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
SMC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee 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 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>
SMC CORPORATION
Notice of Annual Meeting of Shareholders
June 19, 1997
To the Shareholders of SMC Corporation:
The Annual Meeting of Shareholders of SMC Corporation, an Oregon
corporation, (the "Company") will be held at the corporate headquarters of the
Company, located at 30725 Diamond Hill Road, Harrisburg, Oregon, on Thursday,
June 19, 1997 at 1:00 p.m. for the following purposes:
1. To elect seven directors, each to serve until the next Annual Meeting of
Shareholders and until a successor has been elected and qualified (Proposal 1);
2. To vote on an amendment to the Company's 1994 Stock Incentive Plan to
increase the number of shares reserved for issuance under the Plan from
1,100,000 shares to 1,400,000 shares, an increase of 300,000 shares (Proposal
2); and
3. To transact any other business that properly comes before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business on May 8, 1997 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Please date and sign the enclosed proxy and return it in the
postage-prepaid envelope enclosed for that purpose. You may attend the meeting
in person even if you send in your proxy, because retention of the proxy is not
necessary for admission to or identification at the meeting.
By Order of the Board of Directors,
Connie M. Perlot
Secretary
May 14, 1997
Harrisburg, Oregon
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE SO THAT YOUR STOCK WILL BE VOTED. THE ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
<PAGE>
SMC CORPORATION
PROXY STATEMENT
Annual Meeting of Shareholders
--------
The mailing address of the principal executive offices of the Company is
30725 Diamond Hill Road, Harrisburg, Oregon 97446. This Proxy Statement and the
accompanying Notice of Annual Meeting and the Proxy Card are first being sent to
the shareholders on or about May 14, 1997.
Upon written request to Paul M. Brown, Jr., Senior Vice President - Finance
and Chief Financial Officer, any person whose proxy is solicited by this proxy
statement will be provided, without charge, a copy of the Company's Annual
Report on Form 10-K.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of SMC
Corporation, an Oregon corporation, for use at the Annual Meeting of
Shareholders to be held on June 19, 1997 and at any adjournment thereof. The
Company will bear the cost of preparing and mailing the proxy, proxy statement,
and any other material furnished to shareholders by the Company in connection
with the annual meeting. Proxies will be solicited by use of the mails, and
officers and employees of the Company may also solicit proxies by telephone or
personal contact. Copies of solicitation materials will be furnished to
fiduciaries, custodians, and brokerage houses for forwarding to beneficial
owners of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Company, attention Connie M. Perlot, Secretary, an instrument
of revocation or a duly executed proxy bearing a later date. The proxy may also
be revoked by affirmatively electing to vote in person while in attendance at
the meeting. A shareholder who attends the meeting, however, need not revoke the
proxy and vote in person unless he or she wishes to do so. All valid, unrevoked
proxies will be voted at the annual meeting in accordance with the instructions
given. If no instructions are specified, the shares will be voted FOR Proposal
1, Election of Directors, and FOR Proposal 2, Amendment to the 1994 Stock
Incentive Plan, in the accompanying Notice of Annual Meeting of Shareholders,
and these votes will be counted toward determining a quorum
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding authorized voting security of the
Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is May 8, 1997. Each share of Common Stock
outstanding on the record date will be entitled to one vote. The Common Stock
does not have cumulative voting rights. On March 31, 1997, there were 6,563,064
shares of Common Stock outstanding.
The following table sets forth certain information regarding the beneficial
ownership as of March 31, 1997 of the Common Stock by (i) each person known by
the Company to own beneficially more than 5 percent of the Common Stock, (ii)
each director and nominee for director of the Company, (iii) each executive
officer of the Company named in the Summary Compensation Table, and (iv) all
executive officers and directors as a group. Except as otherwise noted, the
persons listed below have sole investment and voting power with respect to the
Common Stock owned by them, and their addresses are c/o SMC Corporation, 30725
Diamond Hill Road, Harrisburg, Oregon, 97446.
<TABLE>
<CAPTION>
Number of Shares Percentage
Beneficial Owner Beneficially Owned of Shares
- ---------------- ------------------ ---------
<S> <C> <C>
Mathew M. Perlot...................................... 3,672,360 (1) 55%
Curtis W. Lawler...................................... 1,233,090 (2) 19%
L. Michael Cary....................................... 241,545 (3) 4%
Paul M. Brown, Jr..................................... 237,495 (4) 3%
Jay L. Howard......................................... 33,360 (5) *
Lawrence S. Black..................................... 36,172 (6) *
Gordon R. Perlot...................................... 17,236 (7) *
Milton L. Ray......................................... 5,924 (8) *
Jim L. Traughber...................................... 5,261 (9) *
Connie M. Perlot...................................... -- (10) --
All directors and executive officers as a
group (10 persons).................................. 5,482,443 (11) 77%
- ---------------
<FN>
* Less than 1%
(1) Includes 172,360 shares subject to an option exercisable within 60 days
after March 31, 1997. Excludes 27,640 shares subject to an option not
exercisable within 60 days after that date.
