<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Stimsonite Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
STIMSONITE CORPORATION
6565 West Howard Street
Niles, Illinois 60714
April 9, 1999
Dear Stockholder:
We cordially invite you to attend the 1999 Annual Meeting of Stockholders
to be held on Thursday, May 20, 1999, at 9:00 a.m., Central time, at the
Company's principal executive offices, 6565 West Howard Street, Niles,
Illinois 60714.
The following pages include a formal notice of the meeting and the proxy
statement. The proxy statement describes various matters on the agenda for the
meeting. After we conclude the formal part of the meeting, we will discuss the
Company's financial performance last year, the progress made in meeting
important strategic objectives and other items of general interest. We will be
pleased to answer any questions that you might wish to raise at the meeting.
We encourage you to attend in person. If that is not possible, please sign
and return the enclosed proxy card as soon as possible. Otherwise, your vote
cannot be counted.
Sincerely,
Robert E. Stutz
President and Chief Executive
Officer
<PAGE>
STIMSONITE CORPORATION
6565 West Howard Street
Niles, Illinois 60714
----------------
Notice of Annual Meeting of Stockholders
May 20, 1999
----------------
To the Stockholders of Stimsonite Corporation (the "Company"):
Notice is hereby given that the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") will be held at the Company's principal
executive offices, 6565 West Howard Street, Niles, Illinois 60714, on
Thursday, May 20, 1999 at 9:00 a.m., Central time, for the following purposes:
1.To elect nine directors to serve during the year and until their
successors are elected;
2.To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending December 31,
1999; and
3.To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 5, 1999 are
entitled to notice of, and to vote at, the annual meeting and any
postponements or adjournments thereof. If you do not expect to attend the
meeting in person, please sign and return the accompanying proxy card in the
enclosed postage prepaid envelope. If you later find that you can be present
or for any other reason desire to revoke your proxy, you can do so at any time
before the voting.
By order of the Board of Directors,
Thomas C. Ratchford
Secretary
Niles, Illinois
April 9, 1999
<PAGE>
STIMSONITE CORPORATION
----------------
PROXY STATEMENT
----------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company from the holders of the
Company's common stock, $.01 par value (the "Common Stock"), in connection
with the Annual Meeting and all postponements or adjournments thereof. This
notice of the Annual Meeting and proxy statement, and the accompanying proxy
card, are first being mailed to stockholders on or about April 9, 1999, for
the purposes set forth in the notice of the Annual Meeting.
GENERAL
Only holders of record of shares of Common Stock at the close of business
on April 5, 1999 (the "Record Date") are entitled to notice of, and to vote
at, the Annual Meeting or any postponements or adjournments thereof. At the
close of business on the Record Date, there were 8,343,877 shares of Common
Stock outstanding, each of which is entitled to one vote on each matter to be
acted upon at the Annual Meeting.
If the accompanying proxy card is properly signed and returned to the
Company and is not revoked, it will be voted in accordance with the
instructions contained therein. Unless contrary instructions are given, the
persons designated as proxy holders in the proxy card will vote (i) for the
election as director of all of the nominees proposed by the Board of
Directors, and (ii) for ratification of the appointment of
PricewaterhouseCoopers LLP, as the Company's independent accountants for the
fiscal year ending December 31, 1999. Because the Company did not receive by
March 1, 1999 (the date determined by reference to Rule 14a-4(c)(1) under the
Securities Exchange Act of 1934 (the "Exchange Act")) notice of any matter
intended to be raised by a stockholder at the Annual Meeting, the persons
designated as proxy holders in the proxy card will vote the shares represented
thereby, with regard to all other matters, as recommended by the Company's
Board of Directors or, if no such recommendation is given, in their own
discretion. Proxy cards that are properly signed and returned in a timely
manner with no other marking will be voted in accordance with the
recommendation of the Company's Board of Directors. Each stockholder may
revoke a previously granted proxy at any time before it is voted by filing
with the Secretary of the Company a revoking instruction or a duly executed
proxy bearing a later date. The powers of the proxy holders will also be
suspended if the person executing the proxy attends the Annual Meeting and
requests to vote in person. Attendance at the Annual Meeting will not, in
itself, constitute revocation of a previously granted proxy.
The Company will bear the cost of soliciting proxies in the enclosed form.
The Company will also request brokerage firms, banks, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of shares of
Common Stock as of the Record Date and will reimburse the cost of forwarding
the proxy materials in accordance with customary practice.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting, present in person or
by proxy, will constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes will be counted for purposes of determining the presence of a
quorum at the Annual Meeting.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
a representative of the Company's transfer agent, who will determine whether
or not a quorum is present. Votes may be cast for, against or as abstentions.
Because abstentions will be counted for purposes of determining the shares
present or represented at the Annual Meeting and entitled to vote, abstentions
will have the same effect as a vote against the proposal to which such
abstention applies. Broker/dealers who hold their customers' shares in street
name may, under the applicable rules of the exchange and other self-regulatory
organizations of which the broker/dealers are members, sign and submit proxies
for such shares and may vote such shares on routine
1
<PAGE>
matters, which typically include the election of directors, but broker/dealers
may not vote such shares on certain other matters, which typically include
transactions related to mergers, without specific instructions from the
customer who owns such shares. Proxies signed and submitted by broker/dealers
that have not been voted on certain matters as described above in the previous
sentence are referred to as broker non-votes. Broker non-votes on a particular
matter are not deemed to be shares present and entitled to vote on such matter
and, assuming presence of a quorum, will not affect whether any proposal is
approved at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 1, 1999 by (a) persons owning of
record or known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock, (b) each director, (c) each
of the Named Executive Officers (as defined under "Executive Compensation"
below) and (d) all current directors and executive officers of the Company as
a group. All information with respect to beneficial ownership has been
furnished by the respective director, executive officer or stockholder, as the
case may be, or has been derived from documents filed with the Securities and
Exchange Commission (the "SEC"). Unless otherwise indicated in a footnote, the
address of each beneficial owner of more than five percent of the Common Stock
is 230 East High Street, Charlottesville, Virginia 22902.
