<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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 Rule 14a-11(c) or Rule 14a-12
PERCEPTRON, INC.
- -------------------------------------------------------------------------------
(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] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
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(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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<PAGE> 2
[PERCEPTRON LOGO]
June 7, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held on Friday, July 12, 1996, at 9:00 a.m., local time, at 23855 Research
Drive, Farmington Hills, Michigan 48335.
In addition to the election of directors, the proposals to be presented at
the Annual Meeting include (a) approval of an amendment to the Company's 1992
Stock Option Plan to increase the shares of Common Stock available for grant
under such plan by 250,000 shares and to restrict the number of shares of Common
Stock which may be granted to any salaried employee in any fiscal year to
200,000 (the "1992 Amendment"); and (b) approval of an amendment to the
Company's Directors Stock Option Plan to increase the shares of Common Stock
available for grant under such plan by 63,000 shares (the "Directors Plan
Amendment").
The Board of Directors has carefully considered the 1992 Amendment and the
Directors Plan Amendment in light of the Company's current growth strategy. To
meet the challenges of this growth strategy, it is necessary for the Company to
continually strengthen its team. In February 1996, Alfred A. Pease joined the
Company as President and Chief Executive Officer. Prior to the date of the
Annual Meeting, the Company expects to hire a new Chief Financial Officer and a
Vice President of Engineering and, in the next year, intends to add numerous
other new employees. In addition, at the Annual Meeting, the Company is seeking
to add four new, highly qualified non-employee directors to the Board of
Directors.
The Company's philosophy is to link compensation to performance and has
historically favored stock-based compensation incentives, in particular, stock
option grants, as part of its compensation program for all team members,
including directors, management and other employees. Due to the rapid expansion
of the Company's business and the additional talent required to support
continued growth, there are insufficient shares of Common Stock available under
the 1992 Stock Option Plan and the Directors Stock Option Plan to continue the
Company's successful history of providing compensation that is tied to
increasing shareholder value. As a result, the Board of Directors has amended
the stock option plans to permit the Company to continue to use stock option
grants to build and strengthen its team.
The Board of Directors believes that the 1992 Amendment and the Directors
Plan Amendment will prove to be of significant benefit to the Company for the
following reasons:
- The Board of Directors believes that historic grants of stock options to
team members have provided significant performance incentives to the team
and have contributed to the Company's strong financial performance and
increased shareholder value.
- If the amendments are approved, the additional 250,000 shares of Common
Stock available under the 1992 Stock Option Plan will be used
specifically for options to purchase 200,000 shares of Common Stock which
the Company granted to Alfred A. Pease, subject to shareholder approval,
at the time he joined the Company as President and Chief Executive
Officer, as well as for options to purchase approximately 65,000 shares
of Common Stock which the Company believes will be required to attract
and motivate a new Chief Financial Officer and a Vice President of
Engineering.
- The additional 63,000 shares being requested under the Directors Stock
Option Plan will be used specifically for option grants required to be
made under such plan to the four new outside director
<PAGE> 3
nominees, as well as annual option grants required under such plan
through 1999 for up to seven outside directors, and will permit the
Company to add one additional outside director who will be able to
participate in the plan.
- Each of the proposed stock incentive plans or related agreements include
a vesting or holding period requirement which require directors,
management and employees to contribute to the Company over an extended
period of time in order to benefit from these plans.
- These plans have been designed to encourage Common Stock ownership, with
the intention of further aligning the interests of the Company's
employees with the interests of shareholders.
The enclosed Proxy Statement offers a more complete description of the 1992
Amendment and the Directors Plan Amendment. The Board of Directors encourages
you to read the Proxy Statement carefully.
THE BOARD OF DIRECTORS BELIEVES IT IS OF CRITICAL IMPORTANCE THAT THE
AMENDMENTS TO THESE PLANS BE ADOPTED, AND WE NEED YOUR VOTE. The Company's
revenues have grown from $14.5 million in 1992 to $37.3 million in 1995; net
income has grown from $1.8 million to $9.3 million over the same period. This
has significantly increased shareholder value as the Company's stock price has
risen from the Initial Public Offering price (as adjusted for the 1995 stock
split) of $4.33 at August 20, 1992 to $36.13 at May 31, 1996. None of this would
have been possible without the hard work of team members, who have all been
incentivized with stock options.
We are proud of our accomplishments and look forward to building the team
required to continue our efforts. We need your vote to help us attract
additional talent and retain our exceptional team who have built shareholder
value.
Please take the time now to vote in favor of each of the proposals to be
presented at the Annual Meeting by promptly returning the enclosed proxy,
marked, dated and signed.
Sincerely,
/s/James E. McGrath
James E. McGrath
Chairman of the Board of Directors
<PAGE> 4
[PERCEPTRON LOGO]
----------------------------------
PERCEPTRON, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JULY 12, 1996
----------------------------------
The Annual Meeting of Shareholders of Perceptron, Inc., a Michigan
corporation, will be held on Friday, July 12, 1996, at 9:00 a.m., local time, at
23855 Research Drive, Farmington Hills, Michigan 48335 for the following
purposes:
1. To elect nine directors to serve until the 1997 Annual Meeting of
Shareholders.
2. To approve and adopt an amendment to the Company's 1992 Stock Option
Plan which would (a) increase the total number of shares of the
Company's Common Stock available for grant under such plan by 250,000
shares and (b) restrict the number of shares of Common Stock which may
be subject to options granted under such plan to any salaried employee
of the Company, in any fiscal year, to 200,000 shares of Common Stock.
3. To approve and adopt an amendment to the Company's Directors Stock
Option Plan which would increase the total number of shares of the
Company's Common Stock available for grant under such plan by 63,000
shares.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on May 17, 1996, as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting. A certified list of shareholders entitled to vote at the
meeting will be available for examination by any shareholder during the meeting
at the corporate offices at 23855 Research Drive, Farmington Hills, Michigan,
48335.
By the Order of the Board of Directors
Thomas S. Vaughn
Thomas S. Vaughn, Secretary
23855 Research Drive
Farmington Hills, Michigan 48335
June 7, 1996
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THE VOTE OF EVERY SHAREHOLDER IS IMPORTANT, AND YOUR COOPERATION IN
PROMPTLY RETURNING YOUR MARKED, DATED AND SIGNED PROXY WILL BE APPRECIATED. THE
PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING. YOUR PROXY WILL, HOWEVER, HELP TO ASSURE A QUORUM AND TO
AVOID ADDED PROXY SOLICITATION COSTS.
- --------------------------------------------------------------------------------
<PAGE> 5
-------------------------
PROXY STATEMENT
-------------------------
PERCEPTRON, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON JULY 12, 1996
-------------------------
INTRODUCTION
This Proxy Statement and the accompanying form of proxy, which were first
mailed to shareholders on approximately June 11, 1996, are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Perceptron, Inc. (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held at the corporate
offices of the Company on Friday, July 12, 1996, at 9:00 a.m., local time, and
at any adjournments thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and in this Proxy Statement. The
corporate offices of the Company are located at 23855 Research Drive, Farmington
Hills, Michigan, 48335, and the Company's telephone number is (810) 478-7710.
Only holders of record of the Company's Common Stock at the close of
business on May 17, 1996 (the "Record Date") will be entitled to notice of and
to vote at the Annual Meeting or any adjournments thereof. Shareholders of
record on the Record Date are entitled to one vote per share on any matter that
may properly come before the Annual Meeting. As of the Record Date, there were
6,874,395 shares of Common Stock outstanding and entitled to vote. The presence,
either in person or by properly executed proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. See "Share Ownership of Management and Certain Shareholders"
for a description of the beneficial ownership of the Company's Common Stock. The
Company's Board of Directors announced a three-for-two stock split of the
Company's Common Stock, which was effected in the form of a stock dividend
payable on November 30, 1995 to shareholders of record on November 20, 1995 (the
"1995 Stock Split"). All reported historical information contained herein has
been adjusted accordingly to reflect the impact of the 1995 Stock Split.
The Company has engaged D.F. King & Co., Inc. at an estimated cost of
$6,000 to solicit proxies by any appropriate means, including personal
interview, mail, telephone, courier service and facsimile transmissions,
following the original mailing of proxy soliciting material. In addition,
directors and officers and other employees of the Company may solicit, without
additional compensation, proxies by any appropriate means, including personal
interview, mail, telephone, courier service and facsimile transmissions.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries which are record holders of the Company's Common Stock
to forward proxy soliciting material to the beneficial owners of such shares and
the Company will reimburse such record holders for their reasonable expenses
incurred in connection therewith. The cost of soliciting proxies, including the
preparation, assembling and mailing of the Notice of Meeting, Proxy Statement,
form of proxy and any other soliciting material, as well as the cost of
forwarding such material to the beneficial owners of Common Stock, will be borne
by the Company.
Shares represented by a duly executed proxy, unless previously revoked,
will be voted at the Annual Meeting in accordance with the instructions of the
shareholder thereon if the proxy is received by the Company before the close of
business on July 11, 1996. Shares represented by a proxy received after that
date will be voted if the proxy is received by the Company in sufficient time to
permit the necessary examination and tabulation of the proxy before the vote of
shareholders is taken. Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before it is voted. Proxies may be
revoked by (i) filing with the Secretary of the Company, at or before the Annual
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company at the Company's corporate offices
at or before the Annual Meeting, or (iii) attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not in and of
itself constitute a revocation of a proxy).
<PAGE> 6
For purposes of determining the number of votes cast with respect to the
election of directors, only those cast "for" or "against" are included.
Abstentions are counted only for purposes of determining whether a quorum is
present at the Annual Meeting and determining whether the requisite vote is
received on the proposals to amend the 1992 Stock Option Plan and the Directors
Stock Option Plan. Broker non-votes are not counted for any purpose.
MATTERS TO COME BEFORE THE MEETING
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will be asked to elect a board of nine
directors to hold office, in accordance with the Bylaws of the Company, until
the 1997 annual meeting and until the election and qualification of their
successors, or until their resignation or removal. The following table sets
forth information regarding the nominees for election to the Company's Board of
Directors. The shares represented by properly executed proxies will be voted in
accordance with the specifications made therein. PROXIES WILL BE VOTED "FOR" THE
ELECTION OF SUCH NOMINEES UNLESS THE SPECIFICATION IS MARKED ON THE PROXY
INDICATING THAT AUTHORITY TO DO SO IS WITHHELD. If a nominee is unable to serve
or, for good cause, will not serve, the proxy confers discretionary authority to
vote with respect to the election of any person to the Board. The nominees
receiving a plurality of votes cast at the Annual Meeting will be elected to the
Board of Directors. Shares may not be voted cumulatively for the election of
directors.
The nominees named below have been selected by the Board of Directors of
the Company. The following information with regard to business experience has
been furnished by the respective nominees for director.
<TABLE>
<CAPTION>
POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
- ---------------------------- ---------------------------------------------------------------
<S> <C>
Dwight D. Carlson, 52....... Mr. Carlson has been a director of the Company since 1981, when
he founded the Company. Since February 1996, Mr. Carlson has
served as Vice Chairman of the Board of Directors. From 1981 to
February 1996, Mr. Carlson was President and Chief Executive
Officer of the Company. Mr. Carlson also serves as Chairman of
the Board of Michigan Future, Inc., a Michigan non-profit
corporation addressing competitiveness issues in the State of
Michigan; Chairman of the Auto Body Consortium, a non- profit
company engaged in research to improve manufacturing processes
in the automotive industry; a director of Industrial Technology
Institute of Michigan, a non-profit corporation focused on
research to enhance Michigan's economy; and a director of the
National Coalition for Advanced Manufacturing, a non-profit
corporation whose purpose is to develop cooperation between
industry, government and academia in advanced manufacturing and
industrial modernization. Recently, Mr. Carlson joined the
Visiting Committee of the National Institute of Standards and
Technology.
Philip J. DeCocco, 58....... Mr. DeCocco has been President of Sturges House, Inc., a
company founded by Mr. DeCocco, since 1983. Sturges House, Inc.
offers executive recruiting and management consulting services
in human resources, strategic planning, executive development
and organization design and development to various companies,
including the Company.
Paul L. McDermott, 42....... Mr. McDermott has been a director of the Company since 1993.
