<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CANNONDALE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth in the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CANNONDALE CORPORATION
9 BROOKSIDE PLACE
GEORGETOWN, CONNECTICUT 06829
(203) 544-9800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 1997
To the Stockholders of Cannondale Corporation:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of Cannondale
Corporation (the "Company") will be held on Wednesday, November 12, 1997, at
10:00 a.m., Eastern Standard Time, at the Ethan Allen Inn, 21 Lake Avenue
Extension, Danbury, Connecticut, for the following purposes:
1. To elect two (2) Class III directors of the Company for a three-year term;
2. To approve the increase of the number of authorized shares of Common Stock to
40,000,000 shares;
3. To consider and act upon a proposal to ratify the selection of Ernst & Young
LLP as independent accountants of the Company; and
4. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Accompanying this Notice is a Proxy, a Proxy Statement and a copy of the
Company's Annual Report on Form 10-K/A for fiscal year 1997.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN
AND DATE THE PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT
PURPOSE. The Proxy may be revoked at any time prior to the time that it is
voted. Only stockholders of record as of the close of business on October 4,
1997, will be entitled to vote at the meeting.
By Order of the Board of Directors
John Sanders
Secretary
Georgetown, Connecticut
October 10, 1997
<PAGE> 3
CANNONDALE CORPORATION
9 BROOKSIDE PLACE
GEORGETOWN, CONNECTICUT 06829
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors and management of Cannondale Corporation, a Delaware
corporation (the "Company"), of proxies for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the Ethan
Allen Inn, 21 Lake Avenue Extension, Danbury, Connecticut on Wednesday,
November 12, 1997, at 10:00 a.m., Eastern Standard Time, and at any and all
postponements or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting.
This Proxy Statement, Notice of Annual Meeting and accompanying proxy card
are first being mailed to stockholders on or about October 10, 1997.
GENERAL
Only stockholders of record at the close of business on October 4, 1997,
are entitled to notice of and to vote the shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock") held by them on that date
at the Annual Meeting or any postponements or adjournments thereof. A list of
stockholders entitled to vote at the meeting will be available for inspection at
the meeting.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote (i) FOR the slate of
nominees proposed by the Board of Directors, (ii) FOR approval of the increase
of the number of authorized shares of Common Stock to 40,000,000 shares, (iii)
FOR ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending June 27, 1998, and (iv) with
regard to all other matters which may be brought before the Annual Meeting, in
accordance with the judgment of the person or persons voting the proxies. Each
stockholder may revoke a previously granted proxy at any time before it is
exercised by filing with the Company a revoking instrument or a duly executed
proxy bearing a later date. The powers of the proxy holders will be suspended if
the person executing the proxy attends the Annual Meeting in person and so
requests. Attendance at the Annual Meeting will not, in itself, constitute a
revocation of a previously granted proxy.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock outstanding on October 4, 1997, will
constitute a quorum. As of October 4, 1997, 8,674,351 shares of Common Stock
were outstanding. Each outstanding share entitles its holder to cast one vote on
each matter to be voted upon at the Annual Meeting.
Directors will be elected by a plurality of votes cast at the Annual
Meeting. Abstentions are not counted toward a nominee's number of total votes
cast. All other matters which properly come before the Annual Meeting must be
approved by a majority of the votes present at the Annual Meeting. Abstentions
will have the practical effect of voting against such matter, since an
abstention is one less vote for approval. Broker non-votes on any matter will
have no impact on such matter since they are not considered "shares present" for
voting purposes.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of September 26, 1997, by (i) each person known to the
Company to own more than 5% of the outstanding Common Stock as of September 26,
1997, (ii) each director and nominee to be a director of the Company, (iii) each
of the executive officers named in the Summary Compensation Table included
elsewhere herein, and (iv) the current directors and executive officers of the
Company as a group. Unless otherwise indicated in the footnotes below, the
persons named in the table have sole voting and investment power with respect to
all shares shown as beneficially owned.
