<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ELTRON INTERNATIONAL, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
ELTRON INTERNATIONAL, INC.
41 MORELAND ROAD
SIMI VALLEY, CALIFORNIA 93065
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Eltron
International, Inc., a California corporation (the "Company"), will be held at
the Radisson Hotel, 999 Enchanted Way, Simi Valley, California 93065, on May 14,
1998 at 2:00 p.m., local time, for the following purposes:
1. To elect members of the Board of Directors to serve until the next
Annual Meeting of Shareholders;
2. To approve an amendment to the Company's 1996 Stock Option Plan to
increase by 325,000 the number of shares of the Company's Common Stock
available for future option grants; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 2, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting. Only shareholders of record at the close of business on
the record date will be entitled to vote at the meeting and any adjournments
thereof.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT
BE ABLE TO ATTEND THE MEETING TO VOTE IN PERSON PLEASE COMPLETE, SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. The Proxy may be revoked by you at any time prior to its use at the
meeting.
By Order of the Board of Directors,
/s/ Kriston D. Qualls
Kriston D. Qualls
Secretary
Simi Valley, California
April 10, 1998
<PAGE> 3
ELTRON INTERNATIONAL, INC.
41 MORELAND ROAD
SIMI VALLEY, CALIFORNIA 93065
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1998
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Eltron
International, Inc., a California corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company. The
proxies solicited hereby are to be voted at the Annual Meeting of Stockholders
of the Company to be held on May 14, 1998 at 2:00 p.m., and at any and all
adjournments thereof (the "Annual Meeting").
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
executing the proxy. If no direction is made, the shares represented by each
properly executed unrevoked proxy will be voted "FOR" (i) the election of the
Company's nominees to the Board of Directors and (ii) the amendment of the
Company's 1996 Stock Option Plan to increase by 325,000 the number of shares of
the Company's Common Stock available for future option grants. With respect to
any other item of business that may come before the Annual Meeting, the proxy
holders will vote the proxy in accordance with their best judgment.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with Kriston D. Qualls, Secretary of the Company, an instrument revoking
such proxy or by the filing of a duly executed proxy bearing a later date. Any
shareholder present at the meeting who has given a proxy may withdraw it and
vote his or her shares in person if such shareholder so desires.
It is contemplated that the solicitation of proxies will be made primarily
by mail and, if necessary, the officers, agents and employees of the Company may
communicate with shareholders, banks, brokerage houses and others by telephone,
telegraph, or in person to request that proxies be furnished. All expenses
incurred in connection with this solicitation will be borne by the Company. The
Company also may make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to the beneficial
owners of the shares eligible to vote at the Annual Meeting and will reimburse
them for their expenses in so doing. The Company has no present plans to hire
special employees or paid solicitors to assist in obtaining proxies, but it may
do so if it should appear that a quorum may not be obtained. This Proxy
Statement and the accompanying form of proxy are first being mailed to
shareholders on or about April 14, 1998.
VOTING SECURITIES
Only holders of record of the Company's voting securities at the close of
business on April 2, 1998 are entitled to notice of and to vote at the Annual
Meeting. As of April 2, 1998, the Company had issued and outstanding 7,651,817
shares of the Company's Common Stock ("Common Stock"), the holders of which are
entitled to vote at the Annual Meeting. Each share of Common Stock that was
issued and outstanding on April 2, 1998 is entitled to one vote at the Annual
Meeting. The presence, in person or by proxy, of shareholders holding at least a
majority of the votes entitled to be cast by all shareholders will constitute a
quorum for the transaction of business at the Annual Meeting.
Stockholders may cumulate their votes with respect to the election of
directors of the Company if one or more shareholders give notice at the Annual
Meeting, prior to voting, of an intention to cumulate votes for a
1
<PAGE> 4
nominated director. A shareholder may cumulate votes either by casting for the
election of one nominee the number of votes equal to the number of directors to
be elected multiplied by the number of shares held by such shareholder or by
distributing his votes on the same principle among as many candidates as the
shareholder may determine. If a proxy is marked "FOR" the election of directors,
it may, at the discretion of the proxy holders, be voted cumulatively in the
election of directors.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting other than the election of directors. Approval of each of the
other proposals to be brought before the Annual Meeting (not including the
election of directors) will require the affirmative vote of at least a majority
in voting interest of the shareholders present in person or by proxy at the
Annual Meeting and entitled to vote thereon. As to those proposals, if a
shareholder abstains from voting it will have the effect of a negative vote on
that proposal, but if a broker indicates that it does not have authority to vote
certain shares, those votes will not be considered as shares present and
entitled to vote at the Annual Meeting with respect to that proposal and
therefore will have no effect on the outcome of the vote.