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Name Owned (1) Beneficially Owned
- ---- ------------ ------------------
<S> <C> <C>
Zayucel Limited/Laurence Z.Y. and Celia Moh
(2)........................................... 1,476,504 17.7%
Terrence D. Daniels (3)........................ 1,173,557 14.0%
Quad-C, Inc. (4)............................... 24,733 *
Quad-C Partners III, L.P. (5).................. 441,000 5.3%
Quad-C II, L.L.C. (6).......................... 441,000 5.3%
Quad-C Partners II, L.P. (5)................... 24,733 *
Quaker Capital Management Corporation (7)...... 852,575 10.2%
Kestrel Investment Management Corporation (8).. 604,000 7.2%
Kalmar Investments Inc. (9).................... 548,750 6.6%
Reich & Tang Asset Management L.P. (10)........ 425,400 5.1%
Lawrence S. Eagleburger (11)................... 11,795 *
Donald H. Haider (12).......................... 10,589 *
Edward T. Harvey, Jr. (13)..................... 338,399 4.1%
Anthony R. Ignaczak (14)....................... 48,335 *
Richard J.M. Poulson (15)...................... 3,697 *
Samuel K. Skinner.............................. 0 *
Robert E. Stutz (16)........................... 66,000 *
Jay R. Taylor (17)............................. 227,700 2.5%
Lew C. Coffin.................................. 0 *
Clifford S. Deremo (18)........................ 12,333 *
Robert M. Pricone (19)......................... 40,183 *
Thomas C. Ratchford (20)....................... 30,083 *
All directors and executive officers
as a group (15 persons) (21).................. 2,004,004 23.1%
</TABLE>
- --------
*Less than one percent.
(1) Unless otherwise indicated in these footnotes or under "--Quad-C", each
stockholder has sole voting and investment power with respect to the
shares of Common Stock beneficially owned. All share amounts reflect
beneficial ownership determined pursuant to Rule 13d-3 under the Exchange
Act.
2
<PAGE>
(2) Laurence Z.Y. and Celia Moh share voting and investment power with
respect to these shares of Common Stock, all of which are held by Zayucel
Limited. Mr. and Mrs. Moh disclaim beneficial ownership of the shares of
Common Stock. The address for Zayucel Limited is 301 Yu To Sang Bldg., 37
Queens Road Central, Hong Kong, and the address for Laurence Z.Y. and
Celia Moh is 15 Bin Tong Park, Singapore 269796. Such ownership
information is based on a Form 5 (Annual Statement of Changes in
Beneficial Ownership) filed for 1996 by Laurence Z.Y. and Celia Moh and
the most recently filed Schedule 13G (filed for 1995) by Laurence Z.Y.
and Celia Moh.
(3) Includes 10,095 shares of Common Stock issuable upon the exercise of
stock options exercisable on or before April 1, 1999. Mr. Daniels is the
direct beneficial owner of 677,273 shares of Common Stock (which includes
20,456 shares of Common Stock directly owned by his child). Mr. Daniels
is also the sole director of Quad-C, Inc. ("Quad-C"), and, as such, may
be deemed to beneficially own the 24,733 shares of Common Stock
beneficially owned by Quad-C and the 24,733 shares of Common Stock
beneficially owned by Quad-C Partners II, L.P. ("Quad-C Partners II").
Mr. Daniels is also the managing member of Quad-C II, L.L.C. and, as
such, may be deemed to beneficially own the 441,000 shares of Common
Stock beneficially owned by Quad-C Partners III, L.P. ("Quad-C Partners
III"). See footnotes (3) and (5) below and "--Quad-C." Mr. Daniels is a
director of the Company. Mr. Daniels disclaims beneficial ownership of
the shares of Common Stock held by each of Quad-C (including those shares
held indirectly by Quad-C through Quad-C Partners II) and Quad-C II,
L.L.C. (including those shares held indirectly through Quad-C Partners
III), except to the extent of Mr. Daniels' interest in each of such
entities.
(4) Represents shares of Common Stock held by Quad-C Partners II. Quad-C
disclaims beneficial ownership of such shares held by Quad-C Partners II,
except to the extent of Quad-C's interest in such entity. See "--Quad-C."
(5) See "--Quad-C."
(6) Represents shares of Common Stock held by Quad-C Partners III. Quad-C II,
L.L.C. disclaims beneficial ownership of these shares of Common Stock
except to the extent of its interest in such entity. See "--Quad-C."
(7) As reported in Amendment No. 3 to Schedule 13G, dated February 14, 1999,
Quaker Management Capital Corporation shares voting and dispositive power
over 613,775 of such shares of Common Stock. Quaker Management Capital
Corporation disclaims beneficial ownership of these shares of Common
Stock. Its address is The Arrott Building, 401 Wood Street, Suite 1300,
Pittsburgh, Pennsylvania 15222-1824.
(8) As reported in a Schedule 13G, dated February 10, 1999, (a) Kestrel
Investment Management Corporation ("Kestrel") has sole voting power with
respect to 479,000 of such shares of Common Stock and (b) David J.
Steirman and Abbott J. Keller are deemed to be the beneficial owners of
such shares of Common Stock pursuant to their ownership interests in
Kestrel. The address for Kestrel and Messrs. Steirman and Keller is 411
Borel Avenue, Suite 403, San Mateo, California 94402.
(9) As reported in a Schedule 13G, dated August 27, 1997. The address for
Kalmar Investments Inc. is Barley Mill House, 3701 Kennett Pike,
Greenville, Delaware 19807.
(10) As reported in Amendment No. 1 to Schedule 13G, dated February 11, 1999.
Reich & Tang Asset Management L.P. shares voting and dispositive power
over all of such shares of Common Stock. Its address is 600 Fifth Avenue,
New York, New York 10020.
(11) Includes 11,695 shares of Common Stock issuable upon the exercise of
stock options exercisable on or before April 1, 1999. Mr. Eagleburger is
a director of the Company.
(12) Includes 800 shares of Common Stock held in an IRA account for Mr.
Haider's spouse and 6,789 shares of Common Stock issuable upon the
exercise of stock options exercisable on or before April 1, 1999. Mr.
Haider is Chairman of the Board and a director of the Company.
(13) Includes 10,095 shares of Common Stock issuable upon the exercise of
stock options exercisable on or before April 1, 1999. Mr. Harvey is a
director of the Company.
(14) Includes 900 shares of Common Stock issuable upon the exercise of stock
options exercisable on or before April 1, 1999. Mr. Ignaczak is a
director of the Company.
3
<PAGE>
(15) Represents shares of Common Stock issuable upon the exercise of stock
options exercisable on or before April 1, 1999. Mr. Poulson is a director
of the Company.
(16) Represents shares of Common Stock issuable upon the exercise of stock
options exercisable on or before April 1, 1999. Mr. Stutz is a director
of the Company and its President and Chief Executive Officer.
(17) Includes 100,800 shares of Common Stock issuable upon the exercise of
stock options exercisable on or before April 1, 1999. Mr. Taylor is a
director of the Company and its former President and Chief Executive
Officer.
(18) Represents shares of Common Stock issuable upon the exercise of stock
options exercisable on or before April 1, 1999. Mr. Deremo is the
Company's Vice President--Sales and Marketing.
(19) Includes 4,083 shares of Common Stock issuable upon the exercise of stock
options exercisable on or before April 1, 1999. Mr. Pricone is the
Company's Vice President--Technology.
(20) Includes 2,000 shares of Common Stock Mr. Ratchford holds as custodian
for his child and 28,083 shares of Common Stock issuable upon the
exercise of stock options exercisable on or before April 1, 1999. Mr.
Ratchford is the Company's Vice President--Finance, Chief Financial
Officer and Treasurer.
