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 Section 240.14a-11(c) or
Section 240.14a-12
PERCON INCORPORATED
- --------------------------------------------------------------------------------
(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)(1) and 0-11
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which
the filing fee is calculated and state how it was determined.
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------------
<PAGE>
PERCON INCORPORATED
Notice of Annual Meeting of Shareholders
May 22, 1998
To the Shareholders of Percon Incorporated:
The annual meeting of the shareholders of Percon Incorporated, a Washington
corporation, will be held at 9:00 a.m., Pacific Time, on May 22, 1998, at the
Valley River Inn, 1000 Valley River Way, Eugene, Oregon, for the following
purposes:
1. Electing directors to serve for the following year and until their
successors are elected; and
2. Amending the Company's 1995 Stock Incentive Plan (the "Plan") (i) to
increase the total number of shares of the Company's common Stock (the
"Shares") reserved for issuance under the plan from 500,000 to 600,000
Shares and (ii) to eliminate certain restrictions in the Plan that are
no longer necessary or appropriate based on recent changes to the
rules under Section 16 of the Securities Exchange Act of 1934; and
3. Transacting any other business that properly comes before the meeting.
Only shareholders of record at the close of business on April 9, 1998 will
be entitled to vote at the annual meeting.
You are respectfully requested to date and sign the enclosed proxy and
return it in the postage-prepaid envelope enclosed for that purpose. You may
attend the meeting in person even though you have sent in your proxy, since
retention of the proxy is not necessary for admission to or identification at
the meeting.
By Order of the Board of Directors
Andy J. Storment
Secretary
Eugene, Oregon
April 13, 1998
<PAGE>
PERCON INCORPORATED
PROXY STATEMENT
Annual Meeting of Shareholders
---
The mailing address of the principal executive offices of the Company is
1720 Willow Creek Circle, Suite 530, Eugene, Oregon, 97402-9171. The approximate
date this proxy statement and the accompanying proxy form are first being sent
to shareholders is April 13, 1998.
Upon written request to Andy J. Storment, Secretary, any person whose proxy
is solicited by this proxy statement will be provided, without charge, a copy of
the Company's Annual Report on Form 10-KSB.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of
Percon Incorporated, a Washington corporation, for use at the Annual Meeting of
Shareholders to be held on May 22, 1998 and at any adjournment thereof. The
Company will bear the cost of preparing and mailing the proxy, proxy statement,
and any other material furnished to shareholders by the Company in connection
with the annual meeting. Proxies will be solicited by use of the mails, and
officers and employees of the Company may also solicit proxies by telephone or
personal contact. Copies of solicitation materials will be furnished to
fiduciaries, custodians and brokerage houses for forwarding to beneficial owners
of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Company, attention Andy J. Storment, Secretary, an instrument
of revocation or a duly executed proxy bearing a later date. The proxy may also
be revoked by affirmatively electing to vote in person while in attendance at
the meeting. However, a shareholder who attends the meeting need not revoke the
proxy and vote in person unless he or she wishes to do so. All valid, unrevoked
proxies will be voted at the annual meeting in accordance with the instructions
given.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding authorized voting security of the
Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is April 9, 1998. On that date there were 4,007,971
shares of Common Stock outstanding, entitled to one vote per share. The Common
Stock does not have cumulative voting rights.
The following table sets forth certain information regarding the beneficial
ownership as of February 28, 1998 of the Common Stock by (i) each person known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each executive officer of the Company named in
the Summary Compensation Table, and (iv) all executive officers and directors as
a group. Except as otherwise noted, the persons listed below have sole
investment and voting power with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
Number of Shares Percentage
Beneficial Owner Beneficially Owned(1) of Shares
- ---------------- --------------------- ----------
<S> <C> <C>
Michael P. Coughlin (2)............................. 645,166 16.1%
1720 Willow Creek Circle, Suite 530
Eugene, OR 97402
Andy J. Storment (3)................................ 645,491 16.1%
1720 Willow Creek Circle, Suite 530
Eugene, OR 97402
Arlen I. Prentice (4)............................... 395,000 9.8%
6177 162nd Place SW
Bellevue, WA 98006
Donald K. Skinner (5)............................... 25,000 *
2130 Kingsbridge Way
Oxnard, CA 93035
Dana E. Siebert (6)................................. 15,000 *
4383 North Shasta Loop
Eugene, OR 97405
All directors and executive officers................ 1,780,315 43.2%
as a group (9 persons) (7)
- --------------
* Less than 1%
(1) Shares which the person or group has the right to acquire within 60 days
after February 28, 1998 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
(2) Includes 629,075 shares held by the Coughlin Family Limited Partnership of
which Mr. Coughlin and his spouse are the general partners and also
includes 11,200 shares subject to options exercisable within 60 days after
February 28, 1998.
(3) Includes 11,200 shares subject to options exercisable within 60 days after
February 28, 1998.
(4) Includes 25,000 shares subject to options exercisable within 60 days after
February 28, 1998.
(5) Consists of 25,000 shares subject to options exercisable within 60 days
after February 28, 1998.
(6) Consists of 15,000 shares subject to options exercisable within 60 days
after February 28, 1998.
(7) Includes 115,207 shares subject to options exercisable within 60 days after
February 28, 1998. Excludes shares subject to options within 60 days after
that date.
</TABLE>
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected at the Annual Meeting to serve
until their successors are elected and qualified. All current directors are
nominees for re-election. If a quorum of shareholders is present at the annual
meeting, the nominees for election as directors who receive the greatest number
of votes cast at the meeting shall be elected directors. Abstentions and broker
non-votes will have no effect on the results of the vote. Unless otherwise
instructed, proxy holders will vote the proxies they receive for the nominees
named below. If any of the nominees for director at the annual meeting becomes
unavailable for election for any reason (none being known), the proxy holders
will have discretionary authority to vote pursuant to the proxy for a suitable
substitute or substitutes. The following table briefly describes the Company's
nominees for directors.
<TABLE>
<CAPTION>
Director
Name, Principal Occupation and Other Directorships Age Since
- -------------------------------------------------- --- --------
<S> <C> <C>
Michael P. Coughlin was a member of a private investor group that 43 1990
acquired the Company in July 1990 and has served as its President,
Chief Executive Officer and a Director since the acquisition.
Andy J. Storment was a member of a private investor group that 35 1990
acquired the Company in July 1990 and has served as its Vice
President, Secretary, Treasurer and a Director since the
acquisition and as the Company's Chief Operating Officer from
July 1990 to January 1997. In June 1995 Mr. Storment was promoted
to Executive Vice President.
Arlen I. Prentice was a member of a private investor group that 60 1990
acquired the Company in July 1990 and has served as a Director
since the Acquisition. In October 1993 he became Chairman of the
Board. Mr. Prentice is a founder of Kibble & Prentice, Inc., a
financial services firm. Mr. Prentice has served as Co-Chairman
and Chief Executive Officer of Kibble & Prentice, Inc. since
June 1972. Mr. Prentice serves as a director of Starbucks Coffee
Corporation, Western Drug Distributors (d.b.a. Drug Emporium
Northwest), Northland Telecommunications Corporation and Flow
International, Inc., a manufacturer and distributor of high
pressure water jet cutting systems.
