<PAGE>
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
Filed by the registrant [X]
Filed by a party other than the registrant [_]
<TABLE>
<CAPTION>
<S> <C> <C>
Check the appropriate box: [_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to [_] Rule 240.14a-11(c) or [_] Rule 240.14a-12
Sheldahl, 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] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
</TABLE>
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 8, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Sheldahl,
Inc. will be held at the Radisson Plaza Hotel, 35 South 7th Street,
Minneapolis, Minnesota, on Wednesday, January 8, 1997 at 3:00 p.m., Central
Standard Time, for the following purposes:
1. To elect eight directors to hold office until the next Annual Meeting
of Shareholders or until their successors are elected.
2. To ratify and approve amendments to the Sheldahl, Inc. 1994 Stock
Option Plan (i) to increase the number of shares of Common Stock available
under the plan by 400,000 shares, (ii) to bring that plan into compliance
with Section 162(m) of the Internal Revenue Code of 1986, as amended, and
(iii) to change the number of stock options automatically granted to non-
employee directors upon their election and subsequent re-elections from
1,000 to 2,000 and to change the term of those options from 5 years to 10
years.
3. To ratify and approve the selection of independent public accountants
for the Company for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 11, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors
Gerald E. Magnuson, Secretary
Northfield, Minnesota
November 27, 1996
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES
AND VOTE IN PERSON IF THEY SO DESIRE. THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY.
<PAGE>
LOGO
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Sheldahl, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the Annual Meeting of Shareholders to
be held on January 8, 1997 or any adjournment or adjournments thereof. The
cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, telegraph or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in the Company's common stock registered in the names of nominees and
will reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Any proxy may be revoked at any time before it is voted by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by
revocation of a written proxy by request in person at the Annual Meeting; if
not so revoked, the shares represented by such proxy will be voted. The
Company's principal offices are located at 1150 Sheldahl Road, Northfield,
Minnesota 55057, and its telephone number is (507) 663-8000. The mailing of
this proxy statement to shareholders of the Company commenced on or about
November 27, 1996.
The total number of shares outstanding and entitled to vote at the meeting
as of November 11, 1996 consisted of 8,912,695 shares of $0.25 par value
common stock. Each share of common stock is entitled to one vote. Shareholders
have cumulative voting rights in connection with the election of directors by
giving written notice of intent to cumulate votes to any officer of the
Company before the meeting or to the presiding officer at the meeting. A
shareholder may cumulate votes for the election of directors by multiplying
the number of votes to which the shareholder may be entitled by eight (the
number of directors to be elected) and casting all such votes for one nominee
or distributing them among any two or more nominees. Only shareholders of
record at the close of business on November 11, 1996 will be entitled to vote
at the meeting. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at the Annual Meeting of Shareholders
constitutes a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a meeting
of shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or
by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number
of shares that would constitute such a quorum. Votes cast by proxy or in
person at the Annual Meeting of Shareholders will determine whether or not a
quorum is present. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of the matter submitted to
the shareholders for a vote. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table includes information as of November 11, 1996 concerning
the beneficial ownership of common stock of the Company by (i) the only
shareholders known to the Company to hold more than five percent of the common
stock of the Company, (ii) each of the directors of the Company, (iii) each
executive officer named in the table on page 5, and (iv) all officers and
directors of the Company as a group. Unless otherwise indicated, all
beneficial owners have sole voting and investment power over the shares held.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENT
------------------------------------ AMOUNT OF CLASS
--------- --------
<S> <C> <C>
Peter B. Cannell and Co., Inc. 555,750(1) 5.94%
919 Third Avenue
New York, NY 10022
Trust Company of the West 756,500(1) 8.08%
865 S. Figero St., 21st Floor
Los Angeles, CA 90017
Woodward & Associates 706,200(1) 7.54%
17 State Street, 26th Floor
New York, NY 10004
James E. Donaghy(2)(3) 206,038(4)(5) 2.20%
James S. Womack(2) 66,658(5) *
John G. Kassakian(2) 10,997(5) *
Gerald E. Magnuson(2) 18,919(5) *
William B. Miller(2) 20,000(5) *
Kenneth J. Roering(2) 19,000(5) *
Richard S. Wilcox(2) 107,155(5)(6) 1.14%
Beekman Winthrop(2) 274,800(5) 2.94%
Gregory D. Closser(3) 50,174(4)(5) *
Edward L. Lundstrom(3) 46,557(5) *
John V. McManus(3) 64,400(4)(5) *
Roger D. Quam(3) 63,737(4)(5) *
All Officers and Directors as a Group 1,065,120(4)(5)(6) 11.38%
(16 persons)
</TABLE>
- ---------------------
* Less than one percent.
(1) Based upon information available to the Company.
(2) Serves as a director of the Company and has been nominated for re-
election.
(3) Serves as an executive officer of the Company and appears in the table on
page 5 hereof.
(4) Includes shares held by the Company's Employee Savings Plan for the
benefit of the person or group named herein.
