<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
TRANSMATION, INC.
(Name of Registrant as Specified in its Charter)
XXXXXXXXXXXXXXXX
(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> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
[TRANSMATION LOGO]
AUGUST 17, 1999
The Annual Meeting of Shareholders of TRANSMATION, INC. (the "Company")
will be held at the Hutchison House, 930 East Avenue, Rochester, New York, on
Tuesday, August 17, 1999 at 12:00 noon, local time, for the following purposes
more fully described in the accompanying proxy statement:
1. To elect three directors of the Company.
2. To consider and act upon a proposal to approve and adopt an amendment to
the Company's Articles of Incorporation which increases the number of
shares of the Company's authorized Common Stock from 15,000,000 shares
to 30,000,000 shares.
3. To consider and act upon a proposal to approve and adopt an amendment to
the Company's Code of Regulations which permits the number of directors
of the Company to be fixed or changed by the Board of Directors as well
as by the shareholders.
4. To consider and act upon a proposal to approve and ratify an amendment
to the Transmation, Inc. Amended and Restated 1993 Stock Option Plan
which permits exercise of previously granted options by persons who are
no longer employees of the Company but continue to serve as non-employee
directors of the Company.
5. To consider and act upon a proposal to approve and ratify an amendment
to the Transmation, Inc. Amended and Restated Directors' Warrant Plan
which permits the exercise of warrants for a period of 90 days after
cessation of service as a director of the Company.
6. To consider and act upon a proposal to approve and ratify the selection
of PricewaterhouseCoopers LLP as the Company's independent auditors for
the fiscal year ending March 31, 2000.
7. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on June 25, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
John A. Misiaszek
Secretary
Dated: July 9, 1999
<PAGE> 3
TRANSMATION, INC.
10 VANTAGE POINT DRIVE
ROCHESTER, NEW YORK 14624
------------------
PROXY STATEMENT
------------------
GENERAL INFORMATION
This proxy statement is furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors of Transmation, Inc. (the
"Company") to be used at the Annual Meeting of Shareholders of the Company which
will be held on Tuesday, August 17, 1999, and at any adjournments thereof (the
"Meeting"). This proxy statement and accompanying form of proxy are being first
mailed to shareholders on or about July 9, 1999. The proxy, when properly
executed and received by the Secretary of the Company prior to the Meeting, will
be voted as therein specified unless revoked by filing with the Secretary prior
to the Meeting a written revocation or a duly executed proxy bearing a later
date. Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, a signed proxy will be
voted FOR the election of the three director nominees named herein and, unless
otherwise indicated, FOR each of the other five proposals described in this
proxy statement and the accompanying notice of meeting.
As of June 25, 1999, the record date for the Meeting, there were
shares of the Company's Common Stock, par value $.50 per share (the "Common
Stock"), issued and outstanding. Only shareholders of record on the books of the
Company at the close of business on June 25, 1999 are entitled to notice of and
to vote at the Meeting. Each such shareholder is entitled to one vote for each
share of Common Stock registered in his or her name. A majority of the
outstanding Common Stock, represented in person or by proxy at the Meeting, will
constitute a quorum for the transaction of all business. Directors are elected
by a plurality of the votes cast at the Meeting with a quorum present. The
affirmative vote of at least two-thirds of the outstanding shares of Common
Stock entitled to vote at the Meeting, without regard to broker non-votes, is
required for approval of "PROPOSAL 2" described below. The affirmative vote of
at least 75% of the outstanding shares of Common Stock entitled to vote at the
Meeting, without regard to broker non-votes, is required for approval of
"PROPOSAL 3" described below. The affirmative vote of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting, without
regard to broker non-votes, is required for approval of each of the other three
proposals described in this proxy statement and the accompanying notice of
meeting. Shares as to which "Abstain" has been selected on the accompanying
proxy will be counted as shares present and entitled to vote for purposes of
establishing a quorum, and will have the same effect as a vote against the
matter.
Shareholders are entitled to cumulate votes in the election of directors
provided a shareholder gives the President, a Vice President or the Secretary of
the Company notice that he or she desires that voting at the Meeting be
cumulative. Such notice must be in writing and must be given at least 48 hours
before the time fixed for holding the Meeting. In addition, a formal
announcement must be made at the commencement of the Meeting by the Chairman,
the Secretary or by or on behalf of the shareholder, stating that such notice
has been given. In the event the Company does not receive such notice within the
prescribed time, shareholders will not be entitled to cumulate votes.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by use of the mails, directors, officers or regular employees of
the Company, without extra compensation, may solicit proxies
1
<PAGE> 4
personally or by telephone or other telecommunication. In addition, the Company
has retained Regan & Associates, Inc., a professional solicitation firm, which
may assist in soliciting proxies for a fee estimated at $4,000 plus
reimbursement of out-of-pocket expenses. The Company has requested persons
holding stock for others in their names or in the names of nominees to forward
soliciting material to the beneficial owners of such shares and will, if
requested, reimburse such persons for their reasonable expenses in so doing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of June 25, 1999
regarding the only persons known to the Company to be a record or beneficial
owner of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF COMMON STOCK OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS (1)
------------------- ---------------------- ---------
<S> <C> <C>
E. Lee Garelick 325,096 %
10 Vantage Point Drive
Rochester, NY 14624
Kennedy Capital Management, Inc. 365,624(2)
10829 Olive Boulevard
St. Louis, MO 63141
</TABLE>
- ---------------
(1) As reported by such holders as of June 25, 1999 (except as otherwise stated
in footnote (2) to this table), with percentages based on shares issued
and outstanding.
