Williams Controls, Inc.
-----------------------
Notice of Annual Meeting of Stockholders
to be held on February 26, 1999
-------------------------------
The Annual Meeting of Stockholders of Williams Controls, Inc. (the "Company")
will be held at the offices of the Company's subsidiary, Premier Plastic
Technologies, Inc., 42155 Merrill Street, Sterling Heights, Michigan on Friday,
February 26, 1999 at 10:00 a.m. Eastern Standard Time, for the following
purposes:
1. To elect two Class III directors for a three year term expiring in
2002. 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 3,000,000 to 4,500,000. 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 and Series A Preferred
Stock of record at the close of business on January 27, 1999 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 provided 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 27, 1999
Portland, Oregon
<PAGE>
Proxy Statement
for the 1999 Annual Meeting of Stockholders of
Williams Controls, Inc.
-----------------------
Forward-Looking Statements
--------------------------
This Proxy Statement may contain certain "Forward-Looking" statements
as such term is defined in the Private Securities Litigation Reform Act of 1965
or by the Securities and Exchange Commission in its Rules, Regulations and
Releases, which represent the Company's expectations or beliefs, including but
not limited to, statements concerning the Company's operations, economic
performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," "might," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements, by their nature, involve substantial risks and
uncertainties, certain of which are beyond the Company's control, and actual
results may differ materially depending on a variety of important factors,
including uncertainty related to acquisitions, governmental regulations,
managing and maintaining growth, volatility of stock prices and any other
factors discussed in this and other company filings with the Securities and
Exchange Commission.
Additional Information
----------------------
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC
20549 or at the Regional Offices of the Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates. Written requests for such material should be addressed to the
Public Reference Section, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy statements and other information filed electronically by the
Company with the Commission which can be accessed over the internet at
http://www.sec.gov.
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,
February 26, 1999 at the office of the Company's subsidiary, Premier Plastic
1
<PAGE>
Technologies, 42155 Merrill Street, Sterling Heights, 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 January 29, 1999.
As of the close of business on January 27, 1999, the record date for
entitlement to notice of and vote at the Meeting, the Company had outstanding
18,338,588 shares of common stock, $.01 par value per share (the "Common Stock")
and 80,000 shares of Series A 7 1/2% Convertible Redeemable Preferred Stock,
$.01 par value per share ( the "Preferred Stock"). The presence, in person or by
proxy, of holders of one-third of the shares of capital 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. Each share of Preferred
Stock outstanding on the record date is convertible into 36.364 shares of Common
Stock and is entitled to that number of votes 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 and Preferred 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.
2
<PAGE>
Prior to the filing of this proxy, the Board consisted of four members,
including two Class I directors whose terms expire in 2001, one Class II
director whose term expires in 2000 and one Class III director whose term
expires in 1999. The Class III director, R. William Caldwell, who is retiring,
will not stand for re-election at the Meeting and will become a
director-emeritus of the Company. The bylaws of the Company permit a maximum of
two directors in each of the three classes, and as such, management has decided
to nominate two individuals to the Board as Class III directors. The nominees to
fill the open Class III directorships, each covering a three year term, are
Anthony B. Cashen and Charles G. McClure, neither of whom currently serve on the
Board of the Company.
Directors are elected by a plurality of the votes cast. Unless you
withhold authority to vote for the nominee, your proxy will be voted for the
election of Messrs. Cashen and McClure.
If either Mr. Cashen or Mr. McClure 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. Neither management nor the Board knows of any reason why Mr. Cashen or
Mr. McClure would be unavailable to serve on the Board.
Position/Offices Year First
Name Age with Company Elected
---- ----- ---------------- ----------
Nominees:
- - ---------
Class III - Term Expires 2002
- - -----------------------------
Anthony B. Cashen 64 Director ----
Charles G. McClure 45 Director ----
Continuing Directors:
- - ---------------------
Class I - Term Expires 2001
- - ---------------------------
Thomas W. Itin 64 President, Chairman 1988
of the Board, Chief
Executive Officer
and Treasurer
H. Samuel Greenawalt 70 Director 1994
ClassII - Term Expires 2000
- - ---------------------------
Timothy S. Itin 40 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 serves on the Cornell University Council and is
Chairman of the Technology Transfer Committee of the Council. 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 was awarded a
Masters of Business Administration degree from New York University and received
a Bachelor of Science degree from Cornell University.