ELECTION OF DIRECTORS
NOMINEES
The presently authorized number of directors of the Company is five, and
the five persons presently serving as directors are proposed for election as
directors. Directors are elected at each annual meeting of the shareholders and
hold office until their respective successors are elected and qualified. The
Board of Directors is of the opinion that the election to the Board of Directors
of the persons identified below, all of whom are currently serving as Directors
of the Company and have consented to continue to serve if elected, would be in
the best interests of the Company. The names of such nominees are as follows:
Robert G. Bartizal
George L. Bragg
Hugh K. Gagnier
William R. Hoover
Donald K. Skinner
The shares of each properly executed unrevoked proxy will be voted FOR the
election of all of the above named nominees unless the shareholder executing
such proxy indicates that the proxy shall not be voted for all or any one of the
nominees. If cumulative voting is utilized, the proxy holders intend to
distribute the votes represented by each proxy, unless such authority is
withheld, among the five nominees named, in such proportion as they see fit.
Nominees receiving the highest number of affirmative votes cast, up to the
number of directors to be elected, will be elected as directors. Abstentions,
broker non-votes, and instructions on the accompanying proxy card to withhold
authority to vote for one or more of the nominees will result in the respective
nominees receiving fewer votes. If any nominee should become unavailable for
election as a Director the proxies will be voted for such substitute nominee, if
any, as may be recommended by the Board of Directors. In no event, however,
shall the proxies be voted for a greater number of persons than the number of
nominees named.
MEETINGS; ATTENDANCE; COMMITTEES
The Board of Directors of the Company held five meetings during the fiscal
year ended December 31, 1997. Each of the directors attended at least 75% of all
meetings of the Board of Directors.
The Stock Option Committee consists of Messrs. Bartizal, Bragg and Hoover.
The Stock Option Committee administers the Company's stock option plans. The
Stock Option Committee met three times last year and each of the Committee
members attended all of these meetings.
The Compensation Committee consists of Messrs. Bartizal, Bragg, Hoover and
Skinner. The Compensation Committee reviews the performance of the executive
officers and determines the compensation of such
2
<PAGE> 5
officers. The Compensation Committee met five times last year and each of the
Committee members attended all of these meetings.
The Audit Committee consists of Messrs. Bartizal, Bragg and Hoover. The
duties of the Audit Committee are to review and act or report to the Board of
Directors with respect to various audit and accounting matters, including the
annual audits of the Company (and their scope), the annual selection of the
independent auditors of the Company, and the nature of services to be performed
by the independent auditors of the Company. The Audit Committee met two times
last year and each of the Committee members attended each of these meetings.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert G. Bartizal(1)(2)(3) 65 Director
George L. Bragg(1)(2)(3) 65 Director
William R. Hoover(1)(2)(3) 68 Director
Donald K. Skinner(3) 57 Chairman of the Board and Chief
Executive Officer
Hugh K. Gagnier 42 President, Chief Operating Office
and Director
Roger Hay 49 Vice President, Finance and Chief
Financial Officer
Patrice J. Foliard 39 Senior Vice President, Sales and
Marketing
W. Robert Gormley 55 Vice President, Supplies Division
Kriston D. Qualls 40 Vice President, General Counsel and
Secretary
</TABLE>
- ---------------
(1) Member of Stock Option Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
ROBERT G. BARTIZAL has been a director of the Company since February 1994.
Mr. Bartizal currently serves on the Boards of Directors of Datavision
Technology Corp. and Validyne Engineering Corp., both privately-held
corporations, and on the Board of Counselors of the UCLA School of Dentistry. In
1986, Mr. Bartizal founded RGB Associates and co-founded Bartizal and Sherby,
both business consulting companies, and he has served in executive capacities
since then. Prior thereto, Mr. Bartizal served in executive capacities at
Logisticon Inc., a manufacturer of real time material management systems,
Dataproducts Corporation, a manufacturer of computer printers, Control Data
Corporation, and IBM.
GEORGE L. BRAGG has been a director of the Company since February 1995.
Since September 1996, Mr. Bragg has been Chairman and Chief Executive Officer of
White River Concepts, Inc., a medical products company. He has served as
Chairman of Markwood Capital Alliance, a management consulting and financing
services company since September 1994 and also has served as a director of
Leasing Solutions, Inc., a computer equipment and software leasing company since
1989. From October 1993 to September 1994, Mr. Bragg was President and a
Director of Nichols Institute, a nationwide specialized medical testing services
company for physicians, hospitals and other testing laboratories. Nichols
Institute was merged with Corning Life Science in September 1994. In his
business career, Mr. Bragg has served in various senior executive capacities
with Western Digital Corporation, Sooner Federal Savings, Memorex Telex, the
Telex Corporation, Memorex Corporation and Collins Radio Corporation.