Mr. McDermott has been a Managing Director at Nomura Securities
International, Inc., an investment banking firm, since 1993,
and has served in various other capacities at Nomura since
1986. Mr. McDermott also serves as a director of New Valley
Corp. and International Apparel, Inc.
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
- ---------------------------- ---------------------------------------------------------------
<S> <C>
Robert S. Oswald, 55........ Mr. Oswald has been President and Chief Executive Officer of
Robert Bosch Corporation ("Bosch"), a manufacturer of
automotive components and systems, since January 1994. From
January, 1990 to December 1993, Mr. Oswald was President of the
Original Equipment Manufacturer's Division of Bosch. Mr. Oswald
serves as a director of Robert Bosch, Gmbh and Associated Fuel
Pump Systems Corporation.
Alfred A. Pease, 50......... Mr. Pease has been a director of the Company since February
1996. Since February 1996, Mr. Pease has been President and
Chief Executive Officer of the Company. From November 1993 to
February 1996, Mr. Pease was President and founder of Digital
Originals, Inc., a manufacturer of digital imaging products and
related software. From December 1990 to October 1993, Mr. Pease
served as Product Line Director of Advanced Micro Devices,
Inc., a manufacturer of semi-conductor products.
Harry T. Rein, 51........... Mr. Rein has been a director since 1985. Since 1987, he has
been Managing General Partner and founder of Canaan Partners, a
venture capital firm. Mr. Rein also serves as a director of
various private corporations.
Paul E. Rice, 52............ Mr. Rice has been a director of the Company since 1989. Since
1984, he has been Administrator of the Alternative Investments
Division, Bureau of Investments, Michigan Department of
Treasury. Mr. Rice currently serves on the advisory boards of
numerous investment funds and is also a director of various
private corporations.
Louis R. Ross, 64........... Mr. Ross retired in December 1995 as Vice Chairman and Chief
Technical Officer of Ford Motor Company ("Ford") and a member
of Ford's Office of Chief Executive and its Board of Directors,
positions he held since January 1993. From October 1991 to
January 1993, he served as Executive Vice President and Chief
Technical Officer of Ford and from May 1989 to October 1991, he
was Vice President International Automotive Operations of Ford.
Terryll R. Smith, 46........ Mr. Smith has been Group Vice President, Sales and Marketing of
Advanced Micro Devices, Inc. ("AMD"), a manufacturer of
integrated circuits, since February, 1996. From January, 1994
to February, 1996, Mr. Smith was Group Vice President,
Applications Solutions Products of AMD. From October, 1992 to
January, 1994, Mr. Smith was Vice President, International
Sales and Marketing and from March, 1989 to October, 1992, was
Vice President, European Sales, Marketing and Operations of
AMD.
</TABLE>
3
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors is responsible for direction of the overall affairs
of the Company. Directors of the Company are elected to serve until their
successors are elected. During the year ended December 31, 1995, the Board of
Directors met a total of eight times. All of the current directors who are
standing for re-election attended at least 75% of the total meetings of the
Board of Directors, and of any committee on which they served, held during the
period in 1995 in which they served as directors or members of any such
committees.
The Board of Directors has delegated certain authority to an Audit
Committee, a Management Development and Compensation Committee and an Executive
and Nominating Committee to assist it in executing its duties. The composition
and principal functions of each Committee are as follows:
Audit Committee. The Audit Committee is comprised of three members of the
Board of Directors: Messrs. James A. McGrath (who is not standing for
re-election to the Board of Directors), McDermott and Rein. The principal
functions of the Audit Committee are to nominate the accounting firm to be
appointed as the Company's independent certified public accountants and to
review the plan and scope of the audit, the report of the audit upon its
completion and the adequacy of the Company's internal accounting procedures and
controls. The Audit Committee also reviews the nature and extent of all services
provided to the Company by such accountants and evaluates their fees and the
effects of such services upon their independence. The Audit Committee held two
meetings in 1995.
Management Development and Compensation Committee. The Management
Development and Compensation Committee is comprised of three members of the
Board of Directors: Messrs. McDermott, Rein and Rice. The principal functions of
the Committee are to review the Company's compensation programs, to establish
the compensation programs for the Company's executive officers, and to review
and approve annual bonuses to be paid to such executive officers. The Committee
also administers the Company's two Stock Option Plans. The Committee formally
meets from time to time and also takes action by consent resolution. The
Committee took informal action by consent resolution four times in 1995.
Executive and Nominating Committee. The Executive and Nominating Committee
is comprised of five members: Messrs. Carlson, McGrath, James A. Ratigan (who is
not standing for re-election to the Board of Directors), Rein and Rice. The
Committee is generally authorized to act on behalf of the Board of Directors
between meetings of the Board. The Committee's duties also include recommending
to the Board of Directors the nominees to stand for election as directors at
each annual meeting of shareholders and recommending to the Board of Directors
the directors to serve on the standing committees of the Board. Recommendations
by shareholders of possible director nominees may be addressed to the Executive
and Nominating Committee of the Board of Directors in care of the Secretary of
the Company and will be forwarded to the Committee for consideration.
PROPOSAL 2 -- AMENDMENT TO THE 1992 STOCK OPTION PLAN
PROPOSED AMENDMENT TO THE 1992 PLAN
The Company proposes to amend the 1992 Stock Option Plan (the "1992 Plan")
to (a) increase the total number of shares of Common Stock available for grant
under such plan from 1,564,286 to 1,814,286 and (b) restrict the number of
shares of Common Stock which may be subject to options granted under such plan
to any salaried employee, in any fiscal year, to 200,000 shares of Common Stock.
This amendment is necessitated by the fact that there are insufficient
shares of Common Stock currently available under the 1992 Plan for the Company
(i) to grant all options it committed to grant to Alfred A. Pease, the Company's
new President and Chief Executive Officer, under the terms of his employment
agreement; (ii) to grant the level of options believed necessary to attract
other new executives, in particular a chief financial officer and a vice
president of engineering, and additional team members; and (iii) to continue to
grant options as a means of retaining and incenting existing officers, managers
and other team members. This amendment, if approved by the shareholders of the
Company, will result in Mr. Pease receiving all
4
<PAGE> 9
options which the Company had committed to grant to him and will permit the
continued use of options to attract new executives and other team members and to
retain and incent the Company's existing team.
The amendment restricting the number of shares of Common Stock which may be
subject to options granted to any salaried employee is being proposed so that
the Company will not be limited by applicable federal income tax regulations in
its ability to deduct compensation expense arising from options granted under
the 1992 Plan.
Increase in Shares Authorized Under Plan. The Company's executive officer
and management compensation program reflects the Company's philosophy that
executive compensation should be linked to performance. As a result, a
substantial portion of each such executive's cash compensation is paid in the
form of a bonus which is earned only if the Company achieves established
performance standards. Similarly, the Management Development and Compensation
Committee (the "Management Development Committee") has historically favored
stock-based compensation incentives for the Company's executives, such as stock
options which permit the executives to buy a specified number of shares of
Common Stock at the fair market value on the date an option is granted. Such
stock options gain value only if the price of the Common Stock increases above
the exercise price.
The Company has also historically utilized stock option grants as part of
its compensation program for all team members, reflecting the Company's
philosophy of linking compensation to performance. The Board of Directors
believes that it is appropriate to link compensation, at all levels within the
organization, to performance and to continue such practice through future grants
of stock options. In addition, the Company believes that the use of stock option
grants to team members helps to provide an incentive for their continued
employment and otherwise more closely aligns their interests with those of the
Company and its shareholders.
Further, as the Company continues to grow, it has a continuing need to
attract highly qualified executive and other team member candidates to meet the
Company's personnel requirements. The Company utilizes stock options as part of
a standard compensation package developed to attract such candidates.
If the 1992 Plan is amended as proposed, the Company intends to continue to
use stock options as a key component of its executive and team compensation
program as described above.
As of May 31, 1996, there were 23,718 shares of Common Stock available for
grants under the 1992 Plan and there were outstanding options to purchase
200,000 shares of Common Stock which become exercisable only if the shareholders
approve the proposed amendment to the 1992 Plan (the "Contingent Options"). The
Contingent Options consist of options to purchase 200,000 shares of Common Stock
issued to Mr. Pease, in connection with his appointment as the Company's
President and Chief Executive Officer, effective February 14, 1996. The
Contingent Options consist of non qualified options to purchase 182,980 shares
of Common Stock exercisable at an exercise price of $20.625 per share and the
remainder as incentive stock options exercisable at an exercise price of $23.50
per share. None of the Contingent Options will become exercisable unless the
proposed amendment to the 1992 Plan is approved by the shareholders of the
Company. If the shareholders of the Company approve the proposed amendment to
the 1992 Plan, the Contingent Options become exercisable in cumulative annual
installments of 25% beginning February 14, 1997 and expire on February 14, 2006
or earlier, in the event of the termination of Mr. Pease's employment with the
Company. As of the date of the termination of Mr. Pease's employment with the
Company, all unexercisable Contingent Options expire, except that in the event
of the termination of Mr. Pease's employment without cause after July 14, 1996,
unexercisable Contingent Options for 66,667 shares of Common Stock will become
immediately exercisable. In the event shareholders do not approve such
amendment, the Company has agreed to grant Mr. Pease an option to purchase
100,000 shares of Common Stock (the "Substitute Option") on terms no less
favorable than those applicable to the Contingent Options, options to purchase
100,000 of the Contingent Options shall expire and be cancelled and the Company
shall use its best efforts to obtain shareholder approval for the remainder of
the Contingent Options. See "Further Information -- Compensation of Directors
and Executive Officers -- Employment Agreements."
Assuming the proposed amendment to the 1992 Plan is adopted, the Contingent
Options will become exercisable in accordance with their terms and there would
be 273,718 shares available for future grants under
5
<PAGE> 10
the 1992 Plan. Future grants of options under the 1992 Plan may be made to new
team members, including new additions to the Company's executive team,
management team and other team members, and to existing team members, including
the Company's executive officers, management team and other team members. It is
anticipated that options to purchase up to 65,000 shares, in the aggregate, will
be granted to attract new executives, including a chief financial officer and a
vice president of engineering.
If the proposed amendment to the 1992 Plan is not adopted, the Contingent
Options will not become exercisable, the Company will be obligated to issue
replacement options for one-half of the Contingent Options, the Company will be
obligated to use its best efforts to obtain shareholder approval for the
remainder of the Contingent Options at a future meeting of the shareholders of
the Company and, assuming no further options were issued under the 1992 Plan
after May 31, 1996 (other than one-half of the Contingent Options as described
above), there would be only 123,718 shares available for future grants under the
1992 Plan. The Company believes that this number of available option shares
would be inadequate to meet the Company's needs and would significantly impede
the Company's ability to attract new team members, including new executives, and
to retain existing key team members. Further, the inability of Mr. Pease to
exercise one half of his Contingent Options as a result of the failure of the
shareholders to approve the proposed amendment to the 1992 Plan could negatively
impact the Company's ability to retain and to incent Mr. Pease.
Limit on Number of Shares. The Company proposes to amend the 1992 Plan to
limit to 200,000 the number of shares of Common Stock that may be subject to
options granted under such plan to any salaried employee in any fiscal year.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and certain proposed regulations and transitional rules promulgated
thereunder by the Internal Revenue Service contain rules regarding the federal
income tax deductibility of compensation paid to a publicly traded corporation's
chief executive officer and to each of its four most highly paid executive
officers. Under Section 162(m), the Company may deduct compensation paid to such
an executive only to the extent that it does not exceed $1,000,000 during any
fiscal year, unless the compensation constitutes "performance-based"
compensation. In general, compensation attributable to a stock option or stock
appreciation right is deemed to be based on performance if (i) the grant is made
by the corporation's compensation committee, (ii) the plan under which the grant
is made includes a per-employee limit on the number of shares with respect to
which options may be granted during a specific period; and (iii) the amount of
compensation the employee could receive under the terms of the option is based
solely on the increase in value of the stock after the date of the grant.
The Board of Directors concluded that it would be advisable to establish
certain restrictions on the granting of options under the 1992 Plan to exempt
from Section 162(m) compensation realized in connection with future exercises of
options. Accordingly, the Board has amended the 1992 Plan to limit to 200,000
the number of shares of Common Stock that may be subject to options granted to
any salaried employee in any fiscal year. If this amendment is approved by the
shareholders, compensation deductions available to the Company arising from the
exercise of options granted under the 1992 Plan generally should not be limited
by Section 162(m).
