<PAGE> 1
SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEMATRON CORPORATION
------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
(3) Per unit or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction
----------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.
----------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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(Amended by Sec Act Rel No. 7331; Exch Act Rel No. 37692, eff. 10/7/96.)
<PAGE> 2
NEMATRON CORPORATION
5840 INTERFACE DRIVE
ANN ARBOR, MICHIGAN 48103
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Nematron Corporation (the "Company") will be held at the Holiday Inn Executive
Center, 5655 Greenwich Road, Virginia Beach, Virginia 23462 on Friday, March 13,
1998 at 10:00 a.m. for the following purposes:
1. To elect two directors.
2. To vote upon the approval of an amendment to the 1993
Directors Stock Option Plan to provide the Board of Directors
with discretionary authority to grant options under such plan
from time to time for such number of shares of Common Stock
and upon such other terms as it may designate.
3. To vote upon such other matters as may properly come before
the meeting or any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on February 6,
1998 are entitled to notice of and to vote at the meeting and any adjournments
or postponements thereof.
You are invited to attend the Annual Meeting. Whether or not you expect
to attend the Annual Meeting, please complete, date and sign the enclosed proxy
and return it promptly in the enclosed postage-paid envelope. The proxy is
revocable and will not affect your right to vote in person if you attend the
Annual Meeting.
By Order of the Board of Directors
/S/ DAVID P. GIENAPP
----------------------------------
David P. Gienapp
Secretary
Ann Arbor, Michigan
February 13, 1998
<PAGE> 3
NEMATRON CORPORATION
5840 INTERFACE DRIVE
ANN ARBOR, MICHIGAN 48103
ANNUAL MEETING OF SHAREHOLDERS
MARCH 13, 1998
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors
of Nematron Corporation, a Michigan corporation (the "Company"), for use at the
Annual Meeting of Shareholders of the Company to be held at the Holiday Inn
Executive Center, 5655 Greenwich Road, Virginia Beach, Virginia 23462 on Friday,
March 13, 1998 at 10:00 a.m. (the "Annual Meeting") or at any adjournment or
adjournments thereof. In addition to the solicitation by mail, proxies may be
solicited in person or by telephone or facsimile by officers, directors and
employees of the Company. Such officers, directors and employees will not be
additionally compensated, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation. The cost of soliciting proxies will be borne
by the Company. The principal executive offices of the Company are located at
5840 Interface Drive, Ann Arbor, Michigan 48103. This Proxy Statement and the
accompanying form of proxy will be first given or sent to shareholders on or
about February 13, 1998.
The Company's Annual Report to Shareholders for the year ended
September 30, 1997 is enclosed herewith.
Only holders of record of Common Stock of the Company at the close of
business on February 6, 1998 are entitled to vote at the meeting or any
adjournment or adjournments thereof. On February 6, 1998, 5,339,538 shares of
Common Stock were issued and outstanding. Each shareholder is entitled to one
vote for each share of Common Stock held of record on the record date. Shares
cannot be voted at the meeting unless the holder is present in person or
represented by proxy. Shares may not be voted cumulatively for the election of
directors.
Shares represented by a proxy in the accompanying form, unless
previously revoked, will be voted at the meeting if the proxy, properly
executed, is received by the Company before the close of business on March 12,
1998. Shares represented by a proxy received after that time 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 a vote is taken. Shareholders who
execute a proxy in the accompanying form may nevertheless revoke the proxy at
any time before it is exercised by giving written notice to the Secretary of the
Company bearing a later date than the proxy, by submitting a later-dated proxy,
or by voting the shares represented by such proxy in person at the Annual
Meeting.
For purposes of determining the number of votes cast with respect to
the election of directors and the proposal to amend the Company's 1993 Directors
Stock Option Plan, 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. Broker non-votes are not counted for any purpose.
-1-
<PAGE> 4
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation divide the
directors into three classes, the terms of which expire as set forth below. At
each annual meeting, the shareholders of the Company will elect to three-year
terms directors to replace those directors whose terms expire at that annual
meeting. The term of office of each director elected at this year's Annual
Meeting will continue until the 2001 Annual Meeting and until his successor has
been elected and qualified, or until his earlier resignation or removal.
The following sets forth information as to each nominee for election at
the Annual Meeting and each director continuing in office, including his age,
present principal occupation, other business experience during the last five
years, directorships in other publicly-held companies and period of service as a
director of the Company.