(2) The amount shown and the following information is derived from Amendment No.
1 to Schedule 13G dated February 5, 1999: Kennedy Capital Management, Inc.
has sole power to vote 342,874 of such shares and sole power to dispose of
all 365,624 shares.
The following table sets forth certain information as of June 25, 1999
regarding the Common Stock held by (i) each current director of the Company,
(ii) each "Named Executive" (see "EXECUTIVE COMPENSATION" below), and (iii) all
current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
OF COMMON STOCK OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS (1)
------------------------ ---------------------- ---------
<S> <C> <C>
Angelo J. Chiarella 47,065(2) %
E. Lee Garelick 325,096
Nancy D. Hessler 8,969(3)
Robert G. Klimasewski 293,838(4)
Eric W. McInroy 134,130(5)
Cornelius J. Murphy 37,776(6)
John W. Oberlies 22,172(6)
Harvey J. Palmer 35,783(6)
Arthur M. Richardson 35,284(6)
John A. Misiaszek 128,718(7)
Barry F. Wharity 73,676(8)
All current directors and executive
officers as a group (11 persons) 1,142,507(9)
</TABLE>
- ---------------
(1) As reported by such persons as of June 25, 1999, with percentages based on
shares issued and outstanding except where the issuance of shares
pursuant to options or warrants that are currently or will
2
<PAGE> 5
within the next 60 days become exercisable ("presently exercisable"), as
indicated in the other footnotes to this table, would increase the number of
shares owned by such person and the number of shares outstanding.
(2) Includes 6,400 shares jointly owned by Mr. Chiarella and his wife, and
presently exercisable warrants to purchase an aggregate of 7,000 shares.
(3) Includes 1,000 shares jointly owned by Ms. Hessler and her husband, and a
presently exercisable warrant to purchase 1,000 shares.
(4) Includes presently exercisable options to purchase an aggregate of 253,000
shares.
(5) Includes presently exercisable options to purchase an aggregate of 99,450
shares.
(6) Includes presently exercisable warrants to purchase an aggregate of 7,000
shares.
(7) Includes (i) 30,760 shares jointly owned by Mr. Misiaszek and his wife, (ii)
400 shares owned by his wife as custodian for their child (as to which
shares Mr. Misiaszek disclaims beneficial ownership), and (iii) presently
exercisable options to purchase an aggregate of 57,000 shares.
(8) Includes presently exercisable options to purchase an aggregate of 43,500
shares.
(9) Includes presently exercisable options and warrants to purchase an aggregate
of 488,950 shares.
3
<PAGE> 6
PROPOSAL 1:
ELECTION OF DIRECTORS
Three of the Company's nine directors are to be elected by the shareholders
at the Meeting, each to hold office for a term expiring in 2002 or until his
successor is duly elected and qualifies.*
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF THE THREE NOMINEES NAMED
BELOW, all of whom are currently directors of the Company. Unless authority to
vote for one or more of the nominees is specifically withheld according to the
instructions, proxies in the enclosed form will be voted FOR the election of
each of the three nominees named below. The votes represented by such proxies
may be cumulated if notice is given as described in "GENERAL INFORMATION" above.
The Board of Directors does not contemplate that any of the nominees will
be unable to serve as a director, but if that contingency should occur prior to
the voting of the proxies, the persons named in the enclosed proxy reserve the
right to vote for such substitute nominee or nominees as they, in their
discretion, shall determine.
PROPOSED FOR ELECTION AS DIRECTORS
AT THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR
NAME AND BACKGROUND SINCE
------------------- --------
<S> <C>
ANGELO J. CHIARELLA, age 65, is Director of Planning for 1967
F.J.F. Architects, Rochester, New York. From November 1997
until April 1999, he served as Vice President in the
Rochester, New York office of Arnold Industries, Inc.
(commercial real estate). From 1963 to November 1997, he
served as President and Chief Executive Officer of Midtown
Holdings Corp., Rochester, New York (commercial real
estate). Mr. Chiarella also serves on the Board of
Directors of Rochester Gas and Electric Corporation.
E. LEE GARELICK, age 64, is retired. From April 1996 until 1996
March 1999, he was employed by the Company as a senior
executive. From June 1979 until April 1996, he was
President and part owner of Altek Industries Corp.,
Rochester, New York (manufacturer of calibration
instrumentation), which was acquired by the Company in
April 1996.
DR. HARVEY J. PALMER, age 53, is Professor and Chair of the 1987
Department of Chemical Engineering in the School of
Engineering and Applied Science of the University of
Rochester, Rochester, New York (education and scientific
research), where he has been a member of the faculty since
1971.
</TABLE>
- ---------------
* Dr. Harvey J. Palmer, who had previously been elected a director in the class
of directors whose term of office expires in 2000 (the "2000 Class"), has been
nominated by the Board instead for election at the Meeting to the class whose
term of office expires in 2002. As a result, a vacancy now exists in the 2000
Class. The Board of Directors intends to engage an individual having
appropriate talent, skills and experience to fill that vacancy; however, the
Board's search for such a candidate has not been completed. When identified,
that candidate will stand for election at the next Annual Meeting of
Shareholders, scheduled to be held in August 2000. Alternatively, the Board
may determine not to fill the vacancy and (if Proposal 3 is adopted by the
shareholders at the Meeting) reduce size of the Board of Directors to eight
members. See "PROPOSAL 3" below.
