3,000 shares which
vest prior to 6/20/97.
(6) Consists of options to acquire 15,000 shares which vest prior to 6/20/97.
(7) Consists of options to acquire 11,250 shares which vest prior to 6/20/97.
(8) Consists of 3,320 shares owned directly by Mr. Senior and options to
acquire 23,000 shares which vest prior to 6/20/97.
(9) Consists of 16,000 shares owned directly by Mr. Stewart and options to
acquire 833 shares which vest prior to 6/20/97. Mr. Stewart disclaims
beneficial ownership of an additional 5,000 shares owned by family members
and partnerships with which he is associated.
(10) Consists of options to acquire 6,147 shares which vest prior to 6/20/97.
5
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
The executive compensation program is administered by the Compensation Committee
of the Board of Directors (the "Committee") which is composed of the individuals
listed below, who are outside, non-employee directors of the Corporation with
responsibility for all compensation matters for the Corporation's senior
management other than employee directors, as to whom the Committee makes
recommendations to the Board of Directors which then determines their
compensation.
The program has been designed to enable the Corporation to attract, motivate and
retain senior management by providing a competitive total compensation package
based on performance. It provides for competitive base salaries, which reflect
individual performance; annual variable performance incentive opportunities,
which are payable in cash for the achievement of performance goals established
by the Committee; and long-term, stock-based incentive opportunities, which
strengthen the mutuality of interests between senior management and the
Corporation's shareholders. The annual performance incentive opportunities and
long-term incentive opportunities established by the Committee are intended to
be competitive with competitor incentive compensation opportunities based on
surveys conducted by independent compensation consulting firms.
In designing and administering the individual elements of the executive
compensation program, the Committee strives to balance short and long-term
incentive objectives and to employ prudent judgment in establishing performance
criteria, evaluating performance and determining actual incentive payments.
Following is a discussion of each of the elements of the executive compensation
program, along with a description of the decisions and actions taken by the
Committee with regard to 1996 compensation and specific discussion of the
decisions regarding the Chief Executive Officer's ("CEO") compensation.
Annual Compensation
Annual total cash compensation for senior management consists of base salary and
the annual variable performance incentive earned under the Key Executive Bonus
Plan. Total annual cash compensation varies each year, based on achievement of
Corporation performance goals established by the Committee under the annual
incentive plan and changes in base salary.
Payment of the annual variable performance incentive award for 1996 for the
current CEO and the other named executives was based on achievement of various
goals, both financial and strategic. For 1996 the Committee determined that
bonus awards would be calculated as percentages of base salary, and based upon
the achievement of an operating income target. To the extent that this target
was exceeded, bonus awards increased commensurately. Having determined that
management exceeded its operating income target, the Committee then set the
bonus payment accordingly. The bonuses awarded are listed in the tabular
disclosure which follows.
6
<PAGE>
Long-Term Compensation
The long-term incentive program for senior management consists of awards granted
under the 1992 Equity Incentive Plan (the "Plan"), which is administered by the
Compensation Committee. The Plan provides for awards of stock options, stock
appreciation rights, restricted stock and performance shares. To date only stock
options have been granted under the Plan. During 1996, in recognition of the
completed objective noted above, the following stock option grants were awarded
to the four most highly compensated officers of the Corporation, other than the
CEO: 1) to Joel M. Blenner, Vice President - Sales, 45,000 shares; 2) to Thomas
Ermolovich, Vice President-Engineering, 20,000 shares; 3) to Geoffrey P. Clear,
Vice President-Finance & Administration, 4,000 shares; and 4) to Robert J.
Senior, Vice President and General Manager- European Operations, 4,000 shares
Chief Executive Officer's Compensation
Mr. Davis assumed the office of Chief Executive Officer in April 1996. His base
salary was determined by considering Mr. Davis' years of corporate experience
and his salary at his previous employer, as well as comparing salaries of
executives of similar companies, based on the Company's internal benchmarking
survey activities. Mr. Davis also participates in the Key Executive Bonus Plan,
as discussed above in the section entitled "Annual Compensation". Mr. Davis was
also awarded an option grant of 200,000 shares of stock at an exercise price of
$15.00. The option vests in equal annual installments over a four-year period
commencing on the first anniversary of the date of the grant. This grant was
designed to ensure an ongoing mutuality of interest between the Company and Mr.
