<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2)).
[X] Definitive proxy statement
[ ] Soliciting material under Rule 14a-12.
</TABLE>
ROCKFORD CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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> 2
ROCKFORD CORPORATION
546 SOUTH ROCKFORD DRIVE
TEMPE, ARIZONA 85281
To the Holders of
Rockford Corporation Common Stock
Dear Shareholder:
You are cordially invited to attend Rockford's 2000 Annual Shareholders
Meeting. We will hold the meeting on Wednesday, September 6, 2000, at the Tempe
Mission Palms Hotel, 60 E. Fifth Street, Tempe, Arizona 85281. The meeting will
begin promptly at 10:00 a.m., Mountain Standard Time, and you should plan to
arrive at least 1/2 hour before it starts.
The formal notice of the meeting follows on the next page. No admission
tickets or other credentials are required.
We will have some of our directors and officers available before and after
the meeting to speak with you. During the meeting, we will answer your questions
about our business affairs and will consider the matters explained in the notice
and proxy statement that follow.
Please vote, sign and return the enclosed proxy as soon as possible,
whether or not you plan to attend the meeting. Your vote is important.
Sincerely,
/s/ W. Gary Suttle
--------------------------------------
W. Gary Suttle
President and Chief Executive Officer
<PAGE> 3
NOTICE OF 2000 ANNUAL SHAREHOLDERS MEETING
August 7, 2000
To the Holders of
Rockford Corporation Common Stock
We will hold our 2000 Annual Shareholders Meeting at the Tempe Mission
Palms Hotel, 60 E. Fifth Street, Tempe, Arizona 85281, on Wednesday, September
6, 2000 at 10:00 a.m., Mountain Standard Time. At the meeting we will:
1. Elect 6 Directors;
2. Ratify Ernst & Young LLP as our independent accounting firm for
2000; and
3. Consider any other matters that properly come before the meeting.
Only shareholders who owned our common stock of record at the opening of
business, 8:00 a.m., Eastern Daylight Time, on July 28, 2000 ("Shareholders")
are entitled to receive notice of and to vote at the meeting. We will have a
list of the Shareholders at the meeting and, for ten days before the meeting, at
our principal executive office, 546 South Rockford Drive, Tempe, Arizona 85281.
Any Shareholder may examine the list for any purpose germane to the meeting.
We have enclosed the 1999 annual report, including financial statements,
and the proxy statement with this notice of annual meeting.
The Board of Directors is soliciting your proxy and requests that you
please sign, date and mail the enclosed proxy card. We have enclosed a return
envelope for that purpose, which requires no postage if mailed in the United
States. We urge you to vote as soon as possible.
/s/ James M. Thomson
--------------------------------------
James M. Thomson
Vice President of Finance,
Chief Financial Officer and Secretary
------------------------
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
------------------------
<PAGE> 4
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 1
Required Vote To Approve Each Proposal...................... 2
Who To Call If You Have Questions........................... 2
Proposals and Board Recommendations......................... 2
Executive Officers And Board Of Directors................... 4
About The Board And Its Committees.......................... 6
Executive Compensation...................................... 8
Compensation Committee Report On Executive Compensation..... 10
Related Party Transactions.................................. 12
Principal Shareholders And Shareholding Of Officers and
Directors................................................. 14
Section 16(A) Beneficial Ownership Reporting................ 15
Stock Price Performance Graph............................... 15
Our Next Annual Meeting and Proposals By Stockholders....... 15
Annual Report............................................... 15
</TABLE>
i
<PAGE> 5
GENERAL INFORMATION
WHO MAY VOTE.................. You may vote if our records show that you held
shares of our common stock as of July 28, 2000.
At that date, 7,805,634 shares were outstanding
and entitled to vote. The enclosed Proxy Card
shows the number of shares you may vote.
NUMBER OF VOTES............... You have one vote for each share, except that
you may cumulate votes in the election of
directors. Your individual vote is confidential
and will not be disclosed to third parties.
Because you may cumulate votes in the election
of directors and we will elect 6 directors, you
have 6 votes for each share in our election of
directors. You may cast your votes for a single
candidate or you may divide them as you choose
among up to 6 candidates.
VOTING BY PROXY............... If you hold your shares in your own name, you
may vote by signing, dating and mailing the
Proxy Card in the envelope provided. If you
give us a proxy without giving specific voting
instructions, the Proxies will vote your shares
as the Board of Directors recommends. If the
meeting is adjourned, the Proxies will vote
your shares on the new meeting date unless you
revoke your proxy.
The Board of Directors is soliciting the
enclosed proxy. We anticipate first mailing
this Proxy Statement and the Proxy Card on
August 7, 2000.
If a broker, bank or other nominee holds your
shares (i.e., they are in "street name"), you
will receive instructions from them. You must
follow their instructions if you want to have
your shares voted.
OTHER MATTERS................. We are not aware of any matters that will be
presented at the Annual Meeting other than
those described in this Proxy Statement. If any
other matters are properly presented at the
meeting, the Proxies will vote your shares
using their own judgment.
VOTING IN PERSON.............. You may vote your shares at the meeting if you
attend in person.
REVOKING YOUR PROXY........... You may revoke your proxy if you:
1. Send us another signed proxy with a
later date and we receive it before the
Proxies vote your shares at the
meeting;
2. Send us a letter revoking your proxy
and we receive it before the Proxies
vote your shares at the meeting; or
3. Attend the meeting and vote your shares
in person.