4
<PAGE> 7
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE 1999 ANNUAL MEETING
The following table sets forth certain information with respect to each
director of the Company whose term in office does not expire at the Meeting.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AND BACKGROUND SINCE EXPIRES
------------------- -------- -------
<S> <C> <C>
NANCY D. HESSLER, age 53, has been Senior Manager of Human 1997 2001
Resources of Nortel Networks Corp., Network Information
Services Group, Rochester, New York (telecommunications
systems) since October 1998. From May 1996 until September
1998, she was Group Manager of Human Resources for
Rochester Gas and Electric Corporation, Rochester, New
York (public utility). From 1991 until May 1996, Ms.
Hessler served as Human Resource Manager of the Advanced
Imaging Business Unit and as Manager of Sourcing for the
General Services Division of Xerox Corporation.
ROBERT G. KLIMASEWSKI, age 56, has served as Chairman of the 1982 2001
Board of the Company since April 1998. From June 1994
until April 1998, he served as President and Chief
Executive Officer of the Company. Mr. Klimasewski is also
Vice Chairman of Burleigh Instruments, Inc., Rochester,
New York (manufacturer of laser instrumentation and
micropositioning equipment), which he founded in 1972. He
also serves as Chairman of the Board of Directors of Laser
Power Corporation.
ERIC W. MCINROY, age 52, has served as President and Chief 1998 2001
Executive Officer of the Company since April 1998. He
served as Executive Vice President and Chief Operating
Officer of the Company from April 1996 until April 1998.
From 1982 until April 1996, he was President of the
Company's Transcat Division. Mr. McInroy has been employed
by the Company since 1978.
CORNELIUS J. MURPHY, age 68, has served as Lead Director of 1991 2000
the Company since August 1998. He served as Chairman of
the Board of the Company from January 1995 until April
1998, and as Chairman of the Executive Committee of the
Board from April 1998 until August 1998. He has been
Senior Vice President in the Rochester, New York office of
Goodrich and Sherwood Company (human resources management
consulting) since 1990. For over 35 years prior to that,
he was employed by Eastman Kodak Company in various
executive positions, most recently Senior Vice President
and a Director in the office of the Chairman. Mr. Murphy
also serves on the Board of Directors of Rochester Gas and
Electric Corporation.
ARTHUR M. RICHARDSON, age 72, has been President of 1985 2000
Richardson Capital Corp., Rochester, New York
(investments) since 1986. From 1974 to 1986 he served as
Chairman and Chief Executive Officer of Security N.Y.
State Corp., a commercial bank holding company.
</TABLE>
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held five meetings during the fiscal year ended
March 31, 1999 ("Fiscal 1999"). Each director attended at least 75% of the total
of such Board meetings and meetings of Board Committees on which he or she
served.
The Board of Directors has established, among other Committees, an Audit
Committee, a Compensation, Benefits and Stock Options Committee, and a Committee
on Directors, which serves as the nominating committee of the Board.
The current members of the Audit Committee are Mr. Richardson (Chair), Mr.
Chiarella, Mr. Garelick and John W. Oberlies. The Committee reviews with
PricewaterhouseCoopers LLP, the Company's independent auditors, the Company's
financial statements and internal accounting procedures, PricewaterhouseCoopers
LLP's
5
<PAGE> 8
auditing procedures and fees, and the possible effects of professional services
upon the independence of PricewaterhouseCoopers LLP. The Committee held two
meetings during Fiscal 1999.
The current members of the Compensation, Benefits and Stock Options
Committee are Mr. Chiarella (Chair), Ms. Hessler, Mr. Murphy, Dr. Palmer, Mr.
Richardson and John W. Oberlies. The Committee makes recommendations to the
Board with respect to compensation and benefits paid to the Company's management
and acts as the Stock Option Committee of the Board (see "EXECUTIVE
COMPENSATION" below). The Compensation, Benefits and Stock Options Committee
held five meetings during Fiscal 1999.
The current members of the Committee on Directors are Mr. Klimasewski
(Chair), Mr. Murphy and Mr. Richardson. The Committee on Directors is charged
with improving the training and performance of the Company's directors, as well
as making director nominations. It also considers and establishes procedures
regarding director nominations submitted by shareholders. The Committee held two
meetings during Fiscal 1999. Shareholder recommendations for director
nominations should be sent to the Company, to the attention of the Chairman of
the Board.
DIRECTORS' COMPENSATION
The Directors' Stock Plan provides for automatic, non-discretionary awards
of shares of Common Stock, in lieu of cash directors' fees, to each non-employee
director who elects to participate, at the rates of (i) a retainer of 2,000
shares of Common Stock for each full year during which he or she serves as a
director (or such fewer shares as has an aggregate market value of $10,000),
(ii) 400 shares of Common Stock for each meeting of the Board that he or she
attends (or such fewer shares per meeting as has an aggregate market value of
$1,500), and (iii) 200 shares of Common Stock for each meeting of a Committee of
the Board that he or she attends (or such fewer shares per meeting as has an
aggregate market value of $750). Except in certain defined instances, attendance
at meetings by telephone does not qualify for such awards. A maximum of 200,000
shares of Common Stock are available for awards under the Directors' Stock Plan.
During Fiscal 1999, Mr. Chiarella, Ms. Hessler, Mr. Murphy, Dr. Palmer, Mr.
Richardson and John W. Oberlies elected to participate in the Directors' Stock
Plan, and an aggregate of 28,583 shares of Common Stock were so issued to them.
During Fiscal 1999, the Company also paid to Mr. Murphy $17,500 in cash and
a bonus award of 667 shares of Common Stock (having a market value of $2,500 on
the date of the award) for his additional services during the prior year as
Chairman of the Board and Chairman of the Executive Committee of the Board.
Directors who are also employees of the Company (currently, Messrs.
Klimasewski and McInroy) are paid no compensation for their services as
directors.