If, as a result of circumstances not known or foreseen, any of the
nominees shall be unavailable to serve as a director, the proxies may be voted
for any such substitute nominees as the Board of Directors may select.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR A TERM EXPIRING IN 2001
Garnel F. Graber, 66, became a director in February 1993 at the time of
the Company's spin-off from Interface Systems, Inc. and served as Chairman of
the Board of Nematron until March 1996. Mr. Graber is a retired executive of,
and the current Chairman of the Board of Directors of, Applied Dynamics
International, a computer firm specializing in high speed simulation. Mr. Graber
also serves as Chairman of the Board of Interface Systems, Inc.
Michael L. Hershey, 59, became a director in March 1995 at the time the
Company merged with Imagination Systems, Inc. Mr. Hershey had served as a member
of the Board of Directors and Secretary of Imagination Systems, Inc. Mr. Hershey
has been the President and Chairman of the Board of Directors of Landis
Associates, Inc., an investment management company, since its formation in 1986.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Frank G. Logan III, 41, has been President, Chief Executive Officer and
a director of the Company since joining the Company in March 1995 in connection
with its merger with Imagination Systems, Inc. Mr. Logan has been the Chairman
of the Board since March 1996. Prior to joining the Company in March 1995, Mr.
Logan was the President and Chief Executive Officer of Imagination Systems,
Inc., which was a privately held Virginia-based software development company
which he founded in 1983.
Douglas B. Juanarena, 44, became a director on December 16, 1996, as a
result of his election by the other members of the Board of Directors, to fill a
vacant Board seat. Mr. Juanarena is the President and Chief Executive Officer of
Pressure Systems, Inc., an electronics manufacturer specializing in designing
and producing advanced pressure measurement instrumentation for aeronautical
design and research. Pressure Systems, Inc. is a wholly-owned subsidiary of
Roxboro PLC, a public company headquartered in the United Kingdom. Prior to
forming Pressure Systems, Inc. in 1978, Mr. Juanarena worked in the Instrument
Research Division of the NASA Langley Research Center.
Joseph J. Fitzsimmons, 63, is a retired executive of Bell & Howell
Company and University Microfilms International ("UMI"), a subsidiary of Bell &
Howell. From January 1994 through June 1995 when he retired, Mr. Fitzsimmons was
Corporate Vice President of Bell & Howell and Chairman of UMI. From March 1987
through December 1993, Mr. Fitzsimmons was Corporate Vice President of Bell &
Howell and President and Chief Executive Officer of UMI, a leading provider of
technology services to libraries and other organizations regarding acquiring,
preserving and distributing literature. Mr. Fitzsimmons is a member of the Board
of Directors of First of America Bank Corporation, a Midwest bank holding
company. Mr. Fitzsimmons is a past Chairman of the Information Industry
Association and was the Vice Chairman of the White House Conference on Libraries
and Information Services in 1991.
-2-
<PAGE> 5
DIRECTORS WHOSE TERMS EXPIRE IN 1999
David P. Gienapp, 49, became a director in March 1995. Mr. Gienapp has
been the Executive Vice President Finance and Administration and Treasurer of
the Company since joining the Company in September 1994 and has served as
Secretary since March 1996. Prior to joining the Company, Mr. Gienapp spent over
20 years with Deloitte & Touche LLP, a certified public accounting firm.
Hugo E. Braun, 39, has been a director since March 1996. Mr. Braun is a
partner with Access Ventures, an investment fund manager, where he has been
employed since 1989.
RECOMMENDATION AND VOTE REQUIRED. THE ELECTION OF DIRECTORS REQUIRES A
PLURALITY OF THE VOTES CAST. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH
OF THE NOMINEES FOR ELECTION. PROXIES WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES UNLESS THE SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT
AUTHORITY TO DO SO IS WITHHELD.
(2) PROPOSAL TO AMEND THE 1993 DIRECTORS STOCK OPTION PLAN
PROPOSED AMENDMENT
On July 28, 1997, the Board of Directors of the Company approved an
amendment, subject to shareholder approval, to the Company's 1993 Directors
Stock Option Plan (the "Directors Plan") to give the Board discretionary
authority to grant stock options to the Company's non-employee directors from
time to time upon such terms and conditions as determined by the Board of
Directors; provided that all such discretionary option grants will vest
immediately upon a change in control of the Company and are required to be
granted at an exercise price per share which is not less than the fair market
value of the Common Stock on the date of the grant. The discretionary option
grants are in addition to the automatic grants provided for in the Directors
Plan. Shareholder approval of the amendment is required by the regulations of
The Nasdaq Stock Market.