(2) Includes 43,090 shares subject to an option exercisable within 60 days
after March 31, 1997. Excludes 6,910 shares subject to an option not
exercisable within 60 days after that date.
(3) Includes 21,545 shares subject to an option exercisable within 60 days
after March 31, 1997. Excludes 3,455 shares subject to an option not
exercisable within 60 days after that date.
(4) Includes 236,995 shares subject to an option exercisable within 60 days
after March 31, 1997. Excludes 38,005 shares subject to an option not
exercisable within 60 days after that date.
(5) Consists of 33,360 shares subject to options exercisable within 60 days
after March 31, 1997. Excludes 66,640 shares subject to options not
exercisable within 60 days after that date.
2
<PAGE>
(6) Includes 3,922 shares subject to options exercisable within 60 days after
March 31, 1997 and 26,250 shares subject to a warrant exercisable after
January 18, 1996. Excludes 2,078 shares subject to options not exercisable
within 60 days after March 31, 1997.
(7) Consists of 17,236 shares subject to an option exercisable within 60 days
after March 31, 1997. Excludes 2,764 shares subject to an option not
exercisable within 60 days after that date.
(8) Includes 3,700 shares held as community property in a revocable trust and
2,224 shares subject to an option exercisable within 60 days after March
31, 1997. Excludes 2,776 shares subject to an option not exercisable within
60 days after that date.
(9) Consists of 5,261 shares subject to options exercisable within 60 days
after March 31, 1997. Excludes 1,739 shares subject to options not
exercisable within 60 days after that date.
(10) Excludes shares owned by Mathew M. Perlot, husband of Connie M. Perlot,
over which Ms. Perlot has no voting power or investment authority.
(11) Includes 535,993 shares subject to options held by executive officers and
directors that are exercisable within 60 days after March 31, 1997 and
26,250 share subject to an exercisable warrant held by a director. Excludes
152,007 shares subject to options held by executive officers and directors
that are not exercisable within 60 days after that date.
</FN>
</TABLE>
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected at the Annual Meeting to serve
until their successors are elected and qualified. Vacancies resulting from an
increase in the size of the Board may be filled by the Board of Directors or by
the shareholders. Six of the Company's seven current directors are nominees for
re-election, and Jay L. Howard, Executive Vice President and Chief Operating
Officer of the Company, is the Company's nominee for election as the seventh
director. If a quorum of shareholders is present at the annual meeting, the
seven nominees for election as directors who receive the greatest number of
votes cast at the meeting will be elected directors. Abstentions and broker
non-votes will have no effect on the results of the vote. Unless otherwise
instructed, proxy holders will vote the proxies they receive for the nominees
named below. If any of the nominees for director at the annual meeting becomes
unavailable for election for any reason, the proxy holders will have
discretionary authority to vote pursuant to the proxy for a substitute. The
following table briefly describes the Company's nominees for directors.
<TABLE>
<CAPTION>
Director
Name, Principal Occupation and Other Directorships Age Since
- -------------------------------------------------- --- --------
<S> <C> <C>
Mathew M. Perlot. Mr. Perlot co-founded the Company 61 1986
in November 1986 and has since served as its President,
Chief Executive Officer and Chairman of the Board.
Mr. Perlot is married to Connie M. Perlot, a director
and Secretary-Treasurer of the Company.
Curtis W. Lawler. Mr. Lawler's most recent positions 75 1989
with the Company were Vice President of the Company and
General Manager -- Beaver Motor Coaches, Inc. Mr. Lawler
co-founded the Company in November 1986 and had been
employed by the Company in various capacities since
March 1987. Mr. Lawler retired as an officer of the
Company effective March 1, 1996.
3
<PAGE>
Director
Name, Principal Occupation and Other Directorships Age Since
- -------------------------------------------------- --- --------
Connie M. Perlot. Ms. Perlot became Secretary-Treasurer 48 1986
in January 1987. Since 1986 Ms. Perlot has served as
internal auditor for the Company. Ms. Perlot is married
to Mathew M. Perlot.
Jim L. Traughber. Since 1968 Mr. Traughber has owned and 59 1994
served as President of Traughber Oil Company, a wholesale
petroleum products distributor located in central Oregon.