Davis.
The tables which follow, and accompanying narrative and footnotes, reflect the
decisions covered by the above discussion.
By the Compensation Committee,
Ronald Fisher
Edward J. Stewart III
7
<PAGE>
The following table shows, for the fiscal years indicated, the annual
compensation paid by the Corporation, together with long-term and other
compensation, for the current Chief Executive Officer, the previous Chief
Executive Officer, and the next four most highly compensated executive officers
(the "Named Officers") of the Corporation.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------- Awards Payouts
------ -------
Securities
Underlying LTIP
Year Salary Bonus (1) Options Payouts
---- ------ --------- ------- -------
<S> <C> <C> <C> <C> <C>
James D. Logan 1996 $125,000 -0- -0- -0-
President, Chief Executive Officer 1995 $125,000 $42,500 -0- -0-
and Chairman of the Board of 1994 $125,607 $85,000 -0- -0-
Directors (2)
D. Westervelt Davis 1996 $142,308 $85,125 200,000 -0-
President, Chief Executive Officer
and Director (3)
Geoffrey P. Clear 1996 $129,508 $47,775 4,000 -0-
Vice President - Finance & 1995 $120,000 $30,000 9,000 -0-
Administration, Chief Financial 1994 $120,000 $60,000 6,000 $89,250
Officer and Treasurer
Robert J. Senior 1996 $129,049 $48,507 4,000 -0-
Vice President & General Manager 1995 $141,724 $15,680 3,000 -0-
- European Operations (4) 1994 $116,308 $70,000 9,000 -0-
Thomas Ermolovich 1996 $134,754 $49,980 20,000 -0-
Vice President - Engineering (5) 1995 $124,754 $30,000 20,000 -0-
Joel M. Blenner 1996 $115,385 $55,925 45,000 -0-
Vice President -Sales (6)
- -----------------------
</TABLE>
(1) Reflects amounts awarded for performance in the respective fiscal year,
even though the compensation may not have actually been paid until a later
date.
(2) Mr. Logan stepped down as President and Chief Executive Officer in April
1996. He continues to serve as Chairman of the Board.
(3) Mr. Davis became President and Chief Executive Officer in April 1996. He
continues to serve as a Director (Class I) of the Corporation.
(4) Mr. Senior was promoted to the position of Vice President - Sales in March
1993. He became Vice President and General Manager - European Operations
in January 1995.
(5 Mr. Ermolovich became Vice President - Engineering in May 1995.
(6 Mr. Blenner became Vice President - Sales in March 1996.
8
<PAGE>
EXECUTIVE OFFICERS
The current executive officers of the Corporation who are not also directors are
listed below. Each such person's term of office extends until the meeting of the
Board of Directors following the Annual Shareholders' Meeting and until his
successor is elected and qualified.
Mr. Clear (Age: 47) has been Vice President - Finance & Administration, Chief
Financial Officer and Treasurer of the Company since February 1992. He was Vice
President - Finance and Administration at T Cell Sciences, Inc., a biotechnology
company, from April 1986 until February 1992. Previously he served as Division
Controller for the Organic Chemicals Division of W.R. Grace & Co., a
manufacturer of specialty chemicals, from March 1982 to April 1986. Mr. Clear is
a Certified Public Accountant and a member of the Financial Executives
Institute. Mr. Clear received an M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College, where he was an Edward Tuck Scholar, and a
B.A. from Dartmouth College.
Mr. Senior (Age: 40) has been Vice President and General Manager - European
Operations since January 1995. Before that, he was Vice President - Sales from
March 1993 until December 1994. He was General Manager of the Company's U.K.
subsidiary from January 1991 until March 1993. Previously, he served as National
Sales Manager (U.K.) for Poqet Computer, a U.S. manufacturer of hand-held
personal computers and as Business Development Manager for NCR Ltd., the U.K.
subsidiary of the U.S. - based computer equipment manufacturer. Mr. Senior
received a B. Ed. in Physics from Exeter University.