3
<PAGE>
H. SAMUEL GREENAWALT has served as a director of the Company and a member of the
Audit Committee of the Board 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 ten percent 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 since March 1994. Since January
1999, he has been a Partner in the investment banking firm of Thomas Weisel
Partners in San Francisco, California. From July 1998 to December 1998, he was a
Principal of the investment banking firm NationsBank Montgomery Securities, LLC,
located in San Francisco, California. From January 1996 to June 1998, Mr. Itin
was a Managing Director of the investment banking firm Volpe Brown Whelan &
Company, LLC, in San Francisco. From 1991 through 1995, Mr. Itin was a Managing
Director of Jensen Securities, an institutional brokerage firm located in
Portland, Oregon, where 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 at 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.
ANTHONY B. CASHEN has been nominated to serve as a director of the Company for a
three-year term beginning in 1999. For the past five years, Mr. Cashen has
served as a Managing Partner, then as a Senior Partner, of LAI Ward Howell, a
publicly held management consulting and executive recruiting firm located in New
York City. He has served as Secretary, Treasurer and director of LBO Capital
Corporation, a publicly held Company, since its inception. He currently serves
as a director of Immucell Corp. and Ajay Sports, Inc., both publicly held
companies. See "Certain Relationships and Related Transactions". Previously, Mr.
Cashen had been an officer and principal of the investment firms A.G. Becker,
Inc. and Donaldson Lufkin and Jenrette, Inc. He received an MBA from the Johnson
Graduate School of Management at Cornell University, and a Bachelor of Science
degree from Cornell University.
CHARLES G. MCCLURE has been nominated to serve as a director of the Company for
a three-year term beginning in 1999. Since August 1997, he has been President of
Detroit Diesel Corporation, a publicly held company, and has been a director
since November 1997. From 1995 to 1997, he was President, and before that Vice
President and General Manager, of the Americas Division of Johnson Controls,
Inc., a publicly held company. From 1992 to 1995, he was Vice President and
managing director of Johnson Controls' Automotive Systems Group's European
Operations. Mr. McClure serves on the Cornell University Council and is a member
of the Technology Transfer Committee of the Council. He received an MBA from the
University of Michigan and a Bachelor of Science degree from Cornell University.
4
<PAGE>
Proposal 2 - Approval of an Amendment to the Company's 1993 Stock Option Plan
-----------------------------------------------------------------------------
The Board 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 3,000,000 shares of Common Stock, as adjusted annually (the
"Available Shares") to 4,500,000 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, and in 1998, the
stockholders approved an amendment to the Plan to increase the number of shares
allocated under the plan to no more than 3,000,000. 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 3,000,000 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 4,500,000 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 December 31, 1998, the status of
Available Shares:
- - -------------- ---------------- ------------ ------------------ ----------------
Shares # of Options # of Options Shares Subject Shares Avail.For
Reserved Granted (Net of Exercised to Outstanding Grant of Future
Forfeitures) Options Options
- - -------------- ---------------- ------------ ------------------ ----------------
3,000,000 2,642,875 8,750 2,634,125 357,125
- - -------------- ---------------- ------------ ------------------ ----------------
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 1,857,125 shares available for the grant of future
options under the 1993 Plan, representing 4,500,000 shares less the 2,642,875
options previously granted.
The 1993 Plan was adopted by the Board on September 20, 1993 for a
ten-year term. Amendments to the 1993 Plan were approved by the stockholders on
February 22, 1995 and March 27, 1998, increasing the maximum number of shares to
be allocated under the 1993 Plan from the original amount of 700,000 to
1,500,000 and then to 3,000,000, respectively.
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.
At December 31, 1998 approximately 74%, or 280 of the Company's non-union
5
<PAGE>
employees were participating 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.
The 1993 Plan is currently administered by the Board's Compensation
Committee ("Committee"). 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 Committee has the authority and
discretion to determine when Options will be granted and the number of Options
to be granted. The Committee 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 Committee 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, subject to the limitations of the Plan. The Committee may adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable for the administration of the 1993 Plan.
The Committee 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 Committee 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 Committee, the Plan
will terminate on September 20, 2003. At such time, the Committee would become
unable to grant further options. However, prior granted options will remain in
effect through their expiration and exercise dates.
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,
spin-off, 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 Committee 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 Committee 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.
6
<PAGE>
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 Committee 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 Company will be for no more than five years. The
Committee 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 Committee 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.
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 of 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.
7
<PAGE>
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.
8
<PAGE>
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.
