SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 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 ss. 240.14a-11(c) or ss. 240.14a-12
------------------------------------
NICOLLET PROCESS ENGINEERING, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
------------------------------------
Payment of Filing Fee (Check the appropriate box): N/A
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1 Title of each class of securities to which transaction applies:
2 Aggregate number of securities to which transaction applies:
3 Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4 Proposed maximum aggregate value of transaction:
5 Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was 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.:
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4 Date Filed:
1997 ANNUAL MEETING
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
TO THE SHAREHOLDERS OF NICOLLET PROCESS ENGINEERING, INC.:
You are cordially invited to attend our Annual Meeting of Shareholders to be
held on January 21, 1997, at 3:30 p.m., local time, at the Marriott Hotel --
City Center, 30 South Seventh Street, Minneapolis, Minnesota.
The formal Notice of Meeting, Proxy Statement and form of proxy are enclosed.
Whether or not you plan to attend the meeting, please date, sign and return
the enclosed proxy in the envelope provided as soon as possible so that your
vote will be recorded.
Very truly yours,
/s/ Pierce A. McNally
Pierce A. McNally
CHAIRMAN OF THE BOARD
December 13, 1996
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION.
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1997
TO THE SHAREHOLDERS OF NICOLLET PROCESS ENGINEERING, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Nicollet
Process Engineering, Inc. will be held on January 21, 1997, at 3:30 p.m., local
time, at the Marriott Hotel -- City Center, 30 South Seventh Street,
Minneapolis, Minnesota, for the following purposes:
1. To elect five directors to serve for the ensuing year or until their
successors are elected and qualified;
2. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares of capital stock
from 5,000,000 shares to 15,000,000 shares, 12,000,000 shares of common
stock, no par value and 3,000,000 shares of preferred stock, undesignated as
to series.
3. To ratify the appointment of Ernst & Young LLP, certified public accountants,
as independent auditors for the Company for the year ending August 31, 1997.
4. To consider and act upon such other matters as may properly come before
the meeting or any adjournment thereof.
The close of business on November 29, 1996 has been fixed as the record date
for the determination of shareholders who are entitled to vote at the meeting
or any adjournments thereof.
By Order of the Board of Directors,
/s/ Kristine L. Gabel
Kristine L. Gabel
SECRETARY
December 13, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. NO ADMISSION TICKET
OR OTHER CREDENTIALS WILL BE NECESSARY. IF YOU DO NOT PLAN TO ATTEND THE
MEETING, PLEASE BE SURE YOU ARE REPRESENTED AT THE MEETING BY MARKING, SIGNING,
DATING AND MAILING YOUR PROXY IN THE REPLY ENVELOPE PROVIDED.
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 21, 1997
INTRODUCTION
The Annual Meeting of Shareholders (the "Annual Meeting") of Nicollet
Process Engineering, Inc. (the "Company") will be held on January 21, 1997, at
3:30 p.m., local time, at the Marriott Hotel -- City Center, 30 South Seventh
Street, Minneapolis, Minnesota, or at any adjournment or adjournments thereof,
for the purposes set forth in the Notice of Annual Meeting of Shareholders.
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost of
soliciting proxies, including the preparation, assembly and mailing of the
proxies and soliciting material, as well as the cost of forwarding such material
to the beneficial owners of the Company's Common Stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies by
telephone, telegraph or personal conversation. The Company may reimburse
brokerage firms and others for expenses in forwarding proxy materials to the
beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its use
at the Annual Meeting either by giving written notice of such revocation to the
Secretary of the Company, by filing a duly executed proxy bearing a later date
with the Secretary of the Company, or by appearing at the Annual Meeting and
filing written notice of revocation with the Secretary of the Company prior to
use of the proxy. Proxies will be voted as specified by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will first be mailed to
shareholders on or about December 13, 1996.
VOTING OF SHARES
Only holders of Common Stock of record at the close of business on
November 29, 1996 will be entitled to vote at the Annual Meeting. On November
29, 1996, the Company had 3,346,305 outstanding shares of Common Stock, each
such share entitling the holder thereof to one vote on each matter to be voted
on at the Annual Meeting.
The presence at the Annual Meeting, in person or by proxy, of the holders
of fifty percent (50%) of the outstanding shares of Common Stock entitled to
vote at the meeting (1,673,153 shares) is required for a quorum for the
transaction of business. In general, shares of Common Stock represented by a
properly signed and returned proxy card will be counted as shares present and
entitled to vote at the Annual Meeting for purposes of determining a quorum,
without regard to whether the card reflects abstentions (or is left blank) or
reflects a "broker non-vote" on a matter (I.E., a card returned by a broker on
behalf of its beneficial owner customer that is not voted on a particular matter
because voting instructions have not been received and the broker has no
discretionary authority to vote).
