Williams Controls, Inc.
Notice of Annual Meeting of Stockholders
to be held on March 27, 1998
The Annual Meeting of Stockholders of Williams Controls, Inc. (the "Company")
will be held at the Company's administrative office, 7001 Orchard Lake Road,
Suite 424, West Bloomfield, Michigan on Friday, March 27, 1998 at 10:00 a.m.
Eastern Standard Time, for the following purposes:
1. To elect two Class I directors for a three year term expiring in 2000. To
be elected, a nominee must have more shares cast in his favor than shares
for which voting authority is withheld.
2. To consider and approve an amendment to the Company's 1993 Stock Option
Plan to increase the number of shares, available for grant thereunder,
from 1,500,000 to 3,000,000. Approval of this proposal requires the
affirmative vote of a majority of the shares represented at the Meeting
and entitled to vote on this proposal.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders holding shares of Common Stock of record at the close of business
on February 27, 1998, will be entitled to receive notice of and vote at the
meeting.
Stockholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement.
By Order of the Board of Directors,
Gerard A. Herlihy
Secretary
January 28, 1998
Portland, Oregon
1
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Proxy Statement
for the 1998 Annual Meeting of Stockholders
General Information
This Proxy Statement is furnished to stockholders of Williams Controls, Inc.
(the "Company") in connection with the solicitation of proxies by and on behalf
of the Company's Board of Directors (the "Board") for use at the Annual Meeting
of Stockholders of the Company (the "Meeting") to be held on Friday, March 27,
1998 at the Company's administrative office, 7001 Orchard Lake Road, Suite 424,
West Bloomfield, Michigan at 10:00 a.m., Eastern Standard Time, for the purposes
set forth in the Notice of Annual Meeting of Stockholders. The Notice of Annual
Meeting, this Proxy Statement and the accompanying proxy card (collectively, the
"Proxy Materials") will be first sent to the Company's stockholders on or about
March 2, 1998.
As of the close of business on February 27, 1998, the record date for
entitlement to notice of and vote at the Annual Meeting, the Company had
outstanding 17,782,040 shares of common stock, $.01 par value per share (the
"Common Stock"). The presence, in person or by proxy, of holders of one-third of
the shares of Common Stock entitled to vote at the Meeting constitutes a quorum
for the transaction of business at the Meeting.
Each share of Common Stock outstanding on the record date is entitled to one
vote on each matter presented at the Meeting. Directors are elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Approval of
the amendment to the 1993 Stock Option Plan requires the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on this
proposal.
Abstentions will be treated as shares present or represented and entitled to
vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the stockholders. As to any shares a broker indicates on its proxy that it does
not have the authority to vote on any particular matter because it has not
received direction from the beneficial owner thereof, those shares will not be
counted as voting on the particular matter.
A stockholder who gives his proxy may revoke it at any time before it is voted
by giving notice of the revocation thereof to the Secretary of the Company, by
filing another proxy with said Secretary or by attending the Meeting and voting
in person. All properly executed and unrevoked proxies delivered pursuant to
this solicitation, if received in time, will be voted in accordance with the
instructions of the beneficial owners contained thereon.
The Company will bear the cost of the solicitation. In addition to solicitation
by mail, the Company will request banks, brokers and other custodian nominees
and fiduciaries to supply proxy materials to the beneficial owners of the
Company's Common Stock for whom they hold shares and will reimburse them for
their reasonable expenses in so doing.
Proposal 1 - Election of Directors
The Company's Certificate of Incorporation provides for three classes of
directors with staggered terms of office. Nominees of each class serve for terms
of three years and until the election and qualification of their successors or
until their resignation, death, disqualification or removal from office.
The Board of Directors consists of four members, including two Class I directors
whose terms expire in 1998, one Class II director whose term expires in 2000 and
one Class III director whose term expires in 1999. At the Meeting, two Class I
directors will be elected to serve three-year terms expiring in 2001. The
nominees for Class I directors are Thomas W. Itin and H. Samuel Greenawalt, both
of whom presently serve on the Board of Directors of the Company.
Directors are elected by a plurality of the votes cast. Unless you withhold
authority to vote for a nominee, your proxy will be voted for the election of
Mr. Itin and Mr. Greenawalt.
If either Mr. Itin or Mr. Greenawalt becomes unavailable to serve as a
director, discretionary authority may be exercised by the proxy holders named
in the accompanying proxy card to vote for a substitute nominee proposed by the
Board of Directors. Neither management nor the Board of Directors knows of any
reason why Mr. Itin or Mr. Greenawalt would be unavailable to serve on the
Board of Directors.
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Position/Offices with Year First
Name Age Company Elected
---- --- -------------------------- ---------
Nominee:
Class I - Term Expires 1998
Thomas W. Itin 63 President, Chairman of the 1988
Board, Chief Executive
Officer and Treasurer
H. Samuel Greenawalt 68 Director 1994
Continuing Directors:
Class III - Term Expires 1999
R. William Caldwell 80 Director 1994
Class II - Term Expires 2000
Timothy S. Itin 39 Director 1994
Thomas W. Itin has been Chairman of the Board and Chief Executive Officer of the
Company since March 1989 and a Director since inception of the Company in
November 1988. In addition, Mr. Itin was elected President and Treasurer of the
Company in June 1993. Mr. Itin has been Chairman, President and owner of TWI
International, Inc. ("TWI") since he founded that entity in 1967. TWI acts as
consultant for mergers, acquisitions, financial structuring, new ventures and
asset management. Mr. Itin also is the owner and principal officer of Acrodyne
Corporation. In addition, Mr. Itin is Chairman of the Board and President of LBO
Capital Corporation and Ajay Sports, Inc., both of which are publicly-held
corporations. Mr. Itin received a Bachelor of Science degree from Cornell
University and was awarded a Masters of Business Administration degree from New
York University.