The Board believes it is in the best interests of the shareholders to
maximize the Company's available tax deductions through this amendment to the
1992 Plan, but not unduly limit its discretion in establishing executive
compensation. As a result, the Board established the permitted size of option
awards to a single individual based on the Board's determination of the maximum
number of option shares which would be required to be granted in any fiscal year
to retain or attract any executive officer of the Company.
REQUIRED VOTE
Approval of the amendment to the 1992 Plan requires the affirmative vote of
holders of a majority of the shares present, or represented, and entitled to be
voted at the Annual Meeting. Abstentions will have the effect of a vote against
approval of the 1992 Plan and broker non-votes will have no effect.
PROXIES WILL BE VOTED "FOR" THE APPROVAL OF THE AMENDMENT TO THE 1992 PLAN
UNLESS OTHERWISE INDICATED ON THE PROXY.
6
<PAGE> 11
THE 1992 STOCK OPTION PLAN
The 1992 Plan was adopted by the Board of Directors on April 21, 1992 and
approved by the shareholders on April 27, 1992 and has been amended on several
occasions thereafter. Most recently the Plan was amended on January 25, 1996 and
June 3, 1996, (i) to increase the total number of shares of Common Stock
available for grant under such plan from 1,564,286 to 1,814,286 and (ii) to
restrict the number of shares of Common Stock which may be subject to options
granted under such plan to any salaried employee of the Company, in any fiscal
year, to 200,000 shares of Common Stock. Such amendment is being submitted to
the shareholders for approval at the Annual Meeting.
Subject to the subsequent sentence, an aggregate of 1,564,286 shares of the
Common Stock are reserved for issuance upon the exercise of options granted
under the 1992 Plan. If, for any reason, an option lapses, expires or terminates
without having been exercised in full, the unpurchased shares covered thereby
are again available for grants of options under the 1992 Plan. In addition, if
the option is exercised by an optionee through the retention by the Company of a
portion of the option in payment of the exercise price of such option or by
delivery to the Company of shares previously acquired pursuant to options
granted under the 1992 Plan, then shares of Common Stock underlying the retained
option and shares of Common Stock delivered in payment of the exercise price of
an option as described above will again be available for grants of options under
the 1992 Plan.
Pursuant to the 1992 Plan, employees of the Company (approximately 186
persons) may be granted incentive stock options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
other persons (including employees) may be granted non-qualified options to
acquire Common Stock. The purpose of the 1992 Plan is to encourage employees of
the Company and certain other key persons to acquire Common Stock. The Company
believes that stock option grants to employees help to provide an incentive for
their continued employment and otherwise more closely align their interests with
those of the Company and its shareholders.
The 1992 Plan presently is administered by the Management Development
Committee of the Board of Directors. Subject to the express provisions of the
1992 Plan, the Management Development Committee has authority, in its
discretion, to determine which employees and other persons receive options, the
times when options shall be granted, the exercise price of each option, the
period during which each option may be exercised, the number of shares subject
to each option and the terms of the respective option agreements covering each
option granted under the 1992 Plan. The Management Development Committee may set
aside a fixed number of shares of Common Stock out of the shares available under
the 1992 Plan for grants by the President to employees of the Company who are
not executive officers of the Company.
Stock options granted under the 1992 Plan are exercisable upon such terms
as the Management Development Committee, in its discretion, may determine. No
option granted under the 1992 Plan may be exercisable more than ten years from
the date upon which it was granted. In addition, no option granted under the
1992 Plan may be exercisable within six months from the date of grant by persons
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended. No
ISO shall be exercisable by any employee who has not been in the continuous
employ of the Company for a period of at least one year from the date of grant.
The exercise price of an ISO may be no less than the fair market value of the
Common Stock on the date of grant. Employees possessing more than ten percent of
the voting stock of the Company are eligible to receive ISOs; provided, however,
that the option price of ISOs granted to such employees shall not be less than
110% of the fair market value of the shares covered by the ISOs on the date of
grant and such ISOs shall not be exercisable more than five years after the date
of grant. The exercise price of non-qualified options granted to employees,
officers, directors and affiliates shall be no less than 85% of the fair market
value of the Common Stock on the date of grant. The last reported sale price of
the Common Stock, as quoted on The Nasdaq Stock Market's National Market (the
"Nasdaq National Market"), on May 31, 1996 was $36.125 per share.
The exercise price is payable in full in cash or in shares of Common Stock
at the time of purchase; or, in the case of non qualified stock options or in
the case of ISOs issued on or after May 21, 1993, the exercise price may be paid
by delivery to the Company of a properly executed exercise notice, acceptable to
the Company, together with irrevocable instructions to the participant's broker
to deliver to the Company
7
<PAGE> 12
sufficient cash to pay the exercise price and any applicable income and
employment withholding taxes, in accordance with a written agreement between the
Company and the brokerage firm ("cashless exercise" procedure); or, in the case
of non-qualified stock options or in the case of ISOs issued on or after October
21, 1994, the option exercise price may be paid through the retention by the
Company of shares of Common Stock which would otherwise be transferred to the
optionee upon the exercise of exercisable options, with such retained shares
having a value equal to the difference between the fair market value of the
shares being retained (determined as of the date of exercise of the options),
less the exercise price of such options; or, in the case of ISOs, may be paid in
three installments as hereinafter provided; or, a combination of the foregoing.
In the event of payments in installments, 50% of the purchase price shall be
paid on the date of exercise and on such date the exercising optionee shall
execute and deliver to the Company such optionee's promissory note making such
optionee personally liable to pay the balance of the purchase price in two
installments on the first and second anniversaries of the date of exercise. Such
promissory note shall bear interest at a rate determined by the Management
Development Committee and shall be secured by a pledge of the Common Stock being
purchased.
Generally, if the employment by the Company of any optionee who is an
Employee (as defined in the 1992 Plan) shall terminate for any reason, other
than by death or total and permanent disability, any option which such optionee
is entitled to exercise on the date of such termination shall be exercisable by
the optionee at any time on or before the earlier of the expiration date of the
option or three months after the date of such termination, but only to the
extent of the accrued right to purchase at the date of such termination. If the
employment of any optionee who is an Employee shall be terminated because of
total and permanent disability of such optionee, the option shall be exercisable
by the optionee at any time on or before the earlier of the expiration date of
the option or one year after the date of such termination of employment, but
only to the extent of the accrued right to purchase at the date of such
termination. If any optionee shall die while employed by the Company and, if at
the date of death, the optionee shall be entitled to exercise an option, such
option may be exercised by any person who acquires the option by bequest or
inheritance or by reason of the death of the optionee, or by the executor or
administrator of the estate of the optionee, at any time before the earlier of
the expiration date of the option or one year after the date of death of the
optionee, but only to the extent of the accrued right to purchase at the date of
death.
Certain option agreements issued to officers of the Company contain a
provision accelerating the exercisability of options granted under the 1992 Plan
in the event of their termination of employment under certain circumstances,
including terminations of an officer's employment without cause. All agreements
issued to date under the 1992 Plan contain provisions accelerating the
exercisability of options granted under the 1992 Plan in the event of certain
mergers and sales of all or substantially all of the assets of the Company.
See "Further Information -- Compensation of Directors and Executive
Officers -- Termination of Employment and Change of Control Arrangements" for a
description of additional provisions applicable to the executive officers named
in the Summary Compensation Table.
AMENDMENT OR TERMINATION
The 1992 Plan may be suspended or terminated in its entirety at any time by
the Board of Directors. In addition, the Board of Directors may suspend,
terminate or amend the 1992 Plan at any time without the approval of
shareholders; provided, however, that the approval of shareholders is required
for any amendment which: (i) increases the total number of shares of stock
issuable under the 1992 Plan; (ii) decreases the minimum option price; (iii)
alters the class of employees eligible for grants of options; (iv) increases the
maximum term of options granted under the 1992 Plan; (v) reduces the period of
time after the date of grant during which an employee must remain in the employ
of the Company in order to exercise an option; (vi) increases the term of the
1992 Plan; (vii) withdraws the administration of the 1992 Plan from the Board of
Directors; or (viii) otherwise materially increases the benefits accruing to
participants under the 1992 Plan.
8
<PAGE> 13
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Under the Code as now in effect, at the time an
ISO is granted or exercised, the optionee will not be deemed to recognize any
income and the Company will not be entitled to any deduction. However, the
difference between the exercise price and the fair market value of the purchased
shares on the date of exercise is an item of tax preference which may subject
the optionee to the alternative minimum tax in the year the ISO is exercised.
The holder of an ISO generally will be accorded long-term capital gain or loss
treatment on the disposition of Common Stock acquired by exercise of the option;
provided that the disposition occurs more than two years from the date of grant
and one year from the date of exercise. An optionee who disposes of shares
acquired upon exercise of an ISO prior to the expiration of the foregoing
holding periods recognizes ordinary income upon the disqualifying disposition
equal to the difference between the option price and the lesser of the fair
market value of the shares on the date of exercise or the date of disposition.
Any appreciation between the date of exercise and date of disposition is taxed
as long or short-term capital gain, depending upon the holding period of the
shares. Payment of the option price with previously acquired ISO shares that
have not been held for the statutory holding periods will be treated as a
disqualifying disposition of those shares, with the tax consequences described
above. Payment of the exercise price by surrendering shares of Common Stock
generally will not result in the recognition of a capital gain or loss on the
shares surrendered. If an ISO is exercised by the retention by the Company of
shares of Common Stock underlying ISOs under the 1992 Plan, the optionee will
recognize ordinary income in the year the option is exercised equal to the
difference between the fair market value of the Common Stock underlying the
retained options on the date of exercise and the exercise price of such options.
The optionee's basis for the newly acquired shares will be equal to the fair
market value of the shares on the exercise date and the optionee's holding
period will begin on the day after the date of exercise. To the extent ordinary
income is recognized by the optionee, the Company may deduct a corresponding
amount as compensation.
Nonqualified Stock Options. Upon the exercise of a nonqualified option, an
optionee will recognize ordinary income equal to the difference between the
option price and the fair market value of the Common Stock at the time of
exercise. When the optionee disposes of shares acquired by the exercise of an
option, the amount received in excess of the fair market value on the date of
exercise will be treated as long or short-term capital gain, depending on the
holding period of the shares. Payment of the option price for shares of Common
Stock by surrender of shares of Common Stock previously owned by the optionee
will not give rise to a recognized gain on the shares surrendered. If a
nonqualified option is exercised with payment by Common Stock, to the extent the
number of new shares received upon the exercise of a nonqualified option exceeds
the number of shares surrendered upon the exercise of such option, the fair
market value of the additional shares on the date the option is exercised,
reduced by the amount of any cash paid by the optionee upon the exercise of the
option, will be taxable to the optionee as ordinary income in the year the
option is exercised. The optionee's basis and holding period for the number of
newly-acquired shares equal to the number of surrendered shares will carry over
from the surrendered shares on a share-for-share basis. The optionee's basis in
the remaining shares will equal the fair market value of the shares on the
exercise date, and the optionee's holding period will begin on the day after the
date on which the optionee's tax basis is determined. If a nonqualified option
is exercised by the retention by the Company of shares of Common Stock
underlying options under the 1992 Plan, the optionee will recognize ordinary
income in the year the option is exercised equal to the difference between the
fair market value of the Common Stock underlying the retained options and the
exercised options on the date of exercise and the exercise price of such
options. The optionee's basis for the newly acquired shares will be equal to the
fair market value of the shares on the exercise date and the optionee's holding
period will begin on the day after the date of exercise. To the extent ordinary
income is recognized by the optionee, the Company may deduct a corresponding
amount as compensation.
STOCK OPTIONS GRANTED UNDER THE 1992 PLAN
The following table lists each person named in the Summary Compensation
Table under "Further Information -- Executive Compensation -- Summary
Compensation Table" below, all director nominees, all current executive officers
as a group, all current directors (other than executive officers) as a group,
each associate of the foregoing persons, each other person who received or is to
receive at least five percent of the options under the 1992 Plan, and all
current team members of the Company (other than executive officers) as
9
<PAGE> 14
a group, indicating the number and weighted average exercise price of options
granted under the 1992 Plan to each of the foregoing, as of May 31, 1996. The
table does not include options previously granted under the Company's 1983 Stock
Option Plan.