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK
---------------------------------------------------- ------------------- ------------
<S> <C> <C>
Joseph S. Montgomery(2)............................. 1,533,875 17.4%
James Scott Montgomery.............................. 369,653 4.2
William A. Luca..................................... 125,254 1.4
Richard J. Resch.................................... 57,666 *
Daniel C. Alloway................................... 118,569 1.4
John H.T. Wilson.................................... 2,500 *
Tarek Abdel-Meguid.................................. 0 0
Michael Carter...................................... 5,000 *
Michael J. Stimola.................................. 5,200 *
The Capital Group Companies, Inc.(3) ............... 619,000 7.1
Franklin Resources, Inc.(4)......................... 915,800 10.6
Rainier Investment Management Inc.(5)............... 477,500 5.5
All current directors and executive officers as a
group
(12 persons)...................................... 2,275,681 24.8%
</TABLE>
- ---------------
* Represents less than 1% of the Company's outstanding Common Stock.
(1)The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options which may be exercised within 60 days of
September 26, 1997, for the following persons: Mr. Joseph
Montgomery -- 115,416 shares, Mr. James Scott Montgomery -- 67,666 shares,
Mr. Luca -- 117,754 shares, Mr. Resch -- 57,666 shares, and Mr.
Alloway -- 84,821 shares.
(2)Mr. Joseph S. Montgomery has a business address c/o Cannondale Corporation, 9
Brookside Place, Georgetown, Connecticut 06829.
(3)Based on information contained in Schedule 13G filed jointly by The Capital
Group Companies, Inc. ("CGC") and Capital Guardian Trust Company ("CGTC")
dated February 12, 1997 (the "Schedule 13G"), CGC may be deemed to have sole
voting power with respect to 592,000 shares of Common Stock and sole
investment power with respect to all of the shares of Common Stock reported
for CGC. According to the Schedule 13G, CGC is the parent holding company of
a group of investment management companies that hold investment power and, in
some cases, voting power over the securities reported in the Schedule 13G.
CGC disclaims beneficial ownership of all of the shares of Common Stock
reported for CGC.
Based on information contained in the Schedule 13G, CGTC is a wholly owned
subsidiary of CGC and may be deemed to have sole voting power with respect to
574,000 shares of Common Stock and sole investment power with respect to
601,000 shares of Common Stock reported for CGC. CGC and CGTC have an address
at 333 South Hope Street, 52nd Floor, Los Angeles, California 90071.
(4)Based on information contained in Schedule 13G/A filed by Franklin Resources,
Inc. dated July 10, 1997, Franklin Resources, Inc. may be deemed to have sole
voting and investment power with respect to all of the shares of Common Stock
reported for Franklin Resources, Inc. Franklin Resources, Inc. has an address
at 777 Mariners Island Boulevard, San Mateo, California 94404.
(5) Based on information contained in the CDA/Spectrum Ownership Summary dated
September 30, 1997, Rainier Investment Management Inc. ("Rainier
Investment") may be deemed to have sole voting and investment power with
respect to all of the shares of Common Stock reported for Rainier
Investment. Rainier Investment has an address at 601 Union Street, Seattle,
Washington 98101.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers, directors and persons
owning more than 10% of the Company's Common Stock ("Reporting Persons") to file
reports of ownership and reports of changes of ownership with the Securities and
Exchange Commission. Reporting Persons are required to furnish the Company with
copies of all Section 16(a) forms that they file. Based solely upon a review of
copies of these filings received, the Company
2
<PAGE> 5
believes that with respect to the fiscal year ended June 28, 1997 ("Fiscal
1997"), all required filings during this period were made on a timely basis.
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves three years, with the
terms of office of the respective classes expiring in successive years. The term
of office of directors in Class III expires at the 1997 Annual Meeting. The
Board of Directors proposes that the nominees described below be elected to
Class III for a new term of three years and until their successors are duly
elected and qualified. The Board of Directors has no reason to believe that any
of the nominees will not serve if elected, but if any of them should become
unavailable to serve as a director, and if the Board designates a substitute
nominee, the persons named as proxies will vote for the substitute nominee
designated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE SLATE OF NOMINEES
DESCRIBED BELOW.