3
<PAGE> 6
WILLIAM R. HOOVER has been a director of the Company since September 1996.
Mr. Hoover is Chairman of the Executive Committee and a director of Computer
Sciences Corporation, an independent provider of information technology
consulting, systems integration and outsourcing to industry and government;
prior thereto, he served as Chairman of the Board, Chief Executive Officer and
President from 1972 to June 1993, Chairman of the Board and Chief Executive
Officer from June 1993 through March 1995 and Chairman of the Board from April
1995 through March 1997. Mr. Hoover serves as a director on the boards of
Merrill Lynch & Company, Storage Technology Corporation and Rofin-Sinar
Technologies, Inc.
DONALD K. SKINNER co-founded the Company in 1991 and has served as its
Chief Executive Officer since December 1992, and as its Chairman of the Board
from July 1995. From January 1991 (inception) to December 1992, Mr. Skinner
served as the Company's Executive Vice President and Chief Operating Officer and
as President from December 1992 until Mr. Gagnier assumed the position of
President in September 1995. From September 1989 to January 1991, Mr. Skinner
founded and served as President of Eltron, Incorporated, a manufacturer of
custom thermal printers. From January 1989 to August 1989, Mr. Skinner served as
General Manager of Axiom-Edwards-CPE Incorporated, a manufacturer of thermal
printers. In 1985, Mr. Skinner co-founded and served as Executive Vice President
and Chief Operating Officer of Peripheral Technology Corporation, a manufacturer
of computer disk drives, and was responsible for new product development,
engineering, sales and marketing, and operations. Prior to his tenure at
Peripheral Technology Corporation, Mr. Skinner spent 15 years at Dataproducts
Corporation, a manufacturer of computer printers. While at Dataproducts
Corporation, Mr. Skinner was responsible for the development, manufacturing and
marketing of the company's new product lines. Mr. Skinner is a director of
Percon, Inc. (Eugene, Oregon), a manufacturer of bar code reading products.
HUGH K. GAGNIER has been a director of the Company since February 1994. Mr.
Gagnier became Executive Vice President and Chief Operating Officer in June
1994, and became President in September 1995. From October 1991 to November
1993, Mr. Gagnier was the Group President of Wangtek and WangDAT, Inc.,
manufacturers of tape drives for automated data back-up and subsidiaries of
Rexon Incorporated, formerly a publicly held company. Prior to his position as
Group President, Mr. Gagnier served as President of Wangtek from May 1991 to
October 1991, and as Vice President of Engineering from October 1988 to May
1991. Prior to his tenure at Rexon Incorporated, Mr. Gagnier spent three and
one-half years at Peripheral Technology Corporation, a disk drive manufacturer,
in various engineering management positions.
ROGER HAY joined the Company in December 1997 as Vice President Finance and
Chief Financial Officer. Previously, Mr. Hay served as the Chief Financial
Officer of Pinnacle Micro, a manufacturer of optical storage devices, from July
1996 until August 1997. From 1994 until 1996, Mr. Hay was Executive Vice
President Finance and Chief Financial Officer of Titan Corporation, a San Diego
based communications company. From 1989 to 1993, Mr. Hay was the Chief Financial
Officer of International Rectifier, Inc., a manufacturer of semi-conductors.
PATRICE J. FOLIARD, founder and former president of Privilege S.A. in
France, joined the Company in January 1996, through the Company's acquisition of
Privilege, S.A., initially serving as president of the Company's newly formed
Card Division and in January 1997 became Senior Vice President, Sales and
Marketing. Prior to founding Privilege during 1994, Mr. Foliard founded in 1990
AP-Print and Newcode, a French company specializing in the design and production
of thermal label printers and card printers. From 1988 to 1989, Mr. Foliard was
General Manager of Cominor, a French company which designs accounting software.
From 1982 to 1988 he served in Paris with the United Kingdom-based International
Computers Limited, and was responsible for sales of minicomputers to end users
for two years and then in charge of the sales force for the personal computer
line.
W. ROBERT GORMLEY joined the Company in September 1997 as Vice President,
Supplies Division. From 1993 to 1997, Mr. Gormley served as Vice President and
General Manager of the Custom Products Division of 20th Century Plastics, Inc.,
a privately-held manufacturer and marketer of consumer, office and industrial
products fabricated from polypropylene and vinyl film. In 1989, Mr. Gormley
formed Equivest Business Brokers Inc., a privately-held real estate firm
specializing in small business transactions, and served as its President from
1989 until 1993. From 1971 to 1989, Mr. Gormley served in several marketing,
sales and
4
<PAGE> 7
general management roles with Avery Dennison Corporation, a manufacturer and
marketer of self-adhesive materials, labels and label application systems.