DIRECTORS' WARRANT GRANTS AND EXERCISES
Pursuant to the Company's Amended and Restated Directors' Warrant Plan,
during Fiscal 1999 each then current non-employee director of the Company (Mr.
Chiarella, Ms. Hessler, Mr. Murphy, Dr. Palmer, Mr. Richardson and John W.
Oberlies) received an automatic, non-discretionary grant of a warrant, expiring
on August 18, 2003, to purchase 4,000 shares of Common Stock at an exercise
price of $3.75 per share (the market price of the Common Stock on the grant
date). Each warrant becomes exercisable in 1,000-share increments on specified
dates provided that the market price of the Common Stock reaches and maintains
certain specified levels; in any event, each warrant vests and becomes
exercisable no later than August 19, 2002. None of such warrants is transferable
except by will or intestacy, and during the director's lifetime they are
exercisable only by the director. Unexercised warrants currently lapse on the
date a director ceases to be a director of the Company (see "PROPOSAL 5" below),
except that if one ceases to be a director by reason of his or her death, the
warrant lapses 90 days thereafter.
No warrants were exercised during Fiscal 1999.
6
<PAGE> 9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During Fiscal 1999, two directors of the Company, Mr. Murphy and John W.
Oberlies, each inadvertently filed late with the Securities and Exchange
Commission (the "SEC") one report disclosing one transaction in his Common
Stock. All of the Company's directors and executive officers are now current in
such filings. In making the foregoing statements, the Company has relied on the
written representations of its directors and officers and copies of the reports
that they have filed with the SEC.
EXECUTIVE OFFICERS
The Company is currently served by four executive officers, who are elected
annually by the Board of Directors and serve until their successors are elected
and qualified:
ERIC W. MCINROY, age 52, has served as President and Chief Executive
Officer of the Company since April 1998. Further information about Mr. McInroy
is set forth under "PROPOSAL 1: ELECTION OF DIRECTORS" above.
ROBERT G. KLIMASEWSKI, age 56, has served as Chairman of the Board of the
Company since April 1998. Further information about Mr. Klimasewski is set forth
under "PROPOSAL 1: ELECTION OF DIRECTORS" above.
JOHN A. MISIASZEK, age 51, is Vice President-Finance of the Company, a
position he has held since 1982. Mr. Misiaszek, a certified public accountant
who has been with the Company since 1975, has also served as Secretary and
Treasurer of the Company for more than the past five years.
BARRY F. WHARITY, age 52, is President of the Company's Transcat Division,
a position he has held since April 1996. Mr. Wharity has been employed by the
Company since April 1988 in various positions, including Vice President of
Sales.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation for services rendered to the Company in all capacities, for the
fiscal years ended March 31, 1999, 1998 and 1997, paid by the Company to those
persons who were, at March 31, 1999, the Chief Executive Officer and each other
executive officer of the Company (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------------- COMPENSATION
BONUS OR OTHER ------------
PERFORMANCE ANNUAL OPTION ALL OTHER
NAME AND FISCAL SALARY AWARD COMPENSATION GRANTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) (#)(3) ($)(4)
------------------ ------ -------- ----------- ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
ERIC W. MCINROY 1999 $210,000 $ 50,000 0 35,000 $5,103
President and Chief 1998 170,000 0 0 52,000 6,191
Executive Officer 1997 120,750 100,000 0 100,000 0
ROBERT G. KLIMASEWSKI 1999 $175,000 $ 50,000 0 20,000 0
Chairman of the Board(5) 1998 235,000 0 0 52,000 0
1997 200,000 280,000(6) 0 160,000 0
BARRY F. WHARITY 1999 $150,000 0 0 75,000 $5,029
President, Transcat
Division(7)
JOHN A. MISIASZEK 1999 $ 92,070 $ 20,000 0 25,000 $3,526
Vice President-Finance 1998 92,070 0 0 52,000 4,098
1997 90,300 80,000 0 60,000 2,517
</TABLE>
7
<PAGE> 10
- ---------------
(1) The amounts shown include cash compensation earned during the fiscal year
indicated (whether paid during or subsequent to that year) as well as cash
compensation deferred at the election of the Named Executive into the
Company's Long Term Savings and Deferred Profit Sharing Plan (the "401(k)
Plan").
(2) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation for any year does not
exceed 10% of the total amount of annual salary and bonus for any Named
Executive.
(3) Share amounts have been retroactively adjusted to give effect to a 2-for-1
stock split in the form of a stock dividend paid on July 22, 1997.
(4) The amounts shown reflect the Company's contributions to the 401(k) Plan.
(5) Mr. Klimasewski served as the Company's President and Chief Executive
Officer during Fiscal 1998 and Fiscal 1997.
(6) Pursuant to Mr. Klimasewski's employment agreement, 70% of such bonus was
paid in cash and 30% was paid in the form of shares of Common Stock (based
on the market value of the Common Stock on the date of payment of the
bonus).
(7) Mr. Wharity first became an executive officer of the Company in Fiscal 1999.