(21) Includes (a) an aggregate of 273,403 shares of Common Stock issuable upon
the exercise of stock options exercisable on or before April 1, 1999; (b)
800 shares of Common Stock held in an IRA account as described in
footnote (12) above; and (c) 2,000 shares of Common Stock held as
custodian as described in footnote (20) above. Also includes shares with
respect to which beneficial ownership is disclaimed as described in
footnote (2) above and under "--Quad-C".
Quad-C
Quad-C, Quad-C Partners III, Quad-C II, L.L.C., Quad-C Partners II and Mr.
Daniels file a Schedule 13G as a group. Quad-C is the sole general partner of
Quad-C Partners II and, as such, may be deemed to beneficially own the shares
of Common Stock held by Quad-C Partners II. Mr. Daniels is the sole director
of Quad-C and may be deemed to beneficially own shares of Common Stock
beneficially owned by Quad-C and held by Quad-C Partners II. Mr. Daniels is
also the managing member of Quad-C II, L.L.C., which is the sole general
partner of Quad-C Partners III. As such, Mr. Daniels and Quad-C II, L.L.C. may
be deemed to beneficially own shares of Common Stock held by Quad-C Partners
III. Mr. Daniels disclaims beneficial ownership of the shares of Common Stock
held by each of Quad-C (including those shares held indirectly by Quad-C
through Quad-C Partners II) and Quad-C II, L.L.C. (including those shares held
indirectly through Quad-C Partners III), except to the extent of Mr. Daniels'
interest in each of such entities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and holders of 10% or more of the outstanding
Common Stock (collectively, "Reporting Persons") to file an initial report of
ownership (Form 3) and reports of changes of ownership (Forms 4 and 5) of
Common Stock with the SEC. Such persons are required to furnish the Company
with copies of all Section 16(a) reports that they file. Based solely upon a
review of Section 16(a) reports furnished to the Company for 1998 and written
representations from Reporting Persons that no other reports were required,
the Company believes that all the Reporting Persons complied with all
applicable filing requirements for 1998.
ELECTION OF DIRECTORS
The Board of Directors presently consists of nine members. All directors
hold office for a term of one year or until their successors have been
elected.
At the Annual Meeting, stockholders will elect a board consisting of nine
directors. Unless authority to do so is specifically withheld, the persons
named in the accompanying proxy will vote for the election of each of the
nominees named below. Under Delaware law, the nine nominees who receive the
most votes at the meeting will be elected as directors. All of the nominees
are currently directors of the Company.
4
<PAGE>
The name, age, and current principal position(s), if any, with the Company
of each nominee for director is as follows:
<TABLE>
<CAPTION>
Director Present Principal Position
Name Since Age and Offices with the Company
---- -------- --- ----------------------------
<S> <C> <C> <C>
Terrence D. Daniels..... 1990 56 Director
Lawrence S. Eagleburger. 1994 68 Director
Donald H. Haider........ 1994 57 Chairman of the Board and Director
Edward T. Harvey, Jr.... 1990 51 Director
Anthony R. Ignaczak..... 1993 35 Director
Richard J.M. Poulson.... 1994 60 Director
Samuel K. Skinner....... 1998 60 Director
Robert E. Stutz......... 1997 46 President, Chief Executive Officer and Director
Jay R. Taylor........... 1990 64 Director
</TABLE>
Terrence D. Daniels has served as a director since 1990 and served as
Chairman of the Board from 1990 to May 1997. Since 1990, Mr. Daniels has also
been the president of Quad-C (a structured investment firm). Prior thereto,
Mr. Daniels was a vice chairman of W. R. Grace & Co. (a manufacturer of
specialty chemical products and provider of products and services in the
health care industry) with overall responsibility for the specialty chemical,
health care, natural resource and corporate technical groups. Mr. Daniels is
also a director of IGI, Inc. and Collins & Aikman Floorcoverings, Inc.
Lawrence S. Eagleburger has served as a director since 1994. Since January
1993, Mr. Eagleburger has been senior foreign policy advisor for the law firm
of Baker, Donelson, Bearman & Caldwell. From 1992 to 1993, Mr. Eagleburger was
Secretary of State of the United States of America and from 1989 to 1992 was
Deputy Secretary of State of the United States. Mr. Eagleburger is also a
director of Halliburton Company, Phillips Petroleum Company, Universal
Corporation and COMSAT Corporation.
Donald H. Haider has served as a director since 1994 and as Chairman of the
Board since May 1997. Since 1990, Mr. Haider has been a professor at the
Kellogg School of Northwestern University.
Edward T. Harvey, Jr. has served as a director since 1990. Mr. Harvey has
also served as Vice President of the Company (1990 to January 1995), Treasurer
of the Company (1990 to April 1993) and as Secretary of the Company (1990 to
October 1993). Since 1990, Mr. Harvey has also been a Vice President of Quad-
C. Prior to 1990, Mr. Harvey was a senior vice president of W. R. Grace & Co.
and was responsible for corporate development and acquisitions.
Anthony R. Ignaczak has served as a director since 1993. Mr. Ignaczak has
also been a Vice President of Quad-C since December 1993 and an employee of
Quad-C since 1992. He is also a director of Alliance Imaging, Inc.
Richard J.M. Poulson has served as a director since 1994. Since June 1998,
Mr. Poulson has been Executive Vice President and General Counsel of
Smithfield Foods, Inc. (a food processing and production company). From April
1995 through January 1998, Mr. Poulson was president and senior managing
director of The Appian Group (a private merchant and investment banking
partnership). From 1990 through January 1994, Mr. Poulson was a senior
corporate partner in the law firm of Hogan & Hartson.
Samuel K. Skinner has served as a director since October 1998. Since
September 1998, Mr. Skinner has been a partner in and co-chairman of the law
firm of Hopkins & Sutter. From February 1993 until his retirement in March
1998, he was President and a director of Commonwealth Edison Company. Prior
thereto, he served as Chief of Staff to the President of the United States and
as United States Secretary of Transportation. He is also a director of ANTEC
Corporation, Union Pacific Resources Group Inc., EVEREN Capital Corporation,
Midwest Express Holdings, Inc. and The LTV Corporation.
5
<PAGE>
Robert E. Stutz has served as the President and Chief Executive Officer and
a director of the Company since March 1997. From 1991 to March 1997, Mr. Stutz
was Vice President and General Manager, Automotive Controls Division, of
Cherry Electrical Products, a Division of the Cherry Corporation (a designer,
manufacturer and marketer of custom electrical, electronic and semi-conductor
components in automotive, computer and consumer and commercial markets).
Jay R. Taylor has been a director of the Company since 1990 and served as
President and Chief Executive Officer of the Company from 1990 until March
1997. Prior to 1990, Mr. Taylor was vice president and general manager of the
Stimsonite Products Division of Amerace Corporation ("Amerace") (a
manufacturer of electrical utility, battery separator and traffic safety
products), from which the Company in 1990 purchased the majority of its
assets.