HOW A QUORUM IS DETERMINED.... If you have returned a proxy or attend the
meeting in person, the inspectors of election
will count your shares to determine whether
there is a quorum even if you abstain from
voting. If a broker indicates on a proxy that
it does not have discretionary authority to
vote certain shares on a particular matter,
those shares will not be considered present or
entitled to vote on that matter.
COST OF THIS SOLICITATION..... We will pay the cost of this proxy
solicitation, including the charges of
brokerage firms and others who forward material
to
1
<PAGE> 6
beneficial owners of our shares. We will
solicit proxies by mail and may also solicit
them by personal interview, telephone, e-mail
or telegraph.
Corporate Investor Communications will serve as
our proxy solicitation agent, will coordinate
the distribution of proxy materials, and will
oversee the return of Proxy Cards. We estimate
the fee for these services will be $4,000.
ATTENDING THE MEETING IF YOUR
SHARES ARE IN "STREET NAME"... If your shares are held in street name you may
attend the meeting, but you must vote through
your broker or bank and cannot vote in person.
If you are a beneficial owner of shares held by
a broker or bank you will need proof of
ownership to attend the meeting. We will accept
a recent statement or letter from your broker
or bank, showing your ownership of our shares
on the record date, as proof of ownership.
REQUIRED VOTE TO APPROVE EACH PROPOSAL
ELECTION OF SIX DIRECTORS..... The six nominees for director who receive the
most votes will be elected.
Shareholders may cumulate votes in the election
of directors, so each shareholder has 6 votes
for each share in the directors election. You
may cast your 6 votes per share for a single
candidate or you may divide them as you choose
among up to 6 candidates.
RATIFICATION OF INDEPENDENT
PUBLIC ACCOUNTANTS............ The ratification of the independent auditors
requires approval of a majority of the shares
present. As a result, an abstention from voting
has the same effect as a no vote.
WHO TO CALL IF YOU HAVE QUESTIONS
INVESTOR RELATIONS
COORDINATOR................... If you have questions about the meeting or
voting please call Victoria Hodson, our
Investor Relations Coordinator, at (480)
517-3042.
PROPOSALS AND BOARD RECOMMENDATIONS
PROPOSAL TO ELECT SIX DIRECTORS
DIRECTORS TO BE ELECTED....... The shareholders will elect the entire Board of
Directors, a total of 6 Directors, at the
meeting.
CUMULATIVE VOTING ALLOWED..... Shareholders may cumulate votes in the election
of directors, so each shareholder has 6 votes
for each share. You may cast your 6 votes per
share for a single candidate or you may divide
them as you choose among up to 6 candidates.
VOTE REQUIRED................. The six nominees who receive the most votes
will be elected.
NOMINEES OF THE BOARD......... Our Board has nominated the following
individuals to serve on our Board of Directors:
<TABLE>
<S> <C> <C>
W. Gary Suttle Jerry E. Goldress
Nicholas G. Bartol Timothy C. Bartol
Ralph B. Godfrey John P. Lloyd
</TABLE>
2
<PAGE> 7
Each nominee is currently serving on the Board,
has agreed to be named in this Proxy Statement
and has agreed to serve if elected. See page 4
for information about each of the nominees.
Each Director elected will hold office until
the next annual meeting or until a successor is
elected and qualified. If a Director resigns or
otherwise is unable to complete his term of
office, the Board of Directors may elect
another Director for the remainder of the term.
We know of no reason why any of the listed
nominees will not be able to serve. If a
nominee is unavailable, the Proxies will vote
your shares for any substitute nominee proposed
by the Board of Directors.
RECOMMENDATION................ YOUR DIRECTORS RECOMMEND THAT YOU ELECT THE SIX
NOMINEES.
PROPOSAL TO RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
OUR INDEPENDENT PUBLIC
ACCOUNTANTS................... We used Ernst & Young LLP, independent public
accountants, as our principal independent
public accounting firm during our 1996, 1997,
1998, and 1999 fiscal years.
RECOMMENDATION................ YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
APPROVE ERNST & YOUNG LLP AS OUR PRINCIPAL
ACCOUNTING FIRM FOR THE 2000 FISCAL YEAR, WHICH
ENDS DECEMBER 31, 2000. THE PROXIES WILL VOTE
TO RATIFY ERNST & YOUNG LLP AS OUR INDEPENDENT
AUDITORS UNLESS YOU INSTRUCT OTHERWISE ON YOUR
PROXY CARD.
3
<PAGE> 8
EXECUTIVE OFFICERS AND BOARD OF DIRECTORS
Our Executive Officers and Board of Directors are listed in the following
table:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
W. Gary Suttle(1)......................... 60 President, Chief Executive 1992
Officer, Treasurer and Director
David A. Boshes........................... 46 Vice President of Operations
Daniel C. McLeod.......................... 46 Vice President of Sales
David L. Richards......................... 53 Vice President of Information
Technology
James C. Strickland....................... 62 Vice President of Engineering
James M. Thomson.......................... 53 Vice President of Finance, Chief
Financial Officer, and
Secretary
Alan R. Zimmerman......................... 44 Vice President of Product Design
and Development
Jerry E. Goldress(1)(2)(3)................ 69 Chairman of the Board 1998
Nicholas G. Bartol........................ 47 Director 1985
Timothy C. Bartol(1)(2)(3)................ 45 Director 1997
Ralph B. Godfrey(2)....................... 60 Director 1999
John P. Lloyd(3).......................... 48 Director 1988
</TABLE>
---------------
(1) Member of the executive committee.