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAMES AND PRINCIPAL POSITION UNDER 1992 PLAN(1) EXERCISE PRICE
- --------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Alfred A. Pease, President and Chief Executive
Officer; Director Nominee........................ 200,000(2) $20.87
James E. McGrath, Chairman of the Board............ 120,000(3) 3.71
Dwight D. Carlson, Vice Chairman of the Board;
Former President and Chief Executive Officer;
Director Nominee................................. 263,191(4) 5.14
James A. Ratigan, Executive Vice President and
Chief Financial Officer; Former Executive Vice
President
and Chief Operating Officer...................... 172,500(5) 7.33
Neil E. Barlow, Executive Vice President --
International.................................... 62,961(6) 6.21
Gary D. Johnson, Former Executive Vice President --
Marketing........................................ 62,961(7) 6.21
All Current Executive Officers as a Group (5
persons)......................................... 818,652(2)(3)(4)(5)(6) 9.32
All Current Directors (other than Executive
Officers) as a Group (4 persons)................. 0 --
Philip J. DeCocco, Director Nominee................ 0 --
Paul L. McDermott, Director Nominee................ 0 --
Robert S. Oswald, Director Nominee................. 0 --
Harry T. Rein, Director Nominee.................... 0 --
Paul E. Rice, Director Nominee..................... 0 --
Louis R. Ross, Director Nominee.................... 0 --
Terryll R. Smith, Director Nominee................. 0 --
All Current Team Members (other than Executive
Officers) as a Group............................. 721,915 19.04
</TABLE>
- -------------------------
(1) All options are ISOs, except that 182,980; 120,000; 193,973; 131,595; 7,002,
and 7,032 shares held by Messrs. Pease, McGrath, Carlson, Ratigan, Barlow,
Johnson and one officer of the Company, respectively, are non-qualified
options. The exercise price of all options is equal to 100% of the fair
market value of the Common Stock on the date of grant.
(2) If the shareholders approve "Proposal 2 -- Amendment to the 1992 Stock
Option Plan", Mr. Pease's options become exercisable in cumulative annual
installments of 25% beginning February 14, 1997 and expire on the earlier of
February 14, 2006 or, if earlier, one year after Mr. Pease's death or
permanent disability or three months after Mr. Pease's termination of
employment. In the event shareholders do not approve such amendment, the
Company has agreed to grant Mr. Pease an option to purchase 100,000 shares
of Common Stock on terms no less favorable than those applicable to the
Contingent Options, options to purchase 100,000 of the Contingent Options
shall expire and be cancelled and the Company shall use its best efforts to
obtain shareholder approval for the remainder of the Contingent Options. In
the event that Mr. Pease's employment is terminated without cause, after
July 14, 1996, options for 66,667 shares that are not then exercisable
become exercisable. As of May 31, 1996, none of Mr. Pease's options under
the 1992 Plan are exercisable or have been exercised.
(3) All of Mr. McGrath's options are currently exercisable and expire on the
earlier of May 21, 2003 or one year following Mr. McGrath's death. As of May
31, 1996, Mr. McGrath held unexercised options for 21,364 shares of Common
Stock under the 1992 Plan.
10
<PAGE> 15
(4) Options for 225,000 shares held by Mr. Carlson expire on July 6, 2003 and
options for 38,191 shares held by Mr. Carlson expire on December 31, 1998,
or, if earlier, one year after Mr. Carlson's death or permanent disability
or three months after Mr. Carlson's termination of employment. Options for
112,500 shares held by Mr. Carlson became exercisable in cumulative annual
installments of 25% beginning July 6, 1994. Options for 112,500 shares held
by Mr. Carlson become exercisable in cumulative annual installments of 25%
beginning on April 1, 1995. The remaining options for 38,191 shares become
exercisable in cumulative annual installments of 25% beginning December 31,
1994. In the event that Mr. Carlson's employment is terminated without
cause, all options held by Mr. Carlson, to the extent not then exercisable,
will become immediately exercisable. As of May 31, 1996, Mr. Carlson held
unexercised options for 187,844 shares of Common Stock under the 1992 Plan,
of which 56,250 options are exercisable.
(5) Mr. Ratigan's options expire on December 13, 1998, or, if earlier, one year
after Mr. Ratigan's death or permanent disability or three months after Mr.
Ratigan's termination of employment. Of the options held by Mr. Ratigan,
options for 30,000 shares originally became exercisable in cumulative 50%
increments on December 13, 1995 and 1996. In August 1995, the terms of such
options were amended so that they became exercisable as follows: 11,250 on
August 16, 1995, 3,750 on December 13, 1995, and 2,500 on each of January 1,
1996, February 1, 1996, March 1, 1996, April 1, 1996, May 1, 1996 and June
1, 1996. The remaining options for 142,500 shares originally became
exercisable in cumulative increments as follows: 43,125 on June 13, 1994,
43,125 on December 13, 1994, 28,125 on December 13, 1995, 14,490 on December
13, 1996 and 13,635 on January 1, 1997. In August 1995, the terms of such
options were amended so that the options that were then not exercisable
become exercisable as follows: 21,094 on August 16, 1995, 7,030 on December
13, 1995, 4,688 on each of January 1, 1996, February 1, 1996, March 1, 1996
and April 1, 1996, and 4,687 on each of May 1, 1996 and June 1, 1996. In
April 1996, the terms of such options were amended so that all such options
become exercisable in the event that Mr. Ratigan's employment is terminated
without cause prior to August 31, 1996. As of May 31, 1996, Mr. Ratigan held
unexercised options for 7,188 shares of Common Stock under the 1992 Plan,
none of which are exercisable.
(6) Options for 37,500 shares held by Mr. Barlow, expire on July 6, 2003 and
options for 25,461 shares held by Mr. Barlow, expire on December 31, 1998,
or, if earlier, one year after Mr. Barlow's death or permanent disability or
three months after Mr. Barlow's termination of employment. Options for
18,750 shares held by Mr. Barlow, become exercisable in cumulative annual
installments of 25% beginning July 6, 1994, and such options become
exercisable in the event that Mr. Barlow's employment is terminated without
cause. Options for 18,750 shares held by Mr. Barlow, become exercisable in
cumulative annual installments of 25% beginning April 1, 1995. Options for
25,461 shares held by Mr. Barlow become exercisable in cumulative annual
installments of 25% beginning December 31, 1994. As of May 31, 1996, Mr.
Barlow held unexercised options for 37,303 shares of Common Stock, of which
5,821 options are exercisable.
(7) Options for 37,500 shares held by Mr. Johnson, expire on July 6, 2003 and
options for 25,461 shares held by Mr. Johnson, expire on December 31, 1998,
or, if earlier, one year after Mr. Johnson's death or permanent disability
or three months after Mr. Johnson's termination of employment. Options for
18,750 shares held by Mr. Johnson become exercisable in cumulative annual
installments of 25% beginning July 6, 1994. Options for 18,750 shares held
Mr. Johnson, become exercisable in cumulative annual installments of 25%
beginning April 1, 1995. Options for 25,461 shares held by Mr. Johnson
become exercisable in cumulative annual installments of 25% beginning
December 31, 1994. Beginning September 15, 1996, Mr. Johnson's employment
terminates and he may become a consultant to the Company under an
arrangement which expires April 1, 1998, unless earlier terminated by the
Company upon 90 days' prior written notice to Mr. Johnson or by Mr. Johnson
upon 60 days' prior written notice to the Company. If the Company terminates
the consulting arrangement, Mr. Johnson will vest in 60% of the options held
by him which are not then exercisable and if Mr. Johnson terminates the
consulting arrangement, Mr. Johnson will vest in 40% of the options held by
him which are not then exercisable. As of May 31, 1996, Mr. Johnson held
unexercised options for 31,483 shares of Common Stock under the 1992 Plan,
none of which are exercisable.
11
<PAGE> 16
PROPOSAL 3 -- AMENDMENT TO THE DIRECTORS STOCK OPTION PLAN
PROPOSED AMENDMENT TO THE DIRECTORS PLAN
The Company proposes to amend the Directors Stock Option Plan (the
"Directors Plan") to increase the total number of shares of Common Stock
available for grant from 112,500 to 175,500.
This amendment is necessitated by the fact that there are insufficient
shares of Common Stock currently available under the Directors Plan to make all
grants provided for under such plan to the director nominees to be elected at
the Annual Meeting. This amendment, if approved by shareholders of the Company,
will permit all grants provided for under the Directors Plan to be made to such
director nominees and will further permit the continued use of the Directors
Plan to attract, retain and motivate highly qualified individuals to serve as
directors of the Company.
As of May 31, 1996, there were 52,500 shares of Common Stock available for
grant under the Directors Plan. If all director nominees set forth in "Proposal
1 -- Election of Directors" are elected to the Board of Directors, options to
purchase an additional 60,000 shares of Common Stock will be automatically
granted under the Directors Plan.
If the proposed amendment to the Directors Plan is adopted, and all
director nominees are elected to the Board of Directors, immediately following
the Annual Meeting, there would be options to purchase 124,500 shares of Common
Stock outstanding under the Directors Plan and 51,000 shares available for
future grants under the Directors Plan.
If the proposed amendment to the Directors Plan is not adopted, and all
director nominees are elected to the Board of Directors, there would be
insufficient shares available under the Directors Plan to make all grants of
Initial Options and Annual Options provided for under the Directors Plan to be
made in 1996 to the director nominees. In that case, the available options under
the Directors Plan will be allocated among the director nominees in proportion
to the number of options they would have received if the proposed amendment was
adopted. In addition, there would not be any shares available under the
Directors Plan for the grant of Initial Options to any new non-employee
directors elected or appointed to the Board of Directors in the future or for
future grants of Annual Options.
The Directors Plan was adopted to promote the best interests of the Company
and its shareholders by attracting and motivating highly qualified individuals
to serve as directors of the Company. The Directors Plan was further adopted to
encourage increased ownership of Common Stock by the Company's non-employee
directors, and to provide such directors with incentive-based compensation so as
to further align their interests with the interests of the Company's
shareholders. If the proposed amendment to the Directors Plan is adopted, the
Company intends to continue the use of the Directors Plan for such purposes.
Only directors who are not employed by the Company or any subsidiary of the
Company and who are not serving as the Chairman of the Board are eligible to
participate in the Directors Plan. There currently are four directors eligible
to participate in the Directors Plan. Following the Annual Meeting, if all
director nominees are elected, there will be seven directors eligible to
participate in the Directors Plan. Neither the Chairman of the Board, the
executive officers named in the Summary Compensation Table, nor any other
officers or team members of the Company, are eligible to participate in the
Directors Plan.
REQUIRED VOTE
Approval of the amendment to the Directors Plan requires the affirmative
vote of holders of a majority of the shares present, or represented, and
entitled to be voted at the Annual Meeting. Abstentions will have the effect of
a vote against approval of the Directors Plan and broker non-votes will have no
effect.
PROXIES WILL BE VOTED "FOR" THE APPROVAL OF THE AMENDMENT TO THE DIRECTORS
PLAN UNLESS OTHERWISE INDICATED ON THE PROXY.
12
<PAGE> 17
THE DIRECTORS STOCK OPTION PLAN
The Directors Plan was approved by the Board of Directors on February 9,
1995 and was amended on May 15, 1995 and approved by the shareholders of the
Company on June 23, 1995. The Directors Plan was amended on June 3, 1996 to
increase the total number of shares of Common Stock available for grant from
112,500 to 175,500. This amendment is being submitted to the shareholders for
approval at the Annual Meeting. Under the terms of the Directors Plan, eligible
non-employee directors are granted options under the Directors Plan in addition
to their meeting fees. See "Further Information -- Compensation of Directors and
Executive Officers -- Directors".
The Directors Plan currently provides for the issuance of options to
purchase up to the 112,500 shares of Common Stock to non-employee directors of
the Company. Shares of Common Stock subject to any unexercised portion of a
terminated, forfeited, cancelled or expired option under the Directors Plan may
be used again for subsequent grants under such plan. In the event that an option
granted under the Directors Plan is exercised through the retention by the
Company of shares underlying such options or by payment of the exercise price
with shares of Common Stock previously acquired by the optionee under the
Directors Plan, then such shares may also be used for subsequent grants of
options under the Directors Plan.