CLASS III -- DIRECTORS STANDING FOR ELECTION
WILLIAM A. LUCA, Director since 1994
William A. Luca, 54, joined Cannondale in January 1994 as Vice President of
Finance, Treasurer and Chief Financial Officer. Prior to joining the Company, he
was a management consultant from 1989 to 1993, and served as a consultant to the
Company between August and December 1993.
RICHARD J. RESCH, Director since 1990
Richard J. Resch, 54, joined Cannondale in 1988 as Director of
Manufacturing. He subsequently served as Vice President of Operations and from
1991 to the present has been Vice President for Technology Development.
CLASS II -- TERM EXPIRES AT THE 1999 ANNUAL MEETING
TAREK ABDEL-MEGUID, Director since 1992
Tarek Abdel-Meguid, 41, is a Managing Director and Deputy Head of the
Corporate Finance Department within the Investment Banking Division of Morgan
Stanley Group Inc. Mr. Abdel-Meguid has been employed in various investment
banking capacities with Morgan Stanley since 1982.
JAMES SCOTT MONTGOMERY, Director since 1994
James Scott Montgomery, 36, is a private investor and provides consulting
services to the Company. He was Vice President of Marketing of the Company from
1993 to June 1997. His previous positions with the Company include founder and
President of Cannondale Japan's Sales and Trading Divisions (1991 to 1993),
co-founder and Managing Director of Cannondale Europe (1989 to 1991) and
Director of Purchasing. Mr. Montgomery is the son of Joseph S. Montgomery, the
Company's Chairman, President and Chief Executive Officer.
JOHN H.T. WILSON, Director since 1997
John H.T. Wilson, 63, is an Advisory Director within the Investment Banking
Division of Morgan Stanley Group Inc. Mr. Wilson has been employed in various
investment banking capacities with Morgan Stanley since 1960. Mr. Wilson was
elected to the Board of Directors by a majority of directors on May 28, 1997.
Mr. Wilson was also appointed to the Audit Committee and the Compensation
Committee of the Board of Directors on such date.
CLASS I -- TERM EXPIRES AT THE 1998 ANNUAL MEETING
MICHAEL CARTER, Director since 1995
Michael Carter, 43, is Managing Director of Carter, Morse & Company, a
regional investment banking firm based in Southport, Connecticut, which he
formed in 1987. Mr. Carter is also a Managing Director of Carter Capital Corp.,
a registered broker dealer. Previously, Mr. Carter was a Vice President at The
Chase Manhattan Bank. Mr. Carter also serves as a director of First National
Bank of New England and its holding
3
<PAGE> 6
company, First International Bank Corp. In the past, Carter, Morse & Company
provided certain investment banking services to the Company and may provide
investment banking services to the Company in the future. No fees were paid by
the Company to Carter, Morse & Company in Fiscal 1997.
JOSEPH S. MONTGOMERY, Director since 1971
Joseph S. Montgomery, 56, founded Cannondale in 1971 and has been its
Chairman, President and Chief Executive Officer and a director since its
formation. Mr. Montgomery is the father of James Scott Montgomery, who is also a
director of the Company.
MICHAEL J. STIMOLA, Director since 1995
Michael J. Stimola, 40, is the President of Sandvick Associates, Inc., a
design and construction company headquartered in Bethel, Connecticut. See
"Certain Relationships and Related Transactions." Mr. Stimola is also the
founder, Chief Executive Officer and President of Sandella's Coffee Cafe, Inc.,
a company formed in 1994, of which Mr. Joseph Montgomery is the majority
stockholder. The company develops and operates cafes in New England and the New
York metropolitan area.
DIRECTORS' REMUNERATION; ATTENDANCE
Directors who are also full-time employees of the Company receive no
additional compensation for service as director. During Fiscal 1997, each
non-employee director received a quarterly payment of $1,500, plus $1,000 for
each day on which the member attended a meeting of the Board of Directors or a
committee, together with reimbursement of actual expenses incurred in attending
meetings.