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, 1998, the Board held a total
of eight meetings and acted by unanimous written consent six times. The Board
maintains an Audit Committee, a Compensation Committee and a Nominating
Committee. The members of the Audit Committee are H. Samuel Greenawalt 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 three times during the year. The members of
the Compensation Committee are Timothy S. Itin and William Caldwell, who is
retiring from the Board on February 26, 1999. 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 four times during the year. The
members of the Nominating Committee are Timothy S. Itin and H. Samuel
Greenawalt. The Nominating Committee primarily recommends persons to serve as
directors of the Company. The Nominating Committee met two times during the
year. Each director attended more than 75% of the meetings of the Board of
Directors, the Audit, Compensation and Nominating 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 December 31, 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.
Name Age Position
---- --- --------
Thomas W. Itin 64 President, Chairman of the Board, Chief Executive
Officer and Treasurer
Gerard A. Herlihy 46 Chief Administrative and Chief Financial Officer,
Secretary and Principal Accounting Officer
Timothy J. Marker 49 Vice President - Sales and Marketing
Thomas K. Ziegler 53 Vice President and Counsel
9
<PAGE>
For information regarding Mr. Itin, see his biography above.
GERARD A. HERLIHY has been Chief Financial and Administrative Officer since
February 1997, Secretary of the Company since August 1997. Prior to joining the
Company, Mr. Herlihy directed turnarounds of financially troubled companies.
From 1994 to 1996, he was President and Chief Operating Officer and a member of
the Board of Directors of CliniCorp, Inc., a publicly-held healthcare company.
CliniCorp filed for Chapter 11 bankruptcy protection during the year following
Mr. Herlihy's resignation. 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 and a member of the Board of Directors of 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 an MBA Degree from
the Harvard Business School and a Bachelor of Science Degree from the University
of Rhode Island. He is also a Certified Public Accountant ("Retired Status").
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, Mr.
Marker was Vice President of Sales/Engineering for this same company. From 1972
to 1982, Mr. Marker 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.
THOMAS K. ZIEGLER has been Counsel since 1994 assuming the position of Vice
President in 1998. Since 1994, he has been President of Williams Technologies,
Inc., a wholly-owned subsidiary of the Company involved in research and
development and technology partnering on behalf of the Company's subsidiaries.
From 1989 to 1994, he was an attorney practicing patent law for the firm Dykema
Gossett in Bloomfield Hills, Michigan. He received a Juris Doctor degree in Law
and a Bachelor of Science degree in Electrical Engineering, both from the
University of Missouri.
Executive Compensation
----------------------
Summary Compensation Table
- - --------------------------
The table below sets forth the compensation received by the Chief Executive
Officer of the Company and other executive officers of the Company, for the past
three fiscal years, who received compensation in excess of $100,000 during the
fiscal year ended September 30, 1998. In addition, compensation is reported for
one other employee of the Company who is not an executive officer of the Company
who received compensation in excess of $100,000 during fiscal 1998. The Company
has no restricted stock award or long-term incentive plans.
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------
Name and Principal Year Salary ($) Bonus ($) (1) Other Ann'l Securities All Other
Position Compensation Underlying Compensation
Options (#) ($)
- - -------------------------------------------------------------------------------------------------------------
Thomas W. Itin 1998 150,000 150,000 300,000 -
- - -------------------------------------------------------------------------------------------------------------
Chief Executive Officer 1997 150,000 150,000 - 300,000 -
- - -------------------------------------------------------------------------------------------------------------
1996 150,000 - - - -
- - -------------------------------------------------------------------------------------------------------------
Gerard A. Herlihy 1998 120,000 60,000 80,000 -
- - -------------------------------------------------------------------------------------------------------------
Chief Financial Officer 1997 75,000 (2) 50,000 20,000 (4) 70,000 -
- - -------------------------------------------------------------------------------------------------------------
1996 - - - -
- - -------------------------------------------------------------------------------------------------------------
Timothy J. Marker 1998 120,000 (3) 50,000 70,000
- - -------------------------------------------------------------------------------------------------------------
VP - Sales and 1997 12,500 5,000 30,000
Marketing
- - -------------------------------------------------------------------------------------------------------------
1996 - - -
- - -------------------------------------------------------------------------------------------------------------
Thomas K. Ziegler 1998 120,000 35,000 30,000
- - -------------------------------------------------------------------------------------------------------------
VP and Counsel 1997 120,000 30,000 60,000
- - -------------------------------------------------------------------------------------------------------------
1996 120,000 30,000
- - -------------------------------------------------------------------------------------------------------------
Dennis C. Knowlton 1998 97,500 (2)(3) 40,000 75,000
- - -------------------------------------------------------------------------------------------------------------
General Manager of 1997 - - -
Williams Controls
Subsidiary
- - -------------------------------------------------------------------------------------------------------------
1996 - - -
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Bonuses for 1997 were not known or calculable at the date that the 1998
proxy was mailed to stockholders. The table above reflects the bonus
paid as 1997 compensation.