Each eligible director who is elected or appointed to the Board of
Directors receives an Initial Option to purchase 15,000 shares of Common Stock
on the date of his or her first election or appointment (an "Initial Option").
In addition, each non-employee director who has been a director for six months
before the date of each annual meeting of shareholders held during the term of
the Directors Plan automatically will be granted, as of the date of such annual
meeting, an option to purchase an additional 1,500 shares of Common Stock (an
"Annual Option").
The exercise price of options granted under the Directors Plan shall be
equal to the last reported sale price per share of the Common Stock on the
Nasdaq National Market on the date of determination. As of the close of business
on May 31, 1996, the price per share of Common Stock as quoted on the Nasdaq
National Market was $36.125. The option exercise price is payable in cash, by
certified check, bank draft or money order, by delivery to the Company of
previously acquired shares of Common Stock having a fair market value equal to
the option exercise price, through a cashless exercise procedure whereby the
optionee instructs his or her broker to deliver to the Company sufficient cash
to pay the exercise price and applicable exercise and employment withholding
tax, through the retention by the Company of then exercisable options having a
fair market value equal to the option exercise price, or by any combination of
the foregoing.
Each option granted under the Directors Plan as an Initial Option becomes
exercisable in full on the first anniversary of the date of grant. Options
granted as Annual Options become exercisable in three annual increments of
33 1/3% of the shares subject to the option. All options granted under the Plan
are exercisable for a period of ten years from the date of grant, unless earlier
terminated.
If a non-employee director's term of office terminates for any reason,
including such director becoming an Employee (as defined in the Directors Plan)
of the Company, other than such director's election or appointment as Chairman
of the Board, prior to the date the option or portion thereof becomes
exercisable, such option or portion thereof shall terminate. If the non-employee
director's term of office terminates because such director is elected or
appointed as Chairman of the Board and the director is not an Employee or does
not become an Employee as a result of such election or appointment, then such
director shall not be eligible for further automatic grants of Options so long
as he or she serves as Chairman, but his or her options granted prior to his or
her election as Chairman shall not terminate and shall continue to become
exercisable in full after one year, in the case of Initial Options, or in
33 1/3% annual increments, in the case of Annual Options. Thereafter, if such
Chairman becomes an Employee of the Company or ceases to be a director, prior to
the date his or her options become exercisable, such options or portion thereof
which are not exercisable shall terminate.
To the extent that an option is exercisable and is unexercised on the date
the non-employee director's term of office terminates for any reason, including
such director becoming an Employee of the Company, other than such director's
election or appointment as Chairman of the Board, the option shall terminate on
the
13
<PAGE> 18
earlier of (i) the expiration date of the option or (ii) three months after such
non-employee director's termination; provided, however, that the exercise period
in the foregoing clause (ii) shall be extended to one year after termination if
termination is due to the non-employee director's death or disability. To the
extent an option or any portion thereof is exercisable and unexercised on the
date a non-employee director's term of office as a non-employee director is
terminated due to the non-employee director's election or appointment as
Chairman (and the non-employee director is not an Employee or does not become an
Employee as a result of such election or appointment), the option shall
terminate on the earlier of (i) the expiration date of the option, or (ii) three
months after such non-employee director becomes an Employee or ceases to be a
Director; provided, however, that the exercise period in clause (ii) shall be
extended to one year after the non-employee director ceases to be a Director if
such termination is due to the non-employee director's death or disability.
The Directors Plan provides that (i) in the event of a termination by the
Company of a director's membership on the board or failure to renominate the
director for election to the Board, or voluntary resignation by the director
from the Board at the request of the Board, following a change in Control of the
Company, or (ii), in the event of a Change in Control, if one of the
corporations surviving the Change in Control, or the person purchasing the
Company's assets in the Change in Control, does not assume the options under the
Directors Plan, any portion of an option granted under the Directors Plan that
is then not exercisable shall become immediately exercisable. For purposes
hereof, a "Change in Control" shall be deemed to have occurred in the event of
(i) a merger involving the Company in which the Company is not the surviving
corporation (other than a merger with a wholly-owned subsidiary of the Company
formed for the purpose of changing the Company's corporate domicile); (ii) a
share exchange in which the shareholders of the Company exchange their stock in
the Company for stock of another corporation (other than a share exchange in
which all or substantially all of the holders of the voting stock of the
Company, immediately prior to the transaction, exchange, on a pro rata basis,
their voting stock of such other corporation for more than 50% of the voting
stock of such other corporation); (iii) the sale of all or substantially all of
the assets of the Company; or (iv) any person or group of persons (as defined by
Section 13(d) of the Exchange Act) (other than any employee benefit plan or
employee benefit trust benefitting the team members of the Company) becoming a
beneficial owner, directly or indirectly, of securities of the Company
representing more than 50% of either the then outstanding Common Stock or the
combined voting power of the Company's then outstanding voting securities.
Options granted under the Directors Plan are not transferable except by
will or by the laws of descent and distribution, and may be exercised during a
non-employee director's lifetime only by such non-employee director.
The Directors Plan is administered by the Management Development Committee.
The Management Development Committee is authorized to construe the provisions of
the Directors Plan, but shall have no discretion with respect to the terms of
grants made automatically under the Directors Plan, except to the extent such
discretion would not result in the Directors Plan failing to qualify for the
exemption provided under Securities and Exchange Commission Rule 16b-3.
AMENDMENT OR TERMINATION
The Board may terminate the Directors Plan, or the granting of options
under the Directors Plan, at any time. No new grants shall be made under the
Directors Plan after February 9, 2000. The Board of Directors may at any time
and from time to time, amend or modify the Directors Plan; provided, however, no
amendment or modification may be made to the Directors Plan without the approval
of the shareholders to the extent that Rule 16b-3 requires such amendment or
modification to be approved by the shareholders of the Company. Unless otherwise
permitted under Rule 16b-3, the Directors Plan may not be amended more than once
in any six month period other than to comply with changes in the Code. No
amendment or termination shall affect any option previously granted to a
non-employee director without the consent of such non-employee director.
14
<PAGE> 19
FEDERAL INCOME TAX CONSEQUENCES
Under the Code as now in effect, upon the exercise of an option granted
under the Directors Plan, an optionee will recognize ordinary income equal to
the difference between the option price and the fair market value of the Common
Stock at the time of exercise. When the optionee disposes of shares acquired by
the exercise of an option, the amount received in excess of the fair market
value on the date of exercise will be treated as long or short-term capital
gain, depending on the holding period of the shares. Payment of the option price
for shares of Common Stock by surrender of shares of Common Stock previously
owned by the optionee will not give rise to a recognized gain on the shares
surrendered. To the extent the number of new shares received upon the exercise
of an option exceeds the number of shares surrendered upon the exercise of such
option, the fair market value of the additional shares on the date the option is
exercised, reduced by the amount of any cash paid by the optionee upon the
exercise of the option, will be taxable to the optionee as ordinary income. The
optionee's basis and holding period for the number of newly-acquired shares
equal to the number of surrendered shares will carry over from the surrendered
shares on a share-for-share basis. The optionee's basis in the remaining shares
will equal the fair market value of the shares on the exercise date, and the
optionee's holding period will begin on the day after the date on which the
optionee's tax basis is determined. If an option is exercised by the retention
by the Company of shares of Common Stock underlying options under the Directors
Plan, the optionee will recognize ordinary income equal to the difference
between the fair market value of the Common Stock underlying the retained
options and the exercised options on the date of exercise and the exercise price
of such options. The optionee's basis for the newly acquired shares will be
equal to the fair market value of the shares on the exercise date and the
optionee's holding period will begin on the day after the date of exercise. To
the extent ordinary income is recognized by the optionee, the Company may deduct
a corresponding amount as compensation.
15
<PAGE> 20
STOCK OPTIONS GRANTED UNDER THE DIRECTORS PLAN
The following table lists each person named in the Summary Compensation
Table under "Further Information -- Compensation of Directors and Executive
Officers -- Summary Compensation Table" below, all director nominees, all
current executive officers as a group, all current directors (other than
executive officers) as a group, each associate of the foregoing persons, each
other person who received or is to receive at least five percent of the options
under the Directors Plan, all current team members of the Company (other than
executive officers) as a group and all current directors and director nominees
(other than executive officers as a group), indicating the number and weighted
average exercise price of options granted under the Directors Plan to each of
the foregoing, as of May 31, 1996, and options which would be granted under the
Directors Plan to each of the foregoing if they continued in their present
position with the Company (or if a director nominee, served as a director of the
Company) for the remaining term of the Directors Plan.
<TABLE>
<CAPTION>
FUTURE POSSIBLE
OPTION SHARES WEIGHTED OPTION SHARE
GRANTED UNDER AVERAGE GRANTS UNDER
NAMES AND PRINCIPAL POSITION DIRECTORS PLAN EXERCISE PRICE DIRECTORS PLAN
- --------------------------------------------------- --------------- -------------- ---------------
<S> <C> <C> <C>
Alfred A. Pease, President and Chief Executive
Officer, Director Nominee........................ 0 0 0
James A. McGrath, Chairman of the Board(3)......... 0 0 0
Dwight D. Carlson, Vice Chairman of the Board;
Former President and Chief Executive Officer;
Director Nominee................................. 0 0 0
James A. Ratigan, Executive Vice President and
Chief Financial Officer; Former Executive Vice
President and Chief Operating Officer(3)......... 0 0 0
Neil E. Barlow, Executive Vice President --
International.................................... 0 0 0
Gary D. Johnson, Former Executive Vice President --
Marketing........................................ 0 0 0
Knut M. Heitmann(3)................................ 15,000(1) $11.83 0
Paul L. McDermott, Director Nominee................ 15,000(1) 12.83 6,000(2)
Harry T. Rein, Director Nominee.................... 15,000(1) 12.83 6,000(2)
Paul E. Rice, Director Nominee..................... 15,000(1) 12.83 6,000(2)
Philip J. DeCocco, Director Nominee................ 0 0 19,500(4)
Robert S. Oswald, Director Nominee................. 0 0 19,500(4)
Louis R. Ross, Director Nominee.................... 0 0 19,500(4)
Terryll R. Smith, Director Nominee................. 0 0 19,500(4)
All Current Executive Officers as a Group (5
persons)......................................... 0 0 0
All Current Directors (other than Executive
Officers) as a Group (4 persons)................. 60,000(1) 12.57 18,000(5)
All Current Team Members (other than Executive
Officers) as a Group............................. 0 0 0
All Current Directors and Director Nominees (other
than Executive Officers) as a Group (7
persons)......................................... 60,000(1) 12.57 96,000(2)(4)(5)
</TABLE>
- -------------------------
(1) All options granted to date under the Directors Plan have been Initial
Options. Initial Options held by Messrs. Heitmann, McDermott, Rein and Rice
are fully exercisable.
(2) Consists of four annual grants of Annual Options to three current directors.
(3) Not standing for re-election to the Board of Directors.
(4) Consists of an Initial Option grant and three annual grants of Annual
Options to four director nominees.
(5) Consists of four annual grants of Annual Options to three current directors
who are also director nominees.
16
<PAGE> 21
FURTHER INFORMATION
--------------------------------
EXECUTIVE OFFICERS
The officers listed below were appointed by the Board of Directors and
serve in the capacities indicated. Executive officers are normally appointed
annually by the Board of Directors and serve at the pleasure of the Board.
<TABLE>
<CAPTION>
POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
- ----------------------------- --------------------------------------------------------------
<S> <C>
James E. McGrath, 41......... Mr. McGrath has been Chairman of the Board since May 1993 and
a director of the Company since 1983. Since April 1989, Mr.
McGrath has been Chairman and Chief Executive Officer of
Fairfax Capital Partners, Inc., a private merchant banking
firm, and also is currently a director of American Medical
Response, Inc. and Encon Systems, Inc. Mr. McGrath is not
standing for re-election to the Board of Directors.
Alfred A. Pease, 50.......... President and Chief Executive Officer since February 1996. Mr.
Pease's business experience is described under "Proposal 1 --
Election of Directors".
Dwight D. Carlson, 52........ Vice Chairman of the Board since February 1996. Mr. Carlson's
business experience is described under "Proposal 1 -- Election
of Directors."