The election of a nominee for director and any other proposals that may
come before the Annual Meeting described in this Proxy Statement require the
approval of a majority of the shares present and entitled to vote in person or
by proxy on that matter (and at least a majority of the minimum number of votes
necessary for a quorum to transact business at the meeting). Shares represented
by a proxy card including any broker non-votes on a matter will be treated as
shares not entitled to vote on that matter, and thus will not be counted in
determining whether that matter has been approved. Shares represented by a proxy
card voted as abstaining on any of the other proposals will be treated as shares
present and entitled to vote that were not cast in favor of a particular matter,
and thus will be counted as votes against that matter.
ELECTION OF DIRECTORS
PROPOSAL 1
NOMINATION
The Restated Bylaws of the Company provide that the number of directors
must be at least one, or such other number as may be determined by the Board of
Directors or by the shareholders at a regular meeting. The Board of Directors
(the "Board") has set its size at five and has nominated the five individuals
below to serve as directors of the Company until the next annual meeting of the
shareholders or until their respective successors have been elected and
qualified. All of the nominees are members of the current Board.
The Board recommends a vote FOR the election of each of the nominees listed
below. In absence of other instructions, the proxies will be voted FOR the
election of the nominees named below. If prior to the meeting the Board should
learn that any nominee will be unable to serve by reason of death, incapacity or
other unexpected occurrence, the proxies that otherwise would have been voted
for such nominee will be voted for such substitute nominee as selected by the
Board. Alternatively, the proxies, at the Board's discretion, may be voted for
such fewer number of nominees as results from such death, incapacity or other
unexpected occurrence. The Board has no reason to believe that any of the
nominees will be unable to serve.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company, as of November
5, 1996, by the persons who have been nominated by the Board to serve as
directors for the ensuing year.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
- --------------- --- --------------------
<S> <C> <C>
Pierce A. McNally 47 Chairman of the Board and Director of Corporate
Development of the Company
Robert A. Pitner 53 President and Chief Executive Officer of the Company
Richard W. Koontz (1) 47 Chief Technology Officer of the Company
Thomas W. Bugbee (1) 45 President of Bugbee, Anton and Associates, Inc.
Benton J. Case, Jr. (1) 61 President of Rainy River Resources, Inc.
</TABLE>
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(1) Member of the Audit Committee and Compensation Committee.
PIERCE A. MCNALLY has served as the Director of Corporate Development of
the Company since October 1, 1996, the Chairman of the Board since May 1995 and
has been a director since 1992. He also currently serves as Chairman of the
Board of Minnesota American, Inc., a Minnetonka, Minnesota based holding company
which owns LockerMate Corporation, a developer of locker products. From January
1992 until October 1994, he was also President and Co-Chief Executive Officer of
Minnesota American, Inc. Prior to that time, Mr. McNally was an officer and
director of Midwest Communications, Inc., a communications company. He also
serves on the board of directors of Topeka BroadComm, Inc., Rainy River
Resources, Inc. ("Rainy River") and Minnesota American, Inc.
ROBERT A. PITNER has served as President, Chief Executive Officer and
director of the Company since April 1991. From April 1991 to May 1995, Mr.
Pitner also served as the Company's Chief Financial Officer. From June 1989 to
April 1991, Mr. Pitner was a Vice President at Wiken Advertising and Promotion,
a consulting firm specializing in "high tech" industries. From 1988 to 1989, he
was President and Chief Operating Officer of Springboard Software, Inc., a
software company. Prior to 1988, Mr. Pitner spent twenty years in the banking
industry in various executive positions, most recently as a senior executive at
First Bank System.
RICHARD W. KOONTZ has served on the Board of Directors since January 1996
and as Chief Technology Officer since August 31, 1996. Since May 1994, Mr.
Koontz has been the President of Object Technologies Group, Inc., a software
engineering services company. From October 1993 through April 1994, he served as
the General Manager of Poliac Research Corporation. Mr. Koontz was also a real
estate developer and investor from 1989 through 1993. Prior to his employment
with Poliac Research Corporation, Mr. Koontz served as President of Reldom
Nevada, Inc., a computer software company of on-line casino management and
player tracking systems and President of W.R. Casey, Inc., a computer software
company for the health insurance industry. Mr. Koontz has also served as a
Controller and Vice President of Reldom Corporation, a light manufacturing
company.
THOMAS W. BUGBEE joined the Company's Board of Directors in 1988. He has
been the acting Chief Financial Officer of Datalog Incorporated, a medical
technology company, since June 1996. Mr. Bugbee has also been the President of
Bugbee and Associates, Inc., a corporate financial advisory services company,
since January 1996 when he founded the company. From November 1991 through
January 1996, Mr. Bugbee was the President of Bugbee, Anton and Associates,
Inc., a corporate finance advisory services company. Mr. Bugbee also served as
the Chief Financial Officer of D.V. Talbott, a fabric manufacturer from 1995
through June 1996. From 1989 to 1991, he was a Senior Manager, Special Services
Group, for Ernst & Young LLP.