(2) The compensation reflects the fact that the executives noted, in the years
noted, did not work for the entire fiscal year. Mr. Herlihy started in
February 1997, Mr. Marker started in August 1997, and Mr. Knowlton started
in January 1998.
(3) The "Salary" of Mr. Marker and Mr. Knowlton reflect performance-related
bonuses built into regular compensation of $20,000 and $7,500,
respectively.
(4) Other compensation reflects consulting fees paid prior to Mr. Herlihy's
initial date of employment.
Options/SAR Grants Table
- - ------------------------
The table below summarizes options granted during the fiscal year ended
September 30, 1998 to the executive officers and employee named in the Summary
Compensation Table. The Company has not granted any SARs.
11
<PAGE>
<TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C>
- - ------------------ ---------- ----------- ---------- ---------- -----------------------------
Name # of % of Total Exercise Expiration Potential Realizable Value at
Securities Options Price Date Assumed Ann'l Rate of Stk.
Underlying Granted to ($/Share) Price Appreciation
Options Employees for Option Term
Granted
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
5% ($) 10% ($)
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
Thomas W. Itin 300,000 34 2.44 3/12/03 117,525 339,996
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
Gerard A. Herlihy 80,000 9 2.50 3/26/08 125,779 318,748
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
Timothy J. Marker 70,000 8 2.50 3/26/08 110,057 278,905
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
Thomas K. Ziegler 30,000 3 2.50 3/26/08 47,167 119,531
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
Dennis C. Knowlton 25,000 3 2.50 1/5/08 39,306 99,609
50,000 6 2.63 3/26/08 82,542 209,179
- - ------------------ ---------- ----------- ---------- ---------- ----------- --------------
</TABLE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
- - ------------------------------------------------------------------
The table below summarizes fiscal year-end option values of the executive
officers and an employee named in the Summary Compensation Table.
<TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- - ------------------ ----------- ---------- ---------------------------- ---------------------------
Name # Shares $ Value Securities Underlying Value of Unexercisable In-
Acquired on Realized Unexercised Options at Year the Money Options at Year
Exercise End (#) End ($)
- - ------------------ ----------- ---------- ---------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
Thomas W. Itin (a) 0 0 300,000 450,000 54,675 54,675
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
Gerard A. Herlihy 0 0 55,000 95,000 15,295 15,295
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
Timothy J. Marker 0 0 32,500 67,500 3,285 3,285
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
Thomas K. Ziegler 0 0 37,500 52,500 13,110 13,110
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
Dennis C. Knowlton 0 0 18,750 56,250 - 0 - - 0 -
- - ------------------ ----------- ---------- ----------- -------------- ----------- --------------
</TABLE>
(a) In addition to these options, 150,000 exercisable options are held by
Acrodyne Corporation, a company owned by Mr. Itin with a value of $294,750
at year end.
Pension Plan
- - ------------
Under the Company's Pension Plan, the Company is required to contribute
amounts sufficient to fund specified retirement benefits for covered employees.
Benefits are calculated on the basis of an employee's final average pay and
length of service. Final average pay generally means the average of the
employee's three highest annual compensation amounts during the last ten
calendar years of employment. Compensation means taxable compensation plus any
salary deferrals allowable under the Internal Revenue Code Sections 125 or 402.
Compensation is limited in accordance with Internal Revenue Code Section
401(a)(17). For the 1997 calendar year, compensation considered under the plan
may not exceed $160,000. Benefits are payable under normal (age 65), early (age
55 with 10 years of service) or deferred (over age 65) retirement or death.
Employees who are officers or directors of the Company participate in
the Pension Plan on the same basis as other employees, however, the plan is
closed to new entrants. As a result, the only officer of the Company who is
eligible for the plan is Thomas Itin. In general, an employee retiring under the
plan will receive an annuity payable for life without any offsets.
12
<PAGE>
The following table sets forth estimated annual benefits as retirement
under the Pension Plan for covered employees of the Company at various assumed
years of service and levels of final average pay. The calculations are shown for
an employee retiring at age 65 in the form of a level single life annuity to the
employee. The years of credited service and final average pay for Pension Plan
purposes as of September 30, 1998 for the Named Officer, Thomas Itin, is 6.00
years of service and $150,000 final average pay.