James A. Ratigan, 48......... Mr. Ratigan has been a director of the Company since 1989.
Since April 1996, Mr. Ratigan has been Executive Vice
President and Chief Financial Officer of the Company. From May
1994 to April 1996, Mr. Ratigan served as Executive Vice
President and Chief Operating Officer of the Company and has
served in various other capacities at the Company since
December 1993. From October 1992 to December 1993, Mr. Ratigan
provided financial consulting services for a number of
companies, including the Company. From 1987 until October
1992, he was a Venture Manager with The Adler Group, a private
venture capital firm. Mr. Ratigan has advised the Company that
he intends to leave the Company by August 31, 1996 due to
personal and family considerations. Mr. Ratigan is not
standing for re-election to the Board of Directors.
Neil E. Barlow, 40........... Mr. Barlow is Executive Vice President -- International and
has been an Executive Vice President of the Company in various
capacities since January 1990. Prior to that, he had held
various positions at the Company including Director of
Manufacturing and Managing Director of the Company's European
subsidiaries for more than five years.
</TABLE>
17
<PAGE> 22
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock by each person known by management of
the Company to be the beneficial owner of more than 5% of its outstanding Common
Stock. The number of shares reported is as of the dates indicated in the
footnotes below. The percentage of class is based on 6,951,459 shares of Common
Stock outstanding on May 31, 1996. The information as to each person has been
furnished by such person and, except as where otherwise indicated, each person
has sole voting power and sole investment power with respect to all shares
beneficially owned by such person.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------------------------------------- -------------------- --------
<S> <C> <C>
FMR Corporation
82 Devonshire Street,
Boston, Massachusetts 02109.................................. 452,900(1) 6.52%
U.S. Trust Company of New York
114 W. 47th Street,
New York, New York 10036..................................... 412,131(2) 5.93%
Rockefeller & Co., Inc.
30 Rockefeller Plaza,
New York, New York 10112..................................... 405,875(3) 5.84%
</TABLE>
- -------------------------
(1) Based upon its statement on Schedule 13G dated February 14, 1996.
(2) Based upon its statement on Schedule 13G dated February 14, 1996.
(3) Based upon its statement on Schedule 13G dated February 9, 1996.
18
<PAGE> 23
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock by each of the directors and director
nominees, the persons named in the Summary Compensation Table and by all
directors and executive officers as a group as of May 31, 1996, unless otherwise
indicated. The information as to each person has been furnished by such person
and, except as where otherwise indicated, each person has sole voting power and
sole investment power with respect to all shares beneficially owned by such
person.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------------------------------------- -------------------- --------
<S> <C> <C>
Dwight D. Carlson(2)(3)........................................ 146,848 2.08%
Philip J. DeCocco.............................................. -- --
Knut M. Heitmann(2)(4)(5)...................................... 15,000 *
Paul L. McDermott(2)(6)........................................ 16,500 *
James E. McGrath(2)(5)(7)...................................... 21,264 *
Robert S. Oswald............................................... -- *
Alfred A. Pease(2)............................................. -- --
James A. Ratigan(2)(5)(8)...................................... 7,539 --
Harry T. Rein(2)(9)............................................ 16,870 --
Paul E. Rice(2)(10)............................................ 165,000 2.37%
Louis R. Ross.................................................. -- --
Terryll R. Smith............................................... -- --
Neil E. Barlow(11)............................................. 56,285 *
Gary D. Johnson(12)............................................ 4,687 *
Directors and executive officers as a group
(9 persons)(2)(3)(4)(6)(7)(8)(9)(10)(11)..................... 449,993 6.29%
</TABLE>
- -------------------------
* Less than 1% of class
(1) The address for Messrs. Carlson, DeCocco, Heitmann, McDermott, McGrath,
Oswald, Pease, Ratigan, Rein, Rice, Ross, Smith, Barlow and Johnson is
23855 Research Drive, Farmington Hills, Michigan 48335.
(2) Serves as a member of the Board of Directors of the Company.
(3) Includes options to purchase 98,437 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of May 31,
1996.
(4) Includes options to purchase 15,000 shares of Common Stock which are
presently exercisable.
(5) Not standing for re-election to the Board of Directors.
(6) Includes options to purchase 15,000 shares of Common Stock, which are
presently exercisable.
(7) Includes options to purchase 21,364 shares of Common Stock, which are
presently exercisable.
(8) Includes options to purchase 7,188 shares of Common Stock, which are
exercisable within 60 days of May 31, 1996.
(9) Consists of 1,869 shares of Common Stock owned by Canaan Venture Partners
L.P. and 1 share of Common Stock owned by Canaan Venture Offshore
Management, N.V., with respect to which Mr. Rein shares voting and
dispositive power but disclaims beneficial ownership. Also includes options
to purchase 15,000 shares of Common Stock, which are presently exercisable.
(10) Consists of 150,000 shares of Common Stock owned by the State Treasurer of
the State of Michigan, Custodian of Public School Employees' Retirement
System; State Employees' Retirement System; Michigan State Police
Retirement System; Judges' Retirement System; and Probate Judges'
Retirement System ("State of Michigan Pension Funds"), of which Mr. Rice is
the State Administrator. Also includes options to purchase 15,000 shares of
Common Stock, which are presently exercisable and which will be exercised
at the discretion of the State of Michigan Pension Funds. Shares of Common
Stock received by Mr. Rice in connection with the exercise of such options
are required to be delivered to the State of Michigan Pension Funds. Mr.
Rice shares voting and dispositive power but disclaims beneficial ownership
of these shares.
(11) Includes options to purchase 10,509 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of May 31,
1996.
(12) Includes options to purchase an aggregate of 4,687 shares of Common Stock,
which are presently exercisable or which are exercisable within 60 days of
May 31, 1996.
19
<PAGE> 24
REPORTING OF BENEFICIAL OWNERSHIP BY DIRECTORS, EXECUTIVE OFFICERS AND TEN
PERCENT HOLDERS
Under the securities laws of the United States, the Company's directors,
its executive (and certain other) officers, and any persons holding more than
ten percent of the Common Stock are required to report their ownership of the
Common Stock and any changes in that ownership to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any failure to file by these dates during the
Company's last fiscal year. All of these filing requirements were satisfied by
the Company's officers, directors and ten percent shareholders, except that Knut
M. Heitman, who was a director during the fiscal year ended December 31, 1995,
failed to file on a timely basis one report relating to a single transaction in
Common Stock beneficially owned by him. In making these statements, the Company
has relied on the written representations of its directors, officers and ten
percent shareholders and copies of the reports that have been filed with the
Commission.
20
<PAGE> 25
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
All of the members of the Board of Directors who are not employed by the
Company (other than Mr. McGrath) receive $1,000 for each Board meeting attended.
In addition, directors are reimbursed for their out-of-pocket expenses incurred
in attending Board and committee meetings. Directors, other than directors who
are serving on the Management Development Committee, are also eligible to
participate in the Company's 1992 Plan.
All of the members of the Board of Directors who are not employed by the
Company (other than the Chairman of the Board) (the "Eligible Directors")
participate in the Directors Plan. On February 9, 1995, each of Messrs.
McDermott, Rein and Rice were granted an Initial Option to purchase 15,000
shares of Common Stock with an exercise price of $12.83. Any additional Eligible
Director who is first elected or appointed after February 9, 1995 will receive
an Initial Option to purchase 15,000 shares of Common Stock on the date of his
or her election or appointment. On May 15, 1995, Mr. Heitman, who is not
standing for re-election to the Board of Directors, was granted an Initial
Option with an exercise price of $11.83. In addition, each Eligible Director who
has been a director for six months before the date of each annual meeting of
shareholders held during the term of the Directors Plan automatically will be
granted, as of the date of such annual meeting, an Annual Option to purchase an
additional 1,500 shares of Common Stock. The Directors Plan expires on February
9, 2000. The exercise price of options granted under the Directors Plan is the
last reported sale price per share of the Company's Common Stock as quoted on
the Nasdaq National Market on the date of grant. Each option granted under the
Directors Plan as an Initial Option becomes exercisable in full on the first
anniversary of the date of grant. Options granted as Annual Options become
exercisable in three annual increments of 33 1/3% of the shares subject to the
option. The exercisability of such options is accelerated in the event of the
occurrence of certain changes in control of the Company. All options granted
under the Directors Plan are exercisable for a period of ten years from the date
of grant, unless earlier terminated due to the termination of the Eligible
Director's service as a director of the Company.
In May 1993, the Company engaged James E. McGrath to serve as Chairman of
the Board of the Company. Mr. McGrath is paid $5,000 per month for his services
as Chairman of the Board. Mr. McGrath was granted non qualified stock options to
purchase 120,000 shares of Common Stock, all of which were immediately
exercisable at an exercise price of $3.71 per share, which was the fair market
value of the Common Stock on the date such options were granted. Such options
expire on the earlier of May 21, 2003 or one year following Mr. McGrath's death.
By April 15 of the year following an exercise of Mr. McGrath's option, Mr.
McGrath will receive a payment equal to the difference between Mr. McGrath's
actual federal income tax liability for the calendar year in which an exercise
of Mr. McGrath's option occurs and the amount Mr. McGrath's federal income tax
liability for the calendar year of such exercise would have been if Mr.
McGrath's option had been an incentive stock option rather than a non qualified
stock option, the shares received upon exercise of the option had been sold at
the date of exercise at the exercise price and such shares had been held for
more than one year at that date (the "Tax Differential Payment"), plus an amount
required for the payment to be received on an After-Tax Basis. After-Tax Basis
means the amount of the Tax Differential Payment supplemented by a further
payment so that the sum of the two payments, after deduction of all federal,
state and local taxes resulting from the receipt of such two payments, shall be
equal to the Tax Differential Payment. Of the stock options granted to Mr.
McGrath to purchase 120,000 shares of Common Stock, options to purchase 93,056
shares were exercised in 1995, and options to purchase 21,364 are outstanding at
May 31, 1996. On April 4, 1996, the Company paid Mr. McGrath $279,565,
representing the Tax Differential Payment due Mr. McGrath related to the options
he exercised in 1995.
21
<PAGE> 26
EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information as to compensation paid
by the Company for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1993, 1994, and 1995 to
(i) the Company's Chief Executive Officer during 1995, (ii) the Company's
executive officers at December 31, 1995 (other than the Chief Executive Officer)
whose aggregate annual salary and bonus exceeded $100,000 and (iii) one former
executive officer, who during portions of the fiscal year ended December 31,
1995 was classified as an executive officer for purposes of the Commission's
regulations, whose aggregate annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION OTHER AWARDS
NAME AND PRINCIPAL ----------------------- ANNUAL ------------ ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION(1) OPTIONS(#) COMPENSATION($)
- --------------------- ---- ---------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Dwight D. Carlson,... 1993 $ 137,500 $ 59,408 -- 263,191 $ 7,757(3)
Vice Chairman of 1994 146,000 88,354 -- -- 12,059(4)
the Board of 1995 155,000 129,156 -- -- 12,380(5)
Directors; Former
President and Chief
Executive
Officer(2)
James A. Ratigan,.... 1993 6,749 -- -- 172,500 --
Executive Vice 1994 125,000 82,508 $18,878(7) -- 25,810(4)
President and 1995 132,500 89,524 -- -- 6,958(5)
Chief Financial
Officer; Former
Executive Vice
President and Chief
Operating
Officer(6)
Neil E. Barlow,...... 1993 $ 125,000 41,585 -- 62,961 6,079(3)
Executive Vice 1994 125,000 82,508 -- -- 7,108(4)
President -- 1995 132,500 89,524 -- -- 5,958(5)
International
Gary D. Johnson,..... 1993 107,000 41,585 -- 62,961 3,312(3)
Former Executive 1994 112,350 86,753 -- -- 6,478(4)
Vice President -- 1995 112,350 30,000 -- -- 8,016(5)
Marketing(8)
</TABLE>
- -------------------------
(1) Perquisites and other personal benefits were provided to all of the persons
named in the Summary Compensation Table. Disclosure of such amounts is not
required because such amounts were less than 10% of the total annual salary
and bonuses reported for each of the respective individuals for each period
presented.
(2) Mr. Carlson served as President and Chief Executive Officer until February
14, 1996, at which time he was appointed Vice Chairman of the Board.