H. Samuel Greenawalt has served as a director of the Company and a member of the
Audit Committee of the Board of Directors since March 1994. From 1987 until his
retirement in June 1994, Mr. Greenawalt served as Senior Vice President,
Business Development, for Michigan National Bank in Detroit, Michigan. Mr.
Greenawalt continues to provide consulting services to Michigan National Bank.
From 1958 to 1987, Mr. Greenawalt served in various commercial lending
capacities at Michigan National Corporation. From 1954 to 1958, he was with the
investment firm of McNaughton-Greenawalt Company. Since June 1993, Mr.
Greenawalt has served as a director of Enercorp, Inc., a publicly traded
business development company that owns approximately 10% of the common stock of
the Company. Mr. Greenawalt received a Bachelor of Science degree from the
Wharton School of the University of Pennsylvania, and is a graduate of the
University of Wisconsin Banking School.
Timothy S. Itin has served as a director of the Company and a member of the
Audit and Compensation Committees of the Board of Directors since March 1994.
Since January 1996, Mr. Itin has been a Managing Director of the investment
banking firm Volpe Brown Whelan & Company, LLC, located in San Francisco,
California. From 1991 through 1995, Mr. Itin was a Managing Director of Jensen
Securities, a Pacific Northwest institutional brokerage firm located in
Portland, Oregon, and he served on Jensen's management committee. From 1989 to
1991, he was employed by Laurel Management Partners, a money management
affiliate of Montgomery Securities. From 1983 to 1989, Mr. Itin was a limited
partner of Montgomery Securities and worked in the field of investment banking,
institutional trading and full service brokerage in San Francisco. Mr. Itin has
earned the designation of Chartered Financial Analyst (CFA) and received a
Bachelor of Arts degree in economics from Dartmouth College.
R. William Caldwell has been a director of the Company and a member of the Audit
and Compensation Committees of the Board of Directors since March 1994. Mr.
Caldwell has been retired since 1975. He presently serves as a director of the
Michigan State University Foundation, a director and secretary/treasurer of
Neogen Corporation of East Lansing, Michigan, a limited partner of Doan
Associates of Midland, president and a director of Dow Consultants and a
director of the Chemical Bank and Trust Company of Midland. From 1963 until
1967, Mr. Caldwell served in a variety of positions with Dow Corning
Corporation, a multibillion dollar worldwide chemical company, including
3
<PAGE>
director of Toray Silicone Company, Ltd., Tokyo, Japan, Societe Industrgrielle
des Silicones, Paris, France, and Midland Silicones, London, United Kingdom;
chairman of Molykote, GmbH, Munich, Germany and Arnet Industries, Ltd., Canada;
president and chairman of Dow Corning Silicones. Ltd., Canada; chairman of Dow
Corning International, Ltd.; and corporate vice president of Dow Corning
Corporation, Midland, Michigan. From 1967 to 1968 he served as the assistant
general manager, Pharmaceutical, Agricultural and Consumer Product Department,
Dow Chemical, in Midland, Texas. From 1968 to 1974 he served as director of Dow
Chemical, SpA, Milan, Italy, president and director A.P.E.S.A., Luxembourg,
president and director of Worldwide Operations, Gruppo Lepetit, SA, Italy. From
1974 until his retirement in 1975 he served as executive vice president of Dow
Lepetit, Ltd., Milan, Italy and Midland, Texas. Mr. Caldwell received a Bachelor
of Science degree in Chemical Engineering from Michigan State University and
graduated from the Harvard School of Business Administration, Advance Management
Program.
Proposal 2 - Approval of an Amendment to the Company's 1993 Stock Option Plan
The Board of Directors has approved, and is requesting that the stockholders of
the Company approve, an amendment (the "Amendment") to the Company's 1993 Stock
Option Plan, as amended (the "1993 Plan") to increase the number of shares
reserved for issuance upon exercise of stock options granted thereunder from an
aggregate of 1,500,000 shares of Common Stock, as adjusted annually (the
"Available Shares") to 3,000,000 shares of Common Stock, as adjusted annually in
accordance with the 1993 Plan.
The 1993 Plan provides for an annual adjustment in the number of Available
Shares, commencing December 31, 1994, to a number no less than 4.3% of the
number of shares outstanding on December 31 of the preceding year. In 1995, the
stockholders approved an amendment to the Plan to increase the number of shares
allocated under the plan to no more than 1,500,000. Since the number of shares
allocated under the plan exceeds 4.3% of the number of outstanding shares of
common stock of the Company, the number of shares reserved under the 1993 Plan
has not increased under this provision. The 1993 Plan further provides that,
even after the annual adjustment, no more than 1,500,000 shares of Common Stock
would be available for the grant of Incentive Stock Options under the 1993 Plan.
If the Amendment is approved, no more than 3,000,000 shares of Common Stock will
be available for grant under Incentive Stock Options even after the future
annual adjustments.
The following table shows, as of January 9, 1998, the status of Available
Shares:
Shares
Options Granted Number of Shares Subject Available for
Shares (Net of Options to Outstanding Grant of
Reserved Forfeitures) Exercised Options Future Options
---------- -------------- ----------- --------------- --------------
1,500,000 1,111,875 -0- 1,111,875 388,125
If the Amendment is approved, 1,500,000 additional shares of Common Stock will
be added to the total number of shares reserved under the 1993 Plan, making an
aggregate of 1,888,125 shares available for the grant of future options under
the 1993 Plan, representing 3,000,000 shares less the 1,111,875 shares subject
to outstanding options.
The 1993 Plan was adopted by the Board on September 20, 1993 for a ten-year
term. An amendment to the 1993 Plan was approved by the stockholders on February
22, 1995, increasing the maximum number of shares to be allocated under the 1993
Plan from 700,000 to 1,500,000. The Plan is designed to (i) induce qualified
persons to become employees and/or officers of the Company, (ii) reward such
persons for past service to the Company, (iii) encourage such persons to remain
in the employ of the Company or associated with the Company, and (iv) provide
additional incentive for such persons to put forth maximum efforts for the
success of the business of the Company. To the extent of the Options already
granted under the 1993 Plan and to the extent that management personnel may be
eligible to receive additional options which may be granted under the Plan,
management has an interest in obtaining approval of the Amendment by the
Company's stockholders. As of January 28, 1998, approximately 225 persons were
eligible to participate in the Plan. The 1993 Plan currently provides that
employees, officers of and consultants to the Company are eligible to
participate in the 1993 Plan.