(2) Member of the nominating and compensation committee.
(3) Member of the audit and finance committee.
W. GARY SUTTLE................ Mr. Suttle has served as our President and
Chief Executive Officer since August 1992. From
that time through December 31, 1998, he
simultaneously served as a partner in Grisanti,
Galef & Goldress, a turnaround, growth and
profit improvement firm and provided his
services to us through that firm under a
consulting agreement. From 1982 until 1992, Mr.
Suttle was a partner in Grisanti, Galef &
Goldress and was involved in consulting and
management for various manufacturing and retail
firms. From 1980 to 1982, Mr. Suttle was a
consultant with The Boston Consulting Group. He
also served as a captain in the U.S. Marine
Corps where he was involved in special
operations. Mr. Suttle holds a B.S. in
Electrical Engineering from Auburn University,
an M.S. in Electrical Engineering from the
Georgia Institute of Technology and an M.B.A.
from The Harvard Graduate School of Business
Administration.
DAVID A. BOSHES............... Mr. Boshes has served as our Vice President of
Operations since 1996 and has served us in
various positions since 1993, beginning as
Production Engineering Manager. From 1976 until
1993, Mr. Boshes held various technical
positions with Digital Equipment, ranging from
Product Test Engineer to Plant Engineering
Manager. Mr. Boshes holds a B.S. in Electrical
Engineering from Northern Arizona University.
DANIEL C. MCLEOD.............. Mr. McLeod has served as our Vice President of
Sales since 1991 and has served us in various
sales positions since 1985. From 1982
4
<PAGE> 9
to 1985, Mr. McLeod operated a manufacturers
representative firm selling consumer
electronics. From 1975 to 1982, Mr. McLeod was
a retail store manager for the
Minneapolis-based chain of Team Electronics.
DAVID L. RICHARDS............. Mr. Richards has served as our Vice President
of Information Technology since 1996 and, prior
to that, as Director of Information Technology
beginning in 1993. From 1976 until 1993, Mr.
Richards held a number of MIS management
positions for Digital Equipment with
responsibility for systems and programming
implementation. Mr. Richards also served in the
U.S. Army.
JAMES C. STRICKLAND........... Mr. Strickland has served as our Vice President
of Engineering since 1992 and has served us in
other engineering and research positions since
1987. Prior to joining us in 1987, he served in
various engineering capacities with Sony, MCI,
Acoustat and The David Hafler Company. Mr.
Strickland holds a B.S. in Mathematics from the
University of Miami (Florida). Mr. Strickland
holds seven U.S. patents, three of which have
been assigned to Rockford, involving circuitry
used in home and auto amplifiers.
JAMES M. THOMSON.............. Mr. Thomson has served as our Vice President of
Finance and Chief Financial Officer since
joining us in 1993. Prior to 1993, Mr. Thomson
held positions as Operations Finance Manager,
Corporate Controller of Corporate Planning and
Director of Finance and Customer Administration
for The Toro Company Worldwide Irrigation
Division. He was also a Senior Financial
Analyst for Litton Industries and operated his
own consulting company. Mr. Thomson also served
in the U.S. Navy. Mr. Thomson holds a B.S. and
M.S. in Applied Economics from the University
of Wisconsin -- Madison.
ALAN R. ZIMMERMAN............. Mr. Zimmerman has served as our Vice President
of Product Design and Development since 1998
and has served us in various positions since
1988. Mr. Zimmerman was with Honeywell from
1980 to 1988 where he held various positions in
cost and inventory accounting, manufacturing
financial analysis and business planning. Mr.
Zimmerman holds a B.S. in Accounting and an
M.B.A. from Arizona State University.
JERRY E. GOLDRESS............. Mr. Goldress has served as our Chairman of the
Board since 1998. Mr. Goldress served as an
advisory director to us from 1992 until 1998.
Since 1981, Mr. Goldress has served as Chairman
and Chief Executive Officer of Grisanti, Galef
& Goldress. Mr. Goldress is also a director of
Applied Magnetics, a publicly held supplier of
magnetic recording heads and head stack
assemblies for disc drives, and of K2, Inc., a
publicly held manufacturer of snow ski
equipment. Mr. Goldress has a B.S. and M.S. in
Industrial Engineering from Pennsylvania State
University.
NICHOLAS G. BARTOL............ Mr. Bartol has served as a director since 1985,
except for a two-year period from 1991 to 1993.
Mr. Bartol was employed by EFW, a defense
contractor, from 1985 until April 1999. Mr.
Bartol holds an A.B. from Brown University, an
M.B.A. from Southern Methodist University and a
Master of Theology from Dallas Theological
Seminary. Mr. Bartol is the brother of Timothy
C. Bartol.
5
<PAGE> 10
TIMOTHY C. BARTOL............. Mr. Bartol has served as a director since 1997
and served as our Chairman in 1997 and 1998.
Mr. Bartol has been employed since 1994 by
Phillips Publishing and is currently Director
of Information Technology for its Wealth
Division. From 1997 until February 2000, he
served as Director of Applications Development
for Phillips Publishing. Mr. Bartol holds a
B.A. from Stanford University, and an M.B.A.
and M.S./M.I.S. from Boston University. Mr.
Bartol is the brother of Nicholas G. Bartol.