STOCK OPTIONS
Shown below is further information on grants of stock options, under the
Amended and Restated 1993 Stock Option Plan (the "Option Plan") or otherwise,
during Fiscal 1999 to the Named Executives. The Company has no provision for
stock appreciation rights.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
EMPLOYEES EXERCISE FOR OPTION TERM (1)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric W. McInroy 35,000 15.0% $3.785 10/27/03 $ 36,603 $ 80,875
Robert G. Klimasewski 20,000 8.6% $3.785 10/27/03 $ 20,916 $ 46,214
Barry F. Wharity 50,000 21.4% $ 7.25 4/20/03 $ 100,160 $ 221,305
25,000 10.7% $3.785 10/27/03 $ 26,145 $ 57,768
John A. Misiaszek 25,000 10.7% $3.785 10/27/03 $ 26,145 $ 57,768
</TABLE>
- ---------------
(1) The dollar amounts in these columns are the result of calculations of
potential realizable value at the 5% and 10% rates set by the SEC and are
not intended to forecast future appreciation of the Common Stock. There can
be no assurance that the Common Stock will perform at the assumed annual
rates shown in the table. The Company will neither make nor endorse any
predictions as to future stock performance. As an alternative to the assumed
potential realizable values stated in the 5% and 10% columns, SEC rules
would permit stating the present value of such options at the date of grant.
Methods of computing present value suggested by different authorities can
produce significantly different results. Moreover, since stock options
granted by the Company are not transferable, there are no objective criteria
by which any computation of present value can be verified. Consequently, the
Company has not chosen this alternative for purposes of the table.
8
<PAGE> 11
Shown below is information with respect to (i) options exercised by the
Named Executives during Fiscal 1999 and (ii) unexercised options held by the
Named Executives at the end of Fiscal 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND
FISCAL YEAR-END OPTION VALUES*
<TABLE>
<CAPTION>
VALUE OF ALL UNEXERCISED
UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS AT
SHARES VALUE AT FY-END (#) FY-END ($) (2)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric W. McInroy 0 0 99,450 155,050 $ 6,563 0
Robert G. Klimasewski 0 0 253,000 179,000 $175,000 0
Barry F. Wharity 18,000 $47,250 43,500 137,500 $ 5,250 0
John A. Misiaszek 0 0 57,000 104,000 $ 21,000 0
</TABLE>
- ---------------
* Numbers of shares and per share prices have been retroactively adjusted to
give effect to a 2-for-1 stock split in the form of a stock dividend paid on
July 22, 1997.
(1) Expressed as the excess of the market value of the Common Stock on the date
of exercise over the exercise price of the option.
(2) Expressed as the excess of the market value of the Common Stock at fiscal
year-end ($3.00 per share) over the exercise price of each option. Most of
such options have exercise prices in excess of $3.00 per share.
EMPLOYMENT AGREEMENTS
The provisions of the Company's employment agreements with Eric W. McInroy,
covering Fiscal 1999 and the current fiscal year, are described in "EXECUTIVE
COMPENSATION - REPORT OF THE COMPENSATION, BENEFITS AND STOCK OPTIONS COMMITTEE
WITH RESPECT TO EXECUTIVE COMPENSATION - CHIEF EXECUTIVE OFFICER COMPENSATION"
below.
During Fiscal 1999, the Company and Robert G. Klimasewski were parties to
an amended and restated employment agreement, providing for Mr. Klimasewski to
serve as the Chairman of the Company's Board of Directors at an annual salary of
$175,000, together with certain other benefits that are provided to the
Company's other senior executives. Mr. Klimasewski's employment agreement was
terminable by either party on 30 days' notice, but if the Company were to
terminate the agreement without cause (as defined therein), Mr. Klimasewski
would be entitled to severance in an amount equal to the total compensation
(including bonuses, benefits and other compensation, if any) payable to him
during the 12 months immediately preceding the termination date. Mr.
Klimasewski's employment agreement prohibited him from engaging, during its
term, in any business that is in competition with the Company, and required him
indefinitely to keep confidential the Company's trade secrets. Mr. Klimasewski's
employment agreement expired on March 31, 1999.
Effective April 1, 1999, the Company and Mr. Klimasewski entered into a new
employment agreement on terms identical to those of his Fiscal 1999 employment
agreement described above. This new employment agreement expires on March 31,
2000.
REPORT OF THE COMPENSATION, BENEFITS AND STOCK OPTIONS COMMITTEE
WITH RESPECT TO EXECUTIVE COMPENSATION
The following report of the Compensation, Benefits and Stock Options
Committee (the "Committee") shall not be deemed incorporated by reference by any
statement which incorporates this Proxy Statement by reference into any filing
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (except to the
extent that the Company specifically incorporates this information by
reference), nor shall it otherwise be deemed filed under either such Act.
9
<PAGE> 12
The following discussion applies to the compensation of all of the
Company's senior executives, including Eric W. McInroy, the Chief Executive
Officer, except to the extent that certain elements of Mr. McInroy's
compensation are fixed pursuant to contract with the Company (see "CHIEF
EXECUTIVE OFFICER COMPENSATION" later in this Report).
EXECUTIVE COMPENSATION PHILOSOPHY. The goals of the Company's executive
compensation program are to align compensation with business objectives and
performance, and to enable the Company to attract, retain and reward executives
who contribute to the short-term and long-term success of the Company and each
of its operating divisions and contribute to increasing shareholder value. The
Company attempts to compensate its executives competitively. To ensure that
compensation is competitive, the Company periodically compares its compensation
practices with those of comparable companies and adjusts its compensation
parameters based on this review. More importantly, the Company's executive
compensation program is intended to compensate sustained performance. Executives
are rewarded based upon corporate performance, divisional performance and
individual performance. Corporate performance and divisional performance are
evaluated by reviewing the extent to which strategic and business plan goals are
met, including such factors as operating profit and performance relative to
benchmarks. Individual performance is evaluated by reviewing organizational and
management development progress against set objectives and goals. The primary
criteria for the awarding of incentive compensation are as follows:
- Company-wide profitability in excess of an annually predetermined amount
is generally a prerequisite to the payment of any incentive compensation,
so that every executive is motivated to achieve profitability for the
entire Company.