4
<PAGE>
The 1993 Plan is currently administered by the Board of Directors. Grants of
stock options under the 1993 Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). In addition to determining who will be granted Options, the
Board has the authority and discretion to determine when Options will be granted
and the number of Options to be granted. The Board may determine which Options
may be options intended to qualify for special treatment under the Internal
Revenue Code of 1986, as amended ("Incentive Stock Options") or Non-Qualified
Options ("Non-Qualified Stock Options") which are not intended to so qualify.
See "Federal Income Tax Consequences" below. The Board also may determine the
time or times when each Option becomes exercisable, the duration of the exercise
period for Options and the form or forms of the instruments evidencing Options
granted under the 1993 Plan. The Board may adopt, amend and rescind such rules
and regulations as, in its opinion, may be advisable for the administration of
the 1993 Plan.
The Board also may construe the 1993 Plan and the provisions in the instruments
evidencing Options granted under the Plan and is empowered to make all other
determinations deemed necessary or advisable for the administration of the 1993
Plan. The Board may not adversely affect the rights of any participant under any
unexercised Option or any portion thereof without the consent of such
participant. Unless sooner terminated by the Board, the Plan will terminate on
September 20, 2003.
The 1993 Plan contains provisions for proportionate adjustment of the number of
shares for outstanding Options and the option price per share in the event of
stock dividends, recapitalizations resulting in stock splits or combinations or
exchanges of shares. In addition, the Plan provides for adjustments in the
purchase price and exercise period by the Committee in the event of a proposed
dissolution or liquidation of the Company, or any corporate separation or
division, including, but not limited to, split-up, split-off or spin-off, or
merger or consolidation of the Company with another corporation, or in the event
there is a change in constitution of the Common Stock of the Company.
In determining persons to whom Options will be granted and the number of shares
to be covered by each Option, the Board takes into account the duties of the
Optionees, their present and potential contributions to the success of the
Company and such other factors as the Board deems relevant to accomplish the
purposes of the 1993 Plan.
Only employees of the Company, as the term "employees" is defined for the
purposes of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), are entitled to receive Incentive Stock Options. Incentive Stock
Options granted under the 1993 Plan are intended to satisfy all requirements for
incentive stock options under Section 422 of the Code and the Treasury
Regulations thereunder.
Each Option granted under the 1993 Plan is evidenced by a written Option
Agreement between the Company and the optionee. The option price of any
Incentive Stock Option may be not less than 100% of the Fair Market Value per
share on the date of grant of the Option; provided, however, that any Incentive
Stock Option granted under the Plan to any person owning more than ten percent
of the total combined voting power of the Common Stock will have an option price
of not less than 110% of the Fair Market Value per share on the date of grant of
the Incentive Stock Option. Each Non-Qualified Stock Option granted under the
1993 Plan will be at a price not less than 80% of the Fair Market Value per
share on the date of grant thereof. In the past, all grants made under the 1993
Plan have been made at 100% of the Fair Market Value of the Company's Common
Stock on the date of grant, unless a higher exercise price is required under the
Code for Incentive Stock Options. "Fair Market Value" per share as of a
particular date is defined in the Plan as the last sale price of the Company's
Common Stock as reported on a national securities exchange or on the Nasdaq
National Market System or, if none, the average of the closing bid and asking
prices of the Company's Common Stock as reported by Nasdaq or, if such
quotations are unavailable, the value determined by the Board in its discretion
in good faith.
The exercise period of Options granted under the 1993 Plan may not exceed ten
years from the date of grant thereof. Incentive Stock Options granted to a
person owning more than ten percent of the total combined voting power of the
Common Stock of the Corporation will be for no more than five years. The Board
will have the authority to accelerate or extend the exercisability of any
outstanding Option at such time and under such circumstances as it, in its sole
discretion, deems appropriate. However, no exercise period may be extended to
increase the term of the Option beyond ten years from the date of the grant.
To exercise an Option, the optionee must pay the full exercise price in cash, in
shares of Common Stock having a Fair Market Value equal to the Option Price, or
in property, or in a combination of cash, shares and property and, subject to
approval of the Committee. The Board has the sole and absolute discretion to
determine whether or not property other than cash or Common Stock may be used to
purchase the shares of Common Stock thereunder and, if so, to determine the
value of the property received.
5
<PAGE>
Options granted under the 1993 Plan may be exercised only during the option term
and only to the extent vested at the time of exercise. If the optionee ceases to
be an employee, officer or consultant to the Company or a Subsidiary of or
Parent of the Company, other than by reason of death, disability, retirement or
for cause, all Options granted to such optionee but not yet exercised will
terminate three months after the date the optionee ceased to be an employee
and/or officer of the Company.
If an optionee dies while an employee and/or officer of the Company, or if the
optionee's employment or officer status terminates by reason of disability or
retirement, all Options theretofore granted to such optionee, whether or not
otherwise exercisable, unless earlier terminated in accordance with their terms,
may be exercised at any time within one year after the date of death, disability
or retirement of said optionee, by the optionee or by the optionee's estate or
by a person who acquired the right to exercise such Options by bequest or
inheritance or otherwise by reason of the death or disability of the optionee;
provided, however, that in the case of Incentive Stock Options, such one-year
period will be limited to three months in the case of retirement.
Options granted under the 1993 Plan are not transferable other than by will or
by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Options may be exercised,
during the lifetime of the optionee, only by the optionee and thereafter only by
the optionee's legal representative. An optionee has no rights as a stockholder
with respect to any shares covered by an Option until the Option has been
exercised.