Mr. Ermolovich (Age: 47) has been Vice President - Engineering since May 1995.
From February 1994 until May 1995 he served as Vice President - Engineering at
Concord Communications, a privately held software developer. Previously, he was
employed as a group engineering manager at Digital Equipment Corporation. Mr.
Ermolovich holds a BS degree from Northeastern University and an MBA from
Bentley College.
Mr. Blenner (Age: 53) has been Vice President - Sales since March 1996.
Previously he was Senior Vice President - Sales for Digital Products
Corporation, a privately held manufacturer of print servers. Prior to that, he
was Vice President - Sales at Network Communications Corporation, a privately
held manufacturer of network management equipment and Vice President - Sales at
Corporate Software, Inc., a public company selling software and providing
related services. Mr. Blenner holds a BA degree in Psychology from Southern
Connecticut State University.
9
<PAGE>
Employment Agreements
- ---------------------
The Corporation has entered into a letter agreement dated May 1, 1995 with Mr.
Ermolovich relating to his employment with the Corporation (the "Ermololvich
Employment Agreement"). The Ermolovich Employment Agreement provides for a base
salary of $130,000 in the first year and entitled Mr. Ermolovich to earn a bonus
of between $20,000 and $50,000, based on the achievenent of certain financial
objectives in the first year. The Corporation also granted Mr. Ermolovich an
incentive stock option to purchase up to 20,000 shares of Common Stock at an
exercise price of $16.89 per share. The option vest in equal annual
installments over a four-year period.
The Corporation has entered into a letter agreement dated February 15, 1996 with
Mr. Davis relating to his employment with the Corporation (the "Davis Employment
Agreement"). The Davis Employment Agreement provides for a base salary of
$200,000 in the first year and also entitles Mr. Davis to earn an annual bonus
of up to 50% of his base salary, based on the achievement of certain financial
objectives, with a guaranteed minimum bonus of $35,000 in 1996. The Corporation
also granted Mr. Davis an incentive stock option to purchase an aggregate of up
to 200,000 shares of Common Stock at an exercise price of $15.00. The option
vests in equal annual installments over a four-year period.
The Corporation has entered into a letter agreement dated March 5, 1996 with Mr.
Blenner relating to his employment with the Corporation (the "Blenner Employment
Agreement"). The Blenner Employment Agreement provides for a base salary of
$150,000 in the first year and also entitles Mr. Blenner to earn an annual bonus
of up to 40% of his base salary, based on the achievement of certain financial
objectives, with a guaranteed minimum bonus of $30,000 in 1996. The Corporation
also granted Mr. Blenner an incentive stock option to purchase an aggregate of
up to 45,000 shares of Common Stock at an exercise price of $14.50. The option
vests in equal annual installments over a four-year period.
10
<PAGE>
The following table contains information concerning the grant of stock options
to Named Officers during the last fiscal year.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
----------------------------------------------------------------------------------------------------
Number of Percentage of
Securities Total Options
Underlying Granted to Market Price as
Options Employees in Exercise of Expiration Grant Date
Name Granted (1) 1996 Price Grant Date Date Present Value (2)
- ---- ----------- ---- ----- ---------- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
James D. Logan -0- -0- N.A. N.A. N.A. N.A.
D. Westervelt Davis 200,000 41.5% $15.00 $15.00 4/1/06 $1,417,000
Geoffrey P. Clear 4,000 0.8% $14.56 $14.56 9/5/06 $28,000
Joel M. Blenner 45,000 9.3% $14.50 $14.50 3/11/06 $308,000
Thomas Ermolovich 20,000 4.2% $13.56 $13.56 8/19/06 $127,000
Robert J. Senior 4,000 0.8% $14.56 $14.56 9/5/06 $28,000
</TABLE>
(1) Options granted become exercisable in equal annual installments over
4 years.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
stock options. The actual value, if any, that an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised and there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on arbitrary
assumptions as to variables such as interest rates (a weighted average of
6.4%) and stock price volatility (.63). Amounts indicated are not intended
to be a forecast of possible future appreciation, if any, in the price of
the Corporation's Common Stock.