(5) Includes shares which may be purchased within sixty days from the date
hereof upon exercise of outstanding stock options in the amount of 142,351
shares for Mr. Donaghy, 12,143 shares for Mr. Womack, 36,569 shares for
Mr. Closser, 41,724 shares for Mr. Lundstrom, 40,418 shares for Mr. Quam,
35,568 shares for Mr. McManus, 5,000 shares for each of Messrs. Kassakian,
Magnuson, Roering, Wilcox and Miller, 4,000 shares for Mr. Winthrop and
447,513 shares for all officers and directors as a group.
(6) Includes 35,400 shares held by a trust for the benefit of Mr. Wilcox's
daughter, for which he is trustee. Mr. Wilcox disclaims beneficial
ownership of the 35,400 shares.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
Eight directors will be elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders or until a successor is elected. The Board
of Directors has nominated for election the eight persons named below. All of
the nominees are currently directors and all were elected by the shareholders.
It is intended that proxies will be voted for the named nominees. Unless
otherwise indicated, each nominee has been engaged in his present occupation
as set forth below, or has been an officer with the organization indicated,
for more than the past five years. The Board of Directors believes that each
nominee named below will be able to serve, but should any nominee be unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute nominee as the Board of
Directors may propose.
The names of the nominees, their principal occupations and other information
is set forth below, based upon information furnished to the Company by the
nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND OTHER DIRECTOR
NAME AND AGE DIRECTORSHIPS SINCE
------------ ------------------------------ --------
<C> <S> <C>
James E. Donaghy (62) President and Chief Executive Officer of 1988
the Company; prior to 1988, Director of
Planning and Development for Dupont
Electronics, Wilmington, Delaware
(electronics manufacturer); Director of
Hutchinson Technology, Inc.
John G. Kassakian (53) Professor of Electrical Engineering and 1985
Director, Laboratory for Electromagnetic
and Electronic Systems, Massachusetts
Institute of Technology, Cambridge,
Massachusetts; Director of Ault
Incorporated.
Gerald E. Magnuson (66) Of Counsel, Lindquist & Vennum P.L.L.P., 1975
Minneapolis, Minnesota (law firm);
Partner of Lindquist & Vennum P.L.L.P.
until December 1994; Secretary of the
Company; Director of PremiumWare, Inc.
(f/k/a Munsingwear, Inc.), Research,
Incorporated and Washington Scientific
Industries, Inc.
William B. Miller (64) Partner, Miller & Company, Ayr, Scotland 1991
(business consulting); prior to 1991,
Managing Director and Chairman, Prestwick
Holdings plc, Ayr, Scotland (electronic
component manufacturer); Director of
Magnum Power plc, Prestwick Aviation
Holdings Ltd., and Stathclyde University
Incubator Ltd.
Kenneth J. Roering (54) Professor, School of Management, 1988
University of Minnesota, Minneapolis,
Minnesota; Director of TSI, Inc.,
Mountain Parks Financial Group, Inc.,
Transport Corporation of America, Inc.
and Arctic Cat, Inc.
Richard S. Wilcox (67) Private Investor 1972
Beekman Winthrop (55) Private Investor; President of Woodwin 1992
Management, Inc. (investment advisor);
President and Director of Central Coal &
Coke Corporation, Kansas City, Missouri
(management of interests in coal, gas and
oil properties).
James S. Womack (68) Chairman of the Board of the Company; 1968
Prior to 1992, Chief Executive Officer of
the Company; Director of General
Securities, Inc. and Zytec Corp.
</TABLE>
3
<PAGE>
The Board of Directors met 13 times during fiscal year 1996. Each director
attended more than 75% of the meetings of the Board of Directors and Board
committees on which he served.
The Compensation Committee, which is currently comprised of Messrs. Roering
(Chairman), Magnuson and Womack, met 3 times during fiscal year 1996. The
Compensation Committee reviews and makes recommendations to the Board of
Directors regarding salaries, compensation and benefits of officers and key
employees.
The Audit Committee, which is currently comprised of Messrs. Wilcox
(Chairman), Kassakian, Magnuson, Miller, Roering, Winthrop and Womack, met 2
times during fiscal year 1996. Among other duties, the Committee reviews and
evaluates significant matters relating to the audit and internal controls of
the Company, reviews the scope and results of audits by, and the
recommendations of, the Company's independent auditors and approves additional
services to be provided by the auditors. The Committee reviews the activities
of the Company's internal audit staff and reviews audited financial statements
of the Company.
The Nominating Committee, which is currently comprised of Messrs. Kassakian
(Chairman), Winthrop and Roering, met 2 times in fiscal 1996. The Nominating
Committee was established at the end of fiscal 1995 to consider nominees for
election to the Board of Directors and to evaluate the performance of the
Board of Directors and individual directors. The Nominating Committee will
consider a nomination by a shareholder of a candidate for election as a
director of the Company. The Company's Bylaws provide that a notice of
proposed shareholder nominations for the election of directors must be timely
given in writing to the Secretary of the Company prior to the meeting at which
directors are to be elected. To be timely, the notice must be given by such
shareholder to the Secretary of the Company not less than 45 days nor more
than 60 days prior to a meeting date corresponding to the previous year's
Annual Meeting. The Company's Bylaws provide that the Annual Meeting shall be
held on the second Wednesday in January of each year. The notice to the
Company from a shareholder who intends to nominate a person at the meeting for
election as a director must contain certain information about such shareholder
and the person(s) nominated by such shareholder, including, among other
things, the name and address of record of such shareholder, a representation
that the shareholder is entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting, the name, age, business and residence
addresses and principal occupation of each nominee, such other information as
would be required to be included in a proxy statement soliciting proxies for
the election of the proposed nominee(s), and the consent of each nominee to
serve as a director if so elected. The Company may also require any proposed
nominee to furnish other information reasonably required by the Company to
determine the proposed nominee's eligibility to serve as director. If the
presiding officer of a meeting of shareholders determines that a person was
not nominated in accordance with the foregoing procedure, such person will not
be eligible for election as a director.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending August 30, 1996,
September 1, 1995 and September 2, 1994, the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for those
years, to James E. Donaghy, the Company's President and Chief Executive
Officer, and to each of the four other most highly compensated executive
officers of the Company in office at the end of fiscal year 1996, whose total
cash compensation exceeded $100,000 during fiscal year 1996 (together with Mr.