RALPH B. GODFREY.............. Mr. Godfrey has served as a director since
April 1999. Mr. Godfrey has been employed since
1990 by 3Com, a publicly held manufacturer of
computer networking products. He has held
various sales positions including Senior Vice
President of Americas Sales. He is currently
managing 3Com's electronic business operations
as Senior Vice President of E-Business. Mr.
Godfrey holds a B.S.E.E. and an M.S. in
Electrical Engineering from Auburn University.
JOHN P. LLOYD................. Mr. Lloyd has served as a director since 1988.
Mr. Lloyd has worked since 1994 as a Managing
Director in the Investment Management Group of
Aetna. Mr. Lloyd is a Chartered Financial
Analyst and has a B.S. in Finance from
Villanova University and an M.B.A. in
Investments from Drexel University.
ABOUT THE BOARD AND ITS COMMITTEES
BOARD MEETINGS................ In 1999, our Board held a total of 6 meetings.
Each Director attended at least 75% of his
Board and committee meetings.
BOARD COMMITTEES.............. Executive Committee: The executive committee
meets periodically to advise upon and approve
our business and affairs that arise between the
regularly scheduled Board meetings. The current
members of the executive committee are Messrs.
Goldress (Chair), T. Bartol and Suttle.
Nominating and Compensation Committee: The
nominating and compensation committee
recommends officers and directors to the Board
of Directors and reviews and approves the
amount and type of compensation paid to senior
management. The nominating and compensation
committee met 3 times during 1999. The
nominating and compensation committee will
consider nominees recommended by our
shareholders. Shareholders who wish to make a
recommendation may send them to our Investor
Relations Coordinator, Victoria Hodson, at our
executive offices. We must receive nominations
no later than November 25, 1999, to consider
nominees for election at our annual meeting in
2001. The current members of the nominating and
compensation committee are Messrs. T. Bartol
(Chair), Godfrey and Goldress.
Audit and Finance Committee: The audit and
finance committee reviews our accounting
controls and recommends to the Board of
Directors the engagement of our outside
auditors. The Board of Directors has adopted a
written charter for the audit and finance
committee and a copy of that charter is
attached as Appendix A to this Proxy Statement.
The audit and finance committee met 4 times
during 1999. The members of our audit and
finance
6
<PAGE> 11
committee are independent as defined in Rule
4200(a)(15) of the NASD's listing standards.
The current members of the audit and finance
committee are Messrs. Lloyd (Chair), T. Bartol
and Goldress.
AUDIT AND FINANCE COMMITTEE
ACTIONS....................... The audit and finance committee has reviewed
our audited financial statements, discussed
them with management, and discussed with our
independent auditors the matters that SAS 61
requires it to discuss with the auditors. The
audit and finance committee has received the
written disclosures and letter from the
independent auditors required by Independence
Standards Board Standard No. 1 and has
discussed with the independent auditors their
independence. Based on these reviews and
discussions, the audit and finance committee
recommended to the Board of Directors the
inclusion of our financial statements for 1999
and prior years in our Registration Statement
on Form S-1 that was declared effective by the
SEC on April 19, 2000, and in the annual
report.
Audit and Finance Committee:
John P. Lloyd
Timothy C. Bartol
Jerry E. Goldress
DIRECTOR COMPENSATION......... We compensate our non-executive Directors by
paying them $1,000 per quarter. In addition to
compensation, we reimburse Directors for their
reasonable travel expenses incurred in
attending Board and committee meetings.
We have also customarily granted to our
non-executive Directors options under our 1994
and 1997 Stock Option Plans.
7
<PAGE> 12
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid the Chief Executive
Officer and each of our four other most highly compensated executive officers as
of the end of 1999.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- -------------------
SECURITY UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#)
--------------------------- ---- ------------ -------- -------------------
<S> <C> <C> <C> <C>
W. Gary Suttle............................ 1999 $386,154 $120,000(2) 86,000
President and Chief Executive Officer
David A. Boshes........................... 1999 148,551 26,000 --
Vice President of Operations
Daniel C. McLeod.......................... 1999 198,407 25,000 --
Vice President of Sales
David L. Richards......................... 1999 150,891 30,000 --
Vice President of Information Technology
James M. Thomson.......................... 1999 151,050 30,000 --
Vice President of Finance and Chief
Financial Officer
</TABLE>
---------------
(1) Amounts listed are annual base salaries, with the exception of Mr. McLeod,
who is paid commissions based on our sales. Mr. McLeod's commissions are
included in the salary column.
(2) This bonus was paid to Grisanti, Galef & Goldress, under a consulting
agreement with that firm. Mr. Suttle's services under the consulting
agreement ended and he became a Rockford employee on January 1, 1999.
STOCK OPTION GRANTS IN THE LAST FISCAL YEAR
The following table summarizes the stock options we granted to our officers
during 1999. We have never granted any stock appreciation rights.
The SEC requires that we use the assumed annual compounded rates of stock
price appreciation of 5% and 10% shown in this table. These rates are only an
illustration and are not based on our anticipated results. Our stock price may
increase or decrease based on market conditions, our performance and many other
factors. You should not rely on the amounts in this table as a projection of our
performance.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS EXERCISE PRICE APPRECIATION FOR
OPTION GRANTED TO OR BASE OPTION TERM
GRANTED EMPLOYEES IN PRICE (PER -----------------------
NAME (1)(#) FISCAL YEAR SHARE) EXPIRATION DATE 5% ($) 10% ($)
---- ------- ------------ ---------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
W. Gary Suttle.............. 86,000 100% $7.67 January 1, 2009 $415,000 $1,051,870
David A. Boshes............. -- -- -- -- -- --
Daniel C. McLeod............ -- -- -- -- -- --
David L. Richards........... -- -- -- -- -- --
James M. Thomson............ -- -- -- -- -- --
</TABLE>
---------------
(1) All options were granted under our 1997 Stock Option Plan. 25% of the Option
shares are exercisable on the day of the grant and 25% become exercisable on
each of the first three anniversaries of the grant date.