The Board of Directors recommends that stockholders vote "FOR" the election
as a director of each of the nominees set forth above.
Committees and Meetings
The Company has standing Audit, Compensation, Environmental Compliance,
Stock Repurchase Implementation and Stockholder Value Committees. The Company
does not have a nomination committee.
Audit Committee. The Audit Committee is currently comprised of Messrs.
Eagleburger, Harvey and Poulson. The functions of the Audit Committee are to
recommend annually to the Company's Board of Directors the appointment of the
independent public accountants of the Company, discuss and review the scope
and the fees of the prospective annual audit, review the results thereof with
the Company's independent public accountants, review compliance with existing
major accounting and financial policies of the Company, review the adequacy of
the financial organization of the Company, review management's procedures and
policies relative to the adequacy of the Company's internal accounting
controls and compliance with federal and state laws relating to accounting
practices, and review and approve (with the concurrence of a majority of the
independent directors of the Company) transactions, if any, with affiliated
parties.
Compensation Committee. The Compensation Committee is currently comprised
of Messrs. Daniels, Haider and Poulson. The functions of the Compensation
Committee are to review and approve annual salaries and bonuses for all of the
Company's executive officers and other key management employees, review,
approve and recommend to the Company's Board of Directors the terms and
conditions of all employee benefit plans or changes thereto and administer the
Company's stock option and incentive equity plans.
Environmental Compliance Committee. The Environmental Compliance Committee
is currently comprised of Messrs. Daniels, Haider and Taylor. The function of
the committee is to oversee compliance with applicable environmental
regulations.
Stock Repurchase Implementation Committee. The Stock Repurchase
Implementation Committee is currently comprised of Messrs. Haider, Harvey and
Taylor. The function of the committee is to oversee implementation of the
Company's stock repurchase program approved by the Company's Board of
Directors in October 1995.
Stockholder Value Committee. The Stockholder Value Committee is currently
comprised of Messrs. Haider, Ignaczak and Stutz. The function of the committee
is to consider and evaluate initiatives and alternatives that seek to improve
stockholder value.
During 1998, seven meetings of the Board of Directors were held, two
meetings of the Audit Committee were held, three meetings of the Compensation
Committee were held, two meetings of the Environmental Compliance Committee
were held, two meetings of the Stock Repurchase Implementation Committee were
held
6
<PAGE>
and one meeting of the Stockholder Value Committee was held. All directors
other than Mr. Eagleburger attended at least 75%, in the aggregate, of the
number of meetings of the Board of Directors and the committees of which they
were members during their periods of service as directors and committee
members in 1998. Mr. Eagleburger attended 67%, in the aggregate, of the number
of meetings of the Board of Directors and the committees of which he was a
member during 1998.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information relating to compensation for the
fiscal years ended December 31, 1998, 1997 and 1996 for the Company's chief
executive officer and the other four most highly compensated executive
officers of the Company whose total salary and bonus (as determined pursuant
to SEC rules) exceeded $100,000 (determined by reference to fiscal year 1998)
(collectively, the "Named Executive Officers"). The amounts shown include
compensation for services in all capacities provided to the Company.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------------ ---------------------
Other Annual Securities Underlying All Other
Year Salary($) Bonus($) Compensation($) Options/SARs(#)(1) Compensation($)(2)
---- --------- -------- --------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Stutz (3)..... 1998 232,096 190,125 0 25,000 11,163
President and Chief 1997 277,404(4) 0 0 100,000 0
Executive Officer
Lew C. Coffin (5)....... 1998 120,000 58,614 42,000(6) 20,000 0
Vice President--
Operations
Clifford S. Deremo...... 1998 132,370 80,699 0 20,000 8,156
Vice President--Sales 1997 123,211 5,000 0 0 7,618
and
Marketing 1996 121,269 0 0 12,778 5,950
Robert M. Pricone....... 1998 129,986 66,643 0 20,000 8,449
Vice President-- 1997 124,987 19,000 0 0 11,111
Technology 1996 123,971 0 0 13,500 11,034
Thomas C. Ratchford..... 1998 116,245 87,592 0 20,000 7,556
Vice President--Finance, 1997 111,016 15,000 0 0 7,209
Chief Financial Officer 1996 109,869 0 0 11,278 7,141
and Treasurer
</TABLE>
- --------
(1) These amounts represent the number of shares underlying stock options
granted during the indicated year. See "Stock Option/SAR Grants in Last
Fiscal Year." In February 1996, Messrs. Deremo, Pricone and Ratchford were
each granted a performance-based option to purchase 5,778, 5,624 and 5,778
shares of Common Stock, respectively. The maximum number of shares was
subject to reduction to 30% of the maximum number of shares if, by
December 31, 1996, 90% of the Company's targeted operating income was
achieved and subject to reduction to zero if, by December 31, 1996, less
than 90% of the Company's targeted operating income was achieved. The
Company did not achieve 90% of the targeted operating income for 1996 and,
as a result, the number of shares subject to each of these options was
reduced to zero and all of the options terminated in accordance with their
terms on December 31, 1996.
(2) These amounts represent contributions to the Company's retirement plan in
connection with amounts earned during the indicated fiscal year.
(3) Mr. Stutz became President and Chief Executive Officer of the Company in
March 1997. Accordingly, compensation amounts are not given for 1996.
7
<PAGE>
(4) Of this amount, $100,000 represents the minimum bonus for 1997 that the
Company was obligated to pay Mr. Stutz pursuant to his employment
agreement. See "--Employment Agreements."
(5) Mr. Coffin became a Vice President of the Company in January 1998.
Accordingly, compensation amounts are not given for 1997 or 1996.
(6) Represents payments to Mr. Coffin relating to relocation expenses.
Stock Option/SAR Grants in Last Fiscal Year
The table below provides information regarding stock options granted to the
Named Executive Officers during the fiscal year ended December 31, 1998. No
SARs were granted by the Company during 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation for
Individual Grants OptionTerm(1)
------------------------------------------------------- -----------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year(%) (per share)($) Date
- ---- ------------ ---------------- -------------- ----------
5% 10%
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Stutz......... 25,000(2) 10.5 7.38 12/17/08 $116,031 $294,045
Lew C. Coffin........... 10,000(3) 4.2 5.38 2/12/08 33,835 85,743
10,000(2) 4.2 7.38 12/17/08 46,412 117,618
Clifford S. Deremo...... 10,000(3) 4.2 5.38 2/12/08 33,835 85,743
10,000(2) 4.2 7.38 12/17/08 46,412 117,618
Robert M. Pricone....... 10,000(3) 4.2 5.38 2/12/08 33,835 85,743
10,000(2) 4.2 7.38 12/17/08 46,412 117,618
Thomas C. Ratchford..... 10,000(3) 4.2 5.38 2/12/08 33,835 85,745
10,000(2) 4.2 7.38 12/17/08 46,412 117,618
</TABLE>
- --------
(1) Based on a ten-year option term and annual compounding, the 5% and 10%
calculations are set forth in compliance with SEC rules. The appreciation
calculations are not necessarily indicative of future values of stock
options or of the Common Stock.