On July 28, 1997, the Board of Directors approved the grant of
discretionary options to purchase 12,000 shares of the Company's Common Stock at
an exercise price of $7.08 per share, which price was equal to 110% of the fair
market value of the Common Stock on the date of the grant, to each of the
Company's non-employee directors (Messrs. Hugo E. Braun, Joseph J. Fitzsimmons,
Garnel F. Graber, Michael L. Hershey and Douglas B. Juanarena), subject to
shareholder approval of this proposal. On February 6, 1998, the closing price of
the Company's Common Stock as reported on the Nasdaq Stock Market National
Market was $5.75. If the Company's shareholders approve this proposal, such
options will become exercisable in three equal annual one-third installments
beginning on the date of the grant and remain exercisable until the tenth
anniversary of the date of the grant unless earlier terminated in accordance
with the terms of the plan or until one year following the date the optionee
ceases to serve on the Board, whichever is earlier.
REASONS FOR THE AMENDMENT
Prior to the amendment, the Directors Plan provided only for automatic
grants of options because of the requirements of former Rule 16b-3 of the
Securities Exchange Act of 1934. Because this rule has been changed so that this
restriction is no longer necessary, the Board believes that it is advantageous
to amend the Directors Plan to give the Board of Directors additional authority
to grant discretionary options under the Directors Plan. This amendment will
provide the Company with additional flexibility in order to attract and retain
qualified non-employee directors.
On July 28, 1997, the Board of Directors approved the issuance of an
aggregate 60,000 discretionary options to the Company's current non-employee
directors, as discussed above. In light of the compensation (amount and form)
typically paid by other public companies to their non-employee directors, as
determined by a report received from third party consultants engaged by the
Board of Directors, and the fact that few of the outstanding non-employee stock
options granted under the Directors Plan prior to that date were in-the-money,
these additional grants were intended by the Board of Directors to serve as an
immediate incentive to the non-employee directors to continue their service as
directors of the Company.
-3-
<PAGE> 6
TERMS OF THE DIRECTORS PLAN
Participants in the Directors Plan are directors of the Company who are
not employees. The Company utilizes stock option grants as part of its program
to attract and retain the best available personnel to serve as directors of the
Company, to provide additional incentive to non-employee directors and to
encourage their continued service on the Board of Directors. The Company
believes that it is appropriate to continue such practice in the future through
the use of stock options. In addition, the Company believes that the use of
stock option grants to non-employee members of the Board of Directors helps to
provide incentive for their continued service and otherwise more closely aligns
their interests with those of the Company's shareholders.
The Directors Plan provides for the grant of nonqualified options that
do not meet Incentive Stock Option requirements ("Nonqualified Options").
Options may be granted under the Directors Plan until September 15, 2002, when
the Directors Plan will expire.
On the date on which a participant first becomes a member of the Board
of Directors and on the date of the third Annual Meeting of Shareholders
occurring thereafter, if such participant has been a member of the Board of
Directors for the six months immediately preceding such Annual Meeting, each
participant is automatically and without discretion granted an option to
purchase 4,500 shares of Common Stock (or, with respect to the 1997 Annual
meeting of Shareholders, 4,664 share of Common Stock).
The exercise price for automatic options granted under the Directors
Plan is equal to 110% of the fair market value per share of the Common Stock on
the date the option is granted. Each automatic option granted prior to the 1997
Annual Meeting of Shareholders is exercisable beginning six months after the
date the option is granted. Each option granted beginning with the 1997 Annual
Meeting of Shareholders is exercisable in three equal annual installments
beginning on the date the option is granted. All options expire on the fifth
anniversary of the date the option is granted unless earlier terminated in
accordance with the terms of the plan.
Payment for shares to be acquired upon the exercise of options may be
made in cash, by certified check bank draft or money order, or by tendering to
the Company shares of Common Stock then owned by the participant, duly endorsed
for transfer or with duly executed stock power attached, which shares shall be
valued at their fair market value as of the date of such exercise and payment.
Surrendered shares of the Common Stock will generally be valued for such
purposes at the average of the high and low sales prices for the last preceding
day in which the Common Stock was traded prior to the date with respect to which
the fair market value is to be determined.
The Directors Plan may be terminated or amended at any time by the
Board of Directors. No amendment or termination of the Directors Plan shall
affect any option granted thereunder without the consent of the optionee.
INFORMATION ABOUT OPTIONS GRANTED UNDER THE DIRECTORS PLAN
The following table provides information as to the number of options
granted under the Directors Plan, from its inception through February 6, 1998,
to the executive officers named in the Summary Compensation Table under
"Executive Compensation," all persons who received more than 5% of the options
granted, all current executive officers as a group, all current directors (other
than executive officers) as a group, each nominee for election as a director and
all other employees as a group. All automatic option grants awarded prior to the
1997 Annual Meeting of Shareholders became exercisable six months after the
grant date. All automatic option grants beginning with the 1997 Annual Meeting
of Shareholders become exercisable in thirds, with the first one-third becoming
exercisable on the date of the grant. The discretionary option grants for 60,000
shares, which were granted contingent upon shareholder approval, will also
become exercisable in thirds, with the first one-third becoming exercisable on
the date of the grant if the shareholders approve this proposal. All automatic
options terminate within five years of the date of grant. No associates of the
directors, executive officers or director nominees received options under the
Directors Plan, and no person other than those listed in the table received more
than 5% of the options granted under the Directors Plan.