KRISTON D. QUALLS joined the Company in January, 1998 as Vice President,
General Counsel and Secretary. Mr. Qualls previously practiced law from 1986 to
December 1997 with the Los Angeles law firm of Graven Perry Block Brody &
Qualls, most recently serving as its managing partner, and from 1983 to 1985
with the San Diego law firm of Miller, Ewald and Monson.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid or accrued by the
Company for the year ended December 31, 1997 to its Chief Executive Officer and
to the other three most highly compensated executive officers who received total
salary and bonuses from the Company of over $100,000 (the "Named Executives").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- --------------------- ----------
OTHER ANNUAL SECURITIES UNDERLYING LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS(#) PAYOUTS($)
- --------------------------- ---- -------- -------- --------------- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner,......... 1997 $210,000 $94,815 -- -- --
Chief Executive Officer 1996 $195,000 $85,678 -- 60,000 --
1995 $156,850 $98,020 -- -- --
Hugh K. Gagnier,........... 1997 $170,000 $75,544 -- -- --
President and Chief 1996 $155,000 $68,588 -- 40,000 --
Operating Officer 1995 $149,520 $84,500 -- -- --
Patrice J. Foliard,........ 1997 $115,000 $54,767 -- 20,000
Senior Vice President 1996 $ 67,286 $46,000 -- 43,500 --
Sales and Marketing(3) --
Daniel C. Toomey, Jr.,..... 1997 $115,000 $36,633 -- -- --
Chief Financial Officer 1996 $105,000 $62,736 -- 25,000 --
Vice President Finance 1995 $ 80,621 $52,390 -- -- --
and Secretary(4)
</TABLE>
- ---------------
(1) Represents performance-based bonuses earned during such fiscal year,
regardless of when such bonuses were paid to the officer.
(2) The value of personal benefits furnished to the Named Executives did not
exceed the lesser of either $50,000 or 10% of their respective salary and
bonus compensation.
(3) Mr. Foliard was President of Card Division from January 1996 until January
1997, when he became Senior Vice President Sales and Marketing.
(4) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
5
<PAGE> 8
The following table provides information on stock options granted in the
year ended December 31, 1997 to the Named Executives:
OPTIONS GRANTED IN YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER PERCENT OF VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION --------------------
NAME (#) YEAR ($/SH) DATE 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner...... -- -- -- -- -- --
Hugh K. Gagnier........ -- -- -- -- -- --
Patrice J. Foliard..... 20,000 8.4% $19.875 04/30/07 $249,985 $633,512
Daniel C. Toomey,
Jr.(2)............... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The 5% and 10% assumed rates of appreciation are prescribed by the rules and
regulations of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of future trading prices of the Common
Stock.
(2) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
The following table contains information concerning stock options exercised
in the last fiscal year and stock options remaining unexercised on December 31,
1997 with respect to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS HELD AT FISCAL FISCAL
ACQUIRED VALUE YEAR END(#) YEAR-END($)(1)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald K. Skinner........... -- -- 15,000 45,000 58,125 174,375
Hugh K. Gagnier............. 65,000 1,378,094 7,500 55,000 29,063 950,938
Patrice J. Foliard.......... -- -- 10,875 52,625 92,438 484,813
Daniel C. Toomey, Jr.(2).... 33,442 659,231 -- 28,252 -- 60,390
</TABLE>
- ---------------
(1) Amounts are shown as the difference between exercise price and fair market
value based on the closing price of $30.25 per share at fiscal year ended
December 31, 1997.
(2) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
EMPLOYMENT AGREEMENTS
Under the terms of Mr. Skinner's three year employment agreement entered
into as of January 1, 1997, Mr. Skinner's 1998 annual base salary is $240,000,
subject to adjustment once per year by the Compensation Committee and he may
receive incentive bonuses not to exceed 75% of his annual base salary. The
Company and Messrs. Gagnier and Foliard have entered into one year employment
agreements as of January 1, 1997, which have been extended by the Board for 1998
with an adjustment to their base salaries. Messrs. Gagnier and Foliard currently
receive an annual base salary of $180,000 and $130,000, respectively, and may
receive incentive bonuses not to exceed 75% of their annual base salaries.
Pursuant to their employment agreements, Messrs. Gagnier and Foliard are
entitled to receive a severance payment equal to their annual base salaries, and
Mr. Skinner is entitled to receive a severance
6
<PAGE> 9
payment equal to three times his annual base salary, in the event of a merger or
sale of the Company or in the event of a change in control of the Company and
such executives do not continue their employment. In the event of the death of
any of these executive officers, his estate is entitled to receive any earned
but unpaid compensation and an additional payment equal to one year of base
salary and bonuses paid during the last full year of employment by the Company.