The Company, to the extent permitted or required by law, will deduct a
sufficient number of shares due to the optionee upon exercise of the Option to
allow the Company to pay federal, state and local taxes of any kind required by
law to be withheld upon the exercise of such Option from any payment of any kind
otherwise due to the optionee. The Company is not obligated to advise any
optionee of the existence of any tax or an amount that the Company will be so
required to withhold.
Federal Income Tax Consequences
The federal income tax discussion set forth below is included for general
information only. Optionees are urged to consult their tax advisors to determine
the particular tax consequences applicable to them, including the application
and effect of foreign, state and local income and other tax laws.
Incentive Stock Options. No income results to the holder of an Incentive Stock
Option upon the grant thereof or issuance of shares upon exercise thereof. The
amount realized on the sale or taxable exchange of the Option shares in excess
of the Option exercise price will be considered a capital gain, except that, if
a sale, taxable exchange or other disposition occurs within one year after
exercise of the Incentive Stock Option or two years after the grant of the
Incentive Stock Option (generally considered to be a "disqualifying
disposition"), the optionee will realize compensation, for federal income tax
purposes, on the amount by which the lesser of (i) the fair market value on the
date of exercise or (ii) the amount realized on the sale of the shares, exceeds
the exercise price. The difference between the exercise price and the fair
market value of the shares acquired at the time of exercise is a tax preference
for the purpose of calculating the alternative minimum tax on individuals under
the Code. This preference amount will not be included again in alternative
minimum taxable income in the year the taxpayer disposes of the stock. The
result is achieved by adding the preference amount included in alternative
minimum taxable income in the year of exercise to the basis of the stock. For
alternative minimum tax purposes, the basis of stock is the fair market value of
the stock on the date of exercise. This rule reduces the amount of income to the
alternative minimum tax in the year the stock is sold.
Non-Qualified Stock Options. No compensation will be realized by the optionee of
a Non-Qualified Stock Option at the time it is granted, provided the exercise
price is at least equal to the value of the underlying shares at the time of the
grant. Upon the exercise of a Non-Qualified Stock Option, an optionee will
realize compensation for federal income tax purposes on the difference between
the exercise price and the fair market value of the shares acquired at the time
of exercise. If the optionee exercises a Non-Qualified Stock Option by
surrendering shares of the Company's Common Stock, the optionee will not
recognize income or gain at the time of exercise.
Consequences to the Company. The Company recognizes no deduction at the time of
grant or exercise of an Incentive Stock Option. The Company recognizes no
deduction at the time of grant of a Non-Qualified Stock Option provided the
option price of the Option is at least equal to the value of the underlying
shares. The Company will recognize a deduction at the time of exercise of a
Non-Qualified Stock Option to the extent the option price is less than the value
of the shares acquired or to the extent the optionee recognizes income upon a
disqualifying disposition of shares underlying an Incentive Stock Option.
6
<PAGE>
Recommendation and Vote Required
Management and the Board of Directors recommend that the stockholders vote "FOR"
approval of the Amendment. Approval of this proposal requires the affirmative
vote of a majority of the shares represented at the Meeting and entitled to vote
on this proposal.
Board of Directors and Committee Meetings
During the fiscal year ended September 30, 1997, the Board of Directors held a
total of seven meetings and acted by unanimous written consent two times. The
Board of Directors maintains an Audit Committee and a Compensation Committee.
There is no standing nominating or similar committee of the Board of Directors.
The members of the Audit Committee are H. Samuel Greenawalt, R. William Caldwell
and Timothy S. Itin. The Audit Committee primarily reviews internal accounting
procedures and oversees the review and engagement of the Company's independent
accountants. The Audit Committee met two times during the year. The members of
the Compensation Committee are R. William Caldwell and Timothy S. Itin. The
Compensation Committee primarily reviews and sets compensation paid to the
Company's executive officers and directors and makes recommendations to the
Board regarding awards under the 1993 Plan. The Compensation Committee met three
times during the year. Each director attended more than 75% of the meetings of
the Board of Directors and the Audit and Compensation Committees during the
period in which he served.
Timothy S. Itin is the son of Thomas W. Itin. There are no other family
relationships between any director, executive officer or nominees for director
of the Company.
Executive Officers of the Company
The following table sets forth, as of January 19, 1998, the names and ages of
the Company's executive officers, including all positions and offices held by
each such person. These officers serve at the pleasure of the Board of
Directors.
Name Age Position
------------------- ----- -------------------------------------
Thomas W. Itin 63 President, Chairman of the Board,
Chief Executive Officer and Treasurer
Gerard A. Herlihy 44 Chief Administrative and Chief
Financial Officer and Secretary
Clarence H. Yahn 61 Group Vice President
Timothy J. Marker 48 Vice President-Sales and Marketing
William N. Holmes 31 Corporate Controller and Principal
Accounting Officer
For information regarding Mr. Itin, see his biography above.
Gerard A. Herlihy has been Chief Financial Officer since February 1997 and
Secretary of the Company since August 1977. He was previously President and
Chief Operating Officer of CliniCorp, Inc., a publicly-held healthcare company.
From 1992 to 1993, he was Chief Financial Officer and a member of the transition
turnaround team at Melnor, Inc., a $50 million manufacturer of lawn and garden
products. From 1991 to 1992, Mr. Herlihy was the turnaround advisor to Blount
Doors and Millwork, Inc., a $40 million door manufacturer. Positions held prior
to 1991 included acquisition advisory work for William E. Simon & Sons, Managing
Director of Corporate Finance at Thomson McKinnon Securities, and audit
supervisor at Peat, Marwick, Mitchell & Co. Mr. Herlihy has a Bachelor of
Science Degree from the University of Rhode Island and an MBA Degree from the
Harvard Business School. He is also a Certified Public Accountant.