BENTON J. CASE, JR., joined the Company's Board of Directors in 1988. Since
May 1978, Mr. Case has been employed by Rainy River, a company engaged in oil
and gas exploration. Mr. Case has served as President of Rainy River since
February 1991 and prior to that time, held the position of Treasurer. Mr. Case
has also served as Vice President of Future Care Systems, Inc. since 1994. From
October 1990 until March 1994, he was a general partner of Skylark II, a venture
capital firm. Skylark II was sold to Rainy River in 1994. Mr. Case is also a
member of the Board of Directors of The Benefit Group.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which met
six (6) times during the year ending August 31, 1996. Committees established by
the Board of Directors include the Audit Committee and the Compensation
Committee.
The members of the Audit Committee during fiscal 1996 were Messrs. Bugbee,
Case, and Koontz. The function of the Audit Committee is to review Company
financial statements, oversee the financial reporting and disclosures prepared
by management, make recommendations regarding the Company's financial controls,
and confer with the Company's outside auditors. The Audit Committee met one time
during fiscal 1996.
The members of the Compensation Committee during fiscal 1996 were Messrs.
Bugbee, Case, and Koontz. The function of the Compensation Committee is to set
the compensation for those officers who are also directors, and set the terms
of, and grants of awards under, the Company's 1990 Stock Option Plan (the "1990
Plan") and the 1995 Amended and Restated Stock Incentive Plan (the "1995 Plan")
and to act on other matters relating to compensation as it deems appropriate.
The Compensation Committee met one time during fiscal 1996.
All of the Directors attended 75% or more of the aggregate meetings of the
Board and all committees on which they served.
DIRECTOR COMPENSATION
The Company does not pay fees to the members of the Board of Directors
except to Mr. McNally, who, pursuant to a written agreement, receives
compensation of $50,000 per year, plus a discretionary bonus. On September 1,
1995, for service for fiscal 1995, all of the non-employee directors of the
Company were granted an option to purchase 5,000 shares of Common Stock at a
price of $3.00 per share. An additional 2,500 shares were granted to
non-employee directors for service on the Executive Committee which committee is
no longer in existence. An additional 10,000 shares were granted to Mr. McNally
for his service as Chairman of the Board. All of these options are fully vested.
See "Executive Compensation and Other Benefits -- Employment and Consulting
Agreements."
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of November 5, 1996 unless
otherwise noted (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each director
and executive officer named in the Summary Compensation Table and (c) by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
PERCENT OF
NAME AMOUNT CLASS (2)
- ---- ------ ---------
<S> <C> <C>
Pierce A. McNally (3)............................................ 184,828 5.5%
Robert A. Pitner (4)............................................. 290,000 8.2%
Richard W. Koontz (5)............................................ 79,598 2.4%
Benton J. Case, Jr. (6).......................................... 149,615 4.5%
Thomas W. Bugbee (7)............................................. 115,290 3.4%
Oakleaf Associates (8)........................................... 185,339 5.6%
All executive officers and directors as a group (6 persons)(9)... 869,331 22.8%
</TABLE>
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*Less than one percent.
(1) Except as otherwise indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock. Shares of Common Stock subject to options or
warrants currently exercisable or exercisable within 60 days are deemed
outstanding for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage of any other
person.
(2) Based on 3,295,108 shares of Common Stock outstanding as of November 5,
1996.
(3) Includes 64,000 shares of Common Stock issuable upon the exercise of
outstanding stock options; 4,000 shares of Common Stock issuable upon
exercise of outstanding warrants held by Mr. McNally's wife as custodian for
the benefit of their daughters as to which Mr. McNally disclaims any
beneficial interest; and an aggregate of 16,000 shares of Common Stock
held by Mr. McNally's wife as custodian for the benefit of their
daughters as to which Mr. McNally disclaims any beneficial interest. Mr.
McNally's address is 420 North Fifth Street, Ford Centre, Suite 1040,
Minneapolis, MN 55401.
(4) Includes 232,500 shares of Common Stock issuable upon the exercise of
outstanding stock options. The address for Mr. Pitner is 420 North Fifth
Street, Ford Centre, Suite 1040, Minneapolis, MN 55401.
(5) Includes 75,000 shares of Common Stock issuable upon the exercise of
outstanding stock options; and 4,598 shares of Common Stock of Nicholson
Systems, Inc. ("NSI"). Mr. Koontz is the President and Chief Executive
Officer of NSI. Mr. Koontz, together with his wife, own all of the
capital stock of NSI.
(6) Includes 47,500 shares of Common Stock issuable upon the exercise of
outstanding stock options; 66,685 shares of Common Stock held by Mr.
Case's wife, as to which Mr. Case disclaims any beneficial interest;
7,430 shares of Common Stock held by Rainy River Resources, Inc. ("Rainy
River"); 14,000 shares of Common Stock held by FCSI Business Development
Corp. ("FCSI"); and 14,000 shares of Common Stock held by Future Care
Systems, Inc. ("Future Care"). Mr. Case is an executive of Rainy River,
the Vice President of FCSI and the Vice President and a director of
Future Care. Mr. Case disclaims beneficial ownership of shares held by
Rainy River, FCSI and Future Care except to the extent of his pecuniary
interest therein.