Donaghy, the "Named Executive Officers") in all capacities in which they
served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------ ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James E. Donaghy 1996 $261,620 $0 40,000 $11,939
President and Chief 1995 256,203 0 7,719 8,998
Executive Officer 1994 247,722 0 10,548 10,718
Edward L. Lundstrom 1996 159,812 0 35,000 8,286
Executive Vice 1995 131,053 0 3,985 6,348
President 1994 122,324 0 11,134 6,116
John V. McManus 1996 134,458 0 30,000 5,743
Vice President 1995 121,378 0 3,671 5,172
1994 107,272 0 9,830 4,817
Roger D. Quam 1996 132,985 0 30,000 6,805
Vice President 1995 124,577 0 3,762 6,071
1994 121,540 0 11,267 5,470
Gregory D. Closser 1996 120,018 0 30,000 6,309
Vice President 1995 113,278 0 3,428 5,630
1994 108,161 0 9,972 5,341
</TABLE>
- ---------------------
(1) These amounts represent Company basic and matching contributions to the
Company's 401(k) plan on behalf of such employees.
5
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executive Officers
during the last fiscal year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERM(1)
- ------------------------------------------------------------------- -----------------
NUMBER
OF % OF TOTAL
SECURITIES OPTIONS
UNDER- GRANTED TO
LYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James E. Donaghy........ 25,000 5.3% $18.38 12/13/05 $288,898 $732,125
15,000 3.2 22.13 04/30/06 208,714 528,923
Edward L. Lundstrom..... 20,000 4.3 18.38 12/13/05 231,119 585,700
15,000 3.2 22.13 04/30/06 208,714 528,923
John V. McManus......... 15,000 3.2 18.38 12/13/05 173,339 439,275
15,000 3.2 22.13 04/30/06 208,714 528,923
Roger D. Quam........... 15,000 3.2 18.38 12/13/05 173,339 439,275
15,000 3.2 22.13 04/30/06 208,714 528,923
Gregory D. Closser...... 15,000 3.2 18.38 12/13/05 173,339 439,275
15,000 3.2 22.13 04/30/06 208,714 528,923
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock, overall stock
market conditions, as well as the optionholder's continued employment
through the vesting period. The amounts reflected in this table may not
necessarily be achieved.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of fiscal year 1996:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
------------------------- -------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
- ---- ----------- ----------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James E. Donaghy........ 0 $ 0 130,267 40,000 $1,276,595 $2,342
Edward L. Lundstrom..... 0 0 31,307 35,000 303,369 1,873
John V. McManus......... 0 0 26,818 30,000 258,777 1,405
Roger D. Quam........... 0 0 31,668 30,000 309,839 1,405
Gregory D. Closser...... 0 0 27,819 30,000 271,083 1,405
</TABLE>
- ---------------------
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Based on a per share price of $18.938, which is the average of the high
and low prices for the Company's Common Stock on August 30, 1996, the last
day of the Company's fiscal year. Value is calculated on the difference
between the option exercise price and $18.938 multiplied by the number of
shares of common stock underlying the options, but before taxes associated
with exercise.
6
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executives are generally made by
the three member Compensation Committee of the Board consisting of Messrs.
Roering (Chairman), Womack and Magnuson. All decisions by the Compensation
Committee relating to the compensation of the Company's executive officers are
reviewed by the full Board. Pursuant to rules designed to enhance disclosure of
companies' policies toward executive compensation, set forth below is a report
submitted by Messrs. Roering, Womack and Magnuson in their capacity as the
Board's Compensation Committee addressing the Company's compensation policies
for fiscal year 1996 as they affected the executive officers. The following
report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 (the "1933 Act") or the Securities Exchange Act of 1934
(the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the 1933 Act or the 1934 Act.
Compensation Philosophy. The Company's primary objective is to enhance long-
term shareholder value by safely and profitably providing products of the
highest value and quality for key markets. In furtherance of this objective,
the Company is committed to a strong, positive link between its business and
strategic goals and its compensation programs. The financial goals for
compensation plans are reviewed and approved by the Board in conjunction with
its approval of the Company's strategic and operating plans.
The Company's total compensation philosophy is designed to support its
overall objective of creating value for its shareholders. Key objectives of
this philosophy are:
. Attract and retain key executives critical to the long-term success of
the Company.