Lawrence S. Black. Mr. Black is the Chairman of the Board 67 1995
of Black & Company, Inc., an investment banking firm that
served as the managing underwriter for the initial public
offering of the Company's Common Stock of the Company in
January 1995. Mr. Black is also a director of Arrhythmia
Research Technology, Inc. and Summa RX Laboratories, Inc.
Milton L. Ray. Mr. Ray has served as a director of the 75 1996
Company since January 1996. Mr. Ray also serves as a
director of several unaffiliated private companies.
Mr. Ray is a professor emeritus of the University of
Oregon School of Law, and, before retiring, was both
a certified public accountant and an attorney.
Jay L. Howard. Mr. Howard joined the Company as 44 New
Corporate Vice President of Manufacturing in December nominee
1995. From 1979 to 1995 Mr. Howard served as Vice for director
President of Manufacturing for Dazey Corporation,
an international manufacturer of personal care and
kitchen appliances. Mr. Howard is a Certified
Manufacturing Engineer by S.M.E. with additional
certifications from A.P.I.C.S. and A.S.Q.C.
</TABLE>
Board Meetings and Committees
The Board of Directors met five times during 1996. No current director
attended fewer than 75% of the aggregate of all meetings of the Board of
Directors and the committees of which the director was a member during 1996. The
standing committees of the Board of Directors are the Audit Committee and the
Compensation Committee. The members of each of the Audit Committee and the
Compensation Committee are nonemployee directors. The Company does not have a
nominating committee.
The Audit Committee for 1996 consisted of Messrs. Ray, Traughber, and
Black, who will continue as the Audit Committee for 1997. The Audit Committee
oversees actions taken by the Company's independent auditors. The Compensation
Committee for 1996 consisted of Messrs. Ray, Traughber, and Black, who will
continue as the Compensation Committee for 1997. The Compensation Committee
reviews the compensation of the Company's executive officers and makes
recommendations to the Board of Directors regarding compensation. The
Compensation Committee also administers the Stock Incentive Plan and recommends
grants under the Plan to the Board of Directors. The Audit Committee and the
Compensation Committee each met once in 1996.
4
<PAGE>
Compensation of Directors
Under the Company's 1994 Stock Incentive Plan (the "Plan"), each
nonemployee director automatically is granted an option to purchase 5,000 shares
of Common Stock on the date he or she becomes a nonemployee director and
automatically is granted an option to purchase 1,000 additional shares of Common
Stock in each subsequent calendar year that the nonemployee director continues
to serve in that capacity. Other than these automatic grants, nonemployee
directors may not be granted any other options under the Plan. Nonemployee
directors also receive $10,000 per year as compensation for serving on the Board
of Directors and are reimbursed for reasonable expenses incurred in attending
meetings. Officers are appointed by the Board of Directors and serve at its
discretion.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid by the Company during
the last three years to the Chief Executive Officer and the four other most
highly compensated executive officers.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Annual Compensation Securities
Name and ---------------------- Underlying All Other
Principal Position Year Salary Bonus Options(1) Compensation
- ------------------ ---- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Mathew M. Perlot............... 1996 $ 303,267 $ 276,219 -- $ 5,226
President, Chief Executive 1995 288,000 167,192 -- 3,636
Officer, and Chairman of 1994 180,000 -- 200,000 332
of the Board
Jay L. Howard.................. 1996 153,000 39,033 50,000 3,563
Executive Vice President 1995 6,375 -- 50,000 --
and Chief Operating 1994 -- -- -- --
Officer
Paul M. Brown, Jr.............. 1996 120,000 49,703 -- 3,762
Senior Vice President 1995 120,000 26,127 -- 3,465
and Chief Financial 1994 110,000 3,173 275,000 --
Officer
L. Michael Cary..................1996 112,000 49,703 -- 4,576
Vice President of SMC 1995 112,000 26,127 -- 5,206
Corporation and General 1994 108,000 -- 25,000 4,675
Manager -- Safari Motor
Coaches, Inc.
Gordon R. Perlot.................1996 66,667 41,814 -- 5,402
Vice President of SMC 1995 65,509 24,388 -- 4,506
Corporation and General 1994 58,364 -- 20,000 --
Manager -- Harney County
Operations, Inc.
<FN>
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the Company's 1994 Stock Option Plan.
</FN>
</TABLE>
5
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted in
1996 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Percentage Realizable Value at
Number of of Options Assumed Rates of Annual
Shares Granted to Stock Price Appreciation
Underlying Employees Exercise for Option Terms (1)
Options During Price Per Expiration -------------------------
Name Granted Fiscal Year Share Date 5% 10%
------ ---------- ----------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Jay L. Howard 50,000 (2) 45.5% $9.00 8/29/06 $283,003 $717,184
<FN>
(1) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist for
the respective options based on assumed compounded rates of annual stock
price appreciation of 5 percent and 10 percent from the date the options
were granted over the option term.