Estimated Annual Retirement Benefits
------------------------------------
(nearest $100)
- - --------------- ------ ------ ------ ------ ------ ------ ------
Final Average 5 10 15 20 25 30 35
Salary
- - --------------- ------ ------ ------ ------ ------ ------ ------
$125,000 9,300 18,600 27,900 37,200 46,500 55,800 65,100
- - --------------- ------ ------ ------ ------ ------ ------ ------
$150,000 11,400 22,700 34,100 45,500 56,800 68,200 79,500
- - --------------- ------ ------ ------ ------ ------ ------ ------
$175,000 11,600 23,300 34,900 46,600 58,200 69,800 81,500
- - --------------- ------ ------ ------ ------ ------ ------ ------
$180,000 11,600 23,300 34,900 46,600 58,200 69,800 81,500
- - --------------- ------ ------ ------ ------ ------ ------ ------
Compensation of Directors
- - -------------------------
The non-employee directors of the Company are paid $500 for each
regular Board meeting attended and are reimbursed for reasonable costs incurred
to attend the meetings.
In February 1998, 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 $2.44 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 served as Chief Executive Officer at a minimum salary of
$150,000 per year. On August 15, 1997, the Company' Board approved an employment
agreement with Mr. Itin to employ him for the later of five years from the date
of the Board approval or the termination of the guaranty he has provided to the
Company. The employment agreement has not yet been signed. See "Certain
Relationships and Related Transactions".
Board Compensation Committee Report on Executive Compensation
- - -------------------------------------------------------------
The Compensation Committee of the Board 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
13
<PAGE>
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.
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 100% 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 beneficially own
approximately 42.8% of the outstanding common stock. In particular, Mr. Itin,
the Company's Chairman and Chief Executive Officer beneficially owns
approximately 30.5% 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 ten years and
employees must be employed by the Company in order to continue to accrue time
towards the Plan's 3 year vesting schedule. 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.
14
<PAGE>
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, 1998, the Company's Chief
Executive Officer was paid a base annual salary, provided for under his
employment agreement with the Company, and, in December 1998, was paid a bonus
based on the financial performance of the Company for the 1998 fiscal year. He
also received a cash bonus for the 1997 fiscal year that was paid in February
1998. In addition, on March 12, 1998, he received a grant of 300,000 options
under the 1993 Plan, which expire on March 12, 2003 at an option price of $2.44
per share. On May 1, 1997, he received a grant of 300,000 options under the 1993
Plan, which expire on May 1, 2002 at an option price of $2.13 per share. On May
1, 1997 he also had 150,000 options, originally granted on April 1, 1994 at an
option price of $3.23, canceled and reissued at an option price of $2.13 per
share and expiring May 1, 2002.
Timothy S. Itin, Chairman
R. William Caldwell
15
<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, 1998, 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.
[Insert Graph]
- - --------------
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
CRSP Total Returns Index
------------------------
- - -------- ----------------------- ------- ------- ------- ------- ------- -------
Legend Indices 9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- - -------- ----------------------- ------- ------- ------- ------- ------- -------
Company Williams Controls 100.0 184.2 197.1 162.1 140.0 140.0
- - -------- ----------------------- ------- ------- ------- ------- ------- -------
Market Nasdaq Stock Market 100.0 100.8 139.3 165.2 226.8 231.8
(US Companies)
- - -------- ----------------------- ------- ------- ------- ------- ------- -------
Peer Nasdaq Stocks (SIC 100.0 97.5 100.0 113.5 191.2 148.7
Index 3710-3719 US Companies)
Motor Vehicles and
Motor Vehicle Equipment
- - -------- ----------------------- ------- ------- ------- ------- ------- -------
</TABLE>
NOTES: 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 100.0 on 9/30/93.