8
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
The following table lists the number of shares acquired and the value
realized as a result of option exercises during 1999 for the listed officers. It
also includes the number and value of their exercisable and non-exercisable
options at December 31, 1999. The table includes value for "in the money"
options, meaning a positive spread between the year-end share price of $7.67 and
the exercise price. These values have not been, and may never be, realized. The
options might never be exercised, and the value, if any, will depend on the
share price on the exercise date.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL YEAR IN-THE-MONEY OPTIONS/SARS
SHARES VALUE END(#) AT FISCAL YEAR END
ACQUIRED ON REALIZED ---------------------------- -----------------------------
NAME EXERCISE($) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISEABLE
---- ----------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
W. Gary Suttle....... -- -- 60,200 64,500 $202,500 $ --
David A. Boshes...... -- -- 73,100 12,900 372,788 31,574
Daniel C. McLeod..... -- -- 71,221 14,779 360,945 34,055
David L. Richards.... -- -- 70,950 15,050 338,288 39,074
James M. Thomson..... -- -- 72,025 13,975 365,538 31,824
</TABLE>
9
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OUR COMPENSATION PHILOSOPHY... We have historically established executive
compensation to provide a base salary that will
allow us to hire and retain qualified
management. We have also provided annual cash
incentive bonuses designed to reward all of our
employees including executives for their
contributions to our performance. We attempt to
focus our compensation on bonuses, rather than
base salary, so that we can tie our executives'
cash compensation to our performance.
From time to time we have also granted stock
options to executives and key employees that
were designed to keep them focused on
increasing shareholder value. Until completion
of our initial public offering, these options
were essentially illiquid and could play only a
limited role in our overall compensation
system.
We believe that our executive compensation
practices provide an overall level of
compensation that is competitive with companies
of similar size, complexity and financial
performance and that our executive compensation
practices have allowed us to create an
executive team that will be able to maintain
and increase our business. From time to time we
have reviewed employee compensation data
provided by compensation consulting firms and
have endeavored to maintain our salary and
bonus levels at or above the 75th percentile
for comparable positions at competitive
companies.
PROCEDURES.................... We determine the compensation of our President
and set policies for and review the
compensation of our other officers. This is
designed to ensure consistency in compensation
of our officers. In reviewing the individual
performance of our officers other than the
President, we take into account the views of
the President and, in 1999, established base
salary and bonus for officers other than the
President based largely on the President's
recommendations.
We review annually the annual and long-term
compensation of all our executives and
employees. Our goal is to assure that all of
our executives and employees are properly
motivated to serve the interests of our
shareholders.
BASE SALARY................... We set base salaries within the ranges of
salaries of executive officers with comparable
qualifications, experience and responsibilities
at other companies of similar size, complexity
and profitability. We take into account the
position involved, the executive's experience,
and our desire to emphasize bonus rather than
base salary in executive compensation. In
addition, we consider other factors, including
each officer's contribution to our business as
a whole. From 1998 to 1999, the base salary for
the named executive officers, other than the
President, increased on average approximately
$9,600, or 7%. We approved these increases to
keep our compensation competitive and to allow
for increases in the cost of living.
BONUS......................... Our practice is to award cash bonuses to all of
our employees in years when our performance is
good. In determining bonus awards, we consider
our financial and non-financial achievements,
including revenue growth, profitability,
expansion of our markets and new product
introductions. Bonuses to lower compensated
employees
10
<PAGE> 15
tend to be a smaller portion of compensation,
while bonuses to our most highly compensated
employees (including our executive officers)
tend to be a larger portion of compensation and
to vary more depending on our performance.
In 1999, we increased the cash bonuses of our
executive officers based on excellent overall
business and financial results in 1998 and
1999. We believe that bonuses tied to overall
performance are important incentives for our
employees and are necessary to keep total
compensation competitive. We expect to adjust
bonus compensation for our executive officers
(either upward or downward) to reflect our
financial and business results, the individual
performance of the executive and the job market
for key executives.
OPTIONS....................... Stock options are our primary long-term
incentive compensation. We have awarded stock
options to a broad range of our middle and
upper level managers, including the President
and other executive officers named in the
Summary Compensation Table. The size of awards
is based on position, responsibilities, and
individual performance. We believe that our
long-term incentives are generally consistent
with the incentives at comparable companies.
Until we completed our initial public offering,
our grants of stock options were illiquid and
were less valuable to our employees than grants
at publicly traded companies. Now that we have
completed our public offering, we believe that
stock options are likely to have a greater role
in our executive compensation structure and
will help us continue to focus our key
employees on our profitability and, thus, the
interests of our shareholders.
CHIEF EXECUTIVE OFFICER....... At the beginning of 1999 we entered into a new
employment agreement with our President and
Chief Executive Officer. In determining his
compensation, we considered his demonstrated
leadership, the excellent management team he
has developed since joining us in 1992, and our
performance during 1997 and 1998. Mr. Suttle's
base compensation (including compensation
through Grisanti, Galef & Goldress prior to
1999) had not increased since 1992 when he
joined us. Consequently, the Compensation
Committee decided that an increase was
appropriate to reflect our successful
turnaround and the increasing success or our
business since he joined us in 1992.