If any such executive officer becomes disabled, he is entitled to receive
compensation under his employment agreement for up to one year.
DIRECTORS' COMPENSATION
Each outside director receives $1,500 for each board meeting attended and
$500 for each committee meeting attended; provided, however, that if two or more
committee meetings are held on the same day, outside directors in attendance
only receive $1,000 for such committee meetings. The Stock Option Committee has
also granted stock options to outside directors, at exercise prices equal to the
fair market value on the date of the grant. See the discussion of the Company's
stock option plans under "Proposal to Amend the 1996 Stock Option Plan to
Increase the Number of Shares of Common Stock Reserved For Issuance".
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of Donald K. Skinner, Robert G.
Bartizal, George L. Bragg and William R. Hoover.
The Company entered into a three year employment agreement with its chief
executive officer, Donald K. Skinner, as of January 1, 1997. Mr. Skinner's
compensation for 1997 was governed by such agreement. See "Executive
Compensation." In determining the salary and bonus for the chief executive
officer, the Compensation Committee based its decisions upon the performance of
the Company, as well as a review of the performance of the chief executive
officer. Mr. Skinner did not participate in any Compensation Committee decisions
concerning his compensation as the Chief Executive Officer. Under the 1997
agreement, Mr. Skinner received an annual base salary of $210,000, which
reflects a $15,000 increase from 1996. Mr. Skinner also was eligible to receive
an incentive bonus of up to 75% of his base salary, payable on a quarterly
basis. During 1997, Mr. Skinner received bonuses during the first three quarters
totaling $94,815, which represented approximately 45% of his base salary. For
the fourth quarter of 1997, no bonuses were earned.
The Company entered into one year employment agreements with each of its
other executive officers as of January 1, 1997. The base compensation for each
of these executive officers was fixed at the time of execution of their
respective employment agreements. See "Executive Compensation". Each such
executive officer received bonuses under his employment agreement for the first
three quarters of 1997, but no bonuses were earned during the fourth quarter.
The amount of the bonuses was determined by the Compensation Committee based
upon the performance of the Company, as well as a review of the performance of
each executive officer. In January 1998, those executive officers with one year
employment agreements had the terms of their agreement extended, with salary
increases. The executive officers are eligible to receive a bonus for the
current fiscal year in an amount to be determined by the Compensation Committee
in accordance with the terms of their new employment agreements.
The Company believes that equity ownership by executive officers provides
incentive to build stockholder value and align the interests of executive
officers with the interests of stockholders. Upon the hiring of executive
officers and other key employees, management may recommend for the Stock Option
Committee approval of stock option grants to these new key employees under the
Company's stock option plans, subject to applicable vesting periods. Thereafter,
the Stock Option Committee will consider awarding grants to these employees on a
periodic basis to continue to provide incentives. The Stock Option Committee
believes that these additional option grants will provide incentives for
executive officers to remain with the Company. Options are granted at the market
price of the Company's Common Stock on the date of grant and, consequently, will
have value only if the price of the Company's Common Stock increases from the
date of grant over the exercise price during the term of the option. In
determining the size of the periodic grants, the
7
<PAGE> 10
Stock Option Committee considers various factors, including the amount of any
prior option grants, the executive's or employee's performance during the
current fiscal year and his or her expected contributions during the succeeding
fiscal year. During 1997, the Company issued stock options to new and existing
executive officers and employees based on the preceding factors.
The foregoing report on executive compensation is provided by the following
directors who are members of the Compensation Committee:
Robert G. Bartizal
George L. Bragg
William R. Hoover
Donald K. Skinner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DISCUSSIONS
During the fiscal year ended December 31, 1997, the Board of Directors had
a Compensation Committee consisting of four directors, being Donald K. Skinner,
Robert G. Bartizal, George L. Bragg and William R. Hoover. Mr. Skinner also
services as Chairman of the Board and Chief Executive Officer of the Company.
There are no interlocks between the Company and other entities involving the
Company's executive officers and Board members who served as executive officers
or Board members of such other entities. Mr. Skinner did not participate in any
Compensation Committee decisions concerning his compensation as the Chief
Executive Officer.
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
Introduction. The Company believes that an integral part of its success is
attributable to its ability to continue to attract and retain highly-qualified
and dedicated executive officers, key employees and other persons by providing
such persons with additional incentives to join and serve the Company and to
expend maximum effort to improve the business results and earnings of the
Company. The Company's stock option plans are intended to provide eligible
persons an opportunity to acquire or increase a direct proprietary interest in
the Company by receiving stock options.