Security Ownership of Certain Beneficial Owners and Management
- - --------------------------------------------------------------
The table below sets forth, as of December 31, 1998, the number of
shares of Common and Preferred 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 and/or Preferred Stock. The following stockholders have sole voting and
investment power with respect to their holdings unless otherwise noted.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Percentage Amount of Percentage of
Common Stock of Common Preferred Stock Preferred
Name and Address Beneficially Stock Beneficially Stock
Of Beneficial Owner Owned Owned* Owned Owned**
- - -------------------------------- ------------ ---------- --------------- -------------
Thomas W. Itin (1)(2)(4) 5,713,752 30.5 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Enercorp, Inc. (5) 1,964,829 10.6 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
Acrodyne Corporation (6) 1,200,000 6.5 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
H. Samuel Greenawalt (7)(13) 2,177,729 11.8 -0- -0-
7001 Orchard Lake Rd., Suite 424
West Bloomfield, MI 48322-3608
R. William Caldwell (7) 40,000 *** -0- -0-
515 McDonald Street
Midland, MI 48640
Timothy S. Itin (7) 50,000 *** -0- -0-
1 Montgomery Street, Suite 3700
San Francisco, CA 94104
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Percentage Amount of Percentage of
Common Stock of Common Preferred Stock Preferred
Name and Address Beneficially Stock Beneficially Stock
Of Beneficial Owner Owned Owned* Owned Owned**
- - --------------------------------- ------------ ---------- --------------- -------------
Anthony B. Cashen (12) 166,719 *** -0- -0-
99 Park Avenue, 20th Floor
New York, NY 10016
Charles G. McClure -0- -0- -0- -0-
13400 Outer Drive, W.
Detroit, MI 48239
Gerard A. Herlihy (3)(8) 606,732 3.3 -0- -0-
700 NW 12th Avenue
Deerfield Beach, FL 33442
Thomas K. Ziegler (9) 56,500 *** -0- -0-
7001 Orchard Lake Road, Suite 422
West Bloomfield, MI 48322
Timothy J. Marker (10) 45,787 *** -0- -0-
42155 Merrill Street
Sterling Heights, MI 48314
Dennis C. Knowlton (11) 32,150 *** -0- -0-
14100 SW 72nd Avenue
Portland, OR 97224
Mark E. Brady (14) 356,630 1.9 17,500 21.9
Robert J. Suttman, II
Ronald L. Eubel
7777 Washington Village Drive
Suite 210
Dayton, OH 45459
E. H. Arnold -0- -0- 5,000 6.3
625 South Fifth Avenue
Lebanon, PA 17042
Dolphin Offshore Partners, L.P. -0- -0- 12,750 15.9
c/o Dolphin Management Inc.
129 East 17th Street
New York, NY 10007
All executive officers and 8,177,518 42.8 -0- -0-
directors as a group (twelve persons)
</TABLE>
* Based upon 18,338,588 shares outstanding.
** Based upon 80,000 shares outstanding.
*** Less than one percent.
1) Includes 375,000 shares of Common Stock issuable upon exercise of
presently exercisable stock options held by Mr. Itin. Also includes
3,792,000 shares of Common Stock 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 58,200 shares of
Common Stock held in the name of Dearborn Wheels, Inc. Mr. Itin disclaims
beneficial ownership of the 58,200 shares. Also includes 402,600 shares of
18
<PAGE>
Common Stock owned by certain trusts for which Mr. Itin's spouse serves as
trustee. Neither Mr. or Mrs. Itin is a beneficiary of these trusts, and
they disclaim beneficial ownership of the 402,600 shares owned by the
trusts. Also includes 166,719 shares of Common Stock held in the name of
Ajay Sports, Inc. Mr. Itin is President, CEO and a director of Ajay
Sports, Inc., and disclaims beneficial ownership of the 166,719 shares of
Common Stock.
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 147,000 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 115,000 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 204,323 shares of Common Stock 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 except
for 22,389 shares allocated for his benefit. Also includes 78,809 shares
of Common Stock 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 204,323 shares of Common Stock owned by the Company's 401(k) Plan
for Non-Union Employees, of which Mr. Herlihy is trustee. Mr. Herlihy
disclaims beneficial ownership of these shares, other than 4,308 shares
allocated for his benefit. Also includes 78,809 shares of Common Stock
owned by the Company's 401(k) Plan for Union Employees, of which Mr.
Herlihy is trustee. Mr. Herlihy disclaims beneficial ownership of these
shares. Also includes 115,000 shares of Common Stock owned by the
Company's Non-Union Employees Retirement Income Pension Plan, of which Mr.
Herlihy is the trustee. Mr. Herlihy disclaims beneficial ownership of
these shares. As a trustee, Mr. Herlihy shares 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 8.3% of the outstanding voting
securities of Enercorp, Inc.
5) Includes 112,500 shares of Common Stock 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 35,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
8) Includes 55,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
9) Includes 37,500 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
10) Includes 32,500 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
11) Includes 32,150 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days of the date of this table.
12) Includes 166,719 shares of Common Stock held in the name of Ajay Sports,
Inc. Mr. Cashen is a director of Ajay Sports, Inc. and disclaims
beneficial ownership of the 166,719 shares of Common Stock.