-4-
<PAGE> 7
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Subject To Options
Name Position Previously Granted
---- -------- --------------------------
<S> <C> <C>
Frank G. Logan, III President, Chief Executive
Officer and a Director -0-
David P. Gienapp Executive Vice President -
Finance and Administration,
Secretary, Treasurer and a Director -0-
Hugo E. Braun Director 16,664 (1)
Joseph J. Fitzsimmons Director 16,664 (1)
Garnel F. Graber Director 20,664 (1)
Michael L. Hershey Director 18,664 (1)
Douglas B. Juanarena Director 17,664 (1)
All current Executive Officers
as a group (2 persons) -0-
All current non-employee
directors as a group (5 persons) 90,320 (2)
</TABLE>
(1) Includes 12,000 options which were granted subject to shareholder
approval of the amendment to the Directors Plan.
(2) Includes an aggregate 60,000 options which were granted subject to
shareholder approval of the amendment to the Directors Plan.
Federal Income Tax Consequences. 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 (however, payment of the option price for shares
of Common Stock by surrender of previously owned shares of Company Common Stock
owned by the optionee will not give rise to a recognized gain on the shares
surrendered). The Company is required to withhold FICA and income taxes on the
exercise spread and will be entitled to a tax deduction in an amount equal to
the ordinary income recognized by the optionee. 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 the exercise will be treated as long-term
or short-term capital gain, depending on the holding period of the shares.
RECOMMENDATION AND VOTE REQUIRED. THE AFFIRMATIVE VOTE OF A
MAJORITY OF VOTES CAST BY SHAREHOLDERS OF THE COMPANY'S COMMON STOCK ENTITLED TO
VOTE AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE AMENDMENT TO THE DIRECTORS
PLAN. THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR THE APPROVAL OF
THIS PROPOSAL. PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE
DIRECTORS PLAN UNLESS THE SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT
AUTHORITY TO DO SO IS WITHHELD.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board met four times during the year ended September 30, 1997. No
director attended fewer than 75% of the aggregate of the total number of
meetings of the Board and of the committees of the Board on which he served.
Standing committees of the Board include an Audit Committee, an
Executive Committee, a Nominating Committee, and an Organization and
Compensation Committee.
-5-
<PAGE> 8
The Audit Committee met two times in fiscal 1997. The Audit Committee
meets with the Company's independent accountants to review the adequacy of the
Company's internal control systems and financial reporting procedures; reviews
the general scope of the Company's annual audit and the fees charged by the
independent accountants; and reviews and monitors the performance of non-audit
services by the Company's auditors. The members of the Audit Committee are
Messrs. Braun (Chairman), Fitzsimmons, Graber and Hershey.
The Executive Committee met five times during the of fiscal 1997. The
Executive Committee discusses current operating and strategic matters that arise
between scheduled or special Board meetings. The members of the Executive
Committee are Messrs. Logan (Chairman), Fitzsimmons, Gienapp and Graber.
The Nominating Committee met two times during fiscal 1997. The
Nominating Committee identifies and reviews potential members of the Board and
nominates persons to the Board to serve as Board members. The members of the
Nominating Committee are Messrs. Hershey (Chairman), Juanarena and Logan.
The Organization and Compensation Committee met three times during
fiscal 1997. The Organization and Compensation Committee administers the
Company's Restricted Stock Plan and the 1993 Stock Option Plan, determines
compensation issues for officers, and determines compensation issues for
non-employee directors that do not involve the Company's equity securities. The
members of the Organization and Compensation Committee are Messrs. Graber
(Chairman), Braun, Fitzsimmons and Juanarena.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The Common Stock is the only voting security of the Company. The
following table sets forth information as of February 6, 1998, for all
shareholders known by the Company to be the beneficial owners of more than 5% of
its outstanding Common Stock. Except as noted below, each shareholder exercises
sole voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP CLASS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael L. Hershey (includes shares of J. Eric May, below) 511,097 (1) 9.55%
Landis Associates, Inc.