(3) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1993 as follows: Mr. Carlson $2,520, Mr. Barlow $2,520 and Mr. Johnson
$1,800; (ii) the dollar value of any life insurance premiums paid by the
Company in the fiscal year ended December 31, 1993 with respect to term life
insurance for the benefit of each of the named executives as
22
<PAGE> 27
follows: Mr. Carlson $1,215, Mr. Barlow $778 and Mr. Johnson $1,512; and
(iii) the dollar value of any disability insurance premiums paid by the
Company in the fiscal year ended December 31, 1993 in excess of the
Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Carlson $4,022 and Mr. Barlow $2,781.
(4) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1994 as follows: Mr. Carlson $4,620, Mr. Ratigan $2,310, Mr. Barlow $3,675
and Mr. Johnson $3,750; (ii) the dollar value of any life insurance premiums
paid by the Company in the fiscal year ended December 31, 1994 with respect
to term life insurance for the benefit of each of the named executives as
follows: Mr. Carlson $3,075, Mr. Ratigan $842, Mr. Barlow $414 and Mr.
Johnson $2,728; (iii) the dollar value of any disability insurance premiums
paid by the Company in the fiscal year ended December 31, 1994 in excess of
the Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Carlson $4,364 and Mr. Barlow $3,019; and
(iv) temporary housing, moving, travel and other expenses related to Mr.
Ratigan's relocation to Michigan totaling $22,658.
(5) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1995 as follows: Mr. Carlson $4,620, Mr. Ratigan $4,620, Mr. Barlow $2,100
and Mr. Johnson $4,620; (ii) the dollar value of any life insurance premiums
paid by the Company in the fiscal year ended December 31, 1995 with respect
to term life insurance for the benefit of each of the named executives as
follows: Mr. Carlson $3,396, Mr. Ratigan $2,338, Mr. Barlow $838 and Mr.
Johnson $3,396; (iii) the dollar value of any disability insurance premiums
paid by the Company in the fiscal year ended December 31, 1995 in excess of
the Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Carlson $4,364 and Mr. Barlow $3,020.
(6) Mr. Ratigan joined the Company in December 1993. Mr. Ratigan served as
Executive Vice President and Chief Operating Officer until April 19, 1996,
at which time he was appointed Executive Vice President and Chief Financial
Officer. Mr. Ratigan has advised the Company that he intends to leave the
Company by August 31, 1996 due to personal and family considerations.
(7) Includes payment of certain tax "gross up" amounts of $18,878 for certain
taxable income received by Mr. Ratigan in 1994 as described under "All Other
Compensation".
(8) Mr. Johnson resigned as Executive Vice President -- Marketing, effective
July 15, 1995, but continued his employment with the Company.
23
<PAGE> 28
EXERCISE AND VALUE OF OPTIONS
The following table sets forth certain information concerning exercises of
stock options during the fiscal year ended December 31, 1995 by each of the
persons named in the Summary Compensation Table and the number of and the value
of unexercised stock options held by such persons as of December 31, 1995 on an
aggregated basis.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dwight D. Carlson............ 31,008 $409,301 80,611 165,079 $ 1,358,160 $ 2,853,459
James A. Ratigan............. 43,125(3) 548,942 0 43,125 0 643,281
Neil E. Barlow............... 58,682 667,229 12,710 40,455 199,079 670,869
Gary D. Johnson.............. 31,133(4) 450,835 10,961 40,458 175,319 670,903
</TABLE>
- -------------------------
(1) Represents the total gain which would have been realized if all such options
had been exercised on December 31, 1995.
(2) Represents the fair market value of the shares of Common Stock relating to
exercised options, as of the date of exercise, less the exercise price of
such options.
(3) Includes 15,495 shares of Common Stock underlying stock options retained by
the Company as payment for the exercise price of 27,630 shares of Common
Stock.
(4) 20,755 shares acquired on exercise were paid for by the surrender of 4,699
previously acquired shares of Common Stock.
EMPLOYMENT AGREEMENTS
Messrs. Pease, Carlson, Ratigan and Johnson serve in their present
capacities pursuant to the terms of employment agreements.
Mr. Pease's agreement provides for an annual base salary of $200,000,
subject to increase at the discretion of the Management Development Committee,
benefits comparable to the Company's other executive officers, including life,
disability and health insurance and the use of a Company leased automobile and
an annual performance bonus target level of 60% of his base salary. In addition,
such agreement provides for the reimbursement of temporary housing, travel and
relocation expenses incurred by Mr. Pease, including moving expenses, real
estate brokerage commissions and certain closing and loan costs associated with
the sale of Mr. Pease's prior residence and purchase of a new residence in the
state of Michigan and certain incidental expenses related to the relocation,
plus a payment equal to the income taxes payable by Mr. Pease as a result of the
receipt of such reimbursements and tax payment. In the event Mr. Pease's
employment is terminated without cause, his salary and benefits will continue
for twelve months and he will earn a pro rata portion of any bonus that would
have been earned in the year of the termination.
Mr. Pease was granted options to purchase 200,000 shares of Common Stock
under the 1992 Plan (the "Contingent Options") which do not become exercisable
until shareholders approve certain amendments to the 1992 Plan. See "Proposal 2
- -- Amendment to the 1992 Stock Option Plan". In the event shareholders do not
approve such amendments, the Company has agreed to grant Mr. Pease an option to
purchase 100,000 shares of Common Stock (the "Substitute Option") on terms no
less favorable than those applicable to the Contingent Options, options to
purchase 100,000 of the Contingent Options shall expire and be cancelled and the
Company shall use its best efforts to obtain shareholder approval for the
remainder of the Contingent Options. The Contingent Options consist of
non-qualified stock options for 182,980 shares of Common Stock exercisable at an
exercise price of $20.625 per share and the remainder as incentive stock options
exercisable
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at an exercise price of $23.50 per share. These options become exercisable in
cumulative annual installments of 25% beginning February 14, 1997 and expire on
February 14, 2006. In addition, in the event Mr. Pease's employment is
terminated without cause after July 14, 1996, unexercisable options for 66,667
shares of Common Stock held by him will become immediately exercisable.
Mr. Carlson's agreement provides for an annual base salary of $155,000,
benefits comparable to the Company's other executive officers, reimbursement of
reasonable monthly club dues, and an annual performance bonus target level of
$95,000. In the event of certain terminations of Mr. Carlson's employment
without cause, his salary, a $7,917 monthly bonus and his benefits will continue
for the longer of (a) the number of months following the termination of the
agreement which is equal to one month for each year Mr. Carlson was employed by
the Company or (b) March 1, 1999, and all options held by him to the extent not
then exercisable, shall become immediately exercisable. If Mr. Carlson's
employment terminates for any reason, he will earn a pro rata portion of any
bonus that would have been earned in the year of the termination.
The Company can elect to convert Mr. Carlson's employment agreement into a
consulting arrangement at any time, with Mr. Carlson receiving the same annual
base salary, bonus and perquisites as set forth above through March 1, 1999 and
the Company extending the term of his stock options so that they continue to
vest through March 1, 1999. Mr. Carlson is required to render at least sixteen
hours of consulting services per month. Upon the termination of the consulting
arrangement, Mr. Carlson will receive the same benefits he would have received,
as described above, upon termination of his employment. Mr. Carlson will also be
entitled to office space and secretarial support for one year after he is no
longer an employee of the Company and so long as he continues to serve as Vice
Chairman of the Board.
Mr. Ratigan's employment agreement provides for an annual base salary of
$132,500, subject to increase at the discretion of the Management Development
Committee, benefits comparable to the Company's other executive officers and an
annual performance bonus target level in 1996 of $72,000. In addition, such
agreement provides for loans to Mr. Ratigan in amounts required to pay taxes
incurred by Ratigan upon the exercise of non-qualified stock options granted to
him. No loans have ever been made by the Company to Mr. Ratigan under this
agreement. In the event Mr. Ratigan's employment is terminated without cause
prior to August 31, 1996, he will continue to receive his full salary, together
with full life, disability and health benefits and a $1,112 monthly payment
through August 31, 1996 and all options held by him, to the extent not then
exercisable, shall become immediately exercisable. Following termination of Mr.
Ratigan's employment in August 1996, he will continue to receive one-half of his
salary, together with full life, disability and health insurance benefits and a
$1,585 monthly payment until August 31, 1997. If Mr. Ratigan's employment
terminates for any reason, he will earn a pro rata portion of any bonus that
would have been earned in the year of the termination.
Mr. Johnson's agreement provides for a monthly salary of $9,362.50 through
September 15, 1996, benefits comparable to the executive officers of the Company
and a payment of $54.00 per hour of service in excess of eight hours a month.
Beginning September 15, 1996, when his employment terminates, Mr. Johnson may
become a consultant to the Company under an arrangement which expires April 1,
1998, unless earlier terminated by the Company upon 90 days' prior written
notice to Mr. Johnson or by Mr. Johnson upon 60 days' prior written notice to
the Company. Under this consulting arrangement, Mr. Johnson will be compensated
at a per diem rate of $1,000, with a minimum monthly fee of $2,000. If the
Company terminates the consulting arrangement, Mr. Johnson will vest in 60% of
the options held by him which are not then exercisable and if Mr. Johnson
terminates the consulting arrangement, Mr. Johnson will vest in 40% of the
options held by him which are not then exercisable.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Payments due to Messrs. Pease, Carlson, Ratigan and Johnson upon
termination of their employment with the Company are described above under
"Further Information -- Compensation of Directors and Executive Officers --
Employment Agreements."
Agreements relating to stock options granted under the 1992 Plan to each of
the executive officers named in the Summary Compensation Table, as well as
certain other officers of the Company, also provide that such
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<PAGE> 30
options become immediately exercisable in the event that the optionee's
employment is terminated without cause, or there is a diminishment of the
optionee's responsibilities, following a Change of Control of the Company or,
if, in the event of a Change of Control, such options are not assumed by the
person surviving the Change of Control or purchasing the assets in the Change of
Control. A "Change of Control" is generally defined as a merger of the Company
in which the Company is not the survivor, certain share exchange transactions,
the sale or transfer of all or substantially all of the assets of the Company,
or any person or group of persons (as defined by Section 13(d) the Securities
Exchange Act of 1934, as amended) acquires more than 50% of the Common Stock
("Option Acceleration Provision").
Certain option agreements issued to officers of the Company contain a
provision accelerating the exercisability of options granted under the 1992 Plan
in the event of certain terminations of employment without cause.
In addition to the Option Acceleration Provision contained in the 1992 Plan
agreements, the Company's 1983 Stock Option Plan provides that options granted
under such plan to each of the executive officers named in the Summary
Compensation Table become fully exercisable, even if not otherwise exercisable,
if such options are not assumed by the surviving corporation of any merger or
consolidation of the Company or in connection with the sale or transfer by the
Company of substantially all of its assets.
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<PAGE> 31
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee of the Board of
Directors is responsible for the planning, review and administration of the
Company's executive compensation program. During the year ended December 31,
1995, all members of the Committee were non-employee directors of the Company.
The Company's objective is to provide a superior return to its
shareholders. To support this objective, the Company believes it must attract,
retain and motivate top quality executive talent. The Company's executive
compensation program is a critical tool in this process. The Company's executive
compensation program has been designed to link executive compensation to Company
performance through at-risk compensation opportunities, providing significant
reward to executives who contribute to the Company's success.
The Company's executive compensation program consists of base salary,
annual cash incentive opportunities and long-term incentives represented by
stock options. Total targeted compensation for Dwight D. Carlson, President and
Chief Executive Officer of the Company during 1995, was increased by 17% in 1995
over 1994 levels. The other executive officers' total targeted compensation in
1995 was generally increased by 14% over 1994 levels. These increases are
principally attributable to the Company's strong financial performance in 1994
and the high growth operating plan approved by the Company's Board of Directors
for 1995. Of the additional total targeted compensation approved, 75% of Mr.
Carlson's and 71% of the other executive officers' total targeted compensation
was in the form of additional targeted performance bonuses. As a result, most of
the additional targeted compensation would only be paid if the Company achieved
or exceeded the 1995 operating plan.