11
<PAGE>
The following table sets forth information with respect to the Named Officers
concerning option exercises during the last fiscal year and unexercised options
held as of the end of the last fiscal year.
<TABLE>
<CAPTION>
Aggregated Option Exercises and Fiscal Year-End Values
------------------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Value Options Held at In-the Money Options at
on Exercise Realized December 31, 1996 December 31, 1996 (1)
----------- -------- -------------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James D. Logan -0- -0- 120,000 80,000 $2,130,000 $1,420,000
D. Westervelt Davis -0- -0- 10,000 212,500 $200,000 $1,979,000
Geoffrey P. Clear -0- -0- 56,000 19,000 $1,246,000 $209,000
Joel M. Blenner -0- -0- 0 45,000 $0 $428,000
Thomas Ermolovich -0- -0- 6,147 33,853 $48,000 $303,000
Robert J. Senior -0- -0- 17,000 19,000 $304,000 $273,000
</TABLE>
(1) Based on the closing price of the Corporation's Common Stock as reported on
the Nasdaq Stock Market as of 12/31/96 ($24.00). Dollar values rounded to
the nearest thousand.
12
<PAGE>
Comparative Stock Performance
The comparative stock performance graph below compares the cumulative
shareholder return on the Common Stock of the Corporation for the period from
June 30, 1992 through the fiscal year ended December 31, 1996 with the
cumulative total return on (i) the NASDAQ Market Value Index for the NASDAQ
Stock Market (the "NASDAQ Market Index"), and (ii) a group consisting of
publicly-traded U.S. companies in the Corporation's industry (based on a
Standard Industrial Classification Code) (the "Peer Group Index") for the same
period, assuming the investment of $100 in the Corporation's Common Stock, the
NASDAQ Market Index and the Peer Group Index on June 30, 1992 and reinvestment
of all dividends. Measurement points are on June 30, 1992 and the last trading
day of the Corporation's fiscal years ended December 31, 1992, 1993, 1994, 1995
and 1996. Prior to June 30, 1992 the Corporation's Common Stock was not
registered under the Securities Exchange Act of 1934, as amended. The
Corporation's Common Stock began trading publicly on June 30, 1992, and the
graph reflects returns only subsequent to that date. On November 1, 1994 the
Corporation's stock was split two-for-one.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MICROTOUCH SYSTEMS, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MICROTOUCH SYSTEMS SIS CODE INDEX NASDAQ MARKET INDEX
<S> <C> <C> <C>
6/92 100 100 100
12/92 91.8 155.87 109.37
12/93 90.16 199.08 131.19
12/94 590.16 229.12 137.74
12/95 159.02 365.74 178.66
12/96 314.75 457.76 220.01
</TABLE>
ASSUMES $100 INVESTED ON JUNE 30, 1992
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
13
<PAGE>
AMENDMENT TO THE 1992 EQUITY INCENTIVE PLAN
General
The Company's 1992 Equity Incentive Plan (the "Equity Plan") was adopted by the
Board of Directors and approved by the stockholders of the Company in April
1992. The purpose of the Equity Plan is to attract and retain key employees and
consultants of the Company and its affiliates. The Equity Plan provides for the
grant of stock options (incentive and nonstatutory), stock appreciation rights,
performance shares and restricted stock (the "Awards") to employees and
consultants of the Company and its affiliates ("Eligible Persons").
Currently Awards may be made under the Equity Plan for up to a total of
2,000,000 shares of Common Stock, subject to adjustment for stock splits and
similar capital changes.