. Support a performance-oriented environment that rewards performance with
respect to Company short and long-term financial goals.
. Emphasize pay for performance by having a significant portion of
compensation "at-risk," particularly for senior executives.
. Encourage maximum performance through the use of appropriate incentive
programs.
. Encourage employee stock ownership to enhance a mutuality of interest
with other shareholders.
The Company has designed its executive compensation programs around these
objectives. The Compensation Committee believes the Company's programs
consistently meet these goals. Following is a description of the Company's
current programs and how each design element relates to the objectives outlined
above.
Base Salary. The Compensation Committee annually reviews each officer's
salary, including those of the Named Executive Officers. In determining
appropriate salary levels, the Compensation Committee considers level of
responsibility, experience, individual performance, internal equity, as well as
external pay practices.
Annual Incentives. Annual incentive (performance bonus) award opportunities
are made to managerial and executive employees to recognize and reward
corporate and individual performance. Each year, the Compensation Committee
will approve the performance measures selected, as well as specific financial
targets used. The Compensation Committee believes these goals drive the future
success of the Company's business and enhance shareholder value.
7
<PAGE>
The amount individual executives may earn (target awards) is directly
dependent upon the individual's position, responsibility and ability to impact
the Company's financial success. Additionally, external market data is
reviewed annually to determine competitive incentive opportunities. Awarded
amounts are related to performance.
The short-term incentive plan is dependent on measured financial
performance. Every payout depends on results, not on efforts. Bonuses are paid
based upon attainment of financial goals for earnings growth. No bonuses were
paid to management in fiscal year 1996.
Long-Term Incentives. The Company's overall long-term compensation
philosophy is that long-term incentives should be related to improvement in
the creation of long-term shareholder value. In furtherance of this objective,
the Company awards to its executive officers stock options.
Stock Options. Stock options encourage and reward effective management that
results in long-term corporate financial success, as measured by stock price
appreciation. Stock options only have value for the executive officers if the
price of the Company's stock appreciates in value from the date the stock
options are granted. Shareholders also benefit from such stock price
appreciation.
Stock options are awarded annually consistent with the Company's objectives
to more heavily weigh total compensation toward a long-term equity interest
for executive officers, with greater opportunity for reward if long-term
performance is sustained. Grants are not made at an option price less than
market value on the date of grant.
Chief Executive Officer Compensation. The salary and bonus of the Chief
Executive Officer is set by and subject to the discretion of the Compensation
Committee with Board approval. The compensation for James E. Donaghy, the
Chief Executive Officer, was determined by using a process and philosophy
similar to that used for all executives. For fiscal year 1996, Mr. Donaghy
received no bonus but was awarded options to purchase 40,000 shares. None of
these options vested in fiscal 1996. All of these options vest in increments
through April 1999.
Submitted by the Compensation Committee of the
Company's Board of Directors
Kenneth J. Roering Gerald E. Magnuson James S. Womack
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Magnuson, a Director and a member of the Compensation Committee and the
Company's Secretary, is Of Counsel to the law firm of Lindquist & Vennum
P.L.L.P. which was paid for legal services rendered to the Company during the
last fiscal year. Mr. Magnuson receives no financial benefit on account of
amounts paid by the Company to Lindquist & Vennum P.L.L.P. for such services.
It is anticipated that Lindquist & Vennum P.L.L.P. will continue to perform
legal services for the Company during the current fiscal year. Mr. Womack,
Chairman of the Board and a member of the Compensation Committee, served as an
employee and the Chief Executive Officer of the Company prior to his
resignation in January 1992.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this Proxy Statement a line graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with a broad market index and either a
nationally-recognized industry standard or an index of peer companies selected
by the
8
<PAGE>
Company. The Company has chosen the use of the NASDAQ Stock Market (U.S.
Companies) Index as its broad market index and the NASDAQ Electronic Component
Stock Index as its peer group index. The table below compares the cumulative
total return as of the end of each of the Company's last five fiscal years on
$100 invested as of August 30, 1991 in the common stock of the Company, the
NASDAQ Stock Market Index and the NASDAQ Electronic Component Stock Index,
assuming the reinvestment of all dividends:
Comparison of Five Year Cumulative Total Return
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Fiscal Year
Aug. 30, 1991 Aug. 28, 1992 Aug. 27, 1993 Sept. 2, 1994 Sept. 1, 1995 Aug. 30, 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sheldahl, Inc................. $100.00 $ 54.79 $ 87.67 $128.77 $208.22 $204.45
NASDAQ Stock Market
Index (U.S.)................ $100.00 $180.45 $143.07 $148.91 $200.54 $226.17
Electronic Component
Stocks Index................ $100.00 $110.99 $219.90 $231.22 $460.94 $468.06
</TABLE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Donaghy) were paid during fiscal year 1996 an annual retainer of
$12,000 and a fee of $800 for each day of meetings of the Board of Directors or
any committee. Each non-employee member of the Board of Directors receives at
the time of election or re-election to the Board by the shareholders an option
to purchase 1,000 shares of the Company's Common Stock at a purchase price
equal to the fair market value of the Company's Common Stock on the date of
such election or re-election. Each director option is exercisable as to all or
part of the shares subject to the option during a term of five years but will
expire 30 days after a director's departure from the Board. If Proposal 2 is
adopted, each non-employee director will receive an automatic grant of an
option to purchase 2,000 shares of Common Stock and the term of those options
will be ten years.