Clarence H. Yahn became Group Vice President of the Company in December 1996,
responsible for the Company's Consumer Durables Business Group. Mr. Yahn has
served as director of Ajay Leisure Products, Inc., a wholly-owned subsidiary of
Ajay Sports, Inc., since September 1993 and as Ajay Leisure's president since
January 1994. Mr. Yahn is also a director of Ajay Sports and has been its Chief
Operating Officer since January 1996. Ajay Sports is a publicly traded company,
and the Company owns approximately 18.5% of Ajay's outstanding common stock.
Prior to joining Ajay Leisure Products, Mr. Yahn served as chief executive
officer of Melnor, Inc. a consumer durables company, from 1992 to 1993. From
1991 to 1992, Mr. Yahn was self-employed in the field of mergers and
acquisitions. From 1988 to 1990, Mr. Yahn was President of Gold Medal, Inc., a
leisure furniture manufacturer. From 1982 to 1988, he was President of Aircap
Industries Corporation, a subsidiary of the Sunbeam Corporation. Mr. Yahn
received a Bachelor of Science degree in mathematics and physics from the
University of Wisconsin and a masters degree in international business from the
American Graduate School of International Management.
7
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Timothy J. Marker has been Vice President - Sales and Marketing of the Company
since August 1997. Prior to joining the Company, from 1996 to 1997, he was the
President of Electro-Mechanical Products, a $50 million company involved in the
manufacture and sale of precision switches, sensors and RFI noise suppression
devices to the global automotive industry, which is a division of Alcoa Fujikura
Limited. From 1989 to 1995, Mr. Marker was President of Electro-Mechanical
Products, a division of Electro-Wire Products, Inc. From 1982 to 1988, he was
Vice President of Sales/Engineering for this same company. From 1972 to 1982, he
worked for General Motors' Packard Electric Division, where his last position
was Account Manager responsible for Packard's Chevrolet Truck account with
annual sales of $310 million. Mr. Marker has a Bachelor of Science degree from
Purdue University.
William N. Holmes has been Corporate Controller of the Company since August
1997, responsible for overseeing the day-to-day accounting, finance and
reporting functions of the Company and its operating subsidiaries. Mr. Holmes
has seven years experience in working with publicly traded companies, including
Financial Reporting Manager for Crown Pacific Partners, LP in 1997 and
Controller and Director of Investor Relations for Phoenix Gold International,
Inc. from 1994 to 1996. Prior to 1994, Mr. Holmes was a senior accountant for
Deloitte and Touche, LLP in Portland, Oregon. Mr. Holmes has a Bachelor of
Science Degree from Oregon State University and is a Certified Public
Accountant.
Executive Compensation
Summary Compensation Table
The table below sets forth the compensation received by the Chief Executive
Officer of the Company for the past three fiscal years. No other executive
officer of the Company received compensation in excess of $100,000 during the
fiscal year ended September 30, 1997. The Company has no restricted stock award
or long-term incentive plans.
Annual Compensation Information
<TABLE>
<CAPTION>
Securities
Other Annual Underlying All Other
Name and Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($) (#) ($)
- - ------------------ ----- -------- ----- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Itin, 1997 150,000 -- -- 300,000 --
Chief Executive 1996 150,000 -- -- -- --
Officer 1995 150,000 -- -- -- --
- - ----------
</TABLE>
Options/SAR Grants Table
The table below summarizes options granted during the fiscal year ended
September 30, 1997 to the executive officers named in the Summary Compensation
Table. The Company has not granted any SARs.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Apprec'n for
Option Term
---------------------
Number of Secs. % of Total Exercise
Underlying Optns Granted Price Expiration
Name Optns Granted # to Employees ($/Share) Date 5% ($) 10%($)
- - ---------- --------------- ------------- --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Itin 300,000 27.8% $2.13 5/1/02 176,875 390,849
</TABLE>
8
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The table below summarizes fiscal year-end option values of the executive
officers named in the Summary Compensation Table.
Securities Value of Unexercised
Underlying In-The-Money Options
Unexercised at Year End ($)
Options at
Year End (#)
Shares
Acquired Value
on Exercise Realized
Name (#) ($) Exercisable / Unexercisable
- - --------- ---------- --------- ---------------------------------------
Thomas W. Itin -0- -0- 375,000(1) / 225,000 $351,750 / $56,250
(1) Of these options, 150,000 are held by Acrodyne Corporation, a company
owned by Mr. Itin.
Compensation of Directors
The non-employee directors of the Company are paid $500 for each Board of
Directors Meeting attended and are reimbursed for reasonable costs incurred to
attend the meetings.
In February 1997, R. William Caldwell, H. Samuel Greenawalt and Timothy S. Itin,
the non-employee directors of the Company, each received non-statutory stock
options exercisable for ten years to purchase up to 10,000 shares of Common
Stock for $2.66 per share. These stock options were automatically granted under
the 1995 Stock Option Plan for Non-Employee Directors at 100% of the fair market
value of the Common Stock on the date of grant.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
In 1994, the Company entered into a five-year employment contract with Mr. Itin
under which he serves as Chief Executive Officer at a minimum salary of $150,000
per year. On August 15, 1997, the Company's Board approved an employment
agreement with Mr. Itin to employ him for the later of five years from the date
of this approval or the termination of the guaranty he has provided to the
Company. See "Certain Relationships and Related Transactions".
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the compensation
paid to executive officers. The Company's compensation philosophy is designed to
achieve long-term growth in stockholder value. The Company's compensation
policies are intended to attract, retain and motivate highly qualified
executives who support a performance-oriented environment that rewards
achievement based upon the Company's performance and the individual's
contribution and performance. There are three main components in the Company's
executive compensation program: base salary, annual bonus incentive and
long-term incentive.
Base Salary. The base salary of each executive officer of the Company is
measured against the median base pay level for positions with comparable
functional responsibilities at companies with sales that are comparable in size
to the Company's sales. Executive salaries are reviewed but not necessarily
increased annually. Salary adjustments may be made by the Committee to recognize
individual contribution and performance or to reflect an increased scope of
responsibilities.