400 West Ninth Street, Suite 100
Wilmington, DE 19801
- ---------------------------------------------------------------------------------------------------------
J. Eric May, Trustee Under Declaration of Trust 471,172 8.82%
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890
- ---------------------------------------------------------------------------------------------------------
Frank G. Logan, III 416,217 (2) 7.68%
5840 Interface Drive
Ann Arbor, MI 48103
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares represented in the table include (i) the 471,172 shares
owned by J. Eric May, Trustee Under Declaration of Trust, over which
Mr. Hershey may exercise voting and investment power; (ii) 25,371
shares of Common Stock owned outright; (iii) options to purchase 14,554
shares of Common Stock under the Directors Option Plan which are
currently exercisable or are exercisable within sixty days of February
6, 1998.
-6-
<PAGE> 9
(2) The shares represented in the table include (i) 307,421 shares of
Common Stock owned outright; (ii) 2,000 shares owned by Mr. Logan's
wife; (iii) 25,964 shares of Common Stock owned by Mr. Logan as
custodian of certain trusts for his children; and (iv) options to
purchase 83,332 shares of Common Stock under the 1993 Stock Option Plan
which are currently exercisable or are exercisable within sixty days of
February 6, 1998.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock as of February 6, 1998 by each of the
Company's directors and Named Executives and by all executive officers and
directors of the Company as a group. Except as noted below, each shareholder
exercises sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael L. Hershey, Director 511,097 (1) 9.55%
Landis Associates, Inc.
400 West Ninth Street, Suite 100
Wilmington, DE 19801
- -------------------------------------------------------------------------------------------------------
Frank G. Logan, III, Director and Officer 416,217 (2) 7.68%
5840 Interface Drive
Ann Arbor, MI 48103
- -------------------------------------------------------------------------------------------------------
Hugo E. Braun, Director 145,339 (3) 2.65%
313 North First Street
Ann Arbor, MI 48103
- -------------------------------------------------------------------------------------------------------
David P. Gienapp, Director and Officer 72,792 (4) 1.35%
5840 Interface Drive
Ann Arbor, MI 48103
- -------------------------------------------------------------------------------------------------------
Garnel F. Graber, Director 61,706 (5) 1.15%
600 Adrian
Manchester, MI 48158
- -------------------------------------------------------------------------------------------------------
Douglas B. Juanarena 34,554 (6) 0.65%
34 Research Drive
Hampton, VA 23666
- -------------------------------------------------------------------------------------------------------
Joseph J. Fitzsimmons 16,554 (7) 0.31%
101 North Main Street
Ann Arbor, MI 48104
- -------------------------------------------------------------------------------------------------------
All Directors and Executive Officers as Group (7 persons) 1,258,259 (8) 22.07%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Hershey. See footnote 1 to Principal Shareholder table.
(2) Mr. Logan. See footnote 2 to Principal Shareholder table.
(3) Mr. Braun. The shares represented in the table include (i) options to
purchase 13,554 shares of Common Stock under the Directors Stock Option
Plan which are currently exercisable or are exercisable within sixty
days of February 13, 1998; and (ii) currently exercisable warrants to
purchase 131,785 shares of Common Stock pursuant to a Term Loan and
Warrant Purchase Agreement dated November 7, 1995 between the Company
and Onset BIDCO, Inc., of which Mr. Braun is an officer, The Capital
Fund, Inc., and others in connection with a private placement of
subordinated notes in the amount of $1,800,000. If such warrants were
exercised, Mr. Braun would have sole voting rights and shared
investment power with respect to the underlying shares.
(4) Mr. Gienapp. The shares represented in the table include (i) 29,460
shares of Common Stock owned outright; and (ii) options to purchase
43,332 shares of Common Stock under the 1993 Stock Option Plan which
are currently exercisable or are exercisable within sixty days of
February 13, 1998.
-7-
<PAGE> 10
(5) Mr. Graber. The shares represented in the table include (i) 14,152
shares of Common Stock owned outright; (ii) options to purchase 17,554
shares of Common Stock under the Directors Stock Option Plan which are
currently exercisable or are exercisable within sixty days of February
13, 1998; and (iii) options to purchase 30,000 shares of Common Stock
under special option awards which are currently exercisable or are
exercisable within sixty days of February 13, 1998.
(6) Mr. Juanarena. The shares in the table include (i) 20,000 shares of
Common Stock owned outright; (ii) options to purchase 14,554 shares of
Common Stock under the Directors Stock Option Plan which are currently
exercisable or are exercisable within sixty days of February 13, 1998.
(7) Mr. Fitzsimmons. The shares in the table include (i) 3,000 shares of
Common Stock owned outright; (ii) options to purchase 13,554 shares of
Common Stock under the Directors Stock Option Plan which are currently
exercisable or are exercisable within sixty days of February 13, 1998.