BASE SALARY
The Committee recognizes the importance of a competitive compensation
structure in retaining and attracting valuable senior executives. Executive
salary levels are reviewed and established annually. The salaries received by
the Company's executives generally reflect their levels of responsibility, the
profitability of the Company and other factors, such as assessments of
individual performance. The base salary, performance bonus, stock option and
other compensation terms for new executive officers are established based upon
each executive's qualifications, position and level of responsibility as
compared with the Company's other executives.
In 1995, the salary level of Mr. Carlson and the other executive officers
were increased by approximately 6%. These increases principally reflected the
Company's strong financial performance in 1994.
ANNUAL BONUS
The Company's executive officers are eligible for annual cash performance
bonuses. At the beginning of each year, the Committee develops a Management
Bonus Plan applicable to all executives of the Company, including the Chief
Executive Officer of the Company.
The 1995 Management Bonus Plan provided that bonuses could be earned only
if the Company achieved at least 75% of its targeted operating profit level. If
this minimum performance level was achieved, the Company's executives were then
eligible to earn bonuses, on a pro rata basis, for performance exceeding 75% of
targeted revenue levels (30% of bonus), 75% of targeted pre-tax net income
levels (30% of bonus) and 75% of targeted new order bookings levels (40% of
bonus). In addition, bonuses could be earned at a one-half rate for performance
exceeding 100% of the targeted levels. Seventy percent of the executives'
overall bonus would be paid based solely upon achievement of these performance
standards and the remaining 30% of their bonuses would be paid at the discretion
of the Committee, with all executive officers earning the same percentage of the
discretionary portion of their bonuses.
The Committee set the 1995 targeted performance standards at levels
consistent with the 1995 operating plan approved by the Company's Board of
Directors.
Targeted performance bonus levels for 1995 were increased over such levels
for 1994 by 36% for Mr. Carlson and by 33% for the other executive officers.
During 1995, 40% of Mr. Carlson's total targeted
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<PAGE> 32
compensation was in the form of a performance bonus (as compared to 35% in
1994), while 35% of the other executive officers' total targeted compensation
was in the form of performance bonuses (as compared to 30% in 1994). Targeted
performance bonus levels in 1995 reflect the Committee's continued emphasis on
providing the Company's executives with significant reward for superior
performance through increased at-risk compensation opportunities, rather than
through increases in base salary.
The Company's actual performance in 1995 exceeded the performance targets
for revenue, pre-tax net income and new order bookings. Based upon this
performance, the Committee approved the payment of the entire discretionary
portion of Mr. Carlson and the other executive officers' 1995 performance
bonuses.
STOCK OPTIONS
Stock option grants have historically been utilized by the Company as part
of its compensation program for all levels of team members, including the
Company's executives. The Company's stock option program permits team members to
buy a specific number of shares of Common Stock, in the future, at the fair
market value of such shares on the date the option is granted. Since stock
options gain value only if the price of the Common Stock increases above the
option exercise price, this use of stock option grants reflects the Company's
philosophy of linking compensation to performance. In addition, the Committee
believes that stock option grants to team members help to provide an incentive
for their continued employment and otherwise more closely align their interests
with those of the Company and its shareholders. The Company also utilizes stock
options as part of its standard compensation package developed to attract highly
qualified employment candidates to the Company.
No stock options were granted to the Company's executives officers in 1995.
During 1995, the Committee accelerated the time periods in which options held by
James A. Ratigan, who was then serving as Executive Vice President and Chief
Operating Officer, would become exercisable in order to provide incentive to Mr.
Ratigan to remain with the Company during periods in which Mr. Ratigan's
personal, family and other considerations dictated otherwise.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Board of Directors of the Company has reviewed the provisions of the
Internal Revenue Code and related regulations of the Internal Revenue Service
which restrict deductibility of executive compensation paid to any of the five
most highly compensated executive officers at the end of any fiscal year to the
extent such compensation exceeds $1,000,000 in any year.
The Board of Directors of the Company concluded that it would be advisable
to establish certain restrictions on the granting of options under the Company's
1992 Stock Option Plan so that compensation realized in connection with the
exercise of options granted under such plan would be exempt from the
restrictions on deductibility described above. See "Proposal 2 -- Amendment to
the 1992 Stock Option Plan" for a discussion of such proposed amendment. It is
important to note that while the proposed amendment allows the Committee
continuing discretion in establishing executive officer compensation, it does
limit such discretion by restricting the size of option awards which the
Committee may grant to any single individual. The permitted size of the option
awards to a single individual was established based on the Committee's
determination of the maximum number of option shares which would be required to
be granted in any fiscal year to retain or attract a chief executive officer of
the Company.
The Committee does not believe that other components of the Company's
compensation program are likely to result in payments to any executive officer
in any year which would be subject to the restriction on deductibility, and
therefore concluded that no further action with respect to qualifying such
compensation for deductibility was necessary at this time. The Committee will
continue to evaluate the advisability of qualifying future executive
compensation programs for deductibility under the Internal Revenue Code.
DATED: JUNE 3, 1996 MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE, AS OF JUNE 3, 1996
Paul L. McDermott, Harry T. Rein, Paul E.
Rice
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STOCK PRICE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on the
Company's Common Stock from August 20, 1992, the date the Company's Common Stock
began trading publicly, through December 31, 1995 with an index consisting of
returns from a peer group of companies, consisting of Cognex Corp., Cyberoptics
Corporation, Medar Inc., PPT Vision, Inc. (formerly Pattern Processing
Technology) and Robotic Vision Systems Inc. (the "Peer Group Index") and The
Nasdaq Stock Market Composite Index (the "Nasdaq Composite Index"). Acuity
Imaging, Inc., which was formerly included in the Peer Group, was acquired
during 1995 by Robotic Vision Systems Inc., a member of the Peer Group. The
returns of each company in the Peer Group Index have been weighted according to
their respective stock market capitalization. The graph assumes that the value
of the investment in the Company's Common Stock, the Peer Group Index and the
Nasdaq Composite Index was $100 on August 20, 1992 and that all dividends were
reinvested.
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. This graph in no way reflects the Company's
forecast of future financial performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG PERCEPTRON, INC., THE PEER GROUP
AND THE NASDAQ COMPOSITE INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ COM-
(FISCAL YEAR COVERED) PERCEPTRON, INC. PEER GROUP POSITE
<S> <C> <C> <C>
8/20/92 100.00 100.00 100.00
12/31/92 119 157 125
12/31/93 204 234 133
12/31/94 354 365 131
12/31/95 604 960 135
</TABLE>
CERTAIN TRANSACTIONS
Paul L. McDermott, a director of the Company, is a Managing Director at
Nomura Securities International, Inc., an investment banking firm, which has in
past and may in the future provide investment banking services to the Company.
The Company is a member of the Auto Body Consortium (the "ABC"), a group
comprised of General Motors Corporation, Ford Company and Chrysler Corporation,
companies in automotive-related businesses,
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<PAGE> 34
including the Company, and several universities and research organizations.
Dwight D. Carlson, Vice Chairman of the Board and the former President and Chief
Executive Officer, and a director of the Company, is the Chairman of the Board
of the ABC, a non-profit corporation. In connection with an industry matching
commitment for a $4,800,000 grant made to the ABC by the U.S. Department of
Commerce, the Company has committed to spend approximately $50,000 per year for
three years, commencing in October 1992, to help fund research to reduce
variation in the automobile body manufacturing process. For the three year
period commencing in 1992, the Company has also committed to make available to
the ABC one or more Company employees whose total compensation and benefits cost
to the Company was approximately $150,000 per year. In October 1995, the ABC
received a $8,300,000 grant from the Department of Commerce. In connection with
industry matching commitments for such grant, the Company has committed to spend
approximately $100,000 per year for three years, commencing in October 1995.
Such commitment can be cancelled by the Company upon 60 days' notice.
Philip J. DeCocco is President of Sturges House, Inc., a company which
offers executive recruiting and management consulting services in the areas of
human resources, strategic planning, executive development, and organization
design and development. Sturges House, Inc. provided consulting services to the
Company during 1995, including the recruitment of Alfred A. Pease to join the
Company as President and Chief Executive Officer, for aggregate payments of
$152,929. Sturges House, Inc. has provided consulting services to the Company
during 1996 and may continue to do so in the future.
INDEPENDENT ACCOUNTANTS
The accounting firm of Coopers & Lybrand has been appointed by the Board of
Directors to audit the consolidated financial statements for the Company for the
year ending December 31, 1996. Representatives of Coopers & Lybrand are expected
to be at the Annual Meeting and to be available to respond to appropriate
questions. Such representatives will have the opportunity to make a statement at
such meeting if they desire to do so.
PROPOSALS BY SHAREHOLDERS FOR 1997 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1997 annual meeting
are eligible for inclusion in the Company's proxy statement for the meeting
under the applicable rules of the Securities and Exchange Commission if received
by the Secretary of the Company at its executive offices no later than February
8, 1997. In order to curtail controversy as to the date on which a proposal was
received by the Company, it is suggested that proposals be submitted by
certified mail, return receipt requested.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors is not aware of
any matters to be presented for action at the Annual Meeting other than those
described above. However, if any other matters should come before the meeting,
it is the intention of the persons named in the accompanying proxy to vote such
proxy in accordance with their judgment on such matters.
By order of the Board of Directors,
T.S. VAUGHN
Thomas S. Vaughn, Secretary
Farmington Hills, Michigan
June 7, 1996
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<PAGE> 35
PERCEPTRON, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PERCEPTRON, INC.
The undersigned shareholder hereby appoints ALFRED A. PEASE and THOMAS
S. VAUGHN, or either of them, the attorney and proxies of the undersigned, with
power of substitution, to vote all the shares of common stock of Perceptron,
Inc. standing in the name of the undersigned at the close of business on May
17, 1996 at the Annual Meeting of Shareholders of the Company to be held on
Friday, July 12, 1996 at 9:00 a.m., local time, and at any and all adjournments
thereof, with all the powers the undersigned would possess if then and there
present.
The shareholder instructs the proxies to vote as specified on this
proxy on the matters described in the Proxy Statement dated June 7, 1996.
Proxies will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON TO THE
BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE OR,
FOR GOOD CAUSE, WILL NOT SERVE), FOR THE FOLLOWING AMENDMENT TO THE COMPANY'S
1992 STOCK OPTION PLAN AND FOR THE FOLLOWING AMENDMENT TO THE DIRECTORS STOCK
OPTION PLAN.
The Undersigned acknowledges receipt of the Proxy Statement and Notice
of said meeting, both dated June 7, 1996.
SEE REVERSE SIDE
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 36
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
WITHHELD NOMINEES:
FOR from all Dwight D. Carlson
all nominees nominess Philip J. DeCocco
1. ELECTION OF / / / / Paul L. McDermott
DIRECTORS Robert S. Oswald FOR AGAINST ABSTAIN
Alfred A. Pease 2. APPROVAL OF AN AMENDMENT / / / / / /
Election of Harry T. Rein TO THE 1992 STOCK OPTION PLAN
directors to Paul E. Rice To approve an amendment to the Perceptron, Inc. 1992
hold office until Louis R. Ross Stock Option Plan to (a) increase the total number of
the Annual Meeting Terryll R. Smith shares of the Company's Common Stock available for
of Shareholders in 1997. grant under such plan by 250,000 shares, and (b) restrict
the number of shares of Common Stock which may be
For, except vote withheld from the following nominee(s):_______________ subject to options granted under such plan to any
(INSTRUCTION: To withhold authority to vote for any nominee, salaried employee of the Company, in any fiscal year,
write that nominee's name in the space provided.) to 200,000 shares, as described in the Notice of Annual
Meeting of Shareholders and Proxy Statement dated
June 7, 1996.
FOR AGAINST ABSTAIN
3. APPROVAL OF AN AMENDMENT TO / / / / / /
THE DIRECTORS STOCK OPTION PLAN
To approve an amendment to the Perceptron, Inc.
Directors Stock Option Plan which would increase
the total number of shares of the Company's Common
Stock available for grant under such plan by 63,000
shares, as described in the Notice of Annual Meeting
of Shareholders and Proxy Statement dated June 7, 1996.
Brokers executing proxies should indicate the number of
shares with respect to which authority is conferred by
this Proxy if less than all shares held as nominees
are to be voted.
Dated:______________, 1996 Signature _______________________ Signature _____________________________
</TABLE>
Please sign exactly as your name appears. If acting as attorney, executor,
trustee or in other representative capacity, sign name and title.
PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.