The Board of Directors met four times during Fiscal 1997. No director
attended fewer than 75% of the total number of meetings of the Board and
committees on which such director served.
COMMITTEES OF THE BOARD
At its December 1994 meeting, the Board established standing Compensation
and Audit Committees. The Compensation Committee is composed of Messrs.
Abdel-Meguid, Carter, Stimola, Wilson and Joseph Montgomery. The Audit Committee
is composed of Messrs. Abdel-Meguid, Carter, Stimola and Wilson.
The Compensation Committee's functions are to review and set the
compensation, including salary, bonuses, stock options and other incentive
compensation, of the Company's Chief Executive Officer and certain of its most
highly compensated officers, and to review, approve and recommend the Company's
stock option plans. The Compensation Committee met two times during Fiscal 1997.
The Audit Committee's functions are to review financial and auditing issues
of the Company, including the Company's choice of independent public accounting
firms, and to make recommendations to the Board of Directors. The Audit
Committee met two times during Fiscal 1997.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS OF THE
COMPANY
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Executive Officer Compensation
The Company's compensation program for executive officers consists of three
key elements: a base salary, a discretionary annual bonus and grants of stock
options, in addition to benefit plans available to all employees. The Committee
believes that this approach best serves the interests of stockholders by
ensuring that executive officers are compensated in a manner that advances both
the short- and long-term interests of stockholders.
4
<PAGE> 7
Total Cash Compensation -- Salary and Bonuses. Salaries paid to executive
officers are reviewed annually by the Chief Executive Officer based upon his
subjective assessment of the nature of the position, and the contribution,
experience and Company tenure of the executive officer. The Chief Executive
Officer reviews his salary recommendations for all executive officers with the
Compensation Committee, which is responsible for approving or disapproving those
recommendations. In addition, the Chief Executive Officer makes recommendations
to the Compensation Committee as to discretionary annual bonuses, if any, to be
paid to individual executive officers, based upon his evaluation of each
executive officer's contribution to Company performance.
Stock Options. The Company's 1994 Stock Option Plan, 1994 Management Stock
Option Plan, 1995 Stock Option Plan and 1996 Stock Option Plan authorize the
Administrative Committee of non-employee directors to grant options to
executives of the Company. The Administrative Committee is composed of the three
non-employee directors on the Compensation Committee. Option grants are made
from time to time to executives whose contributions are perceived to have had or
to be likely to have a significant impact on the Company's performance.
Chief Executive Officer Compensation
Mr. Joseph Montgomery's compensation as Chief Executive Officer is composed
of the same elements and performance measures as for the Company's other senior
executives. The Compensation Committee believes that Mr. Montgomery's total
compensation reflects the unique contributions that he makes to the Company's
performance as an innovative leader in the bicycle industry. He was awarded a
bonus of $50,000 in the fiscal year ended June 29, 1996 ("Fiscal 1996") based on
corporate profitability in the fiscal year ended July 1, 1995 ("Fiscal 1995").
Mr. Montgomery received no bonus in Fiscal 1997. The Committee believes that
such compensation is appropriate based on the Company's performance, including
its earnings, revenue growth and cash flow from operations.
Members of the Compensation Committee
Tarek Abdel-Meguid
Michael Carter
Joseph S. Montgomery
Michael J. Stimola
John H.T. Wilson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company has a Compensation Committee composed
of Messrs. Abdel-Meguid, Stimola, Carter, Wilson and Joseph Montgomery. During
the last fiscal year Joseph Montgomery, the Company's Chairman, President and
Chief Executive Officer, participated in discussions with members of the
Compensation Committee concerning executive officer compensation.
Joseph Montgomery serves as a director of Sandella's Coffee Cafe, Inc., a
company formed in 1994, of which Mr. Stimola is the founder, Chief Executive
Officer and President. The company develops and operates cafes in New England
and the New York metropolitan area.
Joseph Montgomery is the sole shareholder of JSM, Inc. ("JSM"). JSM owns a
Cessna Citation Jet aircraft which it leases to the Company. See "Certain
Relationships and Related Transactions."