Annual Incentive. Annual incentive bonuses for executive officers are intended
to reflect the Committee's belief that a significant portion of the annual
compensation of each executive officer should be contingent upon the performance
of the Company, as well as the individual contribution of each officer.
9
<PAGE>
The Company has implemented an annual incentive bonus, which provides executive
officers and other key management employees the opportunity to earn annual
incentive bonuses. As a pay-for-performance plan, the annual incentive bonus is
intended to motivate and reward executive officers and other key employees by
directly linking the amount of any cash bonus to two performance components: (1)
corporate and/or operating unit financial performance (specific measurements are
defined each year and threshold and payout levels are established to reflect the
Company's objectives); (2) management's overall assessment of the executive
officer/key employee performance. These criteria are reviewed and approved by
the Committee. Under the guidelines adopted by the Committee, executive officers
are eligible to receive up to 75% of their salary as an annual bonus, depending
on actual earnings performance compared to target earnings goals.
Long-Term Incentive. The Company utilizes stock options as a long-term incentive
to reward and retain employees. The Committee believes that these programs serve
to link management and stockholder interest and to motivate executive officers
to make long-term decisions that are in the best interest of the Company and the
stockholders. The Committee also believes that executive officers and other key
employees should have significant ownership of the Company stock. As a group,
executive officers and directors own approximately 40% of the outstanding common
stock. In particular, Mr. Itin, the Company's Chairman and Chief Executive
Officer, owns approximately 28% of the outstanding shares.
The Committee believes that stock option grants provide an incentive that
focuses the executive's attention on managing the Company from the perspective
of an equity owner in the business. Stock options are granted from time-to-time,
generally on an annual basis, based upon recommendations from management and the
Committee. In general, stock options vest over five years and employees must be
employed by the Company in order to exercise the options. As the stock options
are granted at the fair market value on the date of grant, the Company's stock
options are tied to the future performance of the Company's stock and will
provide value to the recipient only when the price of the Company's stock
increases above the option grant price.
It is the opinion of the Committee that the aforementioned compensation program
provides features, which appropriately align the Company's executive
compensation with corporate performance and the interest of its stockholders.
For the fiscal year ended September 30, 1997, the Company's Chief Executive
Officer was paid only the base annual salary provided for under his employment
agreement with the Company. The Company's Chief Executive Officer did not
receive a cash bonus for 1997 based on the Company's actual earnings performance
as of the date of this proxy. In addition, the Company's Chief Executive Officer
received a grant of 300,000 options under the 1993 Plan which expire on May 1,
2002 at the price of $2.13 per option. During the year, the Company extended the
expiration date of 150,000 options held by Acrodyne Corporation, a related
party, from November 8, 1997 to November 8, 1999.
Timothy S. Itin, Chairman
R. William Caldwell
10
<PAGE>
Performance Graph
The graph below compares the percentage changes in the Company's cumulative
stockholder return on its Common Stock for the five-year period ended September
30 1997, with the cumulative total return of the Nasdaq Stock Market (US
Companies) and a peer index of the Nasdaq Stocks - Motor Vehicles and Motor
Vehicle Equipment companies.
<TABLE>
CRSP Total Returns Index
-------------------------
<CAPTION>
Indices 9/30/92 09/30/93 09/30/94 09/30/95 09/30/96 09/30/97
- - ------------------------------- -------- ---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Williams Controls 100.0 544.5 1002.9 1073.1 882.6 762.2
Nasdaq Stock Market (US Companies) 100.0 131.0 132.1 182.4 216.4 297.1
Nasdaq Stocks(SIC 3710-3719 US
Companies) Motor Vehicles and
Motor Vehicle Equipment 100.0 141.2 137.8 141.2 160.3 270.1
</TABLE>
Notes: The lines represented monthly index levels derived from compounded
daily returns that include all dividends. The indices are reweighted daily,
using market capitalization on the previous trading day. If the monthly
interval, based on the fiscal year-end, is not a trading day, the preceding
trading day is used. The index level for all series was set at 100.00 on
09/30/92.
11
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth, as of January 23, 1998, the number of shares of
Common Stock beneficially owned by each director and named executive officer of
the Company individually, all executive officers and directors as a group and
all beneficial owners of more than five percent of the Common Stock. The
following stockholders have sole voting and investment power with respect to
their holdings unless otherwise noted.
Name and Address Amount Beneficially Percent of Class
of Beneficial Owner Owned *
- - -------------------------------- ------------------- ----------------
Thomas W. Itin (1)(2)(4) 5,116,837 28.2
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Enercorp, Inc. (5) 1,910,000 10.7
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Acrodyne Corporation (6) 1,200,000 6.7
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
R. William Caldwell (7) 30,000 **
515 McDonald Street
Midland, MI 48640
H. Samuel Greenawalt (4)(7) 202,900 1.1
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Timothy S. Itin (7) 40,000 **
1 Maritime Plaza, 11th Floor
San Francisco, CA 94111
Gerard A. Herlihy (3)(8) 202,636 1.1
700 NW 12th Avenue
Deerfield Beach, FL 33442
Clarence H. Yahn (9) 56,500 **
1501 E. Wisconsin Street
Delavan, WI 53115
Timothy J. Marker (10) 17,500 **
7001 Orchard Lake Road, Suite 422
West Bloomfield, MI 48322
William N. Holmes (3)(11) 186,886 1.1
14100 SW 72nd Avenue
Portland, OR 97224
All executive officers and 7,396,987 40.2
directors as a group (ten persons)
* Based upon 17,782,040 shares outstanding.