(2) This option becomes exercisable for 5.56% of the shares subject to the
option on September 1, 1996, and for an additional 2.78% of the shares
subject to the option on the first day of each month thereafter until fully
exercisable.
</FN>
</TABLE>
Option Exercises and Year-End Option Values
None of the executive officers named in the Summary Compensation Table
exercised any options during 1996. The following table indicates for all
executive officers named in the Summary Compensation Table (i) the number of
shares subject to exercisable and unexercisable stock options as of December 31,
1996 and (ii) the value of "in-the-money" options, which represents the positive
difference between the exercise price of existing stock options and the year-end
price of the Common Stock.
<TABLE>
<CAPTION>
Number of
Shares Subject Value of
Number of to Unexercised Unexercised
Shares Options In-the-Money
Acquired Value at Fiscal Year End at Fiscal Year End(1)
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mathew M. Perlot 0 0 144,560 55,440 $18,070 $ 6,930
Jay L. Howard 0 0 19,460 80,540 4,691 14,059
Paul M. Brown, Jr. 0 0 198,770 76,230 24,846 9,529
L. Michael Cary 0 0 18,070 6,930 2,259 866
Gordon Perlot 0 0 14,456 5,544 1,807 693
- --------------------
<FN>
(1) Based on last sale price of $7.875 for the Company's Common Stock on
December 31, 1996.
</FN>
</TABLE>
6
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three nonemployee directors. The Committee is responsible for
developing and making recommendations to the Board with respect to the Company's
compensation policies and the levels of compensation to be paid to executive
officers. In addition, the Committee has responsibility for the administration
of, and the grant of stock options and other awards under, the Plan.
The objectives of the Company's executive compensation program are to
attract and retain highly qualified executives and to motivate them to maximize
shareholder returns by achieving both short-term and long-term strategic Company
goals. The two basic components of the executive compensation program are base
salary and long-term incentive compensation in the form of stock options. The
Company also has a cash bonus program for senior executives and a 401(k) Profit
Sharing Plan, both of which were instituted in 1995.
Base Salary. The Committee delegated authority to set executive salaries
for 1996 (other than for Mathew Perlot) to Mathew Perlot, the President and
Chief Executive Officer of the Company. Mr. Perlot set executive compensation to
reflect the Committee's recommendations and to provide salary levels appropriate
for the individual experience, job responsibility, and performance of each
executive. In making recommendations to Mr. Perlot concerning executive
compensation, the Committee considered, among other things, executive salary
levels established by companies of similar size in the manufacturing and motor
coach industries, and recommended salary levels near what it perceived to be the
middle range of compensation for comparable positions at comparable companies.
Each executive officer's salary is reviewed annually, and increases to base
salary are made to reflect competitive market increases and the individual
factors described above.
Cash Bonus Program. In 1995 the Company instituted a cash bonus program for
senior executives. The program provides for cash payments based on a percentage
of the Company's pretax profits. Pretax profits for each month of the applicable
period must exceed $100,000 before any bonuses are paid under this program. The
applicable percentage of pretax profits an executive may receive under this
program varies according to the executive's experience, responsibilities and
performance, up to a maximum of three percent.
Long-Term Incentive Compensation. The Plan is a long-term incentive plan
for executives, managers, and other employees within the Company. The objective
of the Plan is to align employee and shareholder long-term interests by creating
a strong and direct link between compensation and shareholder value. The Plan
authorizes the Committee to award stock options to executive officers and other
employees of the Company. Stock options are granted at an option price not less
than 100% of fair market value of the Company's Common Stock on the date of
grant, in the case of incentive stock options, and at prices otherwise
determined by the Committee, in the case of
- --------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission, and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or
the Securities Exchange Act of 1934, regardless of the date of the filing
or any general incorporation language contained in the filing.
7
<PAGE>
nonstatutory stock options. To date, all options granted under the Plan have
been nonstatutory stock options. Stock options granted under the Plan to date
generally become exercisable to the extent of approximately 1/36th of the shares
each month after the date of grant, have ten year terms, and generally terminate
in the event of termination of employment. The amount of stock option grants for
an individual is at the discretion of the Committee and depends upon the
individual's level of responsibility and position in the Company.
The Company's 401(k) Profit Sharing Plan allows eligible employees to
contribute up to 15 percent of their compensation annually. The Profit Sharing
Plan also permits the company to match a percentage of employees' contributions
at management's discretion.