General Features of the Stock Option Plans. The Company has adopted a 1992
Stock Option Plan, a 1993 Stock Option Plan and a 1996 Stock Option Plan
(collectively, the "Stock Option Plans" or "Plans") originally covering 433,812
and 667,188 and 500,000 shares, respectively, of the Company's Common Stock.
Under these Plans, options to purchase stock may be granted employees, officers
and directors of the Company, as well as other persons who render services to or
are otherwise associated with the Company.
The Plans are administered by the full Board of Directors or the Stock
Option Committee composed of three members of the Board of Directors. The
selection of optionees, allotment of option shares, determination of the
exercise price and other conditions of options are determined by the Stock
Option Committee. The Plans were adopted to attract, retain and reward persons
instrumental to the success of the Company. Incentive stock options and
non-qualified options granted under the Plans are exercisable for a period of up
to 10 years from the date of grant at an exercise price that is not less than
100% of the fair market value of the Common Stock on the date of grant, except
that if an incentive stock option is granted under the Plans to a shareholder
owning more than 10% of the voting power of the Company on the date of grant the
term of the option may not exceed five years and its exercise price may not be
less than 110% of the fair market value of the Common Stock on the date of
grant.
Under the 1996 Plan, upon initially joining the Board, each nonemployee
director will receive an option to purchase 15,000 shares at an exercise price
equal to the fair market value on the date of grant, vesting one-third on each
anniversary of becoming a director, provided that such director remains a
director at the time of each vesting. Additionally, on each anniversary of
joining the Board, the nonemployee director will receive an
8
<PAGE> 11
option to purchase 5,000 shares at an exercise price equal to the fair market
value on the date of grant, which option will be immediately exercisable.
The 1992 Plan was approved by the Board of Directors of the Company on
February 18, 1992 and, unless sooner terminated by the Board of Directors or the
Stock Option Committee, will terminate on February 17, 2002. The 1993 Plan was
approved by the Board of Directors of the Company on February 1, 1993 and,
unless sooner terminated by the Board of Directors or the Stock Option
Committee, will terminate on January 31, 2003. The 1996 Plan was approved by the
Board of Directors of the Company on August 1, 1996 and, unless sooner
terminated by the Board of Directors, will terminate on July 31, 2006. All of
the Company's Plans have been registered under the Securities Act of 1933, as
amended, on Form S-8.
Federal Tax Consequences. The grant of a stock option is not a taxable
event for the optionee or the Company. Upon exercise of a non-qualified stock
option, the optionee will be deemed to receive ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the underlying share of Common Stock on the date of the exercise and the Company
will be entitled to a deduction for the amount recognized as ordinary income by
the optionee. With respect to incentive stock options, an optionee will not
recognize taxable income upon exercise of an incentive stock option, and any
gain realized upon disposition of shares received pursuant to the exercise of an
incentive stock option will be taxed as long-term capital gain if the optionee
holds the shares for at least two years after the date of grant and for one year
after the date of exercise and the date the stock was purchased, whichever is
later. However, the excess of the fair market value of the shares subject to an
incentive stock option on the exercise date over the stock option exercise price
will be included in the optionee's alternative minimum taxable income in the
year of exercise.
This discussion of the Federal tax consequences of the Stock Option Plans
is based upon the Internal Revenue Code provisions currently in effect and is
limited to tax consequences for United States Citizens and does not consider the
potential impact of state tax laws. Option holders are encouraged to discuss
with their own personal tax advisor the ramifications and tax consequences
applicable to their personal circumstances.
Proposed Amendment to the 1996 Plan. At the Board of Directors meeting held
December 16, 1997, the Board approved an amendment to all of the Plans to
require non-qualified stock options be granted at 100% of the fair market value,
rather than at 85% of the fair market value. The Board also approved an
amendment to all of the Plans to clarify that the closing price as listed in The
Wall Street Journal shall be the "fair market value" of the options on the date
of grant. Shareholder approval of these amendments is not required.
The Board of Directors also reviewed the number of options available for
future grant under all of the Plans and, with only approximately 6,000 shares
available for future option grants, the Board approved an amendment to the
Company's 1996 Plan to increase the number of authorized shares by an additional
325,000 option shares. Shareholders are being asked to approve this amendment to
the 1996 Plan.
The Board of Directors believes this amendment of the 1996 Plan will
promote the interests of the Company and its shareholders and enable the Company
to attract, retain and reward persons important to the Company's success.
Accordingly, the Board of Directors recommends a vote "FOR" approval of this
amendment of the 1996 Plan. Proxies solicited by the Board will be so voted in
the absence of instructions to the contrary.