Accordingly, as of January 1, 1999, we approved
an increase in Mr. Suttle's salary to $400,000
annually from the former base of $360,000
annually and an award of 86,000 stock options
as of the same date.
We believe Mr. Suttle's interests are well
aligned with the interests of our shareholders
because of our basic compensation system and
also because of the 795,000 options awarded to
him when he joined us in 1992. Our largest
shareholder awarded these options directly from
that shareholder's shareholdings in order to
recruit Mr. Suttle to join us, as a turnaround
specialist, at a time in 1992 when we were in
very poor financial condition.
Compensation Committee:
Timothy C. Bartol
Ralph B. Godfrey
Jerry E. Goldress
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<PAGE> 16
RELATED-PARTY TRANSACTIONS
GRISANTI, GALEF & GOLDRESS CONSULTING AGREEMENT
We initially retained Grisanti, Galef & Goldress to provide Mr. Suttle's
consulting services to us under a February 1992 letter agreement. Effective on
August 1, 1992, we named Mr. Suttle our President and Chief Executive Officer
and entered into a consulting agreement with Grisanti, Galef & Goldress. Under
the consulting agreement, we retained Grisanti, Galef & Goldress to provide
services for three years beginning on August 1, 1992. We agreed to pay
consulting fees of $360,000 per year and bonus fees of up to $120,000 per year.
In addition, we granted Grisanti, Galef & Goldress an option to purchase up to
215,000 shares of our common stock at an exercise price of $5.35 per share. In
October 1994, we agreed to reduce the exercise price of the option to $1.51 per
share.
We renewed our agreement with Grisanti, Galef & Goldress effective as of
August 1, 1995, extending the term for five more years. We agreed to continue
paying consulting fees of $360,000 per year and bonus fees up to $120,000 per
year. We paid bonus fees of $120,000 for each of 1997 and 1998. We also agreed
in 1995 to extend the 215,000 share stock option so that it now expires on
August 1, 2002.
Effective January 1, 1999, the consulting agreement was amended to
discharge our remaining obligation to pay consulting fees or bonuses to
Grisanti, Galef & Goldress, in exchange for a grant to Mr. Goldress of options
to purchase 21,500 shares of our common stock under our 1997 Stock Option Plan.
Also on that date, Mr. Suttle became a Rockford employee under the terms of a
formal employment agreement. The consulting agreement as amended January 1,
1999, gives us the right, but not the obligation, to retain Grisanti, Galef &
Goldress to provide consulting services.
SUTTLE/BARTOL OPTION AGREEMENT
Mr. Suttle holds an option to purchase 795,500 shares of our common stock
from Monument Investors Limited Partnership, a family partnership controlled by
two of our directors, Messrs. N. and T. Bartol. This option was originally
granted to Mr. Suttle effective August 1, 1992, and fully vested on August 1,
1995, as consideration for his agreement to serve as director, Chief Executive
Officer and President of Rockford for a period of not less than three years. On
August 1, 1995, the agreement was amended to extend the term of the option from
August 1, 1999 to August 1, 2002 and to increase the exercise price of the
options during the extended period. The exercise price of Mr. Suttle's options
increase over time on the following schedule:
<TABLE>
<S> <C>
$0.37 per share On or before August 1, 1995
$0.41 per share After August 1, 1995 and on or before August 1, 1999
$0.70 per share After August 1, 1999 and on or before August 1, 2002
</TABLE>
CAROLINE BARTOL NOTE
In March 1996, we borrowed $2.0 million from Caroline Bartol, the mother of
Messrs. N. and T. Bartol. On July 1, 1996, Mrs. Bartol converted $1.0 million of
this loan into 289,562 shares of common stock and extended the $1.0 million
balance of the loan in exchange for our grant of an option to convert this
balance into shares of our common stock at a purchase price of $3.45 per share.
Mrs. Bartol assigned the loan and the option to Boulder Investors Limited
Partnership, a partnership owned by the Bartol children, which exercised the
option and converted the note into 289,562 shares on May 1, 1999.
SUTTLE EMPLOYMENT AGREEMENT
The principal terms of our agreement with Mr. Suttle are as follows:
- five-year term ending January 1, 2004;
- initial base salary of $400,000 per year, subject to increases at the
discretion of our nominating and compensation committee;
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<PAGE> 17
- bonus potential of up to 50% of salary at the discretion of the board of
directors and the compensation committee based upon our performance;
- participation in our stock option plan, with an initial grant of 86,000
shares at $7.67 per share as of January 1, 1999;
- payment by us of up to $36,000 per year in premiums on a "split dollar"
life insurance policy for Mr. Suttle's benefit; and
- we may terminate the agreement at any time after the first year.
If we terminate without good cause, or if Mr. Suttle terminates for good
reason, we must continue to pay Mr. Suttle's base salary for 18 months after the
termination. Mr. Suttle shall not compete with us, call on any of our customers
or induce any of our employees to work for another business during the term of
the agreement and for 12 months after the later of (1) the termination date or
(2) the day we stop paying severance payments under the employment agreement.