9
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Mr. Womack, who retired as an employee of the Company during fiscal year
1992, receives, in addition to the director fees noted above, a $10,000 annual
retainer for serving as the Chairman of the Board. In addition, the Company and
Mr. Womack entered into a Consulting Agreement during fiscal year 1988 which
provides that the Company will retain Mr. Womack as an independent consultant
from the date immediately following his termination of employment until his
75th birthday, unless another date is agreed upon by the parties. Mr. Womack is
to receive as annual compensation under the Consulting Agreement 50% of the
average of his annual cash compensation for the five calendar years preceding
termination of employment (but not less than $125,000), less an amount equal to
an annual annuity that could be purchased with the principal in his retirement
accounts at the date of retirement provided from all retirement contributions
by the Company. The Consulting Agreement also restricts Mr. Womack from
competitive employment and disclosure of trade secrets and confidential
information.
Mr. Miller received $10,411 during fiscal year 1996 representing fees
relating to international consulting work performed on behalf of the Company.
Mr. Magnuson received $5,000 during fiscal year 1996 for his services as
Secretary of the Company.
In fiscal year 1982, the Company established a retirement program for
directors not covered by another retirement plan of the Company which provides
for the payment of an annual benefit equal to the annual retainer paid to
directors during the full fiscal year preceding retirement. The retirement
benefit, which is payable to directors who have served five years or more, will
commence at the later of the time of retirement or when the director becomes 65
years old and will be subject to proportionate reduction if the director has
served the Company less than 15 years. The maximum number of years that the
benefit is payable is ten years.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain of its
executive officers, including each of the Named Executive Officers. The
employment agreements provide, among other things, for a lump sum cash
severance payment to such individuals equal to approximately three times the
individual's average annual compensation over the preceding five years plus
certain fringe benefits under certain circumstances following a change in
control of the Company if the change in control is not formally approved by the
Board of Directors and 1.5 times that compensation amount if the change in
control is approved by the Board of Directors and the officer continues in the
employ of the Company for a period of at least one year following the change in
control. In general, a "change in control" would include a change resulting
from the acquisition of 20% or more of the Company's outstanding voting stock
by any person, a change in the current members of the Board of Directors or
their successors elected or nominated by such members whereby they cease to be
a majority of the Board of Directors, or the Company disposing of 75% or more
of its assets, other than to an entity owned 50% or more by the Company or one
of its subsidiaries. The employment agreement with Mr. Donaghy also requires
the Company to pay Mr. Donaghy a salary of not less than $185,600 annually,
certain portions of which may be deferred. If a change in control which was not
approved by the Board of Directors had occurred at the end of fiscal year 1996,
the following individuals would have received the approximate payment indicated
pursuant to the employment agreements: Mr. Donaghy, $722,424; Mr. Lundstrom,
$369,179; Mr. Quam, $354,953; Mr. Closser, $311,825; Mr. McManus, $319,538; all
current executive officers as a group, $2,866,950.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file
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with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. These insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file, including Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 30, 1996, all
Section 16(a) filing requirements applicable to its insiders were complied
with.
AMENDMENTS TO THE 1994 STOCK OPTION PLAN
(PROPOSAL 2)
GENERAL INFORMATION
On October 14, 1994, the Company's Board of Directors adopted, and on January
11, 1995 the shareholders of the Company approved and ratified the adoption of,
the Sheldahl, Inc. 1994 Stock Plan (the "1994 Plan"). The purpose of the 1994
Plan is to enable the Company and its subsidiaries to retain and attract key
employees, consultants and non-employee directors who contribute to the
Company's success by their ability, ingenuity and industry, and to enable such
key employees, consultants and non-employee directors to participate in the
long-term success and growth of the Company by giving them a proprietary
interest in the Company. The 1994 Plan authorizes the granting of awards in any
of the following forms: (i) stock options, (ii) stock appreciation rights,
(iii) restricted stock, and (iv) deferred stock.
The principal features of the 1994 Plan are summarized below.
Shares Available Under 1994 Plan. The maximum number of shares of common
stock reserved and available under the 1994 Plan for awards is 600,000 (subject
to possible adjustment in the event of stock splits or other similar changes in
the common stock and subject to an increase by 400,000 shares pursuant to the
proposed amendment). Shares of common stock covered by expired or terminated
stock options and forfeited shares of restricted stock or deferred stock may be
used for subsequent awards under the 1994 Plan.
Eligibility and Administration. Officers and other key employees of the
Company and its subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
subsidiaries, as well as consultants and non-employee directors, are eligible
to be granted awards under the 1994 Plan. The 1994 Plan is administered by the
Board or, in its discretion, by a committee of not less than three "non-
employee directors," as defined in the 1994 Plan (the "Committee"), who is
appointed by the Board of Directors. The term "Board" as used in the 1994 Plan
refers to the Board or, if the Board has delegated its authority, the
Committee. The Board will have the power to make awards (other than awards to
non-employee directors), determine the number of shares covered by each award
and other terms and conditions of such awards, interpret the 1994 Plan, and
adopt rules, regulations and procedures with respect to the administration of
the 1994 Plan.