(8) All Directors and Executive Officers as Group. The shares represented
in the table include (i) 424,868 shares of Common Stock owned outright;
(ii) 471,172 shares of Common Stock beneficially owned by J. Eric May,
Trustee Under Declaration of Trust but also reported as beneficially
owned by Mr. Hershey and over which Mr. Hershey may exercise voting and
investment power; (iii) options to purchase 126,664 shares of Common
Stock under the 1993 Stock Option Plan which are currently exercisable
or are exercisable within sixty days of February 13, 1998: (iv) options
to purchase 73,770 shares of Common Stock under the Directors Stock
Option Plan which are currently exercisable or are exercisable within
sixty days of February 13, 1998; (v) options to purchase 30,000 shares
of Common Stock under special option awards which are currently
exercisable or are exercisable within sixty days of February 13, 1998;
and (vi) warrants to purchase 131,785 shares of Common Stock.
EXECUTIVE OFFICERS
NAME OFFICES AGE
Frank G. Logan, III Chairman of the Board, President and 41
Chief Executive Officer
David P. Gienapp Executive Vice President - Finance 49
and Administration, Secretary and Treasurer
See "Election of Directors" for further information concerning Messrs. Logan and
Gienapp.
The executive officers of the Company serve at the pleasure of the Board of
Directors.
-8-
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth information concerning the aggregate
compensation paid by the Company and its subsidiaries to the Company's President
and Chief Executive Officer and to its Executive Vice President - Finance and
Administration, the Company's only other executive officer whose salary and
bonus exceeded $100,000 in fiscal 1997 (the "Named Executives") for the periods
indicated.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
- ----------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
-----------------------------------------------------
-----------------------------
AWARDS PAYOUTS
----------------------------- ALL OTHER
NAME AND PRINCIPAL FISCAL OPTIONS LTIP COMPEN-
POSITION YEAR SALARY ($) BONUS ($) (#) PAYOUTS SATION ($) (2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank G. Logan, III 1997 $ 168,043 $200,000 120,000 $ -0- $ 5,113
-------------------------------------------------------------------------------
President and Chief 1996 $ 154,531 $ 25,000 50,000 $ -0- $ 4,305
-------------------------------------------------------------------------------
Executive Officer(3) 1995 $ 70,088 $ -0- 50,000 $ -0- $ 1,588
- ----------------------------------------------------------------------------------------------------------
David P. Gienapp, 1997 $ 103,005 $ 50,000 36,000 $ -0- $ 5,746
-------------------------------------------------------------------------------
Exec. VP - Finance 1996 $ 95,384 $ 15,000 20,000 $ -0- $ 2,286
-------------------------------------------------------------------------------
and Administration 1995 $ 77,035 $ -0- 25,000 $ -0- $ 395
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reflected in the table do not include other compensation or
personal benefits which did not exceed in the aggregate the lesser of
either $50,000 or 10% of the total of annual salary and bonus for the
Named Executives. No "Other Annual Cash Compensation" or "Long Term
Incentive Plan Payouts" were paid in any of the fiscal years shown.
(2) All Other Compensation shown for Mr. Logan represents amounts paid by
the Company for life insurance for Mr. Logan of $1,560, $956 and $956
for 1997, 1996 and 1995, respectively, and 401(k) Plan contributions by
the Company of $3,553, $3,349 and $632 for 1997, 1996 and 1995,
respectively. All Other Compensation shown for Mr. Gienapp represents
401(k) Plan contributions by the Company.
(3) Mr. Logan assumed the office of President on March 3, 1995 and was
named Chief Executive Officer on March 27, 1995.
Management compensation is established on an annual basis by the
Organization and Compensation Committee of the Board of Directors.
OPTIONS
The following table sets forth information concerning options granted
to the Named Executives in the year ended September 30, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED TO
GRANTED EMPLOYEES IN FISCAL EXERCISE PRICE EXPIRATION
NAME (#) (1) YEAR ($/SHARE) DATE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank G. Logan, III 120,000 29.6% $ 5.78/Share May 1, 2007
- -------------------------------------------------------------------------------------------------------
David P. Gienapp 36,000 8.9% $ 5.78/Share May 1, 2007
- -------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE> 12
(1) All of these options, which were granted pursuant to the Company's 1993
Stock Option Plan, were granted at an exercise price per share of 110% of market
value of the Company's Common Stock on the date of the grant and have a term of
ten years. The Compensation Committee of the Board of Directors determines the
exercise provisions of each option award. The options granted to each of the
Named Executives in fiscal 1997 become exercisable annually in increments of 33
1/3% beginning on the date of the grant. The exercisability of these options may
be accelerated in the event of a change in control of the Company. See "Change
in Control Arrangements." In March 1997, the Compensation Committee determined
that the Company's Executive officers may earn a fixed number of premium-priced
options (options priced at 110% of fair market value of the Common Stock on the
date of the grant) under the 1993 Stock Option Plan that vary by executive in
accordance with a competitive relationship to peer group (market) average,
performance and contribution. The use of premium-priced options emphasizes a
positive linkage between shareholder value creation and executive interests, and
it ensures a minimum total shareholder return before the executives are
rewarded.