(7) Includes 50,000 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(8) The address for Oakleaf Associates is 419 Peavey Building, Minneapolis, MN
55402.
(9) Includes 509,000 shares of Common Stock issuable upon exercise of
outstanding options; 122,713 shares of Common Stock held by directors'
spouses, a director's spouse as custodian for the benefit of their children,
and certain affiliates of directors, as to which such directors disclaim any
beneficial interest except to the extent of their pecuniary interest
therein; and 4,000 shares of Common Stock issuable upon exercise of
outstanding warrants held by a director's wife as custodian for his
children, as to which such director disclaims any beneficial interest.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last two fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the three other most highly compensated executive officers of
the Company whose salary and bonus exceeded $100,000 in the last fiscal year
(the "Named Executive Officer"). Other than Mr. Pitner, no other executive
officer of the Company had salary and bonus which exceeded $100,000 in the
fiscal year ended August 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ----------------------
SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(1) UNDERLYING OPTIONS (#)
- --------------------------- ---- ---------- ----------- ----------------------
<S> <C> <C> <C> <C>
Robert A. Pitner 1996 $108,000 $50,000 7,500
President and Chief Executive Officer 1995 $108,000 $31,517 50,000
</TABLE>
- --------------------------
(1) Cash bonuses for services rendered have been included as compensation for
the year earned, even though such bonuses were actually paid in the
following year.
OPTION GRANTS AND EXERCISES
The following tables summarize option grants and exercises during the year
ended August 31, 1996 to or by the Named Executive Officer and the potential
realizable value of the options held by such person at August 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS GRANTED TO
SECURITIES UNDERLYING EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED(#)(1) FISCAL YEAR PRICE ($/SH) DATE
- ---- --------------------- ------------------ ---------------- ----------
<S> <C> <C> <C> <C>
Robert A. Pitner 7,500 (2) 3.5% $3.00 9/1/2000
</TABLE>
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(1) The options listed above were granted to the Named Executive Officer
under the 1995 Plan. Options become exercisable under the 1995 Plan so long
as the executive remains in the employ of the Company or one of its
subsidiaries. To the extent not already exercisable, options granted under
the 1995 Plan become immediately exercisable in full upon certain changes in
control of the Company, provided that, upon such a change in control, the
Compensation Committee may determine that holders of options granted under
the 1995 Plan will receive cash in an amount equal to the excess of the fair
market value of such shares immediately prior to the effective date of such
change in control of the Company over the exercise price of such options.
See "Executive Compensation and Other Benefits -- Stock Option Plans."
(2) These options were granted on September 1, 1995 and are exercisable in full.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#)(1) AT FY-END ($)(2)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
Robert A. Pitner........... 270,000/0 $361,094/0
- -------------------------
(1) The exercise price of options granted under the Company's 1995 Plan may
be paid in cash or in shares of the Company's Common Stock valued at fair
market value on the date of exercise. In addition, the exercise price of
options granted may be paid pursuant to a cashless exercise procedure under
which the executive provides irrevocable instructions to a brokerage firm to
sell the purchased shares and to remit to the Company, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes. Under the 1995 Plan, the Compensation Committee also has
the discretion to grant a supplemental cash bonus to an optionee in
connection with the grant or exercise of an option or both the grant and
exercise of an option. See "Executive Compensation and Other Benefits --
Stock Option Plans."
(2) The "Value Realized" is calculated as the excess of the market value of the
Common Stock on the date of exercise or August 30, 1996, as the case may be,
over the exercise price. The market price of the Common Stock as of August
30, 1996 was calculated as the average of the bid and asked prices as quoted
on the Nasdaq Small Cap Market ($2.9375). The exercise price of outstanding
options range from $1.00 to $3.00 per share.
STOCK OPTION PLANS
In December 1995, the Board of Directors of the Company reaffirmed the 1995
Amended and Restated Stock Incentive Plan (the "1995 Plan"), which was approved
by the Company's shareholders in January 1996. The 1995 Plan replaced the 1990
Stock Option Plan (the "1990 Plan") which was approved by the shareholders in
1990. Although the 1990 Plan continues to exist until the stated termination
date of April 2, 2000, any shares of the Company's Common Stock available for
issuance under the 1990 Plan which have either not been issued or have been
issued but forfeited, will become shares available for issuance under the 1995
Plan. The Company has reserved a maximum of 400,000 shares of Common Stock for
issuance under the 1995 Plan, in addition to those shares contributed to the
1995 Plan from the 1990 Plan. The major features of the 1995 Plan and 1990 Plan
are summarized below.