As of March 20, 1997 210 employees were eligible to participate in the Equity
Plan, and options to purchase an aggregate of 2,385,000 shares of Common Stock
had been granted. Of these, options to purchase 731,000 shares had been
canceled, 714,000 had been exercised, and options to purchase 940,000 shares
remained outstanding, leaving only 346,000 shares available for new Awards under
the Equity Plan. No stock appreciation rights, performance shares, restricted
stock or other stock-based awards have been granted under the Equity Plan. The
closing price of the Company's Common Stock on March 20, 1997, as reported by
the Nasdaq Stock Market, was $23.00 per share.
Administration and Eligibility
Awards are made by the Compensation Committee, which has been designated by the
Board of Directors to administer the Equity Plan. The Compensation Committee may
delegate to one or more officers the power to make awards under the Equity Plan
to persons other than officers of the Company who are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act").
Awards under the Equity Plan are granted at the discretion of the Compensation
Committee, which determines the recipients and establishes the terms and
conditions of each award, including the exercise price, the form of payments of
the exercise price, the number of shares subject to options or other equity
rights and the time at which such options become exercisable. However, the
exercise price of any incentive stock option granted under the Equity Plan may
not be less than the fair market value of the Common Stock on the date of grant
and the exercise price of any nonstatutory stock option may not be less than 50%
of the fair market value of the Common Stock on the date of grant.
Proposed Amendment to the 1992 Equity Incentive Plan
The Board of Directors has voted, subject to approval of the stockholders, to
increase the number of shares of Common Stock that may be subject to Awards
under the Equity Plan by 375,000 (the "Additional Shares") to an aggregate of
2,375,000, subject to adjustment for stock splits and
14
<PAGE>
similar capital changes. This proposed amendment is intended to ensure that a
sufficient number of shares of Common Stock are available to be issued to
Eligible Persons.
Federal Income Tax Consequences Relating to Stock Options
Incentive Stock Options. An optionee does not realize taxable income upon the
- -----------------------
grant or exercise of an incentive stock option ("ISO") under the Equity Plan.
If no disposition of shares issued to an optionee pursuant to the exercise of an
ISO is made by the optionee within two years from the date of grant or within
one year from the date of exercise, then (a) upon sale of such shares, any
amount realized in excess of the option price (the amount paid for the shares)
is taxed to the optionee as long-term capital gain and any loss sustained will
be a long-term capital loss and (b) no deduction is allowed to the Company for
Federal income tax purposes. The exercise of ISOs gives rise to an adjustment in
computing alternative minimum taxable income that may result in alternative
minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an ISO are disposed of
prior to the expiration of the two-year and one-year holding periods described
above (a "disqualifying disposition") then (a) the optionee realizes ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of such shares) over the option price thereof and (b) the
Company is entitled to deduct such amount. Any further gain realized is taxed as
a short-term or long-term capital gain and does not result in any deduction to
the Company. A disqualifying disposition in the year of exercise will generally
avoid the alternative minimum tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the time a
- --------------------------
nonstatutory option is granted. Upon exercise, (a) ordinary income is realized
by the optionee in the amount equal to the difference between the option price
and the fair market value of the shares on the date of exercise and (b) the
Company receives a tax deduction for the same amount. Upon disposition of the
shares, appreciation or depreciation after the date of exercise is granted as a
short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
Vote Required
The affirmative vote by the holders of a majority of the securities present or
represented, and entitled to vote at the meeting is required to approve the
amendment to the Equity Plan. Broker non-votes will not be counted as present or
represented for this purpose. Abstentions will be counted as present and
entitled to vote and, accordingly, will have the effect of a negative vote.
The Board of Directors recommends a vote FOR approving the amendment to the
Equity Plan.
15
<PAGE>
APPROVAL OF INDEPENDENT AUDITORS
Subject to the approval of the shareholders at the Annual Shareholders' Meeting,
the Board of Directors of the Corporation, on recommendation of the Audit
Committee, has appointed the firm of Arthur Andersen LLP, certified public
accountants, as the independent auditors to audit the financial statements of
the Corporation for the current fiscal year. The Board may appoint a new
accounting firm at any time if it believes that such a change would be in the
best interests of the Corporation and its shareholders.
Arthur Andersen has been the Corporation's auditors for the last six years.