AMENDMENTS TO THE 1994 PLAN
The proposed amendments to the 1994 Plan are as follows:
Increasing Number of Shares. The 1994 Plan originally authorized the issuance
of 600,000 shares of Common Stock pursuant to stock options, restricted stock
and deferred stock granted under the 1994 Plan. On October 31, 1996, the Board
of Directors amended the 1994 Plan, subject to ratification and approval of the
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shareholders, to increase the total number of shares available under the 1994
Plan by 400,000 shares to a total of 1,000,000 shares. There were outstanding
on October 31, 1996 options to purchase 574,181 shares under the 1994 Plan.
Therefore, absent shareholder approval of this amendment to the 1994 Plan, only
24,552 shares remain available under the 1994 Plan for awards. The Board of
Directors has deemed it prudent to increase the shares available for grant
under the 1994 Plan by 400,000 shares to facilitate future stock option grants,
restricted stock awards and deferred stock awards.
Compliance with Section 162(m). Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") limits the Company's deduction for federal
income tax purposes of compensation in excess of $1 million per individual paid
to the Company's Chief Executive Officer and its four highest paid executive
officers. Compensation plans which are performance-based, approved by the
Company's stockholders, granted by a committee consisting solely of two or more
outside directors, and have an annual cap on the number of shares that may be
granted to any given individual will not be subject to the deduction limit. The
1994 Plan currently does not have an annual cap on the amount of shares subject
to an option grant. On October 31, 1996, the Board of Directors amended the
1994 Plan, subject to ratification and approval of the shareholders, to bring
the 1994 Plan into compliance with Section 162(m) of the Code by providing for
an annual cap on the number of shares granted to an individual to 100,000
shares. By adopting this change, the Company may deduct any compensation
expense resulting from the grant or exercise of options issued under the Plan
without regard to the limitations under Code Section 162(m), including options
to the individuals described above.
Automatic Grants to Non-Employee Directors. On October 31, 1996, the Board of
Directors amended the 1994 Plan, subject to ratification and approval of the
shareholders, to provide for an automatic grant to non-employee directors of an
option to purchase 2,000 shares of the Company's Common Stock at the fair
market value of such shares on the date of grant upon such person's election
and each subsequent re-election as a director of the Company. The Board of
Directors also amended the 1994 Plan on that date to change the term of newly
granted options to non-employee directors from five years to ten years, subject
to ratification and approval of the shareholders. Prior to the adoption of that
amendment, each person elected or re-elected as a director was granted an
option to purchase 1,000 shares of the Company's Common Stock and each option
had a five-year term. Both before and after the amendment, all such options
will have an option exercise price equal to the fair market value of the
Company's Common Stock on the date of grant. All options expire 30 days after a
director's departure from the Board.
AWARDS UNDER 1994 PLAN
Stock Options. The Board may grant stock options that either qualify as
"incentive stock options" under the Code or are "non-qualified stock options"
in such form and upon such terms as the Board may approve from time to time.
Stock options granted under the 1994 Plan may be exercised during their
respective terms as determined by the Board. The purchase price may be paid by
tendering cash or, in the Board's discretion, by tendering promissory notes or
common stock. The optionee may elect to pay all or part of the option exercise
price by having the Company withhold upon exercise of the option a number of
shares with a fair market value equal to the aggregate option exercise price
for the shares with respect to which such election is made. No stock option is
transferable by the optionee or exercisable by anyone else during the
optionee's lifetime.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, depending upon the reason for the
termination. Following a participant's death, the participant's stock options
may be exercised to the extent they were exercisable at the time of death by
the legal representative of the estate or the optionee's legatee for a period
of one year or until the expiration of the stated term of the
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option, whichever is less. The same time periods apply if the participant is
terminated by reason of disability. If the participant retires, the
participant's stock options may be exercised to the extent they were
exercisable at the time of retirement or for a period of three months (or such
longer period as determined by the Board at the time of retirement) from the
date or retirement or until the expiration of the stated term of the option,
whichever is less. If the participant is involuntarily terminated without
cause, the participant's options may be exercised to the extent they were
exercisable at the time of termination for the lesser of three months or the
balance of the stated term of the option. If the participant's employment is
terminated for cause, the participant's stock options immediately terminate.
These exercise periods may be reduced by the Board for particular options. The
Board may, in its discretion, accelerate the exercisability of stock options
which would not otherwise be exercisable upon death, disability or retirement.
No incentive stock option may be granted under the 1994 Plan after October
14, 2004. The term of an incentive stock option may not exceed 10 years (or 5
years if issued to a participant who owns or is deemed to own more than 10% of
the combined voting power of all classes of stock of the Company, any
subsidiary or affiliate). The aggregate fair market value of the common stock
with respect to which an incentive stock option is exercisable for the first
time by an optionee during any calendar year may not exceed $100,000. The
exercise price under an incentive stock option may not be less than the fair
market value of the common stock on the date the option is granted (or, in the
event the participant owns more than 10% of the combined voting power of all
classes of stock of the Company, the option price must be not less than 110% of
the fair market value of the stock on the date the option is granted). The
exercise price for non-qualified options granted under the 1994 Plan may be
less than 100% of the fair market value of the common stock on the date of
grant.