1995 PLAN. The 1995 Plan provides for the grant to participating eligible
recipients of the Company of (i) options to purchase Common Stock that qualify
as "incentive stock options" ("Incentive Options"), within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
options to purchase Common Stock that do not qualify as Incentive Options
("Non-Qualified Options"), (iii) awards of shares of Common Stock that are
subject to certain forfeiture and transferability restrictions that lapse after
specified employment periods ("Restricted Stock Awards"), (iv) rights entitling
the recipient to receive a payment from the Company, in the form of shares of
Common Stock, cash, or a combination of both, upon the achievement of
established performance or other goals ("Performance Units"), (v) awards of
shares of Common Stock ("Stock Bonuses") and (vi) rights entitling the recipient
to receive a payment from the Company, in the form of shares of Common Stock,
cash, or a combination of both, equal to the difference between the market value
of one or more shares of Common Stock and the exercise price of such shares
under the terms of such right ("Stock Appreciation Rights"). Incentive Options
and Non-Qualified Options are collectively referred to herein as "Options," and
Options, Restricted Stock Awards, Performance Units, Stock Bonuses and Stock
Appreciation Rights are collectively referred to herein as "Awards." The 1995
Plan provides for the granting of Options at an exercise price that is not less
than 100% of the fair market value of one share of the Company's Common Stock on
the date of grant for Incentive Options, and 85% of the fair market value of one
share of the Company's Common Stock on the date of grant for Non-Qualified
Options.
In the event a "change in control" of the Company occurs, then, if approved
by the Compensation Committee, (i) all outstanding Options and Stock
Appreciation Rights will become immediately exercisable in full and will remain
exercisable for the remainder of their terms, regardless of whether the
participant remains in the employ or service of the Company or any subsidiary,
(ii) all outstanding Restricted Stock Awards will become immediately fully
vested, and (iii) all outstanding Performance Units and Stock Bonuses will vest
and/or continue to vest in the manner determined by the Compensation Committee
and reflected in the award agreement. In addition, the Compensation Committee,
without the consent of any affected participant, may determine that some or all
participants holding outstanding Options will receive cash in an amount equal to
the excess of the fair market value immediately prior to the effective date of
such change in control over the exercise price per share of the Options.
For purposes of the 1995 Plan, a "change in control" of the Company will be
deemed to have occurred, among other things, upon (i) the sale or other
disposition of substantially all of the assets of the Company, (ii) the approval
by the Company's shareholders of a plan or proposal for the liquidation or
dissolution of the Company, (iii) a merger or consolidation to which the Company
is a party if the Company's shareholders immediately prior to the merger or
consolidation beneficially own, immediately after the merger or consolidation,
securities of the surviving corporation representing (A) more than 50%, but not
more than 80%, of the combined voting power of the surviving corporation's then
outstanding securities, unless the transaction was approved in advance by the
directors as of the effective date of the 1995 Plan or by any persons who
subsequently become directors and whose election or nomination was approved by a
majority vote of the directors comprising the Board as of the effective date of
the 1995 Plan (the "Incumbent Directors"), or (B) 50% or less of the combined
voting power of the surviving corporation's then outstanding securities
(regardless of any approval by the Incumbent Directors), (iv) any person
becoming, after the effective date of the 1995 Plan, the beneficial owner of (A)
20% or more, but not 50% or more, of the combined voting power of the Company's
Common Stock, unless the transaction resulting in such ownership was approved in
advance by the Incumbent Directors, or (B) 50% or more of the combined voting
power of the Company's outstanding securities (regardless of any approval by the
Incumbent Directors), or (v) the Incumbent Directors cease for any reason to
constitute at least a majority of the Board, or (vi) any other change in control
of the Company of a nature that would be required to be reported pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
1990 PLAN. The terms of the 1990 Plan are substantially similar to those of
the 1995 Plan, including the pricing of Options, although the 1990 Plan does not
provide for the grant of Performance Units, Restricted Stock Awards or Stock
Bonuses.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into an employment agreement in April 1991, as modified
and amended on July 31, 1994, and as of October 26, 1995, with its President and
Chief Executive Officer, Robert A. Pitner (the "Pitner Employment Agreement")
that provides for an annual base salary of $108,000, which amount may be
increased by the Board of Directors, and a discretionary bonus, payable in cash,
stock options or any other manner, with the amount and terms to be determined by
the Board of Directors. Under the terms of the Pitner Employment Agreement, Mr.
Pitner was granted stock options for (i) the purchase of 100,000 shares of
Common Stock at an exercise price of $1.00 per share exercisable until July 31,
2004; (ii) the purchase of 50,000 shares of Common Stock at an exercise price of
$2.00 per share, exercisable until August 31, 2004; and (iii) the purchase of
50,000 shares of Common Stock at an exercise price of $2.50 per share,
exercisable until August 31, 2005. The Pitner Employment Agreement contains
provisions providing for the assignment of inventions by Mr. Pitner, the
maintenance of confidential information of the Company and is subject to a
two-year non-competition clause in the event of termination of employment. The
Pitner Employment Agreement may be terminated (i) by either party upon twelve
month's notice for whatever reason; and (ii) by the Company immediately in the
event Mr. Pitner defaults or does not perform. Upon termination, if Mr. Pitner
does not obtain employment consistent with his training and education because of
the non-competition clause, the Company must compensate Mr. Pitner until he
secures employment at a rate of 100% of his current base salary for the first
twelve months of separation from the Company.