Donald K. Skinner joined the Company's Board of Directors in 57 1995
March 1995. Mr. Skinner is Chief Executive Officer and Chairman
of the Board of Eltron International, Inc., a company that
designs, manufactures and markets bar code label printers,
software and related products. Mr. Skinner founded Eltron
International, Inc. in January 1991, and served as Executive
Vice President and Chief Operating Officer before assuming
his current positions in December 1992.
Dana E. Siebert joined the Company's Board of Directors in 38 1997
December 1997. Mr. Siebert is Vice President, Americas for
Symantec Corporation, a company that designs and markets
application and system software for remote productivity
solutions and security and assistance applications. Mr. Siebert
has been employed by Symantec since 1985 and previously served
as its Vice President, Sales and Vice President, Worldwide
Services. Mr. Siebert also serves as a director for TimeLine
Solutions Corporation and the Software Publishers Association.
</TABLE>
3
<PAGE>
Board Meetings and Committees
The Board of Directors met five times during 1997. All directors attended
all meetings of the Board of Directors and the committees of which the director
was a member during 1997. The standing committees of the Board of Directors are
the Audit Committee, Compensation Committee and Nominating Committee. The Audit
Committee met twice during 1997 and the Compensation Committee met one time
during 1997.
The Audit Committee makes recommendations concerning the engagement of the
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee consists of Mr. Prentice, Mr. Skinner and Mr. Siebert. The
Compensation Committee determines compensation for the Company's executive
officers and administers the Company's 1995 Stock Incentive Plan. The
Compensation Committee consists of Mr. Prentice and Mr. Skinner. The Nominating
Committee recommends the slate of Board members and consists of Mr. Prentice and
Mr. Skinner.
Compensation of Directors
Nonemployee directors are paid $1,000 per quarter, $1,000 per board meeting
attended and $500 for each telephonic board or committee meeting. Each
nonemployee director also is automatically granted an option to purchase 15,000
shares of the Company's Common Stock when the person becomes a director, and is
automatically granted an option to purchase 5,000 additional shares of the
Company's Common Stock in each subsequent calendar year that the director
continues to serve in that capacity.
Recommendation by the Board of Directors
The Board of Directors recommends that shareholders vote for the election
of the nominees named in this Proxy Statement.
PROPOSAL 2: AMENDMENT TO THE 1995 STOCK INCENTIVE PLAN
The company maintains the 1995 Stock Incentive Plan (the "Plan") for the
benefit of its employees and others who provide services to the Company. The
Board of Directors believes the availability of stock incentives is an important
factor in the Company's ability to attract and retain experienced and competent
employees and to provide an incentive for them to exert their best efforts on
behalf of the Company. As of March 31, 1998, out of a total of 500,000 shares
reserved for issuance under the Plan, only [66,945] shares remained available
for grant. The Board of Directors believes additional shares will be needed
under the Plan to provide appropriate incentives to key employees and others.
Accordingly, on March 10, 1998 the Board of Directors approved an amendment to
the Plan, subject to shareholder approval, to reserve an additional 100,000
shares for the Plan, thereby increasing the total number of shares reserved for
issuance under the Plan from 500,000 to 600,000 shares. Other amendments
approved by the Board of Directors and submitted to the shareholders for
approval principally relate to the elimination of certain restrictions in the
Plan that are no longer necessary or appropriate based on recent changes to the
rules under Section 16 of the Securities Exchange Act of 1934. In addition,
shareholder approval of the Proposal 2 will constitute a reapproval of the
per-employee limits on grants of options and stock appreciation rights under the
Plan of 200,000 shares for new hires and 50,000 shares annually otherwise. This
reapproval is required every five years for continued compliance with proposed
regulations under
4
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986. See "Tax
Consequences."
Certain provisions of the Plan are described below. The complete text of
the Plan, marked to show the proposed amendments, is attached to this proxy
statement as Appendix A.
Description of the Plan
Eligibility. All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the Plan. Also eligible are
non-employee agents, consultants, advisors, persons involved in the sale or
distribution of the Company's products and independent contractors of the
Company or any subsidiary.
Administration. The Plan is administered by the Board of Directors, which
may promulgate rules and regulations for the operation of the Plan and generally
supervises the administration of the Plan. The Board of Directors may delegate
to a committee of the Board of Directors or specified officers of the Company,
or both, authority to administer the Plan, except that only the Board of
Directors may amend, modify or terminate the Plan.
Term of Plan. The Plan will continue until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time.
Stock Options. The Board of Directors or appropriate committee or officer
determines the persons to whom options are granted, the options price, the
number of shares to be covered by each option, the period of each option, the
times at which options may be exercised and whether the option is an incentive
stock option ("ISO") or a nonqualifed stock option ("NSO"). If the option is an
ISO, the option price cannot be less than the fair market value of the Common
Stock on the date of grant. If an optionee with respect to an ISO at the time of
grant owns stock possessing more than ten percent of the combined voting power
of the Company, the option price may not be less than 110 percent of the fair
market value of the Common Stock on the date of grant. No employee may be
granted options for stock appreciation rights under the Plan for more than an
aggregate of 200,000 shares in connection with the hiring of the employee or
50,000 shares in any calendar year otherwise. In addition, the Plan limits the
amount of ISOs that may become exercisable under the Plan in any year to
$100,000 per optionee (based on the fair market value of the stock on the date
of grant). No monetary consideration is paid to the Company upon the granting of
options.
Options granted under the Plan generally continue in effect for the period
fixed by the Board of Directors or appropriate committee or officer, except that
ISOs are not exercisable after the expiration of 10 years from the date of
grant. Options may be exercised only while an optionee is employed by the
Company or a subsidiary or within 12 months following termination of employment
by reason of death or disability or 30 days following termination for any other
reason. The Plan provides that the Board of Directors or appropriate committee
or officer may extend the exercise period for any period up to the expiration
date of the option and may increase the number of shares for which the option
may be exercised up to the total number underlying the option. The purchase
price for each share purchased pursuant to exercise of options must be paid in
cash, including cash that may be the proceeds of a loan from the Company, in
shares of Common Stock valued at fair market value, in restricted stock, in
performance units or other contingent awards denominated in either stock or
cash, in deferred compensation credits or in other forms of consideration, as
determined by the Board of Directors or appropriate committee or officer. Upon
the exercise of an option, the number of shares subject to the option and the
number of shares available under the Plan for future option grants are reduced
by the number of shares with respect to which the option is exercised.