19
<PAGE>
13) Includes 1,852,329 shares of Common Stock and 112,500 options that are
exercisable within 60 days of the date of this table held in the name of
Enercorp, Inc. Mr. Greenawalt is a director of Enercorp, Inc. owns
approximately 2.4% of the outstanding voting shares of Enercorp, Inc. Mr.
Greenawalt disclaims beneficial ownership of the 1,852,329 shares of
Common Stock and 112,500 options.
14) Shares are owned by certain investment partnerships and by individuals
over whose accounts Messrs. Brady, Suttman, and Eubel have voting and
dispositive power. Messrs. Brady, Suttman and Eubel disclaim beneficial
ownership of the shares owned by the investment partnerships and
individuals other than an estimated 6,184 shares of Common Stock and 464
shares of Preferred Stock allocated for their benefit.
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.
Certain Relationships and Related Transactions
----------------------------------------------
At September 30, 1998 the Company had an investment in and notes
receivable from Ajay Sports, Inc. ("Ajay") in the amount of $6,640,000,
including a $500,000 note receivable reflected as a reduction in the Company's
shareholders' equity relating to the issuance of 206,719 shares of the Company's
common stock to Ajay. Ajay manufactures and distributes golf accessories and
outdoor leisure furniture primarily to retailers in the United States. The
Chairman of the Company is the Chairman of Ajay.
The Company's investment in and note receivable from affiliate at
September 30, 1998 is comprised of an investment in common and preferred stock
of Ajay in the amount of $53,000 and $5,000,000 respectively and a secured note
receivable in the amount of $1,087,000. The Company's common stock investment
consisted of 686,274 shares (approximately 18% of Ajay's outstanding common
stock). In addition, the Company owns options to acquire 1,851,813 additional
shares of Ajay common stock at $1.08 per share. The Company could be obligated
to advance to Ajay up to an additional $2,015,000 under the terms of an
Intercreditor Agreement with a prior bank. The chairman of the Company has
provided a guarantee of the investments in and loans to Ajay.
In exchange for providing a loan to Ajay in 1994, the Company received
options to purchase up to 2,538,087 shares (all Ajay share amounts adjusted for
subsequent 1:6 reverse stock split), or 45% of the common stock of Ajay, at
prices ranging from $2.04 to $3.00 per share, and received manufacturing rights
in certain Ajay facilities through 2002 under a joint venture agreement. In
October 1994, the Company exercised options to acquire 686,274 shares through a
reduction in a note receivable in the amount of $1,400,000. The exercise prices
for the remaining options were reduced to $1.08 as partial consideration for the
July 1997 financing.
20
<PAGE>
In July 1995 Ajay obtained a credit facility from a bank which was used
to repay the loan provided by the Company. In July 1997, the Company and Ajay
refinanced their bank debt with a bank under a three-year joint revolving credit
and term loan agreement. 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. Any payments by the Company of
the bridge loan would result in an increase in loans payable to the Company by
Ajay. Through September 30, 1998, the Company has made required payments on the
bridge financing of approximately $275,000. The remaining amount due on the
bridge financing was $2,015,000 at September 30, 1998. In addition, as a
condition to the bank financing, the Company agreed to assume notes payable due
by Ajay to Enercorp in the amount of $200,000 and First Equity Corporation in
the amount of $748,000. Enercorp and First Equity Corporation provided loans to
Ajay during fiscal 1997 to help Ajay finance operations because the Company was
prohibited by the terms of the loan agreement from down-streaming funds to Ajay
while the previous loan was in default. The Company paid the note to First
Equity Corporation during fiscal 1998. The Company paid Enercorp $50,000 during
fiscal 1998 and issued Enercorp a note payable in the amount of $50,000 and
42,329 shares of common stock in the amount of $100,000 in satisfaction of the
$200,000 assumed note.
On June 30, 1998, the Company restructured its investment in Ajay (the
"Ajay Restructuring".) The objective of the Ajay Restructuring is to separate
the Company's and Ajay's financing, eliminate Ajay's dependency on the Company
for capital and provide Ajay with adequate working capital to grow its
operations and improve shareholder value which would benefit the Company. The
restructuring provides Ajay three years to improve shareholder value at which
time the notes receivable become due and payable. No dividends are accrued and
payable on the preferred stock through July 31, 2001. The preferred stock
dividend rate increases to an annual rate of 17% in 2001 and 24% in 2002, rates
which the Company believes would require Ajay to raise capital from new sources
to redeem the preferred stock.