Stock Appreciation Rights. The Board may grant stock appreciation rights
("SARs") in connection with all or part of any stock option (with the exception
of options granted to non-employee directors), either at the time of the stock
option grant, or, in the case of non-qualified options, later during the term
of the stock option. SARs entitle the participant to receive from the Company
the same economic value that would have been derived from the exercise of an
underlying stock option and the immediate sale of the shares of common stock.
Such value is paid by the Company in cash, shares of common stock or a
combination of both, in the discretion of the Board. SARs are exercisable or
transferable only at such times and to the extent stock options to which they
relate are exercisable or transferable. If an SAR is exercised, the underlying
stock option is terminated as to the number of shares covered by the SAR
exercise.
Restricted Stock. The Board may grant restricted stock awards that result in
shares of common stock being issued to a participant subject to restrictions
against disposition during a restricted period established by the Board. The
Board may condition the grant of restricted stock upon the attainment of
specified performance goals or service requirements. The provisions of
restricted stock awards need not be the same with respect to each recipient.
The restricted stock will be held in custody by the Company until the
restrictions thereon have lapsed. During the period of the restrictions, a
participant has the right to vote the shares of restricted stock and to receive
dividends and distributions unless the Board requires such dividends and
distributions to be held by the Company subject to the same restrictions as the
restricted stock. Notwithstanding the foregoing, all restrictions with respect
to restricted stock lapse 60 days (or less as determined by the Board) prior to
the occurrence of a merger or other significant corporate change, as provided
in the 1994 Plan.
If a participant terminates employment during the period of the restrictions,
all shares still subject to restrictions will be forfeited and returned to the
Company, subject to the right of the Board to waive such restrictions in the
event of a participant's death, total disability, retirement or under special
circumstances approved by the Board.
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Deferred Stock. The Board may grant deferred stock awards that result in
shares of common stock being issued to a participant or group of participants
upon the expiration of a deferral period. The Board may condition the grant of
deferred stock upon the attainment of specified performance goals. The
provisions of deferred stock awards need not be the same with respect to each
recipient.
Upon termination of employment for any reason during the deferral period for
a given award, the deferred stock in question will be forfeited by the
participant, subject to the Board's ability to waive any remaining deferral
limitations with respect to a participant's deferred stock. During the
deferral period, deferred stock awards may not be sold, assigned, transferred,
pledged or otherwise encumbered and any dividends declared with respect to the
number of shares covered by a deferred stock award will either be immediately
paid to the participant or deferred and deemed to be reinvested in additional
deferred stock, as determined by the Board. The Board may allow a participant
to elect to further defer receipt of a deferred stock award for a specified
period or until a specified event.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. An optionee will not realize taxable compensation income upon
the grant of an incentive stock option. In addition, an optionee generally
will not realize taxable compensation income upon the exercise of an incentive
stock option if he or she exercises it as an employee or within three months
after termination of employment (or within one year after termination if the
termination results from a permanent and total disability). The amount by
which the fair market value of the shares purchased exceeds the aggregate
option price at the time of exercise will be alternative minimum taxable
income for purposes of applying the alternative minimum tax. If stock acquired
pursuant to an incentive stock option is not disposed of prior to the date two
years from the option grant date or prior to one year from the option exercise
date (the "Applicable Holding Periods"), any gain or loss realized upon the
sale of such shares will be characterized as capital gain or loss. If the
Applicable Holding Periods are not satisfied, then any gain realized in
connection with the disposition of such stock will generally be taxable as
ordinary compensation income in the year in which the disposition occurred, to
the extent of the difference between the fair market value of such stock on
the date of exercise and the option exercise price. The Company is entitled to
a tax deduction to the extent, and at the time, the participant realizes
compensation income. The balance of any gain will be characterized as a
capital gain. Under current law, net capital gains are taxed at a maximum
federal rate of 28% while compensation income may be taxed at higher federal
rates.
An optionee will not realize taxable compensation income upon the grant of a
non-qualified stock option. As a general matter, when an optionee exercises a
non-qualified stock option, he or she will realize taxable compensation income
at that time equal to the difference between the aggregate option price and
the fair market value of the stock on the date of exercise. The Company is
entitled to a tax deduction to the extent, and at the time, the participant
realizes compensation income.
SARs. The grant of an SAR would not result in income for the participant or
in a deduction for the Company. Upon receipt of shares or cash from exercise
of an SAR, the participant would generally recognize compensation income, and
the Company would be entitled to a deduction, measured by the fair market
value of the shares plus any cash received.
Restricted Stock and Deferred Stock. The grant of restricted stock and
deferred stock should not result in immediate income for the participant or in
a deduction for the Company for federal income tax purposes, assuming the
shares are nontransferable and subject to restrictions or to a deferral period
which would result in a
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"substantial risk of forfeiture" as intended by the Company and as defined in
applicable Treasury regulations. If the shares are transferable or there are no
such restrictions or significant deferral periods, the participant will realize
compensation income upon receipt of the award. Otherwise, a participant
generally will realize taxable compensation when any such restrictions or
deferral period lapses. The amount of such income will be the value of the
common stock on that date less any amount paid for the shares. Dividends paid
on the common stock and received by the participant during the restricted
period or deferral period also will be taxable compensation income to the
participant. In any event, the Company will be entitled to a tax deduction to
the extent, and at the time, the participant realizes compensation income. A
participant may elect, under Section 83(b) of the Code, to be taxed on the
value of the stock at the time of award. If the election is made, the fair
market value of the stock at the time of the award is taxable to the
participant as compensation income and the Company is entitled to a
corresponding deduction.