5
<PAGE>
Stock Option Grants to Independent Directors. Pursuant to the terms of the
Plan, as it is proposed to be amended, each individual who becomes an
independent director will receive a non-statutory option to purchase 15,000
shares of Common Stock when the individual becomes a director. In addition, each
independent director of the Company will automatically be granted an annual
non-discretionary, non-statutory option to purchase 5,000 shares of Common
Stock.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted under the Plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the Plan. A SAR
gives the holder the right to payment from the Company of an amount equal to
value to the excess of the fair market value on the date of exercise of share of
Common Stock over its fair market value on the date of grant, or if granted in
connection with an option, the option price per share under the option to which
SAR relates.
A SAR is exercisable only at the time or times established by the Board of
Directors. If a SAR is granted in connection with an option, it is exercisable
only to the extent and on the same conditions that the related option is
exercisable. Payment by the Company upon exercise of a SAR may be made in Common
Stock valued at its fair market value, in cash, or partly in stock and partly in
cash, as determined by the Board of Directors. The Board of Directors may
withdraw any SAR granted under the Plan at any time and may impose any condition
upon the exercise of a SAR or adopt rules and regulations from time to time
affecting the rights of holders of SARs. No SARs have been granted under the
Plan.
The existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the common stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.
Stock Bonus Awards. The Board of Directors may award Common Stock as a
stock bonus under the Plan. The Board of Directors may determine the persons to
receive awards, the number of shares to be awarded and the time of the award.
Stock received as a stock bonus is subject to the terms, conditions and
restrictions determined by the Board of Directors at the time the stock is
awarded.
Restricted Stock. The Plan provides that the Company may issue restricted
stock in such amounts, for such consideration, subject to such restrictions and
on such terms as the Board of Directors may determine.
Cash Bonus Rights. The Board of Directors may grant cash bonus rights under
the Plan in connection with (I) options granted or previously granted, (ii) SARs
granted or previously granted, (iii) stock bonuses awarded or previously awarded
and (iv) shares sold or previously sold under the Plan. Bonus rights may be used
to provide cash to employees for the payment of taxes in connection with awards
under the Plan. No bonus rights have been granted under the Plan.
Performance Units. The Board of Directors may grant performance units
consisting of monetary units that may be earned in whole or in part if the
Company achieves goals established by the Board of Directors over a designated
period of time, but in any event not more than 10 years. Payment of an award
earned may be in cash or stock or both and may be made when earned, or vested
and deferred, as the Board of Directors determines. No performance units have
been granted under the Plan.
6
<PAGE>
Foreign Qualified Grants. Awards under the Plan may be granted to eligible
persons residing in foreign jurisdictions. The Board of Directors may adopt
supplements to the Plan necessary to comply with the applicable laws of foreign
jurisdictions and to afford participants favorable treatment under those laws,
but no award may be granted under any supplement with terms that are more
beneficial to the participants than the terms permitted by the Plan.
Changes in Capital Structure. The Plan provides that if the outstanding
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or securities of the Company or of another
corporation by reason of any recapitalization, stock split or certain other
transactions, appropriate adjustment will be made by the Board of Directors in
the number and kind of shares available for awards under the Plan. In the event
of a merger, consolidation or plan of exchange to which the Company is a party
or a sale of all or substantially all of the Company's assets (each a
"Transaction"), the Board of Directors will, in its sole discretion and to the
extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding options under the Plan: (I)
outstanding options will remain in effect in accordance with their terms; (ii)
outstanding options shall be converted into options to purchase stock in the
corporation that is the surviving or acquiring corporation in the Transaction;
or (iii) the Board of Directors will provide a 30-day period prior to the
consummation of the Transaction during which outstanding options shall be
exercisable to the extent exercisable and upon the expiration of such 30-day
period, all unexercised options shall immediately terminate. The Board of
Directors may, in its sole discretion, accelerate the exercisability of options
so that they are exercisable in full during such 30-day period. In the event of
the dissolution of the Company, options shall be treated in accordance with
clause (iii) above.
Tax Consequences
Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, the optionee will recognize no income upon grant or upon a
proper exercise of the ISO. If an employee exercises an ISO and does not dispose
of any of the option shares within two years following the date of grant and
within one year following the date of exercise, any gain realized on subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset. If an employee disposes of shares acquired upon exercise of an
ISO before the expiration of either the one-year holding period or the two-year
waiting period, any amount realized will be taxable as ordinary compensation
income in the year of such disqualifying disposition to the extent that the
lesser of the fair market value of the shares on the exercise date or the fair
market value of the shares on the exercise date or the fair market value of the
shares on the date of disposition exceeds the exercise price. The company will
not be allowed any deduction for federal income tax purposes at either the time
of the grant or exercise of an ISO. Upon any disqualifying disposition by an
employee, the company will generally be entitled to a deduction to the extent
the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be treated as
NSOs for federal income tax purposes. Under federal income tax law currently in
effect, no income is realized by the grantee of an NSO until the option is
exercised. At the time of exercise of an NSO, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the market value of the shares subject to the option at
the time of exercise exceeds the exercise price. The company is required to
withhold on the income amount. Upon the sale of shares acquired upon exercise of
an NSO, the excess of the amount realized from the sale over the market value of
the shares on the date of exercise will be taxable.
7
<PAGE>
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of section 83 of the Internal
Revenue code of 1986, as amended, and no section 83(b) election is made. If the
shares are not vested at the time of receipt, the employee will realize taxable
income in each year in which a portion of the shares substantially vest, unless
the employee elects under section 83 (b) within 30 days after the original
transfer. The Company will generally be entitled to a tax deduction in the
amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold on the income amount. A participant who receives a cash bonus right
under the Plan will generally recognize income equal to the amount of the cash
bonus paid at the time of receipt, and the Company will generally be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Internal Revenue Code of 1986, as adopted in 1993,
limits to $1,000,000 per person the amount that the Company may deduct for
compensation paid to any of its most highly compensated officers in any year.
Under IRS regulations, compensation received through the exercise of an option
of a SAR is not subject to the $1,000,000 limit if the option or SAR and the
Plan meet certain requirements. One requirement is shareholder approval at least
once every five years of per-employee limits on the number of shares as to which
options and SARs may be granted. Other requirements are that the option of SAR
be granted by a committee of at least two outside directors and that the
exercise price of the option or SAR be not less than fair market value of the
Common Stock on the date of grant.