Sandvick Associates, Inc., of which Mr. Stimola is the President and
majority stockholder, has been the construction manager and general contractor
for several construction projects of the Company, including an ongoing
construction project of the Company's new headquarters and an expansion project
at the Company's Bedford, Pennsylvania facility. See "Certain Relationships and
Related Transactions."
Joseph Montgomery is the sole manager, and Joseph Montgomery and Sandvick
Associates, Inc., are each members, of Nantucket Roost Associates, LLC, a
limited liability company which has purchased the Company's existing
headquarters facility for approximately $1.7 million. See "Certain Relationships
and Related Transactions."
In January 1997, the Company provided Mr. Montgomery with certain loans
which have been repaid. See "Certain Relationships and Related Transactions."
5
<PAGE> 8
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered to the Company in all
capacities during Fiscal 1997, Fiscal 1996 and Fiscal 1995 to its Chief
Executive Officer and to its four most highly paid executive officers other than
the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(3)
ANNUAL ------------
COMPENSATION(1) SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(#)
- ----------------------------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Joseph S. Montgomery................................. 1997 $278,471 $ 0 0
President and Chief Executive Officer 1996 251,304 50,000 40,000
1995 257,668 10,000 50,000
William A. Luca...................................... 1997 233,100 75,000 50,000
Vice President of Finance, Treasurer 1996 233,100 50,000 64,715
1995 168,808 10,000 60,000
Richard J. Resch..................................... 1997 139,000 35,000 0
Vice President for Technology Development 1996 139,000 25,000 25,000
1995 139,000 5,000 20,000
James Scott Montgomery............................... 1997 104,177 42,000 0
Vice President of Marketing 1996 130,000 30,000 10,000
1995 130,000 5,000 30,000
Daniel C. Alloway.................................... 1997 148,462 50,000 50,000
Vice President of Sales -- United States 1996 130,000 30,000 88,091
1995 119,231 8,000 20,000
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or ten percent of the total
annual salary and bonus reported for the executive officer during Fiscal
1997, Fiscal 1996 and Fiscal 1995.
(2) Bonuses paid in Fiscal 1997 are based on corporate profitability in Fiscal
1996. Bonuses based on corporate profitability in Fiscal 1997, payable in
the fiscal year ending June 27, 1998, for Messrs. Joseph Montgomery, Luca,
Resch and Alloway will be $67,391, $67,391 $31,449 and $44,927,
respectively.
(3) The Company did not grant any restricted stock awards or stock appreciation
rights during Fiscal 1997, Fiscal 1996 or Fiscal 1995. The Company does not
have any long-term incentive plan.
The following table sets forth certain information regarding stock options
granted during Fiscal 1997 by the Company to the executive officers named in the
Summary Compensation Table.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
PERCENT POTENTIAL
NUMBER OF OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL
UNDERLYING GRANTED TO EXERCISE RATES OF STOCK
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRICE APPRECIATION
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE FOR OPTION TERM(2)
- ------------------------------ ---------- ------------ --------- ---------- ---------------------
5% 10%
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Montgomery.......... 0 0 $ 0 -- $ 0 $ 0
William A. Luca............... 50,000 11.01 18.75 12/06/06 589,589 1,494,134
Richard J. Resch.............. 0 0 0 -- 0 0
James Scott Montgomery........ 0 0 0 -- 0 0
Daniel C. Alloway............. 50,000 11.01 18.75 12/06/06 589,589 1,494,134
</TABLE>
- ---------------
(1) All options vest over a five-year period from the date of grant.
6
<PAGE> 9
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent of the
fair value of the Common Stock on the date of grant of the options,
compounded annually from the date of grant to the option expiration dates.
The gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise. Actual
gains, if any, are dependent on the performance of the Common Stock and the
date on which the option is exercised. There can be no assurance that the
values reflected will be achieved.
The following table sets forth certain information with respect to the
aggregate exercises of stock options and unexercised stock options held as of
June 28, 1997, by the executive officers named in the Summary Compensation Table
above.