(2) The options will vest (a) in increments of one-third on each of December
17, 1999, 2000 and 2001 if the optionee remains continuously employed by
the Company and (b) 100% in the event of death, disability or a "Change in
Control" (which term has substantially the same meaning as such term has
under the Director Plan).
(3) The options will vest (a) in increments of one-third on each of February
12, 2000, 2001 and 2002 if the optionee remains continuously employed by
the Company and (b) 100% in the event of death, disability or a "Change in
Control" (which term has substantially the same meaning as such term has
under the Director Plan).
8
<PAGE>
Aggregated Option/SAR Exercises In Last Fiscal Year and Fiscal Year End
Option/SAR Values
None of the Named Executive Officers exercised stock options during 1998.
The following table sets forth information regarding the number and value of
unexercised stock options held by each of the Named Executive Officers as of
December 31, 1998. None of the Named Executive Officers held or holds SARs.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs at Fiscal
at Fiscal Year End (#) Year End ($)(1)
---------------------- ----------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(2)
- ---- ---------------------- ----------------------
<S> <C> <C>
Robert E. Stutz................... 66,000/59,000 66,000/34,000
Lew C. Coffin..................... 0/20,000 0/16,200
Clifford S. Deremo................ 12,333/24,667 0/16,200
Robert M. Pricone................. 4,083/24,667 9,748/16,200
Thomas C. Ratchford............... 28,083/32,417 11,288/19,963
</TABLE>
- --------
(1) Value is calculated by multiplying the number of shares of Common Stock
underlying the stock option by the difference between the closing price of
a share of Common Stock on December 31, 1998 as reported by The Nasdaq
Stock Market ("Nasdaq") ($7.00 per share) and the exercise price of the
stock option.
(2) The exercise price of each unexercisable option exceeded the closing price
on December 31, 1998.
Supplemental Executive Retirement Plan
Mr. Taylor retired as CEO of the Company in March 1997 at age 62. In
connection with the acquisition of substantially all of the assets of the
Company from Amerace in 1990, the Company assumed Amerace's obligations to Mr.
Taylor under a Supplemental Executive Retirement Plan (the "SERP") intended to
provide retirement benefits supplementing those provided under other plans.
Subject to certain exceptions, upon retirement, Mr. Taylor is entitled to
receive for 15 years 50% of his final base salary, which was $222,600 (the
"Annual Benefit"). Mr. Taylor's Annual Benefit is reduced by certain other
retirement benefits received by him, including the primary Social Security
benefit and retirement benefits from certain other benefits plans. The SERP
also provides for payment of death benefits and long-term disability benefits.
To provide one source of funding for the Company's obligations under the SERP,
the Company maintains two whole life insurance policies on Mr. Taylor's life.
The Company is the owner of and beneficiary under each insurance policy.
During 1998, Mr. Taylor received $73,992 under the SERP.
Compensation of Directors
The Company's directors who are not currently receiving compensation as
officers or employees of the Company are paid an annual retainer fee of
$20,000 and a fee of $750 for attending each meeting of the Board of Directors
and each meeting of any committee held on a day when the entire Board of
Directors does not meet. Directors are also reimbursed for expenses incurred
in connection with their attendance at Board of Directors and committee
meetings.
Initial Options. Under the Amended and Restated Stock Option Plan for Non-
Employee Directors (the "Director Plan"), each person who first becomes a non-
employee director receives an option to purchase 2,000 shares of Common Stock
at an exercise price per share equal to the fair market value of a share of
Common Stock on such date. The options described in the preceding sentence are
hereinafter referred to as "Initial Options". Initial Options become
exercisable to the extent of 20% of the shares covered thereby after the
optionee has continuously served as a director through the next annual
stockholders' meeting immediately following such grant date, and to the extent
of an additional 20% of the shares covered thereby after the optionee
9
<PAGE>
has continuously served as a director through the next four successive annual
stockholders' meetings. Notwithstanding the foregoing, if an optionee dies or
becomes disabled, all Initial Options held by such optionee become immediately
exercisable in full to the extent the Initial Options would have been
exercisable had the optionee remained a director through the date of the
Company's next annual stockholders' meeting. To the extent exercisable, each
Initial Option is exercisable in whole or in part.
Elective Options. The Director Plan also permits each non-employee director
to make an election to receive all or any portion of his annual retainer for
the current year in the form of a stock option (a "One-Year Elective Option")
or to receive all or any portion of his annual retainer for the current year
and the next four successive years in the form of a stock option (a "Five-Year
Elective Option", and together with One-Year Elective Options, "Elective
Options"). An individual who becomes a director more than six months after any
annual stockholders' meeting is not entitled to make an election to receive
Elective Options for any portion of the retainer payable with respect to the
year in which he becomes a director. The grant of Elective Options is made
automatically on the first business day occurring six months after the date
the election is due. If a non-employee director ceases to be a director after
the date the election is due and prior to the date Elective Options are
granted, the Elective Option to such individual is not granted and any
retainer is paid in cash. The option price per share of each Elective Option
is equal to 20% of the market value of a share of Common Stock on the date of
grant. The total number of shares subject to an Elective Option equals the
number determined by dividing the amount of the retainer to be received in
Elective Options by the difference between the market value per share of the
Common Stock on the date of grant and the option price per share of the
Elective Option. No adjustment is made to an Elective Option to reflect a
director's cessation of service as a director or an increase in the amount of
the annual retainer paid by the Company to directors. Any such increase is
paid in cash.
Each One-Year Elective Option becomes exercisable to the extent of 100% of
the shares covered thereby after the optionee has continuously served as a
director through the date of the next annual stockholders' meeting immediately
following the date such optionee is elected a director and makes an election
to receive such option. Each Five-Year Elective Option becomes exercisable to
the extent of 20% of the shares covered thereby after the optionee has
continuously served as a director through the date of the next annual
stockholders' meeting immediately following the date such optionee is elected
a director and makes an election to receive such option and to the extent of
an additional 20% of the shares covered thereby after the optionee has
continuously served as a director through the date of the next four successive
annual stockholders' meetings. Notwithstanding the foregoing, if an optionee
dies or becomes disabled, all Elective Options held by such optionee become
immediately exercisable in full to the extent such Elective Options would have
been exercisable had the optionee remained a director through the date of the
Company's next annual stockholders' meeting.
Annual Options. Under the Director Plan, each non-employee director elected
at an annual stockholders' meeting automatically receives an option to
purchase 1,500 shares of Common Stock at an exercise price per share equal to
the market value of a share of Common Stock on such date ("Annual Options").