Recommendation by the Board of Directors
The Board of Directors recommends that the amendments to the Plan be
approved. The affirmative vote of the holders of a majority of the shares of
Common Stock present and entitled to vote on the matter is required to approve
this Proposal 2. Abstentions have the same effect as "no" votes in determining
whether the amendment is approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the Special Meeting but are not counted
and have no effect on the results of the vote on Proposal 2. The proxies will be
voted for or against the proposal or as an abstention, in accordance with the
instructions specified not he proxy form. If no instructions are given, proxies
will be voted for approval of amendments to the Plan.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid by the Company with
respect to the last three years to the Chief Executive Officer and the three
other most highly compensated executive officers whose total annual compensation
exceeded $100,000 in 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation ------------------
------------------- Securities All Other
Name and Principal Position Year Salary Bonus Underlying Options Compensation
- --------------------------- ---- -------- ------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Michael P. Coughlin 1997 $121,635 $25,297 11,000 $ 7,347(1)
President and Chief Executive 1996 $112,981 $14,875 0 $ 6,393(1)
Officer 1995 $100,000 $ 7,207 15,000 $ 5,360(1)
Andy J. Storment 1997 $106,654 $15,775 11,000 $ 6,121(1)
Executive Vice President 1996 $100,000 $ 8,356 0 $ 5,418(1)
1995 $100,000 $ 7,207 15,000 $ 5,360(1)
J. Brad West 1997 $101,597 $12,197 20,000 $ 5,431(1)
Chief Operating Officer and Vice 1996(2) $ 62,308 $ 7,391 10,000 $ 1,408(1)
President, Operations and
Corporate Quality
Jean-Francois Codron 1997 $119,174 $ 8,348 0 $11,083(3)
Vice President, European 1996(4) $ 51,465 $ 0 20,000 $ 4,211(3)
Operations
- --------------
(1) Represents the Company's matching contribution under the Company's 401(k)
savings plan.
(2) Mr. West commenced employment with the Company on April 8, 1996.
(3) Represents the value of Company-provided automobile.
(4) Mr. Codron commenced employment with the Company on August 16, 1996.
</TABLE>
9
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding all stock options granted in
1997 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of Percent of
Shares Options
Underlying Granted to Exercise
Options Employees in Price per Expiration
Name Granted (1) Fiscal Year (2) Share Date
- --------------------- ----------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Michael P. Coughlin 11,000 5.4% $10.50 01/02/02
Andy J. Storment 11,000 5.4% $10.50 01/02/02
J. Brad West 10,000 4.9% $10.50 01/02/07
Jean-Francois Codron -- -- -- --
(1) All option grants were made pursuant to the Company's 1995 Stock Incentive
Plan, as amended (the "Plan"). Options become exercisable by 20% increments
on each yearly anniversary date from date of grant.
(2) In 1997, the Company granted options for a total of 202,600 shares of
Common Stock under the Plan and this number was used in calculating the
percentages set forth in this column.
</TABLE>
Option Exercises and Year-End Option Values
The following table indicates for all executive officers named in the
Summary Compensation Table, (i) stock options exercised during 1997, including
the value realized on the date of exercise, (ii) the number of shares subject to
exercisable (vested) and unexercisable (unvested) stock options as of December
31, 1997, and (iii) the value of "in-the-money" options, which represents the
positive spread between the exercise price of existing stock options and the
year-end price of the Common Stock.
<TABLE>
<CAPTION>
Number of Number of Shares Subject Value of Unexercised
Shares to Unexercised Options In-the-Money
Acquired Value at Fiscal Year End 1997 at Fiscal Year End(1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Michael P. Coughlin 0 9,000 17,000 $59,175 $66,400
Andy J. Storment 0 9,000 17,000 $59,175 $66,400
J. Brad West 0 2,000 28,000 $0 $63,750
Jean-Francois Codron 0 4,000 16,000 $4,000 $16,000
- --------------
(1) Options are "in-the-money" at the fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option. The amounts set forth represent the difference between the fair
market value of the securities underlying the options on December 31, 1997,
based on the last sale price of $14.00 per share of Common Stock on that
date (as reported on the Nasdaq National Market) and the exercise price of
the options, multiplied by the applicable number of options.
</TABLE>
Employment Arrangements
Each of the Company's executive officers other than Michael P. Coughlin and
Andy J. Storment has executed an employment agreement with the Company
prohibiting the officer from competing with the Company during the term of
employment and for two years following termination, affirming the Company's
ownership of inventions or other works created by the officer within the scope
of his employment, and limiting disclosure and use of the Company's confidential
information. The agreements permit either the Company or the officer to
terminate employment upon notice, with the notice period ranging from 15 to 30
days. Each of the agreements provides remedies to the Company in the event the
officer breaches his or her obligations. Each officer is eligible to participate
in the Company's standard benefit programs.
10
<PAGE>
INDEPENDENT ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting and will be available to respond to appropriate questions. They do not
plan to make any statement but will have the opportunity to make a statement if
they wish.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors and
beneficial owners of more than ten percent of the Common Stock are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms received by the
Company and on written representations from certain reporting persons that they
have complied with the relevant filing requirements, the Company believes that
all Section 16(a) filing requirements applicable to its executive officers and
directors have been complied with, except as follows: Mr. Purcell filed two late
reports on Form 4.
DISCRETIONARY AUTHORITY
Although the Notice of Annual Meeting of Shareholders provides for
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than those referred to herein. However, the enclosed proxy gives
discretionary authority to the proxy holders to vote in accordance with the
recommendation of management if any other matters are presented.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy material
for the Company's next annual meeting in May 1999 must be received at the
principal executive office of the Company no later than December 18, 1998.
By Order of the Board of Directors
Andy J. Storment
Secretary
Eugene, Oregon
April 13, 1998
11
<PAGE>
APPENDIX A
PERCON [ACQUISITION, INC.] INCORPORATED
============
1995 STOCK INCENTIVE PLAN*
As amended May 22, 1998
=======================
1. Purpose.
The purpose of this Stock Incentive Plan (the "Plan") is to enable Percon
Acquisition, Inc. (the "Company") to attract and retain the services of (1)
selected employees, officers and directors of the Company or of any subsidiary
of the Company and (2) selected nonemployee agents, consultants, advisors,
persons involved in the sale or distribution of the Company's products and
independent contractors of the Company or any subsidiary.
2. Shares Subject to the Plan.
Subject to adjustment as provided below and in paragraph 13, the shares to
be offered under the Plan shall consist of Common Stock of the Company, and the
total number of shares of Common Stock that may be issued under the Plan shall
not exceed [500,000] 600,000 shares. The shares issued under the Plan may be
=======
authorized and unissued shares or reacquired shares. If an option, stock
appreciation right or performance unit granted under the Plan expires,
terminates or is cancelled, the unissued shares subject to such option, stock
appreciation right or performance unit shall again be available under the Plan.
If shares sold or awarded as a bonus under the Plan are forfeited to the Company
or repurchased by the Company, the number of shares forfeited or repurchased
shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective as of June 2, 1995. No
option, stock appreciation right or performance unit granted under the Plan [to
an officer who is subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (an "Officer") or director, an no incentive stock option],
shall become exercisable, however, until the Plan is approved by the affirmative
vote of the holders of a majority of the shares of Common Stock represented at a
shareholders meeting at which a quorum is present and any such awards under the
Plan prior to such approval shall be conditioned on and subject to such
approval. Subject to this limitation, options, stock appreciation rights and
performance units may be granted and shares may be awarded as bonuses or sold
under the Plan at any time after the effective date and before termination of
the Plan.
(b) Duration. The Plan shall continue in effect until all shares available
for issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to options, performance units and shares subject to
restrictions then outstanding under the Plan. Termination shall not affect any
outstanding options, any right of the Company to repurchase shares or the
forfeitability of shares issued under the Plan.