9
<PAGE> 12
PERFORMANCE GRAPH
The chart below sets forth a line graph comparing the performance of the
Company's Common Stock against the Nasdaq Composite (U.S. Companies) index and
the Nasdaq Computer Manufacturers Stocks (SIC 3570-3579 US & Foreign) index for
the period from February 9, 1994 (the date on which the market price of the
Company's shares was first quoted by the Nasdaq National Market following the
Company's initial public offering) through December 31, 1997. The indices assume
that the value of an investment in the Company's Common Stock and each index was
100 on February 9, 1994 and that dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period 'Eltron Nasdaw Composite Nasdaq Computer
(Fiscal Year Covered) International, Inc.' (US) Manufacturers
<S> <C> <C> <C>
2/9/94 100 100 100
12/30/94 239 97 103
12/29/95 861 139 163
12/31/96 488 168 218
12/31/97 733 206 264
</TABLE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 27, 1998, by (i) each
director of the Company, (ii) each Named Executive, (iii) all directors and
executive officers as a group, and (iv) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock. Except as
noted below, the Company
10
<PAGE> 13
believes that the persons listed below have sole investment and voting power
with respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ -------- --------
<S> <C> <C>
FMR Corp.(2)................................................ 914,500 12.0%
PBHG Emerging Growth Fund................................... 491,800 6.4%
William Blair & Company, Limited Liability Company.......... 430,592 5.6%
Fleet Financial Group, Inc.................................. 382,821 5.0%
Donald K. Skinner(3)........................................ 562,548 7.4%
Hugh K. Gagnier(4).......................................... 16,000 *
Patrice J. Foliard(5)....................................... 10,875 *
Daniel C. Toomey, Jr.(6).................................... 66,884 *
Robert G. Bartizal(7)....................................... 49,333 *
George L. Bragg(8).......................................... 38,333 *
William R. Hoover(9)........................................ 32,500 *
All directors and current executive officers as a group (9
persons)(10).............................................. 709,589 9.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Based upon 7,651,817 shares of Common Stock outstanding as of March 27,
1998.
(2) Fidelity Management & Research Company and Fidelity Management Trust
Company, each subsidiaries of FMR Corp., are beneficial owners of 787,400
and 127,100 shares of Common Stock, respectively.
(3) Includes 267,548 shares held by the Skinner Revocable Trust, 280,000 shares
held by Skinner Irrevocable Blind Trust and 15,000 shares subject to options
exercisable presently or within 60 days hereof.
(4) Includes 1,000 shares held directly and 15,000 shares subject to options
exercisable presently or within 60 days hereof.
(5) All 10,875 shares are subject to options exercisable presently or within 60
days hereof.
(6) Mr. Toomey ceased being an executive officer on December 1, 1997 and an
employee on December 31, 1997.
(7) Includes 26,000 shares held directly and 23,333 shares subject to options
exercisable presently or within 60 days hereof.
(8) All 38,333 shares are subject to options exercisable presently or within 60
days hereof.
(9) Includes 15,000 shares held in a revocable trust for the benefit of Mr.
Hoover's children and 17,000 shares subject to options exercisable presently
or within 60 days hereof.
(10) Includes 119,541 shares subject to options exercisable presently or within
60 days hereof.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Federal securities laws, the Company's directors, executive
officers, and any person holding more than 10% of the Company's Common Stock are
required to report their ownership of the Company's securities and any changes
in that ownership to the Commission. Specific due dates for these reports have
been established, and the Company is required to report in this Proxy Statement
any failures to file by such dates. Other than as stated below, the Company
knows of no instances of persons who have failed to file or have delinquently
filed Section 16(a) reports within the most recently completed fiscal year,
except Robert G. Bartizal, a director of the Company, was late in filing a Form
4 with regard to an exercise of options in February 1997, such form being filed
during April 1998.
11
<PAGE> 14
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
1997 were Coopers & Lybrand L.L.P., and the Board of Directors has selected
Coopers & Lybrand L.L.P. as the Company's independent auditors for the current
fiscal year ended December 31, 1998. A representative of Coopers & Lybrand
L.L.P. will be available at the Annual Meeting to respond to appropriate
questions or make any other statements as such representative deems appropriate.
OTHER MATTERS
If any matters not referred to in this proxy statement should properly come
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment. The management is not
aware of any such matters which may be presented for action at the meeting.
Matters incident to the conduct of the meeting may be voted upon pursuant to the
proxies.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge a copy of Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 as filed with the
Securities and Exchange Commission to any shareholder requesting a copy.
Shareholders may write to the Company at:
Corporate Secretary
Eltron International, Inc.