As a result of the Ajay Restructuring, the bank provided separate loan
facilities to the Company and Ajay. Under the restructured facility, all joint
and several liability, cross collateral agreements and guarantees of the Company
with respect to the Ajay portion of the credit facility prior to the
restructuring have been terminated. As consideration to the bank for the
separate loan facilities, the Company provided Ajay $2,000,000 in additional
capital during 1998, purchased Ajay notes payable of $948,000 previously
provided by affiliated parties of the Company, and agreed to convert $5,000,000
of advances to Ajay into a new cumulative convertible preferred stock. The
preferred stock is convertible into 3,333,333 shares of Ajay common stock. The
secured promissory notes bear an annual interest rate of 16% payable monthly. In
addition, Ajay has agreed to pay the Company annual administrative fees of
$90,000 and a management fee for sourcing products overseas in the amount of
$80,000 annually. An employee of Ajay provided management services to the
company as an executive officer of the Company. Ajay was reimbursed
approximately $95,000 in total for his 1998 and 1997 time and services. The
Company accepted the officer's resignation in December 1998. Mr. Itin has
provided an amended guaranty to the Company that guarantees the investments in
and loans to Ajay.
21
<PAGE>
The Chief Executive Officer of the Company is a significant shareholder
of Enercorp, Inc. ("Enercorp"), a publicly held business development company
that beneficially owns approximately 10.6% of the Company's stock. Enercorp's
President is the son-in-law of the Company's Chief Executive Officer. Enercorp
provides the Company certain administrative, consulting and acquisition advisory
services. Enercorp received options to purchase 50,000 shares of the Company's
common stock in October 1998 at the market price at the date of grant. In April
1998, the Company paid Enercorp $25,000 for administrative and consulting
services performed in fiscal 1997.
Independent Public Accountants
------------------------------
The Company's financial statements for the fiscal year ended September
30, 1998 were audited by Arthur Andersen, LLP ("Andersen"). The Company's
financial statements for the fiscal year ended September 30, 1997 were audited
by Horwath Gelfond Hochstadt Pangburn & Co. ("Gelfond"). On July 29, 1998, the
Company notified Gelfond that the Company's Board of Directors, effective that
same day, had decided to retain the services of Andersen as its independent
public accountants, which would complete the audit of the Company's books and
records for the year ended September 30, 1998. There were no disagreements with
Gelfond on matters related to the previous audit relationship. Representatives
of Andersen are not expected to be present at the Meeting.
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 October 26, 1999, in order to be considered for
inclusion in the proxy statement for the year 2000 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 1998 Annual Report and its Annual Report on Form 10-K for
the fiscal year ended September 30, 1998 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
22
<PAGE>
- - --------------------------------------------------------------------------------
PROXY
- - --------------------------------------------------------------------------------
WILLIAMS CONTROLS, INC.
7001 Orchard Lake Road, Suite 424
West Bloomfield, Michigan
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
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 or Gerard A. Herlihy as attorneys
and proxies, to appear, attend and vote all of the shares of the Common Stock
and/or the Series A Preferred Stock of Williams Controls, Inc. standing in the
name of the undersigned at the Annual Meeting of Stockholders of Williams
Controls, Inc. to be held at the Company's wholly-owned Subsidiary, Premier
Plastic Technologies, 42155 Merrill Street, Sterling Heights, Michigan on
Friday, February 26, 1999 at 10:00 a.m. Eastern Standard Time, and at any
postponements or adjournments thereof:
1. To elect the following two Class III directors to serve for a three
year term expiring in 2002: Anthony B. Cashen and Charles G. McClure.
For all nominees ____________.
Withhold authority to vote for all nominee(s) ____________.
Withhold authority to vote for nominee(s) named below:
------------------------------------------------------------------------
2. To consider and vote upon an amendment to the Company's 1993 Stock
Option Plan to increase the number of shares available for grant thereunder from
3,000,000 to 4,500,000.
FOR ______ AGAINST ______ ABSTAIN ______
3. To transact such other business as may properly come before the
meeting.
<PAGE>
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH
RESPECT TO PROPOSAL TWO AND FOR THE NOMINEES LISTED IN PROPOSAL ONE, BUT THEY
WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL ONE AND FOR PROPOSAL TWO IF NO
SPECIFICATION IS MADE. 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: ____________, 1999
--------------------------------------------
Signature(s)
Address if different from that on label:
--------------------------------------------
Street Address
--------------------------------------------
City, State and Zip Code
--------------------------------------------
Number of shares of Common Stock
--------------------------------------------
Number of shares of Series A Preferred Stock
Please check if you intend to be present at the meeting: ___________