- --------------
* NOTE: Double-underlined text is new; text in strikeout and brackets is to
be deleted.
12
<PAGE>
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to time
the individuals to whom awards shall be made, the amount of the awards and the
other terms and conditions of the awards. Subject to the provisions of the Plan,
the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) Committee. The Board of Directors may delegate to a committee of the
Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If authority
is delegated to a Committee, all references to the Board of Directors in the
Plan shall mean and relate to the Committee except (i) as otherwise provided by
the Board of Directors, (ii) that only the Board of Directors may amend or
terminate the Plan as provided in paragraphs 3 and 15 and (iii) that a Committee
including officers of the Company shall not be permitted to grant options to
persons who are officers of the Company. [If awards are to be made under the
Plan to Officers or directors, authority for selection of Officers and directors
for participation and decisions concerning the timing, pricing and amount of a
grant or award, if not determined under a formula meeting the requirements of
Rule 16b 3 under the Securities Exchange Act of 1934, as amended, shall be
delegated to a committee consisting of two or more disinterested directors.]
5. Types of Awards; Eligibility.
The Board of Directors may, from time to time, take the following action,
separately or in combination, under the Plan: (i) grant Incentive Stock Options,
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as provided in paragraphs 6(a) and 6(b); (ii) grant options other than
Incentive Stock Options ("Non-Statutory Stock Options") as provided in
paragraphs 6(a) and 6(c); (iii) award stock bonuses as provided in paragraph 7;
(iv) sell shares subject to restrictions as provided in paragraph 8; (v) grant
stock appreciation rights as provided in paragraph 9; (vi) grant cash bonus
rights as provided in paragraph 10; (vii) grant performance units as provided in
paragraph 11 and (viii) grant foreign qualified awards as provided in paragraph
12. Any such awards may be made to employees, including employees who are
officers or directors, and to other individuals described in paragraph 1 who the
Board of Directors believes have made or will make an important contribution to
the Company or any subsidiary of the Company; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock Options
under the Plan. The Board of Directors shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to each
individual to whom an award is made. At the discretion of the Board of
Directors, an individual may be given an election to surrender an award in
exchange for the grant of a new award. No employee may be granted options or
stock appreciation rights under the Plan for more than an aggregate of 200,000
shares of Common Stock in connection with the hiring of the employee or 50,000
shares of Common Stock in any calendar year otherwise.
13
<PAGE>
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options under the
Plan. With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the option price, the
period of the option, the time or times at which the option may be
exercised and whether the option is an Incentive Stock Option or a
Non-Statutory Stock Option. At the time of the grant of an option or at any
time thereafter, the Board of Directors may provide that an optionee who
exercised an option with Common Stock of the Company shall automatically
receive a new option to purchase additional shares equal to the number of
shares surrendered and may specify the terms and conditions of such new
options.
(ii) Exercise of Options. Except as provided in paragraph 6(a)(iv) or
as determined by the Board of Directors, no option granted under the Plan
may be exercised unless at the time of such exercise the optionee is
employed by or in the service of the Company or any subsidiary of the
Company and shall have been so employed or provided such service
continuously since the date such option was granted. Absence on leave or on
account of illness or disability under rules established by the Board of
Directors shall not, however, be deemed an interruption of employment or
service for this purpose. Unless otherwise determined by the Board of
Directors, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. Except as
provided in paragraphs 6(a)(iv) and 13, options granted under the Plan may
be exercised from time to time over the period stated in each option in
such amounts and at such times as shall be prescribed by the Board of
Directors, provided that options shall not be exercised for fractional
shares. Unless otherwise determined by the Board of Directors, if the
optionee does not exercise an option in any one year with respect to the
full number of shares to which the optionee is entitled in that year, the
optionee's rights shall be cumulative and the optionee may purchase those
shares in any subsequent year during the term of the option. [Unless
otherwise determined by the Board of Directors, if an Officer exercises an
option within six months of the grant of the option, the shares acquired
upon exercise of the option may not be sold until six months after the date
of grant of the option.]
(iii) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors [with respect to an option
granted to a person who is neither an Officer nor a director of the
Company,] each other option granted under the Plan by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death.
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the Board of
Directors, in the event the employment or service of the optionee with
the Company or a subsidiary terminates for any reason other than
because of physical disability or death as provided in subparagraphs
6(a)(iv)(B) and (C), the option may be exercised at any time prior to
the expiration date of the option or the expiration of 30 days after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
14
<PAGE>
(B) Termination Because of Total Disability. Unless otherwise
determined by the Board of Directors, in the event of the termination
of employment or service because of total disability, the option may
be exercised at any time prior to the expiration date of the option or
the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination. The term "total disability" means a medically
determinable mental or physical impairment which is expected to result
in death or which has lasted or is expected to last for a continuous
period of 12 months or more and which causes the optionee to be
unable, in the opinion of the Company and two independent physicians,
to perform his or her duties as an employee, director, officer or
consultant of the Company and to be engaged in any substantial gainful
activity. Total disability shall be deemed to have occurred on the
first day after the Company and the two independent physicians have
furnished their opinion of total disability to the Company.
(C) Termination Because of Death. Unless otherwise determined by
the Board of Directors, in the event of the death of an optionee while
employed by or providing service to the Company or a subsidiary, the
option may be exercised at any time prior to the expiration date of
the option or the expiration of 12 months after the date of death,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of death and
only by the person or persons to whom such optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(D) Amendment of Exercise Period Applicable to Termination. The
Board of Directors, at the time of grant or, with respect to an option
that is not an Incentive Stock Option, at any time thereafter, may
extend the 30-day and 12-month exercise periods any length of time not
longer than the original expiration date of the option, and may
increase the portion of an option that is exercisable, subject to such
terms and conditions as the Board of Directors may determine.
(E) Failure to Exercise Option. To the extent that the option of
any deceased optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and
terminate.