On May 1, 1995, the Company entered into an agreement with Pierce A.
McNally providing for Mr. McNally's services as Chairman of the Board of the
Company on an as needed, up to full time basis. For Mr. McNally's services, he
receives compensation of $50,000 per year plus a bonus payable at the discretion
of the Board of Directors. As part of the agreement, on September 1, 1995, Mr.
McNally was granted options to purchase 10,000 shares of Common Stock at an
exercise price of $3.00 for five years. These options were immediately vested
and remain exercisable until September 1, 2000. On October 26, 1995, the Company
amended this agreement to provide for the future grant of additional options to
purchase 15,000 shares should the Board of Directors so determine. The Board of
Directors granted such options to Mr. McNally on September 1, 1996. These
options are exercisable in full and remain exercisable until September 1, 2001.
On January 1, 1996, the Company entered into an Employment Agreement with
its Chief Operating Officer and Chief Financial Officer, Lanny I. Kurysh, that
provides for an annual base salary of $84,000 and a performance bonus, payable
in cash, stock options or any other manner, with the amount and terms to be
determined by the Board of Directors (the "Kurysh Agreement"). As part of the
Kurysh Agreement, on February 1, 1996, Mr. Kurysh was granted options to
purchase 40,000 shares of Common Stock at an exercise price of $3.30. These
options vested immediately and remain exercisable until February 1, 2001. The
Kurysh Agreement contains provisions providing for the assignment of inventions
by Mr. Kurysh, the maintenance of confidential information of the Company and a
one-year non-competition clause in the event of termination of employment. The
Kurysh Agreement may be terminated by either party for any reason at any time.
If, however, Mr. Kurysh is terminated by the Company without cause, the Company
must pay salary and benefits to Mr. Kurysh for six months.
Effective August 31, 1996, the Company entered into a three (3) year
employment agreement with its Chief Technology Officer, Richard A. Koontz (the
"Koontz Agreement") that provides for an annual base salary of $100,000, which
amount may be increased by the Chief Executive Officer and the Board of
Directors. In addition to the annual salary, Mr. Koontz is entitled to an annual
bonus of one-third of one percent of the amount of net sales of the Company that
exceed certain thresholds. The threshold for fiscal 1997 is $2.0 million of net
sales. The thresholds for fiscal 1998 and 1999 are to be determined by the Chief
Executive Officer, in his sole discretion. Mr. Koontz is also entitled to an
additional bonus of fifty percent (50%) of his salary to the extent that net
sales exceed twelve million dollars in any consecutive twelve month period
during the term of the Koontz Agreement. Mr. Koontz was also granted options to
purchase 75,000 shares of the Company's Common Stock at an exercise price of
$2.75 per share (the "Koontz Option"). The Koontz Option will become exercisable
on a cumulative basis with respect to 25,000 shares on each anniversary of the
Koontz Agreement. The Koontz Agreement contains provisions providing for the
assignment of inventions by Mr. Koontz, the maintenance of confidential
information of the Company and is subject to a one-year non-competition clause
in the event of termination of employment. The Koontz Agreement may be
terminated (i) by either party upon thirty (30) days notice for whatever reason;
(ii) by the Company immediately for cause (including fraud, misrepresentation,
theft, embezzlement or breach of the Koontz Agreement); or (iii) automatically
upon Koontz's death or permanent disability. Upon termination for any reason
other than termination for cause, the Company must pay Mr. Koontz, in one lump
sum, an amount equal to six (6) months salary, plus all non-contingent
compensation earned through the termination date, including any bonus payments.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
PROPOSAL NO. 2
INTRODUCTION
At present, the Articles of Incorporation of the Company authorize the
issuance of 5,000,000 shares of Common Stock, no par value. As of November 5,
1996, 3,295,108 shares of the Company's authorized shares of Common Stock were
issued and outstanding and 1,704,892 shares were authorized but unissued. Of the
1,704,892 shares of Common Stock that were authorized and unissued, 1,197,542
shares are reserved for issuance pursuant to outstanding options and warrants of
the Company. Accordingly, as of November 5, 1996, there were 507,350 shares of
Common Stock available for issuance or sale by the Company other than those
issuable as described above.
The Board of Directors has unanimously proposed that the Company's Articles
of Incorporation be amended to increase the authorized number of shares of
capital stock from 5,000,000 to 15,000,000, 12,000,000 shares designated as
common stock, no par value, and 3,000,000 designated preferred stock, no par
value, but undesignated as to series (the "Preferred Stock") and that this
amendment should be presented to the Company's shareholders at the Annual
Meeting. If this amendment is approved by the shareholders, 7,507,350 shares of
Common Stock and 3,000,000 shares of Preferred Stock will be authorized for
issuance and unreserved immediately after the Annual Meeting. At the Annual
Meeting, the shareholders of the Company are being asked to approve this
amendment.