Representatives of Arthur Andersen will be present at the Annual Meeting with
the opportunity to respond to appropriate questions and to make a statement if
they desire to do so.
The Board of Directors recommends a vote FOR approving Arthur Andersen as
independent auditors of the Corporation for the year 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation's executive officers and directors are required, under Section
16(a) of the Securities Exchange Act of 1934, to file reports of ownership and
changes in ownership of securities of the Corporation with the Securities and
Exchange Commission. Copies of those reports must also be furnished to the
Corporation.
Based solely on a review of (i) Forms 3 and 4, and amendments thereto, furnished
to the Corporation during 1996, (ii) Forms 5 relating to the fiscal year ended
December 31, 1996, and amendments thereto, furnished to the Corporation, and
(iii) written representations that no Form 5 was required, the Corporation
believes that during 1996 the executive officers and directors of the
Corporation complied with all applicable Section 16(a) filing requirements,
except that Mr. Logan did not file nine reports with respect to thirteen
transactions on a timely basis.
OTHER MATTERS
Management does not know of any matters to be presented at the meeting other
than the matters described in this Proxy Statement. If, however, other business
is properly presented to the meeting, the proxy holders named in the
accompanying form of Proxy will vote the Proxy in accordance with their best
judgment. Shareholder proposals intended to be presented to the Corporation's
1998 Annual Meeting must be received by the Corporation not later than December
23, 1997 for inclusion in the Corporation's Proxy Statement and form of Proxy
relating to such meeting.
For the Board of Directors
D. Westervelt Davis
16
<PAGE>
IMPORTANT Whether you own one share or many, you are urged to sign and return
promptly the enclosed proxy in the postage paid envelope provided.
17
<PAGE>
MICROTOUCH SYSTEMS, INC.
(THE "CORPORATION")
The undersigned, revoking previous proxies relating to the shares
P subject hereto, hereby acknowledges receipt of the Notice and Proxy
Statement dated April 22, 1997 in connection with the Corporation's Annual
R Meeting of Shareholders to be held at 10:00 a.m. on June 12, 1997 at Palmer
& Dodge LLP, One Beacon Street, 23rd Floor, Boston, Massachusetts and
O hereby appoints Geoffrey P. Clear and James G. Topetzes, and each of them
(with full power to act alone), the attorneys and proxies of the
X undersigned, with power of substitution to each, to vote all shares of the
Common Stock of the Corporation which the undersigned is entitled to vote
Y at said Annual Meeting of Shareholders, and at any adjournment thereof,
with all the powers the undersigned would have if personally present.
Without limiting the general authorization hereby given, said proxies are,
and each of them is, instructed to vote or act as follows on the proposals
set forth in said Proxy Statement. In their discretion, the proxies are
authorized to vote upon such other matters as may properly come before said
Annual Meeting. Signed but unmarked proxies will be voted in favor of each
proposal.
Election of two Directors (or, if the nominees are not available for
election, such substitutes as the Board of Directors may designate).
Nominees:
Edward J. Stewart, III
Ronald Fisher
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
MICROTOUCH SYSTEMS, INC.
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of Shareholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
COMPANY HIGHLIGHTS DURING 1996
. MicroTouch introduced Ibid, a PC-based electronic whiteboard product in 1996.
. MicroTouch reported $95 million in revenues, representing the 13th year of
consecutive annual increases.
. MicroTouch reported $5.7 million in earnings, a new record.
[X] Please mark
votes as in
this example
This Proxy, when executed, will be voted in the manner directed herein. If
no direction is made, this Proxy will be voted FOR the election of Directors
and FOR Proposals 2 and 3.
The Board of Directors recommends a vote FOR Proposals, 1,2 and 3.
1. Election of Directors
(see reverse)
FOR WITHHELD
[_] [_]
[_]______________________________________
For all nominees except as noted above
2. Amendment of the 1992 Equity Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Selection of Independent Auditors
(Arthur Andersen LLP)
FOR AGAINST ABSTAIN
[_] [_] [_]
MARK HERE FOR ADDRESS [_]
CHANGE AND NOTE AT LEFT
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such.