(v) Purchase of Shares. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted under the
Plan only upon receipt by the Company of notice in writing from the
optionee of the optionee's intention to exercise, specifying the number of
shares as to which the optionee desires to exercise the option and the date
on which the optionee desires to complete the transaction, and if required
in order to comply with the Securities Act of 1933, as amended, containing
a representation that it is the optionee's present intention to acquire the
shares for investment and not with a view to distribution. Unless the Board
of Directors determines otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the optionee
must have paid the Company the full purchase price of such shares in cash
(including, with the consent of the Board of Directors, cash that may be
the proceeds of a loan from the Company (provided that, with respect to an
Incentive Stock Option, such loan is approved at
15
<PAGE>
the time of option grant)) or, with the consent of the Board of Directors,
in whole or in part, in Common Stock of the Company valued at fair market
value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration. The fair market value of Common Stock provided in payment of
the purchase price shall be determined by the Board of Directors. If the
Common Stock of the Company is not publicly traded on the date the option
is exercised, the Board of Directors may consider any valuation methods it
deems appropriate and may, but is not required to, obtain one or more
independent appraisals of the Company. If the Common Stock of the Company
is publicly traded on the date the option is exercised, the fair market
value of Common Stock provided in payment of the purchase price shall be
the closing price of the Common Stock as reported in The Wall Street
Journal on the last trading day preceding the date the option is exercised,
or such other reported value of the Common Stock as shall be specified by
the Board of Directors. No shares shall be issued until full payment for
the shares has been made. With the consent of the Board of Directors
(which, in the case of an Incentive Stock Option, shall be given only at
the time of option grant), an optionee may request the Company to apply
automatically the shares to be received upon the exercise of a portion of a
stock option (even though stock certificates have not yet been issued) to
satisfy the purchase price for additional portions of the option. Each
optionee who has exercised an option shall immediately upon notification of
the amount due, if any, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding
requirements. If additional withholding is or becomes required beyond any
amount deposited before delivery of the certificates, the optionee shall
pay such amount to the Company on demand. If the optionee fails to pay the
amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the optionee, including salary, subject to
applicable law. With the consent of the Board of Directors an optionee may
satisfy this obligation, in whole or in part, by having the Company
withhold from the shares to be issued upon the exercise that number of
shares that would satisfy the withholding amount due or by delivering to
the Company Common Stock to satisfy the withholding amount. Upon the
exercise of an option, the number of shares reserved for issuance under the
Plan shall be reduced by the number of shares issued upon exercise of the
option.
(b) Incentive Stock Options. Incentive Stock Options shall be subject to
the following additional terms and conditions:
(i) Limitation on Amount of Grants. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market value,
on the date of grant, of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by that employee during
any calendar year under the Plan and under all incentive stock option plans
(within the meaning of Section 422 of the Code) of the Company or any
parent or subsidiary of the Company exceeds $100,000.
(ii) Limitations on Grants to 10 Percent Shareholders. An Incentive
Stock Option may be granted under the Plan to an employee possessing more
than 10 percent of the total combined voting power of all classes of stock
of the Company or of any parent or subsidiary of the Company only if the
option price is at least 110 percent of the fair market value, as described
in paragraph 6(b)(iv), of the Common Stock subject to the option on the
date it is granted and the option by its terms is not exercisable after the
expiration of five years from the date it is granted.
16
<PAGE>
(iii) Duration of Options. Subject to paragraphs 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors, except that no
Incentive Stock Option shall be exercisable after the expiration of 10
years from the date it is granted.
(iv) Option Price. The option price per share shall be determined by
the Board of Directors at the time of grant. Except as provided in
paragraph 6(b)(ii), the option price shall not be less than 100 percent of
the fair market value of the Common Stock covered by the Incentive Stock
Option at the date the option is granted. The fair market value shall be
determined by the Board of Directors. If the Common Stock of the Company is
not publicly traded on the date the option is granted, the Board of
Directors may consider any valuation methods it deems appropriate and may,
but is not required to, obtain one or more independent appraisals of the
Company. If the Common Stock of the Company is publicly traded on the date
the option is exercised, the fair market value shall be deemed to be the
closing price of the Common Stock as reported in The Wall Street Journal on
the day preceding the date the option is granted, or, if there has been no
sale on that date, on the last preceding date on which a sale occurred or
such other value of the Common Stock as shall be specified by the Board of
Directors.
(v) Limitation on Time of Grant. No Incentive Stock Option shall be
granted on or after the tenth anniversary of the effective date of the
Plan.
(vi) Conversion of Incentive Stock Options. The Board of Directors may
at any time without the consent of the optionee convert an Incentive Stock
Option to a Non-Statutory Stock Option.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options shall be
subject to the following terms and conditions in addition to those set forth in
Section 6(a) above:
(i) Option Price. The option price for Non-Statutory Stock Options
shall be determined by the Board of Directors at the time of grant and may
be any amount determined by the Board of Directors.
(ii) Duration of Options. Non-Statutory Stock Options granted under
the Plan shall continue in effect for the period fixed by the Board of
Directors.
7. Stock Bonuses.
The Board of Directors may award shares under the Plan as stock bonuses.
Shares awarded as a bonus shall be subject to the terms, conditions, and
restrictions determined by the Board of Directors. The restrictions may include
restrictions concerning transferability and forfeiture of the shares awarded,
together with such other restrictions as may be determined by the Board of
Directors. If shares are subject to forfeiture, all dividends or other
distributions paid by the Company with respect to the shares shall be retained
by the Company until the shares are no longer subject to forfeiture, at which
time all accumulated amounts shall be paid to the recipient. The Board of
Directors may require the recipient to sign an agreement as a condition of the
award, but may not require the recipient to pay any monetary consideration other
than amounts necessary to satisfy tax withholding requirements. The agreement
may contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the shares
awarded shall bear any legends required by the Board of Directors. [Unless
otherwise determined by the Board of Directors, shares awarded as a stock bonus
to an Officer may not be sold until six
17
<PAGE>
months after the date of the award.] The Company may require any recipient of a
stock bonus to pay to the Company in cash upon demand amounts necessary to
satisfy any applicable federal, state or local tax withholding requirements. If
the recipient fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the recipient, including
salary or fees for services, subject to applicable law. With the consent of the
Board of Directors, a recipient may deliver Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of a stock bonus, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.
8. Restricted Stock.
The Board of Directors may issue shares under the Plan for such
consideration (including promissory notes and services) as determined by the
Board of Directors. Shares issued under the Plan shall be subject to the terms,
conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. If shares are
subject to forfeiture or repurchase by the Company, all dividends or other
distributions paid by the Company with respect to the shares shall be retained
by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All Common Stock issued pursuant to this paragraph 8 shall be subject
to a purchase agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement may contain
any terms, conditions, restrictions, representations and warranties required by
the Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. [Unless otherwise determined by the
Board of Directors, shares issued under this paragraph 8 to an Officer may not
be sold until six months after the shares are issued.] The Company may require
any purchaser of restricted stock to pay to the Company in cash upon demand
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the purchaser fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the purchaser, including salary, subject to applicable law. With the consent of
the Board of Directors, a purchaser may deliver Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of restricted stock, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by the
Board of Directors, subject to such rules, terms, and conditions as the Board of
Directors prescribes.
(b) Exercise.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of exercise of
one share of Common Stock of the Company over its fair market value on the
date of grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value of one share
of Common Stock of the Company over the option price per share under the
option to which the stock appreciation right relates), multiplied by the
number of shares covered by the stock appreciation right or the option, or
portion thereof, that is surrendered. No stock appreciation right shall be
exercisable at a time that the amount determined under this subparagraph is
negative. Payment by the Company upon exercise of a stock appreciation
right may be made in Common Stock valued at fair market value, in cash, or
partly in Common Stock and partly in cash, all as determined by the Board
of Directors.