AGGREGATE OPTIONS EXERCISED IN FISCAL 1997 AND
FISCAL 1997 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT JUNE 28, 1997(1)
SHARES OPTIONS AT JUNE 28, 1997
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Montgomery......... -- $ -- 85,416 43,334 $ 885,864 $ 160,736
William A. Luca.............. -- -- 84,421 113,144 650,822 200,928
Richard C. Resch............. 10,000 183,500 42,666 23,334 463,714 89,436
James Scott Montgomery....... -- -- 54,333 16,667 654,199 69,001
Daniel C. Alloway............ -- -- 69,821 115,895 598,047 142,504
</TABLE>
- ---------------
(1) The values in this column represent the closing sales price of the Company's
Common Stock on the Nasdaq National Market on June 27, 1997, $17.94, less
the respective option exercise price.
7
<PAGE> 10
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following graph compares the performance of the Company's Common Stock
with the performance of the Nasdaq Stock Market (US Companies) Stock Price Index
(the "Nasdaq Index") and a peer group index created by the Company, over the
period from November 16, 1994 (the first day of public trading of the Company's
Common Stock) to June 27, 1997. The graph assumes that $100 was invested on
November 16, 1994, in each of the Company's Common Stock, the Nasdaq Index and
the peer group index, and that all dividends were reinvested.
The peer group index created by the Company is composed of companies in
bicycle or other recreational product lines of business. The common stock of the
following companies has been included in the peer group index: K2, Inc., Bell
Sports Corp., Callaway Golf Company, GT Bicycles, Inc., The Coleman Company,
Inc., First Team Sports, Inc., Huffy Corporation, Ride, Inc. and RockShox Inc.
<TABLE>
<CAPTION>
Nasdaq Stock
Measurement Period Cannondale Market (US Self-Determined
(Fiscal Year Covered) Corporation Companies) Peer Group
<S> <C> <C> <C>
Measurement Period
(Fiscal Year Covered) 100.000 100.000 100.000
<CAPTION>
Measurement Period
(Fiscal Year Covered) 91.818 96.969 95.414
Measurement Period
(Fiscal Year Covered) 72.727 96.601 96.258
Measurement Period
(Fiscal Year Covered) 89.091 96.868 94.657
Measurement Period
(Fiscal Year Covered) 94.545 103.584 98.194
Measurement Period
(Fiscal Year Covered) 85.455 107.848 96.951
Measurement Period
(Fiscal Year Covered) 110.909 110.012 88.360
Measurement Period
(Fiscal Year Covered) 107.273 113.833 94.281
<S> <C> <C> <C>
6/28/95 96.364 120.262 92.429
<CAPTION>
Measurement Period
(Fiscal Year Covered) 121.818 131.493 100.230
Measurement Period
(Fiscal Year Covered) 125.455 131.955 98.096
Measurement Period
(Fiscal Year Covered) 114.545 137.225 99.134
Measurement Period
(Fiscal Year Covered) 109.091 134.498 94.212
Measurement Period
(Fiscal Year Covered) 100.000 137.906 105.218
Measurement Period
(Fiscal Year Covered) 112.727 137.047 115.272
Measurement Period
(Fiscal Year Covered) 103 .636 136.610 103.432
Measurement Period
(Fiscal Year Covered) 110.000 145.336 116.403
Measurement Period
(Fiscal Year Covered) 123.636 143.849 128.799
Measurement Period
(Fiscal Year Covered) 153.636 156.287 130.558
Measurement Period
(Fiscal Year Covered) 160.000 163.078 138.841
<S> <C> <C> <C>
6/28/96 147.273 156.629 142.150
<CAPTION>
Measurement Period
(Fiscal Year Covered) 161.818 142.556 128.458
Measurement Period
(Fiscal Year Covered) 133.636 152.295 130.054
Measurement Period
(Fiscal Year Covered) 170.909 162.686 130.510
Measurement Period
(Fiscal Year Covered) 146.364 159.571 120.422
Measurement Period
(Fiscal Year Covered) 138.636 169.632 120.251
Measurement Period
(Fiscal Year Covered) 170.909 170.379 114.293
Measurement Period
(Fiscal Year Covered) 176.364 178.598 124.343
Measurement Period
(Fiscal Year Covered) 148.182 172.190 121.249
Measurement Period
(Fiscal Year Covered) 140.909 164.679 113.611
Measurement Period
(Fiscal Year Covered) 134.545 160.184 119.048
Measurement Period
(Fiscal Year Covered) 130.455 186.009 128.033