The Named Executives did not exercise any options in the year ended
September 30, 1997. The following table provides information with respect to
unexercised options held by the Named Executives as of September 30, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END (#) IN-THE-MONEY OPTIONS AT
FY-END ($)
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank G. Logan, III None N/A 83,332 / 136,668 $ 193,500 / $-0-
- ----------------------------------------------------------------------------------------------------------
David P. Gienapp None N/A 43,332 / 42,668 $ 75,000 / $-0-
- ----------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company receives
for his services as such a fee of $1,000 per meeting attended, $500 for each
committee meeting attended, and an additional $250 for each committee meeting
attended by the chairman of the committee. Directors who are officers or
employees of the Company receive no additional compensation for their service as
a director, although they are reimbursed for their reasonable travel expenses
when meetings are held in a location other than the metropolitan area in which
they reside.
In addition, the company has a 1993 Directors Stock Option Plan (the
"Directors Plan"). For a description of the Directors Plan, see "Proposal to
Amend the 1993 Directors Stock Option Plan. In the fiscal year ended September
30, 1997, Messrs. Braun, Fitzsimmons, Graber, Hershey and Juanarena each
received an automatic option to purchase 4,664 shares of Common Stock under the
Directors Plan at an exercise price of $5.37 per share. On July 28, 1997, the
Board of Directors granted each of Messrs. Braun, Fitzsimmons, Graber, Hershey
and Juanarena a discretionary option to purchase 12,000 shares of Common Stock
at an exercise price of $7.08 per share, subject to shareholder approval of an
amendment to the Directors Plan to permit the grant of discretionary options.
See "Proposal to Amend the 1993 Directors Stock Option Plan."
On April 17, 1997, the Company granted Mr. Harry Sundblad, a former
director, an option to purchase 4,750 shares of the Company's Common Stock at an
exercise price of $4.75 per share, the average of the fair market value of the
Common Stock during the period in which Mr. Sundblad performed consulting
services for the Company. The option was granted in consideration for Mr.
Sundblad's services as a consultant to the Company from August, 1995 to January,
1996. The option was immediately exercisable and will expire April 17, 1998.
-10-
<PAGE> 13
CHANGE IN CONTROL ARRANGEMENTS
The Company granted the options disclosed in the tables above pursuant
to the 1993 Stock Option Plan. The Organization and Compensation Committee of
the Board of Directors determines the exercise provisions of each option award.
All shares subject to an option grant become immediately exercisable upon a
change in control of the Company. A "change in control" is defined as the
acquisition of 20% or more of the voting power of the Company or sale of all or
substantially all of the Company's assets, or a merger, consolidation or similar
transaction in which the Company is a constituent corporation, or a change in
the identity of a majority of the members of the Company's Board of Directors in
any twelve-month period, which change or changes were not recommended by the
incumbent directors immediately prior to such change or changes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its two-story office building in Virginia Beach,
Virginia, which the Company uses for its software development and applied
systems businesses, from LPS Management, a partnership of which Mr. Logan is a
partner. The lease term extends to February 1998 and requires lease payments of
$6,633 per month. Total lease expense for the office building was approximately
$79,600 and $77,600 for fiscal 1997 and fiscal 1996, respectively. The lease is
expected to be renewed in March 1998 on substantially the same terms and
conditions as the current lease.
The Organization and Compensation Committee of the Board of Directors
authorized a loan to Mr. Logan in the principal amount of $94,900 as of April,
1996 to pay federal and state taxes with respect to the 120,000 shares of
Company common stock issued to Mr. Logan in consideration for a Non-Competition
Agreement dated March 3, 1995. Mr. Logan delivered to the Company a promissory
note which was payable in full on the earlier of April 15, 1997 or 90 days after
termination employment with the Company. The note bore interest at 8.25% per
annum; accrued interest was payable at the maturity date of the note. The note
and accrued interest thereon were repaid in their entirety in fiscal 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Act of 1934 requires all Company
executive officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of their
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Specific due dates for these reports have been established and the Company
is required to report any delinquent filings and failures to file such reports.