** Less than one percent.
12
<PAGE>
1) Includes 225,000 shares of Common Stock issuable upon exercise of presently
exercisable stock options held by Mr. Itin. Also includes 3,592,000 shares of
Common Stock and 150,000 shares issuable upon the exercise of stock options
beneficially owned by family members and affiliates of Mr. Itin, including
ownership of Acrodyne Corporation and/or its affiliates which also is reported
separately in this table. Acrodyne Corporation is owned by TWI and TWI is owned
by a Michigan co-partnership of which Mr. Itin is the sole equity owner. Also
includes 402,600 shares owned by certain trusts for which Mr. Itin's spouse
serves as trustee. Neither Mr. or Mrs. Itin is beneficiaries of these trusts,
and they disclaim beneficial ownership of the 402,600 shares owned by the
trusts.
2) Includes 424,101 shares of Common Stock owned by the Company's Employee Stock
Ownership Plan Trust (the "ESOP"), of which Mr. Itin is the trustee. Mr. Itin
disclaims beneficial ownership of these shares, other than the 11,269 shares
allocated for his benefit. Also includes 40,000 shares of Common Stock owned by
the Company's Union Employees Pension Plan, of which Mr. Itin is a trustee. Mr.
Itin disclaims beneficial ownership of these shares. Also includes 100,000
shares of Common Stock owned by the Company's Non-Union Employees Retirement
Income Pension Plan, of which Mr. Itin is the trustee. Mr. Itin disclaims
beneficial ownership of these shares. Also includes 127,740 shares owned by the
Company's 401(k) Plan for Non-Union Employees, of which Mr. Itin is a trustee.
Mr. Itin disclaims beneficial ownership of these shares. Also includes 55,396
shares owned by the Company's 401(k) Plan for Union Employees, of which Mr. Itin
is a trustee. Mr. Itin disclaims beneficial ownership of these shares. As a
trustee, Mr. Itin shares voting and dispositive power over the securities owned
by these plans.
3) Includes 127,740 shares owned by the Company's 401(k) Plan for Non-Union
Employees, of which Mr. Herlihy and Mr. Holmes are trustees. Mr. Herlihy and Mr.
Holmes disclaim beneficial ownership of these shares, other than those share
amounts allocated for their benefit, which are 1,174 and 197 shares,
respectively. Also includes 55,396 shares owned by the Company's 401(k) Plan for
Union Employees, of which Mr. Herlihy and Mr. Holmes are trustees. Mr. Herlihy
and Mr. Holmes disclaim beneficial ownership of these shares. As trustees, these
officers share voting and dispositive power over the securities owned by these
plans.
4) Does not include the ownership by Enercorp, Inc. as reported separately in
this table. Mr. Itin owns approximately 18.5% of the outstanding voting
securities of Enercorp, Inc. and Mr. Greenawalt owns approximately 2.4% of the
outstanding voting shares of Enercorp, Inc.
5) Includes 100,000 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
6) See note (1) above regarding the ownership of Acrodyne Corporation. Mr. Itin
may be deemed to be a beneficial owner of the shares of Common Stock owned by
Acrodyne Corporation and its affiliates, and, therefore, these shares are
included in the ownership reported for Mr. Itin in this table.
7) Includes 25,000 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
8) Includes 17,500 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
9) Includes 20,000 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
10) Includes 7,500 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
11) Includes 3,750 shares issuable upon exercise of stock options that are
exercisable within 60 days of the date of this table.
13
<PAGE>
Compliance with Section 16(a) of the
Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than ten-percent shareholders are
required by the SEC regulation to furnish the Company with copies of Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company, or
written representations of the reporting persons, the Company has determined
that all required reports were timely filed during the year, except for Mr.
Greenawalt, who filed one late Form 4 during the fiscal year.
Certain Relationships and Related Transactions
In exchange for the Company providing interim financing in 1994, the Company
received options to purchase up to 15,228,520 shares of the common stock of Ajay
Sports, Inc. ("Ajay"), which would represent approximately 45% of Ajay's then
outstanding common stock, and received manufacturing rights in certain Ajay
facilities through 2002 under a joint venture agreement. At September 30, 1997
the Company owned 4,117,647 shares (approximately 18% of Ajay's outstanding
common stock) and held vested options to acquire 11,110,873 additional shares of
Ajay common stock at prices ranging from $.34 to $.50 per share.
During 1994 the Company provided a $7,000,000 revolving loan facility to Ajay
for Ajay's operating subsidiary. Ajay manufactures and distributes golf and
billiard accessories primarily to retailers throughout the United States. The
loan to Ajay was recorded as a note receivable, affiliate in the Consolidated
Balance Sheets. In July 1995 Ajay obtained an $8,500,000 credit facility from a
bank which was used to pay off the revolving loan provided by the Company. In
October 1995, Ajay increased its bank line from $8,500,000 to $13,500,000. The
Company had guaranteed this loan up to $13,500,000 and charged Ajay a fee of 1/2
of 1% per annum of the outstanding loan amount for providing this guaranty. The
Chairman and President of the Company is also Chairman and President of Ajay,
and had guaranteed Ajay's obligation to the Company under the loan guaranty.
In July 1997, the Company and Ajay refinanced their bank debt with a bank under
a $34,088,000 three-year joint revolving credit and term loan agreement. At the
date of the Loan closing, the Company borrowed a total of $17,141,000 and had
$488,000 of loan availability under the revolving loan as of September 30, 1997.
The Company had guaranteed the debt of Ajay to Ajay's previous lender, for which
it charged Ajay 1/2% per annum of the outstanding loan balance subject to the
Guaranty. In connection with the July refinancing, the previous lender provided
Ajay $2,340,000 of bridge financing and the Company provided Ajay $2,268,000 at
loan closing to repay the previous loan. The sources of repayment for the bridge
loan are expected to be primarily derived from future expected financial
transactions of the Company. Therefore, it is likely that Ajay will need to
borrow additional funds from the Company in the future to repay the bridge loan
to the extent that the bridge loan is repaid with Company funds. These loans
were necessary because the Company was prohibited from down-streaming funds to
Ajay while the previous loan was in default. The Company has also agreed to
purchase approximately $1,000,000 of notes payable by Ajay to affiliated parties
which had provided loans to Ajay to help Ajay finance operations during the
financial restructuring. Such notes payable have not yet been purchased.