Deductibility. Section 162(m) of the Internal Revenue Code of 1986 limits
to $1 million per person the amount that the Company may deduct for compensation
paid to any of its most highly compensated officers in any year after 1993. The
levels of salary and bonus generally paid by the Company do not exceed this
limit. Upon the exercise of nonstatutory incentive stock options, however, the
excess of the current market price over the option price (the "option spread")
is treated as compensation and, therefore, it may be possible for option
exercises by an officer in any year to cause the officer's total compensation to
exceed $1 million. Under IRS regulations, option spread compensation from
options that meet certain requirements will not be subject to the $1 million
limit on deductibility.
Compensation of Chief Executive Officer. The Committee set Mr. Perlot's
compensation for 1996. The Committee employed the same objectives and criteria
to set Mr. Perlot's salary as it used in recommending compensation levels for
the Company's other executive officers. The Committee increased Mr. Perlot's
salary in 1996 in recognition of Mr. Perlot's individual performance.
COMPENSATION COMMITTEE
Jim L. Traughber
Milton S. Ray
Lawrence S. Black
8
<PAGE>
PERFORMANCE GRAPH(1)
Set forth below is a line graph comparing the cumulative total shareholder
return of the Company's Common Stock with the cumulative total return, assuming
reinvestment of dividends, of the Standard and Poor's 500 Stock Index ("S&P 500
Index") and a peer group consisting of Coachman, Inc., Fleetwood Enterprises,
Monaco Coach Corporation, National RV Holdings, Inc., Thor Industries, Inc., and
Winnebago Industries for period commencing on January 20, 1995 (the date of the
Company's initial public offering) and ending on December 31, 1996. The graph
assumes that $100 was invested in the Company's Common Stock (at the initial
public offering price) and each index on January 20, 1995.
[Graphic line chart depicting the following:
Cumulative return as of
---------------------------------------
Base Period
1/20/95 12/31/95 12/31/96
----------- -------- --------
SMC Corporation $100.00 $106.45 $101.61
S&P 500 Index 100.00 134.21 $164.95
Peer Group 100.00 123.95 $187.42]
- --------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission, and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or
the Securities Exchange Act of 1934, regardless of the date of the filing
or any general incorporation language contained in the filing.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1990 the Company entered into an agreement with Mathew M.
Perlot, President, Chief Executive Officer and Chairman of the Board of the
Company, and Curtis W. Lawler, a director of the Company, and an agreement with
Mr. Perlot and L. Michael Cary, Vice President of SMC Corporation and General
Manager -- Safari Motor Coaches, Inc. These agreements contain rights of first
refusal in favor of the Company and then Mr. Perlot if Mr. Lawler or Mr. Cary
proposes voluntarily to transfer any shares, dies or becomes subject to a
bankruptcy proceeding. In addition, pursuant to the agreement with Mr. Cary, if
he voluntarily terminates his employment with the Company or if he is terminated
for cause, the Company and then Mr. Perlot have the right to purchase his
shares. If the Company's or Mr. Perlot's purchase rights are exercised under the
agreements, the purchase price in the event of death, bankruptcy, or termination
of employment is a price agreed to annually by Mr. Perlot and Mr. Lawler or Mr.
Cary, respectively, and in the event of a proposed voluntary sale, the purchase
price is the lower of the agreed price or the proposed voluntary sales price.
The last agreed price formula was to fix the per share price at two-thirds of
the Common Stock's market price as of the date of a proposed sale.
PROPOSAL 2: AMENDMENT OF THE 1993 STOCK INCENTIVE PLAN
The Company maintains the 1994 Stock Incentive Plan (the "Plan") for the
benefit of its employees and others who provide services to the Company. The
Board of Directors believes the availability of stock incentives is an important
factor in the Company's ability to attract and retain experienced and competent
employees and to provide an incentive for them to exert their best efforts on
behalf of the Company. As of April 28, 1997, out of a total of 1,100,000 shares
reserved for issuance under the Plan, only 199,436 shares remained available for
grant. The Board of Directors believes additional shares will be needed under
the Plan to provide appropriate incentives to key employees and others.
Accordingly, on April 28, 1997 the Board of Directors approved an amendment to
the Plan, subject to shareholder approval, to reserve an additional 300,000
shares for the Plan, thereby increasing the total number of shares reserved for
issuance under the Plan from 1,100,000 to 1,400,000 shares. In addition,
shareholder approval of this Proposal 2 will constitute reapproval of the
per-employee limits on grants of options and stock appreciation rights under the
Plan of 500,000 shares for new hires and 100,000 shares annually otherwise. This
reapproval is required every five years for continued compliance with
regulations under Section 162(m) of the Internal Revenue Code of 1986. See "Tax
Consequences."