- Incentive compensation is measured by the Company's and each operating
division's success in meeting key line items in the Company's budget,
particularly profits.
- Divisional success for purposes of incentive compensation is measured by
sales, gross margin and divisional profitability.
- Leadership is rewarded, as is the extent to which an individual sets,
meets and exceeds goals that are beneficial to the Company's long-term
success.
- Controlling expenses, as measured against budget, is rewarded.
In the first quarter of each fiscal year, the Committee reviews with the
Chief Executive Officer and approves, with any modifications it deems
appropriate, an annual salary plan for the executives other than the Chief
Executive Officer and the Chairman of the Board (whose salaries are fixed by
contract). This salary plan is developed under the ultimate direction of the
Chief Executive Officer based on industry peer group information and performance
judgments as to the past and expected future contributions of each executive.
Prior to the start of each fiscal year, the Chief Executive Officer sets
individualized objectives and key goals for each of the Company's executives in
keeping with the criteria set forth above. During each fiscal year, the Chief
Executive Officer gives executives ongoing feedback on performance. After the
end of the fiscal year, the Chief Executive Officer evaluates each executive's
accomplishment of objectives and attainment of key goals and provides summaries
of performance appraisals to the Committee along with recommendations on salary,
bonuses and stock options. The performance appraisals and recommendations are
considered by the Committee in deciding whether to grant performance awards and
in establishing the base salary for executives for the next fiscal year. Similar
objective-setting, feedback and evaluation with respect to the Chief Executive
Officer's performance is provided by the Chairman of the Board on behalf of the
Committee, and similar objective-setting, feedback and evaluation with respect
to the Chairman of the Board's performance is provided by the Lead Director on
behalf of the Board of Directors.
EXECUTIVE COMPENSATION PROGRAM. The Company's executive compensation
program is structured to attract and retain key executives capable of improving
products and services, promoting technological innovation, fostering teamwork,
motivating employees and accomplishing and integrating acquisitions, all with
the ultimate goal of improving profitability and enhancing shareholder value.
10
<PAGE> 13
The annual compensation paid to executives consists of a base salary, cash
bonuses and, in some circumstances, performance awards and stock bonuses.
Salaries are reviewed by the Committee at least annually, and may be changed
based on (i) information derived from the evaluation procedures described above
and a determination that an individual's contributions to the Company have
increased or decreased, (ii) changes in competitive compensation levels, and/or
(iii) changes in the Company's business prospects.
The Company's Annual Executive Bonus Plan, which is formulated and approved
annually by the Committee, provides for the payment of cash bonuses. Under this
Plan, the Company must first make a profit at a level determined annually by the
Committee before any bonuses are paid to executives. Once that threshold is
reached, a bonus pool is established from which a participating executive
receives a bonus at a predetermined percentage of the pool, subject to a
reduction of up to 25% at the discretion of the Chief Executive Officer. Because
the Company did not achieve the target financial performance in Fiscal 1999, no
cash bonuses were paid to any executives for Fiscal 1999.
In addition, performance awards may be granted by the Committee in the case
of unique performance contributing to the Company's long-term success. During
Fiscal 1999, cash performance awards were paid to four executives, including Mr.
McInroy ($50,000), Mr. Klimasewski ($50,000) and Mr. Misiaszek ($20,000), for
their extraordinary efforts in assimilating the Company's acquisitions.
Long-term incentives are intended to be provided through the grant of stock
options under the Option Plan. The Committee views stock options as a means of
aligning the long range interests of all employees, including executives, with
those of the shareholders by providing them with the opportunity to build a
meaningful stake in the Company. On occasion, the Company also grants options to
employees pursuant to agreements not covered by the Option Plan. During Fiscal
1999, the Committee granted to an aggregate of 79 employees, at all levels of
employment, options to purchase an aggregate of 233,760 shares of Common Stock,
including options to purchase an aggregate of 155,000 shares granted to the four
Named Executives. See "EXECUTIVE COMPENSATION -- STOCK OPTIONS" above.
Executives and other employees are also entitled to participate in the
Company's Long-Term Savings and Deferred Profit Sharing Plan, a 401(k) plan.
CHIEF EXECUTIVE OFFICER COMPENSATION. Eric W. McInroy, previously the
Company's Executive Vice President and Chief Operating Officer, was elected
President and Chief Executive Officer on April 1, 1998. Mr. McInroy succeeded
Robert G. Klimasewski, who became Chairman of the Board of Directors.
The Committee, with the concurrence of the Board of Directors, credits Mr.
McInroy in large measure for the formulation and execution of the Company's
acquisition strategy. The Company completed its acquisition of the stock of
Altek Industries Corp. in April 1996, the assets of E.I.L. Instruments, Inc. in
April 1997, and the stock of Metermaster Inc. in February 1999. Mr. McInroy was
key in finding and developing those acquisition opportunities, and he developed
and spearheaded the Company's approach and strategy for integrating those
acquisitions into the Company. Under Mr. McInroy's leadership and direction, the
difficult integration of large and significant acquisitions was accomplished,
and provides the Company with a platform for increasing shareholder value in the
future.
In addition, Mr. McInroy has worked diligently to put in place a cost
structure to support and enhance the Company's future growth, including
substantial efforts in realigning operations and establishing an efficient and
cost-effective corporate infrastructure.
During Fiscal 1999, the Company and Mr. McInroy were parties to an
employment agreement providing for Mr. McInroy to serve as the Company's
President and Chief Executive Officer at an annual salary of $210,000. Mr.