Based solely on its review of the copies of such reports received by it
and written representations of its executive officers and incumbent directors,
the Company believes that during the year ended September 30, 1997, all filing
reports applicable to its executive officers, directors and greater than ten
percent beneficial owners were complied with, except that Mr. Juanarena, a
director, did not timely file three Form 4 reports disclosing four transactions.
ACCOUNTANTS
KPMG Peat Marwick LLP, independent public accountants, has audited the
financial statements of the Company for the two years ended September 30, 1997.
Representatives from KPMG Peat Marwick LLP will be present at the Meeting, will
have an opportunity to make a statement if they wish, and will be available to
respond to appropriate questions.
-11-
<PAGE> 14
The Company's Audit Committee has selected KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending September 30, 1998.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders which are eligible for inclusion in the Company's Proxy
Statement for that meeting under the applicable rules of the Securities and
Exchange Commission must be received by the Company not later than October 16,
1998 if they are to be included in the Company's Proxy Statement relating to
that meeting. Such proposals should be addressed to the Secretary at the
Company's principal executive offices and should satisfy the requirements
applicable to shareholder proposals contained in the Company's bylaws.
Shareholder proposals to be presented at the 1999 Annual Meeting which
are not to be included in the Company's Proxy Statement relating to that meeting
generally must be received by the Company not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's Annual Meeting. If
the meeting date has been advanced by more than 30 days or delayed by more than
60 days, then such proposal must be received by the Company not less than 60
days nor more than 90 days before the upcoming Annual Meeting or no later than
10 days after the day of the public announcement of the date of such meeting, in
accordance with the procedures set forth in the Company's Bylaws, in order to be
brought properly before the Annual Meeting.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other
business before the Annual Meeting of Shareholders and, so far as is known to
the Board of Directors, no matters are to be brought before the Annual Meeting
of Shareholders except as specified in the notice of the Annual Meeting of
Shareholders. As to any business that may properly come before the Annual
Meeting of Shareholders, however, it is intended that proxies, in the form
enclosed, will be voted in the respect thereof in accordance with the judgment
of the persons voting such proxies.
By Order of the Board of Directors
/S/ DAVID P. GIENAPP
----------------------------------
David P. Gienapp
Secretary
February 13, 1998
Ann Arbor, Michigan
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THANK YOU FOR YOUR PROMPT ATTENTION TO THIS MATTER.
-12-
<PAGE> 15
<TABLE>
<S><C>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE NEMATRON CORPORATION
WITH FOR ALL
FOR HOLD EXCEPT
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS 1. ELECTION OF DIRECTORS [ ] [ ] [ ]
OF NEMATRON CORPORATION
GARNEL F. GRABER
MICHAEL L. HERSHEY
The undersigned hereby appoints Frank G. Logan, III and David
P. Gienapp, or any one of them, proxies with full power of
substitution to vote as designated below all shares of Common INSTRUCTION: To withhold authority to vote for one or more
Stock that the undersigned is entitled to vote at the Annual of the individual nominees, mark "For All Except" and write
Meeting of Shareholders of Nematron Corporation to be held the name of each such nominee on the line below.
on Friday, March 13, 1998 of at any adjournment or adjournments
thereof. ------------------------------------------------------------
FOR AGAINST ABSTAIN
2. APPROVE AN AMENDMENT TO THE [ ] [ ] [ ]
COMPANY'S 1993 DIRECTORS STOCK OPTION PLAN TO GRANT
AUTHORITY FOR DISCRETIONARY OPTION GRANTS TO
NON-EMPLOYEE DIRECTORS.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE
MANNER DIRECTED ABOVE. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES FOR ELECTION AS DIRECTORS AND
FOR PROPOSAL 2.
Discretionary authority is hereby conferred as to any
other matters as may properly come before the meeting. The
undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders, the Proxy Statement and the Annual
--------------------------- Report of Nematron Corporation for the year ended September
Please be sure to sign and date |Date | 30, 1997. The undersigned ratifies that all the proxies or
this Proxy in the box below. | any of them or their substitutes may lawfully do or cause
|--------------------------------------------------------------| to be done by virtue hereof and revokes all former proxies.
| |
| | Please sign this proxy exactly as your name(s) appears
| | on this proxy card. If the stock is registered in the names
- -----Shareholder sign above-----Co-holder (if any) sign above--- of two or more persons, each must sign. Executors,
administrators, trustees, guardians, attorneys and corporate
officers should add their titles.
+ +
- ------------------------------------------------------------------------------------------------------------------------------------
/\ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. /\
NEMATRON CORPORATION
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