Description of the Plan
Eligibility. All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the Plan. Also eligible are
non-employee agents, consultants, advisors, persons involved in the sale or
distribution of the Company's products and independent contractors of the
Company or any subsidiary.
Administration. The Plan is administered by the Board of Directors, which
may promulgate rules and regulations for the operation of the Plan and generally
supervises the administration of the Plan. The Board of Directors may delegate
to a committee of the Board of Directors or specified officers of the Company,
or both, authority to administer the Plan, except that only the Board of
10
<PAGE>
Directors may amend, modify or terminate the Plan, and a Committee including
officers of the Company may not grant options to persons who are officers of the
Company. The Board of Directors has delegated to the Compensation Committee of
the Board (the "Committee") general authority for making option grants. The
Committee determines individuals to whom option grants are made under the Plan
and the price and terms of any such grants.
Term of Plan. The Plan will continue until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time.
Stock Options. The Board of Directors or the Committee determines the
persons to whom options are granted, the option price, the number of shares to
be covered by each option, the period of each option, the times at which options
may be exercised and whether the option is an incentive stock option ("ISO") or
a nonqualified stock option ("NSO"). If the option is an ISO, the option price
cannot be less than the fair market value of the Common Stock on the date of
grant. If an optionee with respect to an ISO at the time of grant owns stock
possessing more than 10 percent of the combined voting power of the Company, the
option price may not be less than 110 percent of the fair market value of the
Common Stock on the date of grant. No employee may be granted options or stock
appreciation rights under the Plan for more than an aggregate of 500,000 shares
in connection with the hiring of the employee or 100,000 shares in any calendar
year otherwise. In addition, the Plan limits the amount of ISOs that may become
exercisable under the Plan in any year to $100,000 per optionee (based on the
fair market value of the stock on the date of grant). No monetary consideration
is paid to the Company upon the granting of options.
Options granted under the Plan generally continue in effect for the period
fixed by the Board of Directors or appropriate committee or officer, except that
ISOs are not exercisable after the expiration of 10 years from the date of
grant. Options are exercisable in accordance with the terms of an option
agreement entered into at the time of grant. Each ISO and, unless otherwise
determined by the Board of Directors with respect to an option granted to a
person who is neither an officer nor a director of the Company, each NSO by its
terms is nonassignable and nontransferable by the optionee, either voluntarily
or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death or, for NSOs, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act.
Options may be exercised only while an optionee is employed by the Company or a
subsidiary or within 12 months following termination of employment by reason of
death or disability or 30 days following termination for any other reason. The
Plan provides that the Board of Directors or appropriate committee or officer
may extend the exercise period for any period up to the expiration date of the
option and may increase the portion of the option that is exercisable. Unless
otherwise determined by the Board of Directors, the purchase price for each
share purchased pursuant to exercise of options must be paid in cash, including
cash that may, with the consent of the Board of Directors be the proceeds of a
loan from the Company, or, with the consent of the Board of Directors, in shares
of Common Stock valued at fair market value, in restricted stock, in performance
units or other contingent awards denominated in either stock or cash, in
deferred compensation credits or in other forms of consideration. Upon the
exercise of an option, the number of shares subject to the option and the number
of shares available under the Plan for
11
<PAGE>
future option grants are reduced by the number of shares with respect to which
the option is exercised.
Stock Option Grants to Non-Employee Directors. Under the Plan, each person
who becomes a non-employee director is automatically granted an option to
purchase 5,000 shares with an exercise price equal to price per share to the
public in the Company's initial public offering ($7.50) unless otherwise
determined by the Board of Directors. These options have ten-year terms and
become exercisable or 2.78% percent of the shares for each complete month of
continuous service after the grant date. The Plan also provides for an automatic
annual additional grant of an option to purchase 1,000 shares to each incumbent
non-employee director who continues in office after each annual meeting. Each
annual additional grant has an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, have a ten-year term, and
become exercisable for 2.78% percent of the shares for each complete month of
continuous service after the grant date.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted under the Plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the Plan. A SAR
gives the holder the right to payment from the Company of an amount equal in
value to the excess of the fair market value on the date of exercise of a share
of Common Stock over its fair market value on the date of grant, or if granted
in connection with an option, the option price per share under the option to
which the SAR relates. The Company has never granted SARs under the Plan.
A SAR is exercisable only at the time or times established by the Board of
Directors. If a SAR is granted in connection with an option, it is exercisable
only to the extent and on the same conditions that the related option is
exercisable. Unless otherwise determined by the Board of Directors, no SAR
granted to an officer or director can be exercised during the first six months
after the date of grant. Payment by the Company upon exercise of a SAR may be
made in Common Stock valued at its fair market value, in cash, or partly in
stock and partly in cash, as determined by the Board of Directors. The Board of
Directors may withdraw any SAR granted under the Plan at any time and may impose
any condition upon the exercise of a SAR or adopt rules and regulations from
time to time affecting the rights of holders of SARs.
The existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the common stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.
Stock Bonus Awards. The Board of Directors may award Common Stock as a
stock bonus under the Plan. The Board of Directors may determine the persons to
receive awards, the number of shares to be awarded and the time of the award.
Stock received as a stock bonus is subject to the terms, conditions and
restrictions determined by the Board of Directors at the time the stock is
awarded. The Company has never granted stock bonus awards under the Plan.
12
<PAGE>
Restricted Stock. The Plan provides that the Company may issue restricted
stock in such amounts, for such consideration, subject to such restrictions and
on such terms as the Board of Directors may determine. The Company has never
issued restricted stock under the Plan.
Cash Bonus Rights. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii) SARs
granted or previously granted, (iii) stock bonuses awarded or previously awarded
and (iv) shares sold or previously sold under the Plan. Bonus rights may be used
to provide cash to employees for the payment of taxes in connection with awards
under the Plan. The Company has never granted bonus rights under the Plan.
Performance Units. The Board of Directors may grant performance units
consisting of monetary units that may be earned in whole or in part if the
Company achieves goals established by the Board of Directors over a designated
period of time, but in any event not more than 10 years. Payment of an award
earned may be in cash or stock or both and may be made when earned, or vested
and deferred, as the Board of Directors determines. No performance units have
ever been granted under the Plan.
Foreign Qualified Grants. Awards under the Plan may be granted to eligible
persons residing in foreign jurisdictions. The Board of Directors may adopt
supplements to the Plan necessary to comply with the applicable laws of foreign
jurisdictions and to afford participants favorable treatment under those laws,
but no award may be granted under any supplement with terms that are more
beneficial to the participants than the terms permitted by the Plan. The Company
has never made foreign qualified grants under the Plan.
Changes in Capital Structure. The Plan provides that if the outstanding
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any stock split, combination of shares or dividend payable in shares,
recapitalization or reclassification, appropriate adjustment will be made by the
Board of Directors in the number and kind of shares available for awards under
the Plan and in the shares outstanding under the Plan. In the event of a merger,
consolidation or plan of exchange to which the Company is a party or a sale of
all or substantially all of the Company's assets (each a "Transaction"), the
Board of Directors will, in its sole discretion and to the extent possible under
the structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Plan: (i) outstanding options will remain
in effect in accordance with their terms; (ii) outstanding options will be
converted into options to purchase stock in the corporation that is the
surviving or acquiring corporation in the Transaction; or (iii) the Board of
Directors will provide a 30-day period before the consummation of the
Transaction during which outstanding options will be exercisable to the extent
exercisable and upon the expiration of such 30-day period, all unexercised
options will immediately terminate. The Board of Directors may, in its sole
discretion, accelerate the exercisability of options so that they are
exercisable in full during such 30-day period. In the event of the dissolution
of the Company, options will be treated in accordance with clause (iii) above.
Tax Consequences
Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, the optionee will
13
<PAGE>
recognize no income upon grant or upon a proper exercise of the ISO. If an
employee exercises an ISO and does not dispose of any of the option shares
within two years following the date of grant and within one year following the
date of exercise, any gain realized on subsequent disposition of the shares will
be treated as income from the sale or exchange of a capital asset. If an
employee disposes of shares acquired upon exercise of an ISO before the
expiration of either the one-year holding period or the two-year waiting period,
any amount realized will be taxable as ordinary compensation income in the year
of such disqualifying disposition to the extent that the lesser of the fair
market value of the shares on the exercise date or the fair market value of the
shares on the date of disposition exceeds the exercise price. The Company will
not be allowed any deduction for federal income tax purposes at either the time
of the grant or exercise of an ISO. Upon any disqualifying disposition by an
employee, the Company will generally be entitled to a deduction to the extent
the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be treated as
NSOs for federal income tax purposes. Under federal income tax law currently in
effect, no income is realized by the grantee of an NSO until the option is
exercised. At the time of exercise of an NSO, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the market value of the shares subject to the option at
the time of exercise exceeds the exercise price. The Company is required to
withhold on the income amount. Upon the sale of shares acquired upon exercise of
an NSO, the excess of the amount realized from the sale over the market value of
the shares on the date of exercise will be taxable.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of section 83 of the Internal
Revenue Code of 1986, as amended, and no section 83(b) election is made. If the
shares are not vested at the time of receipt, the employee will realize taxable
income in each year in which a portion of the shares substantially vest, unless
the employee elects under section 83(b) within 30 days after the original
transfer. The Company will generally be entitled to a tax deduction in the
amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold on the income amount. A participant who receives a cash bonus right
under the Plan will generally recognize income equal to the amount of the cash
bonus paid at the time of receipt, and the Company will generally be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000
per person the amount that the Company may deduct for compensation paid to any
of its most highly compensated officers in any year. Under IRS regulations,
compensation received through the exercise of an option or a SAR is not subject
to the $1,000,000 limit if the option or SAR and the Plan meet certain
requirements. One requirement is shareholder approval at least once every five
years of per-employee limits on the number of shares as to which options and
SARs may be granted. Approval of Proposal 2 will constitute approval of the
per-employee limits under the Plan. Other requirements are that the option or
SAR be granted by a committee of at least two outside directors and that the
exercise price of the option or SAR be not less than fair market value of the
Common Stock on the date of grant. Accordingly, the Company believes, if
Proposal 2 is approved by the Company's shareholders, compensation received on
exercise of options and SARs granted under the Plan in
14
<PAGE>
compliance with all of the above requirements will continue to be exempt from
the $1,000,000 deduction limit.