PURPOSE AND EFFECTS OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is necessary and desirable to
increase the number of shares of Common Stock the Company is authorized to issue
and add undesignated Preferred Stock to give the Board additional flexibility to
declare stock splits or dividends, adopt additional future employee benefit
plans, make acquisitions through the use of stock and raise equity capital. The
Board of Directors has no immediate plans, understandings or agreements or
commitments to issue additional shares of Common Stock or Preferred Stock for
any of these purposes, except as permitted or required by outstanding options
and warrants and additional options which may be granted from time to time under
the 1995 Plan. The flexibility inherent in having the authority to issue shares
of Common Stock or Preferred Stock will, in the opinion of the Board of
Directors, be advantageous to the Company in any negotiations involving the
issuance of such stock. If the shareholders failed to approve the proposed
amendment and authorization of the additional shares of Common Stock or
Preferred Stock were deferred until a specific need existed, the time and
expense required in connection with obtaining the necessary shareholder action
for each proposed issuance could deprive the Company of flexibility that the
Board of Directors believes will result in the most efficient use of such
shares. If this proposed amendment is adopted, no additional action or
authorization by the Company's shareholders will be necessary prior to the
issuance of such additional shares, unless required by applicable law or
regulation, or unless deemed desirable or advisable by the Board of Directors.
Furthermore, the Board of Directors will be empowered, without further
shareholder action, to establish, and to designate the names of, classes or
series of the Preferred Stock and to set the terms of such shares (including
terms with respect to redemption, sinking fund, dividend, liquidation,
conversion and voting rights and preferences).
If adopted, the proposal will not, by itself, have any effect on the rights
of holders of presently issued and outstanding shares of Common Stock. Under the
Company's Articles of Incorporation, the shareholders of the Company do not have
preemptive rights with respect to the Common Stock or Preferred Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock
or Preferred Stock, existing shareholders would not have any preferential rights
to purchase such additional shares of Common Stock or Preferred Stock.
Although the Board of Directors is proposing this amendment to the
Company's Articles of Incorporation for the reasons stated above, the amendment
could, under certain circumstances, discourage or make more difficult an attempt
by a person or organization to gain control of the Company by tender offer or
proxy contest, or to consummate a merger or consolidation with the Company after
acquiring control, and to remove incumbent management, even if such transactions
were favorable to the shareholders of the Company. Issuance of shares of Common
Stock or Preferred Stock in a private placement to a person sympathetic to
management and opposed to any attempt to gain control of the Company could make
a change in control of the Company more difficult. Accordingly, this proposal to
amend the Company's Articles of Incorporation may be deemed (under certain
circumstances which may or may not occur) to be an anti-takeover measure.
However, the proposal is not being presented as an anti-takeover measure.
PROPOSED RESOLUTION
A resolution in substantially the following form will be submitted to the
shareholders at the Annual Meeting:
RESOLVED, That Article III of the Company's Articles of Incorporation is
amended in its entirety to read as follows:
The aggregate number of shares of stock which the Corporation is
authorized to issue is fifteen million (15,000,000) shares, twelve
million (12,000,000) shares of common stock, no par value (hereinafter
referred to as "Common Stock") and three million (3,000,000) of which
shall be designated preferred stock, no par value (hereinafter
referred to as "Preferred Stock"). Shares of Preferred Stock of the
Corporation may be issued from time to time in one or more series,
each of which series shall have such distinctive designation or title
and such number of shares as shall be fixed by the Board of Directors
prior to the issuance of any shares thereof. Each such series of
Preferred Stock shall have such voting powers full or limited, or no
voting powers, and such preferences and relative, participating,
optional or other special rights and such qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series of
Preferred Stock as may be adopted from time to time by the Board of
Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it. The Board of Directors is
further authorized to increase or decrease (but not below the number
of shares then outstanding) the number of shares of any series of
Preferred Stock subsequent to the issuance of shares of that series.
In case the number of shares of any series shall be so decreased, the
shares constituting such decrease shall resume the status which they
had prior to the adoption of the resolution originally fixing the
number of shares of such series. Except as provided in the resolution
or resolutions of the Board ofDirectors creating any series of
Preferred Stock, the shares of Common Stock shall have the exclusive
right to vote for the election and removal of directors and for all
other purposes. Each holder of Common Stock shall be entitled to one
vote for each share held.
RESOLVED FURTHER, That the appropriate officers of the Company are
authorized and directed to make, execute, acknowledge and file such
certificates and documents as may be required by law with respect to the
foregoing resolutions.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors recommends a vote FOR approval of this amendment.
The affirmative vote of the holders of a majority of shares of Common Stock of
the Company present in person or by proxy at the Annual Meeting, assuming a
quorum is present, is necessary for approval. Unless a contrary choice is
specified, proxies solicited by the Board of Directors will be voted FOR the
approval of this amendment.
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
PROPOSAL NO. 3
PROPOSAL
The Board has appointed Ernst & Young LLP, independent certified public
accountants, as auditors of the Company for the year ending August 31, 1997.