Annual Options become exercisable to the extent of 20% of the shares covered
thereby after the optionee has continuously served as a director through the
next annual stockholders' meeting immediately following such grant date, and
to the extent of an additional 20% of the shares covered thereby after the
optionee has continually served as a director through the next four successive
annual stockholders' meetings.
Change in Control. Upon a Change in Control, each Initial Option, Elective
Option and Annual Option (each, an "Option Right") that would become
exercisable through the Company's next annual stockholders' meeting following
a Change in Control becomes immediately exercisable in full. If any event or
series of events constituting a Change in Control is abandoned, the effect
thereof will be null and the exercisability of Option Rights will be governed
by the provisions of the Director Plan described above. The Director Plan
defines a Change in Control as the occurrence of any of the following events:
(i) execution by the Company of an agreement for the merger, consolidation or
reorganization into or with another corporation or other legal person, unless
as a result of such transaction not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting
10
<PAGE>
Stock") immediately prior to such transaction; (ii) execution by the Company
of an agreement for the sale or other transfer of all or substantially all of
its assets to another corporation or legal person, unless as a result of such
transaction not less than a majority of the combined voting power of the then-
outstanding securities of such corporation or legal person immediately after
such transaction is held in the aggregate by the holders of Voting Stock of
the Company immediately prior to such transaction; (iii) a report is filed on
Schedule 13D or Schedule 14D-1 disclosing that any person other than Mr.
Daniels or any of his affiliates has or intends to become the beneficial owner
of a majority or more of the combined voting power of the then-outstanding
Voting Stock; (iv) during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof (each Director
first elected or first nominated for election by a vote of at least two-thirds
of the Directors then in office who were Directors of the Company at the
beginning of any such period being deemed to have been a Director of the
Company at the beginning of such period); or (v) the Company adopts a plan for
the liquidation or dissolution of the Company other than pursuant to a merger,
consolidation or reorganization which would not constitute a Change in
Control, as described in clause (i) above.
Consulting Agreement
The Company and Mr. Taylor are parties to a consulting agreement (the
"Consulting Agreement"). Pursuant to the Consulting Agreement, Mr. Taylor
agreed to provide the Company with consulting and advisory services and to
resign as the President and Chief Executive Officer of the Company and
terminate his employment agreement. The term of the Consulting Agreement began
on March 22, 1997 (the date on which Mr. Stutz became President and Chief
Executive Officer of the Company) and terminated on March 22, 1999; however,
the Company may retain Mr. Taylor to provide it with consulting and advisory
services in the future. Pursuant to the Consulting Agreement, the Company
agreed to pay Mr. Taylor annual consulting fees equal to the difference
between $222,600 less (i) any amounts actually paid to Mr. Taylor under the
SERP, (ii) any amounts actually paid to Mr. Taylor under the Company's pension
plan and (iii) any directors' retainer fees paid to Mr. Taylor as a member of
the Board of Directors. The terms of the Consulting Agreement also entitled
Mr. Taylor to participate in group health, disability, vision and dental
benefit plans provided by the Company to the same extent as are afforded to
executive officers of the Company. In addition, the Company agreed to modify
the vesting and termination provisions of Mr. Taylor's outstanding options to
purchase Common Stock. Under the terms of the Consulting Agreement and subject
to certain exceptions, Mr. Taylor may not engage in business activities
competitive with the Company until March 22, 2000. The Company paid Mr. Taylor
$101,129 in 1998 pursuant to the Consulting Agreement.
Employment Agreements
Pursuant to an employment agreement between the Company and Mr. Stutz, Mr.
Stutz has agreed to serve as President and Chief Executive Officer of the
Company until March 22, 2000 at a minimum base salary of $225,000 or such
greater amount as determined by the Board of Directors (the "Regular Base
Salary") plus an annual bonus payable in accordance with the Company's
incentive compensation plan. The term of Mr. Stutz's employment agreement is
automatically renewed for one-year periods unless previously terminated. The
agreement also provides for the grant of stock options described in the
following paragraph. Mr. Stutz's employment agreement provides that if (i) the
Company terminates Mr. Stutz's employment, except for a termination for cause
or a termination resulting from Mr. Stutz's resignation, retirement, death or
disability or (ii) Mr. Stutz resigns following a substantial breach of his
employment agreement by the Company (a "Termination Event"), Mr. Stutz is
entitled to receive certain termination benefits, which include (i) his
Regular Base Salary until the later of the first anniversary of termination or
the last day of the term of the employment agreement, (ii) an amount equal to
the annual bonus, if any, paid on account of the most recently concluded
fiscal year, until the earlier to occur of the first anniversary of
termination or the last day of the term of the employment agreement, and (iii)
continuation of his then-current level of life and health benefits and certain
outplacement benefits. Under the terms of Mr. Stutz's employment agreement and
subject to certain exceptions, Mr. Stutz may not engage in a business
competitive with the Company while he is employed by the Company
11
<PAGE>
and for a period of two years thereafter, unless the Company fails to perform
its obligations with respect to payment of any post-termination amount to
which Mr. Stutz is entitled.
The employment agreement between the Company and Mr. Stutz also provides
that Mr. Stutz is entitled to receive stock options to purchase up to 400,000
aggregate shares of Common Stock. Effective March 22, 1997, Mr. Stutz received
an option to purchase 100,000 shares of Common Stock at an exercise price of
$6.00. This stock option vested to the extent of 33% of the shares covered
thereby on March 22, 1998 and 1999, respectively, and will vest (i) to the
extent of 34% of the shares covered thereby on March 22, 2000 if Mr. Stutz
remains continuously employed through such date and (ii) 100% on the date of a
Termination Event. On the first date on which the Common Stock closes at or
above $7.50 for the 30th consecutive trading day, Mr. Stutz will receive a
stock option to purchase 100,000 shares of Common Stock, with an exercise
price of $7.50, that will vest to the extent of 33%, 33% and 34% of the shares
covered thereby on the second, third and fourth anniversaries, respectively,
of the date of grant if Mr. Stutz remains continuously employed through such
dates. On the first date on which the Common Stock closes at or above $9.00
for the 30th consecutive trading day, Mr. Stutz will receive a stock option to
purchase 100,000 shares of Common Stock, with an exercise price of $9.00, that
will vest to the extent of 33%, 33% and 34% of the shares covered thereby on
the third, fourth and fifth anniversaries, respectively, of the date of grant
if Mr. Stutz remains continuously employed through such dates. On the first
date on which the Common Stock closes at or above $11.00 for the 30th
consecutive trading day, Mr. Stutz will receive a stock option to purchase
100,000 shares of Common Stock, with an exercise price of $11.00, that will
vest to the extent of 33%, 33% and 34% of the shares covered thereby on the
third, fourth and fifth anniversaries, respectively, of the date of grant if
Mr. Stutz remains continuously employed through such dates. All stock options
contemplated by the employment agreement will vest fully (if previously
granted) if Mr. Stutz dies or becomes disabled or if a Change in Control
(defined substantially the same as in the Director Plan) occurs. All stock
options will terminate on the tenth anniversary of the date of grant unless
terminated earlier as provided therein.