13
<PAGE> 18
PRINCIPAL SHAREHOLDERS AND SHAREHOLDING OF OFFICERS AND DIRECTORS
The following tables list our share ownership as of July 28, 2000 for the
persons or groups specified. Ownership includes direct and indirect (beneficial)
ownership, as defined by SEC rules. To our knowledge, each person, along with
his or her spouse, has sole voting and investment power over the shares unless
otherwise noted.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED COMMON STOCK
------------------------------------ ------------------------- ------------
<S> <C> <C>
Timothy C. Bartol(1)..................................... 3,664,028 47.2
Monument Investors Limited Partnership(2)................ 3,001,289 38.7
W. Gary Suttle(3)........................................ 885,800 11.3
Nicholas G. Bartol(4).................................... 666,015 8.6
Boulder Investors Limited Partnership(5)................. 602,493 7.8
Jerry E. Goldress(6)..................................... 246,840 3.1
James M. Thomson(7)...................................... 99,246 1.3
David A. Boshes(8)....................................... 86,412 1.1
David L. Richards(9)..................................... 77,796 1.0
Daniel C. McLeod(10)..................................... 77,400 1.0
John P. Lloyd(11)........................................ 47,692 *
Ralph B. Godfrey(12)..................................... 42,250 *
All Executive Officers and Directors as a Group (12
persons)(13)........................................... 4,574,432 53.5
</TABLE>
---------------
* Represents less than 1%
(1) Includes 3,001,289 shares held by Monument Investors Limited Partnership,
for which Mr. Bartol serves as general partner; 602,493 shares held by
Boulder Investors Limited Partnership, for which Mr. Bartol serves as
general partner; 31,782 shares held by GST Exempt Trust, a trust in which
Mr. Bartol has a beneficial interest; and 8,600 shares held by Mr. Bartol's
wife. Mr. Bartol disclaims beneficial ownership of the shares held by his
wife. Mr. Bartol's address is 9200 Willow Pond Lane, Potomac, Maryland
20854.
(2) Monument Investors Limited Partnership's address is c/o Mr. T. Bartol, 9200
Willow Pond Lane, Potomac, Maryland 20854. It is controlled by Mr. T.
Bartol, Mr. N. Bartol, Pamela Carrio and Ann Farr Butterfield, the four
natural children of John and Caroline Bartol.
(3) Includes 795,500 shares underlying options granted by Monument Investors
Limited Partnership; and 81,700 shares underlying options granted under our
stock option plans. Mr. Suttle's address is c/o Rockford Corporation, 546
Rockford Drive, Tempe, Arizona 85281.
(4) Includes 602,493 shares held by Boulder Investors Limited Partnership, for
which Mr. Bartol serves as general partner; 31,782 shares held by GST
Exempt Trust, a trust in which Mr. Bartol has a beneficial interest; and
4,095 shares held by Mr. Bartol's wife. Mr. Bartol disclaims beneficial
ownership of the shares held by his wife. Mr. Bartol's address is 353 Pompa
Drive, Pagosa Springs, Colorado 81147.
(5) Boulder Investors Limited Partnership's address is c/o Mr. T. Bartol, 9200
Willow Pond Lane, Potomac, Maryland 20854. It is controlled by Mr. T.
Bartol, Mr. N. Bartol, Pamela Carrio and Ann Farr Butterfield, the four
natural children of John and Caroline Bartol.
(6) Includes 233,275 shares underlying options.
(7) Includes 78,206 shares underlying options.
(8) Includes 78,206 shares underlying options.
(9) Includes 76,056 shares underlying options.
(10) Includes 77,400 shares underlying options.
(11) Includes 40,850 shares underlying options.
14
<PAGE> 19
(12) Includes 32,250 shares underlying options.
(13) Includes 792,329 shares underlying options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The registration statement for the initial public offering of our common
stock was declared effective on April 19, 2000, and our shares began trading on
the NASDAQ National Market on April 20, 2000. As a result, no one was subject to
Section 16(a) beneficial reporting requirements during 1999.
STOCK PRICE PERFORMANCE GRAPH
The registration statement for the initial public offering of our common
stock was declared effective on April 19, 2000, and our shares began trading on
the NASDAQ National Market on April 20, 2000. As a result, we are unable to
report on the publicly traded price of our common stock for 1999.
OUR NEXT ANNUAL MEETING AND PROPOSALS BY SHAREHOLDERS
We expect our 2001 annual meeting will take place on or about April 25,
2001. This year's annual meeting was delayed by the timing of our registration
statement and Initial Public Offering and we intend to return to our normal
schedule in 2001. As a shareholder you may seek to
- nominate directors; or
- have proposals presented in our proxy statement and considered at our
annual meeting.
Your nomination or proposal must comply with Arizona law and, for the 2001
annual meeting, we must receive it no later than November 25, 2000. You should
direct any proposals and related questions to Ms. Victoria Hodson, our Investor
Relations Coordinator, at (480) 517-3042.
ANNUAL REPORT
Our Annual Report with certified financial statements for the fiscal year
ended December 31, 1999 accompanies this Notice and Proxy Statement. Any exhibit
to the Annual Report will be furnished to any requesting person who makes a good
faith representation that he or she was a beneficial owner of our Common Stock
on July 28, 2000
By order of the Board of Directors.