Although it is not required to do so, the Board wishes to submit the selection
of Ernst & Young LLP to the shareholders for ratification. Representatives of
Ernst & Young LLP will be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote FOR ratification of the appointment of Ernst &
Young LLP as auditors of the Company for the year ending August 31, 1997. The
affirmative vote of the holders of a majority of shares of Common Stock of the
Company present in person or by proxy at the Annual Meeting, assuming a quorum
is present, is necessary for approval. Unless a contrary choice is specified,
proxies solicited by the Board will be voted FOR the ratification of Ernst &
Young LLP.
CERTAIN TRANSACTIONS
On December 4, 1995, Pierce A. McNally personally guaranteed a $200,000
note to BankWindsor. The unsecured note matured May 4, 1996 and had an interest
rate at prime plus 2%. The loan provided capital to fund the Company's on-going
operations. In exchange for Mr. McNally's guarantee, he was granted options to
purchase up to 4,000 shares of Common Stock at a price of $3.30 per share,
exercisable until May 4, 2000. Mr. McNally also received a cash fee of 20 basis
points per month on the outstanding balance of the loan until retirement or
maturity, including extensions, if any. Mr. McNally received a total of $1,500
under this arrangement. In addition, the Company has agreed to indemnify and
hold Mr. McNally harmless from and against any liability, loss, cost or expense
associated with his guarantee of the loan. The loan to BankWindsor was paid in
full in April 1996.
From November 1993 through July 1995, four of the Company's directors,
Messrs. Case, Bugbee, Pitner and McNally, personally guaranteed a $200,000 line
of credit between the Company and Riverside Bank. In consideration for their
financial commitment, the Company granted the four directors stock options each
year. On December 1, 1993, the Company granted each of the four directors
options for 10,000 shares of Common Stock at $1.50 per share, exercisable until
December 1, 1998. On August 1, 1994, the Company granted each of the four
directors options for 10,000 shares of Common Stock at $2.50 per share,
exercisable until August 1, 1999. On September 1, 1995, the Company granted each
of the four directors options for 7,500 shares of Common Stock at $3.00 per
share, exercisable until September 1, 2000. The line of credit was terminated in
July 1995 when the Company secured another line of credit with Republic
Acceptance Corporation.
On August 31, 1996, Nicholson Systems, Inc. ("NSI"), a company wholly owned
by Mr. Koontz, a director and executive officer of the Company, and his wife,
received a stock grant of 4,598 shares of Common Stock of the Company for
providing software consulting services to the Company. In addition, Object
Technologies Group, Inc., a company wholly owned by Mr. Koontz and his wife,
received cash payments aggregating approximately $62,000 for the year ending
August 31, 1996 for such services.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based on review of the copies of such reports
furnished to the Company during the period ended August 31, 1996, and based on
representations by such persons, all Section 16(a) filing requirements
applicable to its executive officers, directors, and greater than 10%
shareholders were complied with.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy materials
relating to the next Annual Meeting must be received by the Company at its
principal executive offices on or before August 15, 1997.
OTHER MATTERS
The management of the Company does not intend to present other items of
business and knows of no items of business that are likely to be brought before
the Annual Meeting except those described in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, the persons
named in the enclosed proxy will have discretionary authority to vote such proxy
in accordance with their best judgment on such matters.
MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-KSB (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED AUGUST 31, 1996 TO EACH
PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF NOVEMBER 29, 1996, UPON
RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT.
SUCH REQUEST SHOULD BE SENT TO: 420 NORTH FIFTH STREET, FORD CENTRE, SUITE 1040,
MINNEAPOLIS, MINNESOTA 55401; ATTN: SHAREHOLDER INFORMATION.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kristine L. Gabel
Kristine L. Gabel
SECRETARY
Minneapolis, Minnesota
December 13, 1996
NICOLLET PROCESS ENGINEERING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert A. Pitner, Pierce A. McNally and Lanny
Kurysh, and each of them, as Proxies, each with full power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all the shares of Common Stock of Nicollet Process
Engineering, Inc. held of record by the undersigned on November 29, 1996, at the
Annual Meeting of Shareholders to be held on January 21, 1997, or any
adjournment, thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below [ ] AGAINST all nominees listed
(except as marked to the below
contrary below)
PIERCE A. MCNALLY THOMAS W. BUGBEE RICHARD W. KOONTZ
ROBERT A. PITNER BENTON J. CASE, JR.
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME.)
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 5,000,000 TO 15,000,000
SHARES, 12,000,000 SHARES OF COMMON STOCK, NO PAR VALUE AND 3,000,000
SHARES OF PREFERRED STOCK, UNDESIGNATED AS TO SERIES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP, CERTIFIED PUBLIC
ACCOUNTANTS, AS INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR
ENDING AUGUST 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
(CONTINUED FROM OTHER SIDE.)
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 2 AND 3 AND FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated:_______________________________
_____________________________________
Signature
_____________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