The Company and Mr. Pricone are parties to an employment agreement (the
"Pricone Agreement"). Pursuant to the Pricone Agreement, Mr. Pricone has
agreed to serve as an executive officer of the Company until August 23, 1999,
at a minimum base salary or such greater amount as determined by the Board of
Directors. The term of the Pricone Agreement is automatically renewed for six-
month periods unless previously terminated. The Pricone Agreement provides
that (i) if the Company terminates Mr. Pricone's employment prior to the end
of the employment term, except for a termination for cause or a termination
resulting from Mr. Pricone's resignation, death or disability, or (ii) if Mr.
Pricone resigns following a substantial breach of the Pricone Agreement by the
Company, Mr. Pricone is entitled to receive an amount not to exceed 50% of his
most recent salary and bonus. In addition, Mr. Pricone is entitled to continue
to participate in the Company's life and health plans until the earlier of the
last date of the benefits period set forth in the Pricone Agreement or the
date upon which he accepts other employment. Under the terms of the Pricone
Agreement and subject to certain exceptions, Mr. Pricone may not engage in a
business competitive with the Company while he is employed by the Company and
for a period of 18 months thereafter. As of January 1, 1999, the Company's
minimum base salary obligations for Mr. Pricone were $133,037. The Company and
Mr. Ratchford are parties to an employment agreement that provides for terms
substantially similar to the Pricone Agreement. As of January 1, 1999, the
Company's minimum base salary obligations for Mr. Ratchford were $120,713.
Compensation Committee Interlocks and Insider Participation
During 1998, Messrs. Daniels, Haider and Poulson served as members of the
Compensation Committee. Mr. Haider is Chairman of the Board of the Company.
Mr. Daniels is the majority stockholder, sole director and president of Quad-C
and determines the compensation to be paid to all officers of Quad-C,
including Messrs. Harvey and Ignaczak.
Compensation Committee Report On Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") was
comprised of Messrs. Daniels, Haider and Poulson during 1998. The Board of
Directors has delegated to the Committee the authority to determine the
compensation of the Company's executive officers and other key management
employees.
12
<PAGE>
The Committee's primary objective is to ensure that the Company's
compensation policies attract, motivate and retain qualified managers in a
manner consistent with maximization of stockholder value. The Company's
compensation is structured philosophically on a "pay for performance"
foundation and thus recognizes the desirability of compensation directed
specifically to motivate and reward executive managers for achieving both
short-term and long-term performance objectives. Compensation is comprised of
three major components: base salary, incentive bonus and stock options.
Base Salary
Base salaries are determined in the context of an individual's
responsibilities and competitive benchmarking. Base salaries are reviewed
annually on employment anniversary dates and adjusted on the basis of
individual performance and competitive considerations. In making base salary
adjustments, the Committee considers an individual's performance, especially
the effective discharge of assigned responsibilities and the leadership and
motivation provided to subordinates.
During 1998, base salaries for executive officers were increased an average
of 4.9%. The dollar amounts contained in the table under "--Summary
Compensation Table" reflect a smaller percentage increase from 1997 to 1998
because the typical timing of annual base salary adjustments does not
correspond to the Company's fiscal year. In making salary decisions for 1998,
the Committee considered the effects of inflation and certain subjective
criteria, including competitive market conditions for executive compensation
and the Committee's evaluation of each executive officer's performance of his
duties since the officer's last evaluation.
Incentive Bonus Compensation
In 1998, the Company offered an annual incentive bonus compensation plan to
executive officers. Participants under the plan were generally entitled to an
annual incentive bonus based upon (i) the relationship of actual earnings per
share of Common Stock ("EPS") to budgeted EPS for the 1998 fiscal year and
(ii) the individual's attainment of personal objectives established at the
beginning of the year. Under the 1998 incentive compensation plan, each
executive officer was assigned a "target" bonus that, depending on the
participant, was a fixed percentage of base salary (35% for all executive
officers other than Messrs. Stutz and Ratchford, both of whom were at 50%).
Approximately 75% of each participant's bonus was to be determined with
reference to the EPS component and the remaining 25% of the bonus was to be
determined with reference to personal goal attainment, both of which
components were subject to appropriate modification to reflect divisional
performance. Mr. Stutz's bonus, however, was to be determined solely by
reference to the EPS component. Personal goals generally specified attainment
of particular objectives or completion of certain projects which exceeded the
routine management responsibilities for the participant. The actual bonus
payout could be more or less than the target bonus depending on whether the
Company's EPS were more or less than budgeted EPS and on whether the
participant's personal objectives were achieved.
No bonus was payable unless actual 1998 EPS equaled the Company's actual
EPS for the 1997 fiscal year. The Committee believes that the relatively heavy
weight assigned to attainment of EPS was appropriate in the light of the
priority of maximizing stockholder value and the desirability of emphasizing
teamwork in the management of the Company. In 1998, the Company's EPS exceeded
the Company's actual EPS for the 1997 fiscal year. The Committee also
determined that each executive officer whose bonus was to be determined in
part by reference to personal goal attainment had attained such goals.
Accordingly, the Committee awarded an aggregate of $521,978 in bonus payouts
to executive officers for 1998, including the bonus payouts to the Named
Executive Officers described above under "--Summary Compensation Table." The
Committee decided to award bonus payouts for 1998 in excess of each executive
officers "target" bonus because of the (i) degree to which the Company's
actual EPS for fiscal 1998 exceeded the Company's actual EPS for the 1997
fiscal year and (ii) determination that each personal goal attainment
component had been reached.
Stock Option Grants
The Committee seeks to ensure that the executive officers of the Company
focus attention on long-term objectives, including maximization of value for
stockholders. The Committee believes that stock options are an
13
<PAGE>
appropriate compensation tool to motivate and reward executive managers for
long-term performance. The Committee believes that the Common Stock price is
an appropriate index of long-term value creation by the management group.
Stock options are generally granted to each individual who becomes an
executive officer. These stock options have generally been granted pursuant to
various stock option plans maintained by the Company. See "--Stock Option/SAR
Grants."
From time to time, the Committee grants stock options to key employees as
an incentive for long-term performance. On February 12, 1998, the Committee
granted an aggregate of 60,000 such options to the Company's executive
officers, other than Mr. Stutz. Because Mr. Stutz received an option to
purchase 100,000 shares of Common Stock in 1997, the Committee determined to
allocate the options granted in February 1998 among other members of
management. The individuals received options to purchase a specified number of
shares at $5.38 per share (the fair market value of such shares on the date of
grant). The options vest in three equal installments beginning February 12,
2000. On December 17, 1998, the Committee granted an aggregate of 85,000 such
options to the Company's executive officers, including Mr. Stutz. The
individuals received options to purchase a specified number of shares at $7.38
per share (the fair market value of such shares on the date of grant). The
options vest in three equal installments beginning December 17, 1999. In order
for any portion of such grants to vest, the recipient must remain continuously
employed by the Company from the date of the grant until the date such vesting
occurs.