<S> <C> <C> <C>
6/27/97 130.455 189.769 139.424
</TABLE>
8
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Joseph Montgomery is the sole shareholder of JSM, Inc. ("JSM"). JSM owns a
Cessna Citation Jet aircraft which it leases to the Company under a lease which
expires in October 1999. Rental payments under the lease are based on the fair
rental value of the Cessna Citation Jet. Rental payments from October 6, 1996,
to October 5, 1998, were $100,000 for the first month, and $25,000 per month
thereafter; rent for the third year of the term will be adjusted based on the
fair rental value of the Cessna Citation Jet on the second anniversary date of
the lease. Under the terms of the lease, the Company will pay all taxes,
maintenance and insurance expenses for the aircraft. The Company uses the
aircraft largely for transporting personnel between its Connecticut headquarters
and its Pennsylvania manufacturing facilities.
The Company has entered into an agreement with Joseph Montgomery pursuant
to which he agrees to pay the Company for any personal use of the aircraft
leased from JSM. This agreement does not require the Company to make the
aircraft available to Mr. Montgomery, but governs payments to be made by Mr.
Montgomery for such personal use as may be agreed to by the Company from time to
time. Payment for such personal use is at the rate established from time to time
by the Internal Revenue Service as reasonable for personal use of employer owned
aircraft. During Fiscal 1997, Mr. Montgomery's personal use of the aircraft was
valued at $38,471.
Sandvick Associates, Inc. ("Sandvick"), of which Mr. Stimola is the
president and majority stockholder, has been the construction manager and
general contractor for several construction projects of the Company in
Connecticut and Pennsylvania, including ongoing construction projects at the
Company's new headquarters and its Bedford, Pennsylvania facility. In Fiscal
1997, the Company paid Sandvick $4,362,282 for the ongoing construction projects
at the Company's new headquarters and its Bedford, Pennsylvania facility.
The Company has engaged Sandvick to act as general contractor for the
construction of an addition of up to 40,000 square feet to its manufacturing
facility in Bedford, Pennsylvania. The additional space will be used for
warehousing and expanded production.
The Company purchased land in Fiscal 1997 and is in the process of
constructing a new headquarters facility, located approximately 10 miles from
the existing headquarters. The Company engaged Sandvick to act as general
contractor for the construction of the new facility.
In Fiscal 1997, in connection with the construction of the Company's new
headquarters facility, Sandvick entered into a contract to purchase the existing
headquarters facility for approximately $1.7 million. Sandvick subsequently
assigned the contract to Nantucket Roost Associates, LLC ("Nantucket Roost"),
which purchased the property in October 1996. Joseph Montgomery is the sole
manager, and Joseph Montgomery and Sandvick are each members, of Nantucket
Roost. Pending its relocation to the new headquarters facility, the Company will
continue to occupy the current facility on a month-to-month net lease of $16,000
per month.
The Company has agreed to provide up to $450,000 in interest-free loans to
Mr. Luca to enable him to purchase a home in the vicinity of the Company's
headquarters; the home is currently under construction. As of June 28, 1997,
$170,557 had been advanced to Mr. Luca. The loans mature on December 29, 2006,
at which time the entire principal balance is due. The loans are secured by a
mortgage on Mr. Luca's new residence.
In January 1997, the Company provided Mr. Montgomery with three separate
loans in the aggregate principal amount of $755,000. As of February 13, 1997,
Mr. Montgomery had repaid the entire principal amount of such loans, together
with interest at the Company's then current borrowing rate.