Withholding. The 1994 Plan requires each participant, no later than the date
as of which any part of the value of an award first becomes includible as
compensation in the gross income of the participant, to pay to the Company any
federal, state or local taxes required by law to be withheld with respect to
the award. The Company, to the extent permitted by law, has the right to deduct
any such taxes from any payment otherwise due to the participant. With respect
to any award under the 1994 Plan, if the terms of the award so permit, a
participant may elect to satisfy part or all of the withholding tax
requirements associated with the award by (i) authorizing the Company to retain
from the number of shares of Company common stock which would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares
of Company common stock already owned by the participant that number of shares
having an aggregate fair market value equal to part or all of the tax payable
by the participant. In that case, the Company would pay the tax liability from
its own funds.
REGISTRATION WITH THE SEC
Upon approval of the amendment to the 1994 Plan by the shareholders, the
Company intends to file a registration statement covering the offering of the
additional shares of Common Stock issuable under the 1994 Plan with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
VOTE REQUIRED
Shareholder approval of the amendments to the 1994 Plan requires the
affirmative vote of the holders of a majority of the shares of common stock
represented at the meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL AND RATIFICATION OF
THE AMENDMENTS TO THE 1994 STOCK PLAN.
APPROVAL OF AUDITORS
(PROPOSAL 3)
Arthur Andersen LLP, independent public accountants, have been auditors for
the Company since 1955. They have been reappointed by the Board of Directors,
upon recommendation of its Audit Committee, as the Company's auditors for the
current fiscal year, and shareholder approval of the appointment is requested.
In the event the appointment of Arthur Andersen LLP is not approved by the
shareholders, the Board of Directors will make another appointment to be
effective at the earliest feasible time.
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A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Shareholders, will have an opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF ARTHUR
ANDERSEN LLP.
SHAREHOLDER PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders of a company, after timely notice to the company, to present
proposals for shareholder action in the company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by company action in
accordance with the proxy rules. The Sheldahl, Inc. 1998 Annual Meeting of
Shareholders is expected to be held on or about January 14, 1998, and proxy
materials in connection with that meeting are expected to be mailed on or
about November 24, 1997. Shareholder proposals prepared in accordance with the
proxy rules must be received by the Company on or before July 25, 1997.
GENERAL
The Board of Directors of the Company knows of no matters other than the
foregoing to be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event that any additional matters should be
presented.
The Company's Annual Report to Shareholders for the fiscal year ended August
30, 1996 is being mailed to shareholders with this Proxy Statement.
Shareholders may receive without charge a copy of the Company's Annual Report
on Form 10-K, including financial statements and schedules thereto, as filed
with the Securities and Exchange Commission, by writing to: Sheldahl, Inc.,
1150 Sheldahl Road, Northfield, Minnesota 55057, Attention: John V. McManus,
or by calling the Company at: (507) 663-8210.
By the Order of the Board of
Directors
Gerald E. Magnuson, Secretary
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[LOGO OF SHELDAHL, INC.]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS JANUARY 8, 1997
The undersigned hereby appoints James E. Donaghy, Richard S. Wilcox and James
S. Womack, or any one or more of them, proxies with full power of substitution
to vote in their discretion cumulatively all shares of stock of Sheldahl, Inc.
of record in the name of the undersigned at the close of business on November
11, 1996, at the Annual Meeting of Shareholders to be held in Minneapolis,
Minnesota on January 8, 1997, or at any adjournment or adjournments, hereby
revoking all former proxies.
1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote
(except as indicated to the for all nominees listed below
contrary)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK THE FOR BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
James E. Donaghy, John G. Kassakian, Gerald E. Magnuson, William B. Miller,
Kenneth J. Roering, Richard S. Wilcox, Beekman Winthrop, James S. Womack
2. PROPOSAL TO APPROVE AND RATIFY AMENDMENTS TO THE SHELDAHL, INC. 1994 STOCK
PLAN (I) TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN BY
400,000 SHARES, (II) TO BRING THE PLAN INTO COMPLIANCE WITH SECTION 162(M)
OF THE INTERNAL REVENUE CODE, AND (III) TO CHANGE THE NUMBER OF STOCK
OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS UPON THEIR ELECTION OR SUBSEQUENT
RE-ELECTIONS FROM 1,000 TO 2,000 AND TO CHANGE THE TERM OF THOSE OPTIONS
FROM FIVE YEARS TO TEN YEARS.
FOR [_] AGAINST [_] ABSTAIN [_]
(CONTINUED FROM OTHER SIDE)
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
FOR [_] AGAINST [_] ABSTAIN [_]
4. IN THEIR DISCRETION UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2), AND
(3) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF
THERE IS NO SPECIFICATION.
Dated: _______________________, 19
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Please sign name(s) exactly as
shown at left. When signing as
executor, administrator, trustee or
guardian, give full title as such;
when shares have been issued in
names of two or more persons, all
should sign.