18
<PAGE>
(ii) A stock appreciation right shall be exercisable only at the time
or times established by the Board of Directors. If a stock appreciation
right is granted in connection with an option, the following rules shall
apply: (1) the stock appreciation right shall be exercisable only to the
extent and on the same conditions that the related option could be
exercised; (2) the stock appreciation rights shall be exercisable only when
the fair market value of the stock exceeds the option price of the related
option; (3) the stock appreciation right shall be for no more than 100
percent of the excess of the fair market value of the stock at the time of
exercise over the option price; (4) upon exercise of the stock appreciation
right, the option or portion thereof to which the stock appreciation right
relates terminates; and (5) upon exercise of the option, the related stock
appreciation right or portion thereof terminates. [Unless otherwise
determined by the Board of Directors, no stock appreciation right granted
to an Officer or director may be exercised during the first six months
following the date it is granted.]
(iii) The Board of Directors may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations from
time to time affecting the rights of holders of stock appreciation rights.
Such rules and regulations may govern the right to exercise stock
appreciation rights granted prior to adoption or amendment of such rules
and regulations as well as stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the fair market value of the
Common Stock shall be determined as of the date the stock appreciation
right is exercised, under the methods set forth in paragraph 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to
the value of the fraction or, if the Board of Directors shall determine,
the number of shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors [with respect to a stock appreciation right granted to a person
who is neither an Officer nor a director of the Company], each other stock
appreciation right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the holder's domicile at the time of death, and
each stock appreciation right by its terms shall be exercisable during the
holder's lifetime only by the holder.
(vii) Each participant who has exercised a stock appreciation right
shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant including salary, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon the exercise that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the
Company to satisfy the withholding amount.
19
<PAGE>
(viii) Upon the exercise of a stock appreciation right for shares, the
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued. Cash payments of stock appreciation rights
shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan.
10. Cash Bonus Rights.
(a) Grant. The Board of Directors may grant cash bonus rights under the
Plan in connection with (i) options granted or previously granted, (ii) stock
appreciation rights granted or previously granted, (iii) stock bonuses awarded
or previously awarded and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to rules, terms and conditions as the Board of
Directors may prescribe. Unless otherwise determined by the Board of Directors
[with respect to a cash bonus right granted to a person who is neither an
Officer nor a director of the Company,] each cash bonus right granted under the
Plan by its terms shall be nonassignable and nontransferable by the holder,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder's domicile at the
time of death. The payment of a cash bonus shall not reduce the number of shares
of Common Stock reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Options. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of an option, the
amount of the bonus, if any, shall be determined by multiplying the total fair
market value of the shares and cash received pursuant to the exercise of the
stock appreciation right by the applicable bonus percentage. The bonus
percentage applicable to a bonus right, including a previously granted bonus
right, may be changed from time to time at the sole discretion of the Board of
Directors but shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus right
granted in connection with a stock bonus will entitle the recipient to a cash
bonus payable when the stock bonus is awarded or restrictions, if any, to which
the stock is subject lapse. If bonus stock awarded is subject to restrictions
and is repurchased by the Company or forfeited by the holder, the cash bonus
right granted in connection with the stock bonus shall terminate and may not be
exercised. The amount and timing of payment of a cash bonus shall be determined
by the Board of Directors.
(d) Cash Bonus Rights in Connection With Stock Purchases. A cash bonus
right granted in connection with the purchase of stock pursuant to paragraph 8
will entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Any cash bonus right
granted in connection with shares purchased pursuant to paragraph 8 shall
terminate and may not be exercised in the event the shares are repurchased by
the Company or forfeited by the holder pursuant to applicable restrictions. The
amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid pursuant to
paragraph 10 the amount necessary to satisfy any applicable federal, state and
local withholding requirements.
20
<PAGE>
11. Performance Units.
The Board of Directors may grant performance units consisting of monetary
units which may be earned in whole or in part if the Company achieves certain
goals established by the Board of Directors over a designated period of time,
but not in any event more than 10 years. The goals established by the Board of
Directors may include earnings per share, return on shareholders' equity, return
on invested capital, and such other goals as may be established by the Board of
Directors. In the event that the minimum performance goal established by the
Board of Directors is not achieved at the conclusion of a period, no payment
shall be made to the participants. In the event the maximum corporate goal is
achieved, 100 percent of the monetary value of the performance units shall be
paid to or vested in the participants. Partial achievement of the maximum goal
may result in a payment or vesting corresponding to the degree of achievement as
determined by the Board of Directors. Payment of an award earned may be in cash
or in Common Stock or in a combination of both, and may be made when earned, or
vested and deferred, as the Board of Directors determines. Deferred awards shall
earn interest on the terms and at a rate determined by the Board of Directors.
Unless otherwise determined by the Board of Directors [with respect to a
performance unit granted to a person who is neither an Officer nor a director of
the Company], each performance unit granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the holder's domicile at the time of death. Each
participant who has been awarded a performance unit shall, upon notification of
the amount due, pay to the Company in cash amounts necessary to satisfy any
applicable federal, state and local tax withholding requirements. If the
participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant, including
salary or fees for services, subject to applicable law. With the consent of the
Board of Directors a participant may satisfy this obligation, in whole or in
part, by having the Company withhold from any shares to be issued that number of
shares that would satisfy the withholding amount due or by delivering Common
Stock to the Company to satisfy the withholding amount. The payment of a
performance unit in cash shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan. The number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued upon payment of
an award.
12. Foreign Qualified Grants.
Awards under the Plan may be granted to such officers and employees of the
Company and its subsidiaries and such other persons described in paragraph 1
residing in foreign jurisdictions as the Board of Directors may determine from
time to time. The Board of Directors may adopt such supplements to the Plan as
may be necessary to comply with the applicable laws of such foreign
jurisdictions and to afford participants favorable treatment under such laws;
provided, however, that no award shall be granted under any such supplement with
terms which are more beneficial to the participants than the terms permitted by
the Plan.
13. Changes in Capital Structure.
(a) Stock Splits; Stock Dividends. If the outstanding Common Stock of the
Company is hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any stock split, combination of shares or dividend payable in shares,
recapitalization or reclassification appropriate adjustment shall be made by the
Board of Directors in the number and kind of shares available for grants under
the Plan. In addition, the Board of Directors shall make appropriate adjustment
in the number and kind of shares as to which outstanding options, or portions
thereof then unexercised, shall be exercisable, so that the optionee's
proportionate interest before and after the occurrence of the event is
maintained.
21
<PAGE>
Notwithstanding the foregoing, the Board of Directors shall have no obligation
to effect any adjustment that would or might result in the issuance of
fractional shares, and any fractional shares resulting from any adjustment may
be disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors shall be
conclusive.
(b) Mergers, Reorganizations, Etc. In the event of a merger, consolidation,
plan of exchange, acquisition of property or stock, separation, reorganization
or liquidation to which the Company or a subsidiary is a party or a sale of all
or substantially all of the Company's assets (each, a "Transaction"), the Board
of Directors shall, in its sole discretion and to the extent possible under the
structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance with
their terms.