The Board of Directors of the Company believes that the terms of the
transactions described above (other than those involving loans to employees)
were on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties; and that the transactions involving loans to
employees were fair and reasonable under the circumstances. The Company
anticipates that future transactions with affiliated parties will be approved by
a majority of the Company's disinterested directors and will be on terms no less
favorable to the Company than those that could be obtained from unaffiliated
parties.
9
<PAGE> 12
ITEM 2 -- PROPOSAL CONCERNING INCREASE IN AUTHORIZED SHARES OF
COMMON STOCK
On September 3, 1997, the Board of Directors unanimously approved and
recommended that the stockholders consider and approve an amendment to Article
FOURTH of the Company's Restated Certificate of Incorporation (the
"Certificate") that would increase the number of authorized shares of the
Company's Common Stock, from 18,000,000 shares to 40,000,000 shares. This
proposal would not change the authorized number of shares of the Company's
Preferred Stock, par value $.01 per share (the "Preferred Stock"). To be
adopted, this proposal requires the affirmative vote of the holders of a
majority of all of the outstanding shares of Common Stock entitled to vote
thereon at the Annual Meeting.
It is proposed that Article FOURTH of the Certificate be amended by
deleting paragraph (a) thereof in its entirety and substituting the following in
lieu thereof:
FOURTH:
(a) Designation of Classes. The total number of shares of all classes
of stock which the Corporation shall have the authority to issue is
42,000,000, consisting of 2,000,000 shares of Preferred Stock and
40,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock").
As of September 26, 1997, there were 8,676,851 shares of Common Stock
outstanding, 25,000 shares of Common Stock held in treasury and 2,073,020 shares
reserved for issuance under the Company's stock option plans and employee stock
purchase plans. Accordingly, an aggregate of 7,226,795 authorized but unissued
shares and treasury shares were available for future use as of September 26,
1997.
As of September 26, 1997, there were no shares of Preferred Stock
outstanding or held in treasury.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Board the
necessary flexibility to issue shares of Common Stock in connection with stock
dividends and splits, acquisitions, financings and employee benefits and for
other general corporate purposes without the expense and delay incidental to
obtaining stockholder approval of an increase in the number of authorized shares
at the time of such action (unless such approval is otherwise then required for
a particular issuance by applicable law or by the rules of any stock exchange on
which the Company's securities may then be listed).
Although the Board of Directors has no present intention of issuing
additional shares for such purposes, the proposed increase in the number of
authorized shares of Common Stock could enable the Board of Directors to render
more difficult or discourage an attempt by another person or entity to obtain
control of the Company in the future. Such additional shares could be issued by
the Board of Directors in a public or private sale, merger or similar
transaction, increasing the number of outstanding shares and thereby diluting
the equity interest and voting power of a person or entity attempting to obtain
control of the Company. The amendment to the Certificate is not being proposed
in response to any known effort to acquire control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
18,000,000 SHARES TO 40,000,000 SHARES.
ITEM 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending June 27, 1998 ("Fiscal 1998"). Ernst &
Young LLP has served as the Company's independent accountants since 1993.
Services provided to the Company and its subsidiaries by Ernst & Young LLP with
respect to Fiscal 1997 included the audit of the Company's consolidated
financial statements, limited reviews of quarterly reports, services related to
filings with the Securities and Exchange Commission and consultations on various
tax matters. Representatives of Ernst & Young LLP will be present at the Annual
Meeting to respond to appropriate questions and to make such statements as they
may desire.
10
<PAGE> 13
Ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for Fiscal 1998 will require the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting. In the event stockholders do not ratify
the appointment of Ernst & Young LLP as the Company's independent accountants
for the forthcoming fiscal year, such appointment will be reconsidered by the
Audit Committee and the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
FISCAL 1998.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Secretary of the
Company, for inclusion in the Company's proxy statement relating to the 1998
Annual Meeting, by June 12, 1998.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.
October 10, 1997
By Order of the Board of Directors
John Sanders
Secretary
11