McInroy's employment agreement also provided for the payment to him of an annual
cash bonus pursuant to the Company's Annual Executive Bonus Plan, together with
certain other benefits that are provided to the Company's other senior
executives. Mr. McInroy's employment agreement was terminable by either party on
30 days' notice, but if the Company were to terminate the agreement without
cause (as defined therein), Mr. McInroy would be entitled to severance in an
amount equal to the total compensation (including bonuses, benefits and other
compensation, if any) payable to him during the 12 months immediately preceding
the
11
<PAGE> 14
termination date. Mr. McInroy's employment agreement prohibited him from
engaging, during its term, in any business that is in competition with the
Company, and required him indefinitely to keep confidential the Company's trade
secrets. The Annual Executive Bonus Plan adopted by the Committee for Fiscal
1999 required that, to the extent permitted by securities regulations and The
Nasdaq Stock Market, 25% of the cash bonus payable to Mr. McInroy thereunder in
excess of $50,000 would be paid to him instead in shares of Common Stock, valued
on the date of payment. However, no bonus was payable to any executive,
including Mr. McInroy, under the Annual Executive Bonus Plan for Fiscal 1999.
During Fiscal 1999, Mr. McInroy was paid a cash performance award of
$50,000 for his extraordinary efforts in assimilating the Company's acquisitions
and, as a long-term incentive to enhancing shareholder value, he was granted
options to purchase 35,000 shares of Common Stock. See "EXECUTIVE COMPENSATION
PROGRAM" earlier in this Report.
Based on its study and review of comparable companies, the Committee
believes that Mr. McInroy's employment agreement fixed his total compensation
for Fiscal 1999 at a level that was commensurate with amounts paid to other
chief executive officers with comparable qualifications, experience,
responsibilities and results at similarly positioned companies.
Mr. McInroy's employment agreement expired on March 31, 1999. Effective
April 1, 1999, the Company and Mr. McInroy entered into a new employment
agreement on terms identical to those of his Fiscal 1999 employment agreement
described above (as well as an identical requirement under the Annual Executive
Bonus Plan as that described above). This new employment agreement expires on
March 31, 2000 but may be renewed for one year thereafter if both parties so
elect. It was approved by the Board of Directors on the Committee's
recommendation, reflecting the Committee's assessment of Mr. McInroy's
performance in his first year as the Company's Chief Executive Officer and his
ability and dedication to provide the leadership and vision necessary to enhance
the long-term value of the Company.
COMPENSATION, BENEFITS AND STOCK
OPTIONS COMMITTEE
Angelo J. Chiarella, Chair
Nancy D. Hessler
Cornelius J. Murphy
John W. Oberlies
Harvey J. Palmer
Arthur M. Richardson
INSIDER PARTICIPATION IN COMPENSATION, BENEFITS AND STOCK OPTIONS COMMITTEE
The Chief Executive Officer and the Chairman of the Board consult with the
Committee. They participate in discussions of the Committee and makes
recommendations to it, but they do not vote or otherwise participate in the
Committee's ultimate determinations. The Board of Directors believes that it is
wise and prudent to have the Chief Executive Officer and the Chairman of the
Board so participate in the operations of the Committee because their
evaluations and recommendations with respect to the compensation and benefits
paid to executives other than themselves are extremely valuable to the
Committee. However, the Chief Executive Officer neither participates nor is
otherwise involved in the deliberations of the Committee with respect to his own
compensation and benefits or those of the Chairman of the Board, and the
Chairman of the Board neither participates nor is otherwise involved in the
deliberations of the Committee with respect to his own compensation and
benefits.
12
<PAGE> 15
STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total
shareholder return on the Common Stock during the five-year period ended March
31, 1999 (based on the market price thereof and taking into account the 2-for-1
stock split in the form of a stock dividend paid by the Company on July 22,
1997), with the cumulative total return of companies on the Standard & Poor's
500 Index and the Standard & Poor's Technology 500 Index.
[STOCK PRICE PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
TRANSMATION S&P 500 INDEX TECHNOLOGY-500
----------- ------------- --------------
<S> <C> <C> <C> <C>
'Base Period Mar94' 100.00 100.00 100.00
'Mar95' 124.99 115.57 126.54
'Mar96' 150.02 152.67 170.85
'Mar97' 329.41 182.93 230.96
'Mar98' 385.27 270.74 349.06
'Mar99' 141.18 320.72 559.93
</TABLE>
ASSUMES $100 INVESTED ON MARCH 31, 1994 IN THE COMPANY'S COMMON STOCK, THE
COMPANIES COMPRISING THE STANDARD & POOR'S 500 INDEX AND THE COMPANIES
COMPRISING THE STANDARD & POOR'S TECHNOLOGY 500 INDEX.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will neither make nor endorse any predictions as to future
stock performance.
The Stock Price Performance Graph above shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under either such Act.
RELATED TRANSACTIONS
On April 3, 1996, the Company acquired Altek Industries Corp. ("Altek")
from E. Lee Garelick (now a director of the Company) and James N. Wurtz for a
total purchase price, negotiated at arms length, consisting of $1,700,000 in
cash, $3,100,000 in aggregate principal amount of unsecured notes, 300,000
shares of Common Stock and payment of Altek's bank debt of approximately
$806,000. Of such total purchase price, Mr. Garelick was paid $963,333 in cash,
an unsecured note in the principal amount of $1,756,666, bearing interest at 8%
per year, and an aggregate of 170,000 shares of Common Stock. The $1,416,666
principal balance of such note was paid to Mr. Garelick on or about April 1,
1998. In addition, pursuant to the Stock Purchase Agreement providing for the
Company's acquisition of Altek: (i) if at any time prior to October 3, 1998 the
market price of the
13
<PAGE> 16
Common Stock fell below $2.00 per share for 20 of 30 consecutive trading days,
Mr. Garelick had the right to require the Company to repurchase his Common Stock
at $2.00 per share, subject to certain conditions, including the prior consent
of the Company's lender; (ii) until April 3, 2006, Mr. Garelick has "piggy-back"
registration rights with respect to his shares of Common Stock, subject to
certain conditions; and (iii) subject to the prior consent of the Company's
lender, the Company has the right of first refusal to purchase, at an average
market price, shares of Common Stock which Mr. Garelick proposes to dispose of
(other than in certain transactions).