(ii) Outstanding options shall be converted into options to purchase
stock in the corporation that is the surviving or acquiring corporation in
the Transaction. The amount, type of securities subject thereto and
exercise price of the converted options shall be determined by the Board of
Directors of the Company, taking into account the relative values of the
companies involved in the Transaction and the exchange rate, if any, used
in determining shares of the surviving corporation to be issued to holders
of shares of the Company. Unless otherwise determined by the Board of
Directors, the converted options shall be vested only to the extent that
the vesting requirements relating to options granted hereunder have been
satisfied.
(iii) The Board of Directors shall provide a 30-day period prior to
the consummation of the Transaction during which outstanding options may be
exercised to the extent then exercisable, and upon the expiration of such
30-day period, all unexercised options shall immediately terminate. The
Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during such
30-day period.
(c) Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph 13(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors may also
grant options, stock appreciation rights, performance units, stock bonuses and
cash bonuses and issue restricted stock under the Plan having terms, conditions
and provisions that vary from those specified in this Plan provided that any
such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
14. Amendment of Plan.
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in such respects as it shall deem advisable because of changes in
the law while the Plan is in effect or for any other reason. Except as provided
in paragraphs 6(a)(iv), 9, 10 and 13, however, no change in an award already
granted shall be made without the written consent of the holder of such award.
22
<PAGE>
15. Approvals.
The obligations of the Company under the Plan are subject to the approval
of state and federal authorities or agencies with jurisdiction in the matter.
The Company will use its best efforts to take steps required by state or federal
law or applicable regulations, including rules and regulations of the Securities
and Exchange Commission and any stock exchange on which the Company's shares may
then be listed, in connection with the grants under the Plan. The foregoing
notwithstanding, the Company shall not be obligated to issue or deliver Common
Stock under the Plan if such issuance or delivery would violate applicable state
or federal securities laws.
16. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon
any employee any right to be continued in the employment of the Company or any
subsidiary or interfere in any way with the right of the Company or any
subsidiary by whom such employee is employed to terminate such employee's
employment at any time, for any reason, with or without cause, or to decrease
such employee's compensation or benefits, or (ii) confer upon any person engaged
by the Company any right to be retained or employed by the Company or to the
continuation, extension, renewal, or modification of any compensation, contract,
or arrangement with or by the Company.
17. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights as a
shareholder with respect to any Common Stock until the date of issue to the
recipient of a stock certificate for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
18. Option Grants to Non-Employee Directors.
(a) Initial Board Grants. Each person who is a Non-Employee Director when
the Plan is adopted or who becomes a Non-Employee Director thereafter shall be
automatically granted an option to purchase 15,000 shares of Common Stock on the
date the Plan is approved by the shareholders of the Company or when he or she
becomes a Non-Employee Director. A "Non-Employee Director" is a director who is
not an employee of the Company or any of its subsidiaries.
(b) Additional Grants. Each Non-Employee Director shall be automatically
granted an option to purchase additional shares of Common Stock in each calendar
year subsequent to the year in which such Non-Employee Director was granted an
option pursuant to paragraph 18(a), such option to be granted as of the date of
the Company's annual meeting of shareholders held in such calendar year,
provided that the Non-Employee Director continues to serve in such capacity as
of such date. The number of shares subject to each additional grant shall be
5,000 shares for each Non-Employee Director.
(c) Exercise Price. The exercise price of options for 15,000 shares granted
pursuant to paragraph 18(a) as of the date the Plan is approved by the
Shareholders of the Company shall be equal to the price per share to the public
in the Company's initial public offering, unless otherwise determined by the
Board. The exercise price of all other options granted pursuant to this
paragraph 18 shall be equal to 100 percent of the fair market value of the
Common Stock determined pursuant to paragraph 6(b)(iv).
(d) Term of Option. The term of each option granted pursuant to this
paragraph 18 shall be 10 years from the date of grant.
23
<PAGE>
(e) Exercisability. Until an option expires or is terminated and except as
provided in paragraphs 18(g) and 13, an option granted under this paragraph 18
shall be immediately exercisable in full.
(f) Termination As a Director. If an optionee ceases to be a director of
the Company for any reason, including death, the option may be exercised at any
time prior to the expiration date of the option or the expiration of 30 days (or
12 months in the event of death) after the last day the optionee served as a
director, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option as of the last day the optionee
served as a director.
(g) Nontransferability. Each option by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the optionee's domicile at the time of death, and each option by its
terms shall be exercisable during the optionee's lifetime only by the optionee.
(h) Exercise of Options. Options may be exercised upon payment of cash or
shares of Common Stock of the Company in accordance with paragraph 6(a)(v).
Adopted: [December 9, 1994]
Amended: June 2, 1995
May 22, 1998
============
24
<PAGE>
PROXY
PERCON INCORPORATED
Annual Meeting, May 22, 1998
PROXY SOLICITED BY BOARD OF DIRECTORS
The shares represented by this proxy will be voted as specified on the reverse
hereof, but if no specification is made, this proxy will be voted for the
election of directors and for adoption of the Plan. The proxies may vote in
their discretion as to other matters that may come before this meeting.
PROXY Shares: _____________________ Dated ____________________________, 1998
___________________________________ ___________________________________________
Signature of Signatures
Please date and sign as name is imprinted hereon, including designation of
executor, trustee, etc., if applicable. A corporation must sign its name by the
president or other authorized officer.
The Annual Meeting of Shareholders of Percon Incorporated will be held on May
22, 1998 at 9:00 a.m. Pacific Time, at the Valley River Inn, 1000 Valley River
Way, Eugene, Oregon.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian or brokerage house itself--the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
company are held "street names" by a brokerage house, only the brokerage house,
at the instructions of its client, may vote or appoint a proxy to vote the
shares.
<PAGE>
PERCON INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. O
[ ]
PLEASE SIGN AND RETURN THIS PROXY.
The undersigned hereby appoints Michael P. Coughlin and Andy J. Storment, and
each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares that the undersigned may be entitled to vote at the
annual meeting of shareholders of Percon Incorporated (the "Company") on May 22,
1998 and any adjournments thereof, with all powers that the undersigned would
possess if personally present, with respect to the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
For Withheld For All
1. Election of Directors: All All Except FOR AGAINST ABSTAIN
(Instructions: To withhold authority O O O 2. Amendment of the Company's 1995 O O O
to vote for any individual, strike Stock Incentive Plan (i) to increase
a line through the nominee's name the total number of shares reserved
below.) Michael P. Couglin, Andy J. for issuance under the plan from
Storment, Arlen I. Prentice, 500,000 to 600,000 shares and (ii) to
Donald K. Skinner, Dana E. Siebert eliminate certain restrictions that
are no longer necessary or appropriate.
3. Transaction of any business that
properly comes before the meeting or
any adjournments thereof. A majority
of the proxies or substitutes at the
meeting may exercise all the powers
granted hereby.
</TABLE>
(Continued and to be dated and signed on the other side.)