Recommendation by the Board of Directors
The Board of Directors recommends that the proposed amendment to the Plan
be approved. The affirmative vote of the holders of a majority of the shares of
Common Stock present and entitled to vote on the matter is required to approve
this Proposal 2. Abstentions have the same effect as "no" votes in determining
whether the amendment is approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the Annual Meeting but are not counted
and have no effect on the results of the vote on Proposal 2. The proxies will be
voted for or against the proposal or as an abstention, in accordance with the
instructions specified on the proxy form. If no instructions are given, proxies
will be voted for approval of the amendment to the Plan.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP audited the Company's consolidated financial
statements for the year ended December 31, 1996 and has been selected to audit
the Company's consolidated financial statements for 1997. Representatives of
Price Waterhouse LLP will be present at the Annual Meeting and will be available
to respond to appropriate questions. They do not plan to make any statement but
will have the opportunity to make a statement if they wish.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10 percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors and
beneficial owners of more than ten percent of the Common Stock are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms received by the
Company and on written representations from certain reporting persons that they
have complied with the relevant filing requirements, the Company believes that
all Section 16(a) filing requirements applicable to its executive officers and
directors have been complied with, except that Mr. Howard reported one option
grant late, Mr. Brown reported one purchase late, and Mr. Lawler reported two
sales transactions late.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for transaction
of such other business that properly comes before the meeting, the Board of
Directors does not know of any matters to be presented at the meeting other than
those described in this proxy statement. The enclosed proxy, however, gives the
proxy holders authority to vote in their discretion if any other matters are
presented.
15
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy material
for the Company's next annual meeting in June 1998 must be received at the
principal executive office of the Company no later than January 14, 1998.
By Order of the Board of Directors
Connie M. Perlot
Secretary
Harrisburg, Oregon
May 14, 1997
16
<PAGE>
PROXY
SMC CORPORATION
Annual Meeting, June 19, 1997
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Mathew M. Perlot, Connie M. Perlot, and Paul M.
Brown, Jr., and each of them, proxies with power of substitution to vote on
behalf of the undersigned all shares that the undersigned may be entitled to
vote at the annual meeting of shareholders of SMC Corporation (the "Company") on
June 19, 1997 and any adjournments thereof, with all powers that the undersigned
would possess if personally present, with respect to the following:
1. Election of Directors: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as marked to vote for all
to the contrary nominees listed
below. below.
(Instructions: To withhold authority to vote for any individual,
strike a line through the nominee's name below.)
Mathew M. Perlot, Curtis W. Lawler, Connie M. Perlot, Jim L. Traughber,
Lawrence S. Black, L. Michael Cary, Milton L. Ray
2. Amendment of the 1994 Stock Incentive Plan to increase the number of shares
reserved for issuance from 1,100,000 to 1,400,000, an increase of 300,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the
meeting may exercise all the powers granted hereby.
(Continued and to be signed on the other side.)
<PAGE>
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be
voted for the election of directors. The proxies may vote in their
discretion as to other matters that may come before this meeting.
Shares:
Date:______________________________, 1997
P
R
O _________________________________________
X Signature or Signatures
Y
Please date and sign as name is imprinted
hereon, including designation as
executor, trustee, etc., if applicable. A
corporation must sign its name by the
president or other authorized officer.
The Annual Meeting of Shareholders of SMC
Corporation will be held on June 19, 1997
at 1:00 p.m., Pacific Daylight Time, at
SMC Corporation, 30725 Diamond Hill Road,
Harrisburg, Oregon.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians, or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian, or brokerage house itself--the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
Company are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