Compensation of Chief Executive Officer
The Company is obligated to pay Mr. Stutz a minimum base salary of $225,000
pursuant to his employment agreement. Effective March 1998, the Committee
increased Mr. Stutz's base salary by $9,000 (4%). When determining Mr. Stutz's
salary increase, the Committee considered the Company's performance in the
preceding twelve-month period compared to budgeted performance, competitive
market conditions for executive compensation and the Committee's subjective
evaluation of Mr. Stutz's performance of his duties as President and Chief
Executive Officer.
Mr. Stutz participated in the annual incentive bonus compensation plan and
his target bonus was 50% of his base salary. Consistent with the approach
described above regarding incentive bonuses, Mr. Stutz received a bonus payout
of $190,125 for 1998. Mr. Stutz also received an option to purchase 25,000
shares of Common Stock in December 1998 as an incentive for long-term
performance.
Limitations on Deductibility
In 1993, changes were made to the federal corporate income tax law that
limit the ability of public companies to deduct compensation in excess of $1
million paid annually to each of the chief executive officer and the other
four most highly compensated executive officers. There are exemptions from
this limit, including compensation that is based on the attainment of
performance goals that are established by the Committee and approved by the
Company's stockholders. It is the Committee's policy to seek to qualify
executive compensation for deductibility where practicable and to the extent
that such policy is consistent with the Company's overall objectives in
attracting, motivating and retaining its executives. The Company believes
that, based upon current compensation levels, compensation paid in 1998 should
be fully deductible. Amounts paid and options granted under Mr. Stutz's
employment agreement, however, do not qualify for such exemptions from the $1
million limit and may affect the ability of the Company to deduct compensation
in future years.
COMPENSATION COMMITTEE MEMBERS DURING 1998
Terrence D. Daniels
Donald H. Haider
Richard J.M. Poulson
14
<PAGE>
Performance Graph
The following graph compares the percentage change in the Company's
cumulative return on its Common Stock with that of the Nasdaq-USA Index and
that of the Nasdaq-Non Financial Index at December 31, 1993, December 31,
1994, December 31, 1995, December 31, 1996, December 31, 1997 and December 31,
1998. The graph assumes a $100 investment at December 31, 1993 and
reinvestment of dividends.
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stimsonite Corporation.... $100.00 $101.16 $ 88.37 $ 56.98 $ 47.09 $ 65.12
Nasdaq-USA................ 100.00 97.75 138.26 170.01 208.58 293.21
Nasdaq-Non Financial...... 100.00 96.16 134.03 162.84 191.05 279.82
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 1999. Coopers
& Lybrand L.L.P., which merged with Price Waterhouse LLP to form
PricewaterhouseCoopers LLP in 1998, had served as the Company's independent
accountants since 1991. Services provided to the Company and its subsidiaries
by Coopers & Lybrand L.L.P. and PricewaterhouseCoopers LLP with respect to the
1998 fiscal year included consultations on various tax and information
services matters. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the Annual Meeting to respond to appropriate questions and to
make such statements as they may desire.
In the event stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for 1999,
such appointment will be reconsidered by the Audit Committee and the Board of
Directors.
The Board of Directors recommends that stockholders vote "FOR" ratification
of the appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for 1999.
15
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Because the Company did not receive by March 1, 1999
notice of any matter intended to be raised by a stockholder, proxies in the
enclosed form will be voted in respect of any other matters as may properly
come before the Annual Meeting in accordance with the recommendation of the
Board of Directors or, if no such recommendation is given, in the discretion
of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
2000 annual meeting of stockholders (the "2000 Meeting") and to be considered
for inclusion in the Company's proxy and proxy statement related to the 2000
Meeting must be received by the Secretary of the Company by December 13, 1999.
Any stockholder intending to propose any matter at the 2000 Meeting but not
intending for the Company to include the matter in its proxy statement and
proxy for the 2000 Meeting must notify the Company by February 24, 2000 of
such intention. If the Company does not receive such notice by that date, the
notice will be considered untimely. The Company's proxy for the 2000 Meeting
will grant discretionary authority to the persons named therein to exercise
their voting discretion with respect to any manner of which the Company does
not receive notice by February 24, 2000.
Notices regarding stockholder proposals should be directed to: Secretary,
Stimsonite Corporation, 6565 West Howard Street, Niles, Illinois 60714.
By order of the Board of Directors,
Thomas C. Ratchford
Secretary
April 9, 1999
16
<PAGE>
PROXY
STIMSONITE CORPORATION
6565 West Howard Street
Niles, Illinois 60714
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement and hereby appoints Robert E.
Stutz, Edward T. Harvey, Jr. and Thomas C. Ratchford, and each of them,
attorneys and proxies, with full power of substitution and resubstitution, to
vote all shares of the common stock of STIMSONITE CORPORATION (the "Company")
held of record by the undersigned at the close of business on April 5, 1999, at
the annual meeting of stockholders of the Company to be held at the Company's
principal executive offices, 6565 West Howard Street, Niles, Illinois, on
Thursday, May 20, 1999, and at any adjournment thereof, as follows:
<PAGE>
STIMSONITE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
WITH AUTHORITY TO VOTE FOR ALL NOMINEES LISTED WITHHOLD AUTHORITY to BELOW
(except as marked to the contrary below) [_]
vote for all nominees listed [_]
1.ELECTION OF DIRECTORS
Terrence D. Daniels Richard J. M. Poulson
Lawrence S. Eagleburger Samuel K. Skinner
Donald H. Haider Robert E. Stutz
Edward T. Harvey, Jr. Jay R. Taylor
Anthony R. Ignaczak
(INSTRUCTION: To withhold authority to vote for any individual nominee(s) write
that nominee's name(s) in the space provided below.)
- --------------------------------------------------------------------------------
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending December 31,
1999.
For [_] Against [_] Abstain [_]
3. As recommended by the Board of Directors, or in the absence of such
recommendation in their discretion, to vote upon such other business as may
properly come before said meeting or any adjournment thereof.
All of the foregoing is as set forth in the Notice of Annual Meeting of
Stockholders and Proxy Statement relating to the meeting.
If this proxy is properly executed, the shares represented hereby will be
voted in the manner directed and, in the absence of direction as to the
manner of voting, will be voted FOR the election as director of each of the
nominees listed and FOR the ratification of the appointment of independent
public accountants.
DATED: __________________________________________________________________ , 1999
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature if held jointly
Please date this proxy and sign exactly as name(s) appears and return the
signed proxy in the enclosed envelope. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president of other authorized officer. If a partnership,
please sign in partnership name by authorized person.