The Company and Ajay have structured a plan (the "Ajay Recapitalization")
whereby Ajay plans to obtain permanent bank financing independent of the
Company's loan which management of Ajay has informed the Company, when combined
with a final investment by the Company, would result in adequate working capital
and eliminate any requirements for further advances or guarantees from the
Company. Ajay management informed the Company it has signed a proposal letter
with a lender for an asset based loan, which Ajay management informed the
Company that it believes, based on expected loan advance rates, would result in
an approximately $2,000,000 shortfall of its projected working capital needs.
The Company intends to invest up to $2,000,000 to provide Ajay adequate working
capital, of which approximately $1,000,000 would be required no later than
February 1998. If Ajay successfully completes its bank financing, the Company
has also proposed to exchange up to $4,000,000 of loans and advances into
convertible voting preferred stock which Ajay management has informed the
Company it believes would allow Ajay to meet the minimum net worth criteria for
continued listing on the Nasdaq Stock Market. The preferred stock would pay a
dividend rate of 9% and would be convertible, at the Company's option, into up
to 12,000,000 shares of Ajay common stock. As presently proposed, the dividend
rate would increase two percentage points each in the years 2002 and 2003 if
Ajay does not achieve pre-tax earnings of at least $500,000 in two consecutive
years prior to 2002 and 2003.
14
<PAGE>
Mr. Itin, the Chairman and President of both the Company and Ajay, has
personally guaranteed to the Company the value of the Company's equity
investment in Ajay, performance of Ajay's obligations to the Company for
repayment of the loans provided to Ajay by the Company, and any monetary
liability for the benefit of Ajay which may be incurred by the Company to the
lender under the joint credit facility of the Company and Ajay.
During the year, the Company extended the expiration date of 150,000 options
held by Acrodyne Corporation, a related party, from November 8, 1997 to November
8, 1999.
In January 1996, the Company initiated a stock repurchase program of up to
1,000,000 shares of its common stock. Under this program the Company acquired
100,000 shares during fiscal 1997 at a price of $2.50 per share. The shares were
purchased in a private transaction from Enercorp, Inc., a publicly-held business
development company which beneficially owns approximately 10.7% of the Company's
stock. The purchase price was the market price of the Company's common stock on
the date the shares were repurchased. The Chairman and President of the Company
is a significant shareholder of Enercorp. In addition, during the year ended
September 30, 1997, the Company issued 50,000 shares at $2.50 per share to
Enercorp for consultant advisory work on various matters. The Company's current
bank loan prohibits further purchases under this program.
Independent Public Accountants
The Company's financial statements for the fiscal year ended September 30, 1997
were audited by Horwath Gelfond Hochstadt Pangburn & Co. ("Gelfond Hochstadt").
Representatives of Gelfond Hochstadt are expected to be present by telephone
conference call for the Meeting and will have an opportunity to make a statement
if they desire to do so, and to be available to respond to appropriate
questions.
Stockholder Proposals
All proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received at the Company's corporate offices at
14100 SW 72nd Avenue, Portland, Oregon 97224, Attention: Corporate Secretary, on
or before September 20, 1998, in order to be considered for inclusion in the
proxy statement for the 1999 meeting.
Other Business
Management does not know of any other business to be brought before the Meeting.
If any such matters are brought before the Meeting, the proxies named in the
enclosed form of proxy will vote proxies received by them as they deem best with
respect to all such matters.
Annual Report
The Company's 1997 Annual Report and its Annual Report on Form 10-K for the
fiscal year ended September 30, 1997 are being sent to all stockholders with
this Proxy Statement but are not incorporated herein by reference and are not to
be considered a part of the Proxy Materials.
By Order of the Board of Directors,
Gerard A. Herlihy
Secretary
15
<PAGE>
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
March 27, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned stockholder of WILLIAMS CONTROLS, INC. (the "Company") hereby
constitutes and appoints Thomas W. Itin and Gerard A. Herlihy as proxies, each
with the power to appoint his substitute, to appear, attend and vote all of the
shares of the Common Stock of the Company standing in the name of the
undersigned at the 1998 Annual Meeting of Stockholders of WILLIAMS CONTROLS,
INC. to be held at the Company's administrative office, 7001 Orchard Lake Rd.,
Suite 424, West Bloomfield, Michigan, on March 27, 1998, at 10:00am (EST), and
at any postponements or adjournments thereof, upon the following matters:
1. ELECTION OF _____ Thomas W. Itin, for a _____ WITHHOLD AUTHORITY
ONE CLASS I three (3) year term to vote for the
DIRECTOR expiring in 2001 nominee
ELECTION OF _____ H. Samuel Greenawalt, _____ WITHHOLD AUTHORITY
ONE CLASS I for a three (3) year to vote for the
DIRECTOR term expiring in 2001 nominee
2. To consider and approve an amendment to the Company's 1993 Stock Option
Plan to increase the number of shares, available for grant thereunder, from
1,500,000 to 3,000,000. Approval of this proposal requires the affirmative
vote of a majority of the shares represented at the Meeting and entitled to
vote on this proposal.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The proxy, when properly signed and delivered, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
proxy will be voted FOR the election of director. This proxy will be voted in
accordance with the discretion of the proxies on any other business.
Please mark, date and sign your name exactly as it appears hereon and
return the Proxy in the enclosed envelope as promptly as possible. It is
important to return this Proxy properly signed in order to exercise your right
to vote if you do not attend the meeting and vote in person. When signing as
agent, partner, attorney, administrator, guardian, trustee or in any other
fiduciary or official capacity, please indicate your title. If stock is held
jointly, each joint owner must sign.
Date: _____________________________________, 1998
--------------------------------------------
Signature
Address if different from that on label:
---------------------------------------------
Street Address
---------------------------------------------
City, State and Zip Code
---------------------------------------------
Number of Shares
Please check if you intend to be present at the meeting ______
<PAGE>