41 Moreland Road
Simi Valley, California 93065
SUBMISSION OF SHAREHOLDER PROPOSALS
Stockholders are advised that any shareholder proposal, including
nominations to the Board of Directors, intended for consideration at next year's
Annual Meeting must be received by the Company no later than December 15, 1998
to be included in the proxy material for next year's Annual Meeting. It is
recommended that shareholders submitting proposals direct them to the Corporate
Secretary, Eltron International, Inc., 41 Moreland Road, Simi Valley, California
93065, and utilize certified mail, return-receipt requested in order to ensure
timely delivery.
THE STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN PROMPTLY THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Kriston D. Qualls
Kriston D. Qualls
Secretary
12
<PAGE> 15
APPENDIX TO PROXY STATEMENT
AMENDMENT TO ELTRON INTERNATIONAL, INC.
1996 STOCK OPTION PLAN
The 1996 Stock Option Plan (the "Plan") of Eltron International, Inc., a
California corporation (the "Company"), is hereby amended in the following
respects:
1. Section 4, entitled "Stock Subject to Plan," is hereby amended to
delete the first sentence and to add a new first sentence as follows:
"There shall be reserved for issuance upon the exercise of options
granted under the Plan 825,000 shares of Common Stock of the Company
("Stock") or the number of shares of Stock which, in accordance with the
provisions of Section 10 hereby, shall be substituted therefore."
This Amendment reflects a 325,000 share increase in the number of authorized
shares from 500,000 to 825,000.
2. The definition of "fair market value", as defined in the third sentence
of Section 5(a)(1), entitled "Option Price", is hereby amended to delete the
third sentence and to add a new third sentence as follows:
"The fair market value of the shares shall be determined by the Board
or the Plan Committee in its discretion; provided, however, that if there
is a public market for the Common Stock, the fair market value per Share
shall be, in the event the Common Stock is listed on the NASDAQ National
Market System or on a stock exchange, the closing price as listed in "The
Wall Street Journal", and, if not so listed, the fair market value shall be
the price determined by the Board or Plan Committee based upon such
evidence as it may deem necessary or desirable.
3. Section 5(b)(1), entitled "Option Price." is hereby deleted in its
entirety and replaced as follows:
"The price to be paid for each share upon the exercise of each
nonqualified stock option shall be determined by the Board or Plan
Committee at the time the option is granted (as defined in Section
5(a)(1)), but shall not be less than 100% of the fair market value (as
defined in Section 5(a)(1))."
4. Except as amended above, in all other respects the Plan is hereby
ratified and confirmed. These amendments to the Plan have been approved by the
Board of Directors on December 16, 1997 and, except for the amendment of Section
4 (which is amended subject to receipt of appropriate shareholder approval), are
deemed effective as of December 16, 1997.
By Order of the Board of Directors:
/s/ KRISTON D. QUALLS
--------------------------------------
Kriston D. Qualls
Secretary of the Company
<PAGE> 16
ELTRON INTERNATIONAL, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 14, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELTRON
INTERNATIONAL, INC.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 10, 1998, and does
hereby appoint Donald K. Skinner, Hugh K. Gagnier and Kriston D. Qualls (the
"Proxies"), and each of them, with full power of substitution, as the proxy of
the undersigned to represent the undersigned and to vote all shares of Common
Stock of Eltron International, Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders, to be held on
May 14, 1998, at the Radisson Hotel, 999 Enchanted Way, Simi Valley, California
93065, and at any adjournments thereof. The following are proposed by Elton
International, Inc.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees as listed below (except as marked to the contrary)
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name on the line that follows:
- --------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Donald K. Skinner, Hugh K. Gagnier, Robert G. Bartizal, George L. Bragg, William
R. Hoover
PROXIES NOT MARKED TO WITHHOLD AUTHORITY WILL BE VOTED FOR THE ELECTION
OF ALL NOMINEES WHOSE NAMES ARE NOT WRITTEN ON THE ABOVE LINE.
(CONTINUED ON REVERSE SIDE OF PROXY CARD)
<PAGE> 17
(CONTINUED FROM PREVIOUS SIDE)
2. To approve an amendment to the Company's 1996 Stock Option Plan to
increase by 325,000 the number of shares of the Company's Common Stock
available for future option grants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. At their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED. WHERE NO
DIRECTION IS MADE, THE SHARES WILL BE VOTED FOR PROPOSAL 1 AND
PROPOSAL 2.
DATED: , 1998
-------------
-------------------------
(Signature)
-------------------------
(Signature, if held
jointly)
Please sign exactly as
your name or names appear
hereon, and when signing
as attorney, executor,
administrator, trustee or
guardian, give your full
title as such. If the
signatory is a
corporation, sign the
full corporate name by a
duly authorized officer.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