/s/ James M. Thomson
--------------------------------------
James M. Thomson
Vice President, Chief Financial
Officer and Secretary
15
<PAGE> 20
APPENDIX A
ROCKFORD CORPORATION
ACCOUNTING
PROCEDURE: AUDIT AND FINANCE COMMITTEE CHARTER DOCUMENT
I. ORGANIZATION
This charter governs the operations of the audit and finance committee. The
committee will review and reassess the charter at least annually and will be
approved by the board of directors. The committee shall be appointed by the
board of directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the committee will be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All committee
members will be financially literate, or will become financially literate within
a reasonable period of time after appointment to the committee. At least one
member will have accounting or related financial management expertise.
II. STATEMENT OF POLICY
The audit and finance committee will provide assistance to the board of
directors in fulfilling their oversight responsibility to the shareholders,
potential shareholders, the investment community, and others relating to the
Company's financial statements and the financial reporting process, the systems
of internal accounting and financial controls, the annual independent audit of
the Company's financial statements, and the legal compliance and ethics programs
as established by management and the board. In so doing, it is the
responsibility of the committee to maintain free and open communication between
the committee, independent auditors and management of the Company. In
discharging its oversight role, the committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside
counsel, or other experts for this purpose.
III. RESPONSIBILITIES
The primary responsibility of the audit and finance committee is to oversee
the Company's financial reporting process on behalf of the board and report the
results of their activities to the board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee, in carrying
out its responsibilities, believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances, and
to ensure to the directors and shareholders that the corporate accounting and
reporting practices of the corporation are in accordance with all requirements
and are of the highest quality. The committee should take the appropriate
actions to set the overall corporate "tone" for quality financial reporting,
sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the audit and
finance committee in carrying out its oversight responsibilities. The processes
are set forth as a guide with the understanding that the committee may
supplement them as appropriate.
- The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the committee, as representatives of the
Company's shareholders. The committee shall have the ultimate authority
and responsibility to evaluate and, where appropriate, replace the
independent auditors. The committee shall discuss with the auditors their
independence from management and the Company and the matters included in
the written disclosures required by the Independence Standards Board.
Annually, the committee will review and recommend to the board the
selection of the Company's independent auditors, subject to shareholders'
approval.
16
<PAGE> 21
- The committee shall discuss with the independent auditors the overall
scope and plans for their respective audits including the adequacy of
staffing and compensation. Also the committee will discuss with
management and the independent auditors the adequacy and effectiveness of
the accounting and financial controls, including the Company's system to
monitor and manage business risk, and legal and ethical compliance
programs. The committee will elicit any recommendations for the
improvement of such internal controls or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of internal controls to expose any
payments, transactions or procedures that might be deemed illegal or
otherwise improper. Further, the committee will meet separately with the
independent auditors, with and without management present, to discuss the
results of their examinations.
- The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee will discuss
the results of the quarterly review and any other matters required to be
communicated to the committee by the independent auditors under generally
accepted auditing standards. The chair of the committee may represent the
entire committee for the purposes of this review.
- The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K, or the annual report to shareholders if distributed prior to
the filing of Form 10-K, including their judgment about the quality, not
just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee will discuss the results of the
annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards.
- The committee shall report the results of the annual audit to the board
of directors. If requested by the board, they shall invite the
independent auditors to attend the full board of directors meeting to
assist in reporting the results of the annual audit or to answer other
directors' questions. Alternatively, the other directors, particularly
the other independent directors, may be invited to attend the committee
meeting during which the results of the annual audit are reviewed.
- The committee shall review with financial management the financial
structuring and risks of the company, including issues such as debt
structuring, investment management and foreign currency risk and
exposure.
17
<PAGE> 22
PROXY
ROCKFORD CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints W. Gary Suttle and Jerry E.
Goldress or either of them acting in the absence of the other, with full power
of substitution, the true and lawful attorneys and proxies of the undersigned,
to attend the Annual Meeting of the Shareholders of Rockford Corporation (the
"Company") to be held at the Tempe Mission Palms Hotel, 60 E. Fifth Street,
Tempe, Arizona 85281, on September 6, 2000 at 10:00 a.m., Mountain Standard
Time, and any adjournments thereof, and to vote the shares of Common Stock of
the Company standing in the name of the undersigned, as directed below, with all
the powers the undersigned would possess if personally present at the meeting.
PROPOSAL NO. 1: To elect 6 directors to the Company's Board to serve for the
next year or until their successors are elected.
NOMINEES: W. Gary Suttle, Jerry E. Goldress, Nicholas G. Bartol, Timothy C.
Bartol, Ralph B. Godfrey, John P. Lloyd
[ ] VOTE for all nominees except those whose names are written on the line
provided below (if any).
--------------------------------------------------------------------------------
[ ] VOTE WITHHELD on all nominees.
PROPOSAL NO. 2: Ratification of the selection of Ernst & Young LLP as the
independent public accounting firm for the Company for the fiscal year ending
December 31, 2000. (Mark only one)
<TABLE>
<S> <C> <C>
[ ] VOTE FOR [ ] VOTE AGAINST [ ] VOTE WITHHELD
</TABLE>
(continued, and to be signed, on other side)
<PAGE> 23
(continued from other side)
PLEASE PROMPTLY DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE
This proxy will be voted in accordance with the directions indicated herein.
If no specific directions are given, this proxy will be voted for approval of
all nominees listed herein, for approval of the proposals listed herein and,
with respect to any other business as may properly come before the meeting, in
accordance with the discretion of the proxies.
Dated:
----------------------------------
----------------------------------
Signature
----------------------------------
Signature
When signing as executor,
administrator, attorney, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person. If a joint tenancy, please
have both joint tenants sign.