The Company and Mr. Garelick were also parties to a three-year employment
agreement, commencing April 3, 1996, providing for him to serve in a senior
executive capacity at an annual salary of $150,000. The employment agreement
expired, and Mr. Garelick retired from the Company's employ, on March 31, 1999.
Altek leases certain business premises from a corporation owned by the
adult children of Mr. Garelick and Mr. Wurtz. During Fiscal 1999, Altek paid the
lessor a rental of $64,404 per year, which the Company believes to be a market
rental rate, pursuant to a lease expiring in December 2000.
PROPOSAL 2:
AMENDMENT OF ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
FROM 15,000,000 SHARES TO 30,000,000 SHARES
BACKGROUND AND DESCRIPTION OF PROPOSED AMENDMENT
The Company's Articles of Incorporation, as amended, currently authorize
the Company to issue 15,000,000 shares of Common Stock. On June 16, 1999, the
Board of Directors unanimously approved and adopted, subject to approval and
adoption by the shareholders, an amendment to the Articles of Incorporation
which increases the number of shares of Common Stock that the Company has
authority to issue to 30,000,000 shares (the "Articles Amendment"). The Common
Stock's par value of $.50 per share would not be changed by the Articles
Amendment.
As of June 16, 1999, the Company had 5,945,129 shares of Common Stock
outstanding. As of that date, an additional 2,208,117 shares of Common Stock
were committed for issuance as follows: (i) 1,763,600 shares subject to
outstanding options or available for future option grants under the Option Plan;
(ii) 122,900 shares subject to stock option agreements between the Company and
Eric W. McInroy, Barry F. Wharity, John A. Misiaszek and James A. Searles (see
"EXECUTIVE COMPENSATION - STOCK OPTIONS" above); (iii) 108,705 shares available
for purchase under the Company's Employees' Stock Purchase Plan; (iv) 126,600
shares subject to outstanding warrants or available for future warrant grants
under the Company's Amended and Restated Directors' Warrant Plan; and (v) 86,312
shares available for awards under the Company's Directors' Stock Plan (see
"PROPOSAL 1: ELECTION OF DIRECTORS - DIRECTORS' COMPENSATION" above).
Accordingly, only 6,846,754 shares of Common Stock are currently authorized but
uncommitted and available for issuance for other purposes.
The Board of Directors believes that the authorization of additional shares
of Common Stock is in the best interests of the Company and its shareholders and
believes that it is advisable to authorize such shares and have them available
in connection with possible future transactions, including the payment of stock
dividends, stock splits and other stock rights; increasing stock ownership and
meeting part of the Company's future capital requirements through public
offerings or private placements of Common Stock; effecting corporate mergers,
acquisitions and strategic alliances; possible funding of new business plans;
the payment of stock-based compensation to provide incentives to management and
other employees; and other uses not presently determinable and as may be deemed
by the Board to be feasible and in the best interests of the Company. Any such
future action is, of course, subject to the Company's earnings and financial
condition as well as market conditions and other factors that the Board deems
relevant, and there can be no assurance that the Board will authorize any of
such actions in the future.
Aside from the Board's ongoing consideration of a stock dividend or stock
split, management's ongoing evaluation of acquisition possibilities, and the
Board's belief in the efficacy of stock-based compensation, and
14
<PAGE> 17
except for the shares of Common Stock intended or available for issuance as
described above, the Board has no present plans, agreements or understandings
for the issuance of any shares of Common Stock. However, the Board of Directors
considers that in the prudent operation of the Company, it is desirable to have
sufficient authorized but unissued shares of Common Stock available to allow the
Company to take prompt advantage of market or other conditions in connection
with possible financings or acquisitions, for stock dividends or distributions,
for grants of options and other stock rights, and for other proper corporate
purposes when such action is deemed necessary or desirable by the Board. The
Board of Directors believes that the availability of additional shares of Common
Stock for such purposes without delay or the necessity for a special meeting of
shareholders (except as may be required by applicable law or regulatory
authorities or by the rules of any stock exchange on which the Company's
securities may then be listed) will be beneficial to the Company by providing it
with the flexibility required to consider and respond to future business
opportunities and needs as they arise.
The Articles Amendment, if approved and adopted by the shareholders, would
result in over 21,846,000 shares of Common Stock authorized but uncommitted and
available for future issuance by action of the Board of Directors, without
further action by the shareholders (except as may be required by applicable law
or regulatory authorities or by the rules of any stock exchange on which the
Company's securities may then be listed), for such purposes as the Board may
then determine. None of these shares would be subject to any preemptive rights.
While the Board does not believe that this increased capitalization would
adversely affect the rights of existing shareholders, the future issuance of
shares of Common Stock might serve to dilute the interest of existing
shareholders. It is also possible that shares of Common Stock may be issued at a
time and under circumstances that may decrease the earnings per share, and
decrease the book value per share, of shares currently outstanding.
The Board of Directors is required by Ohio law to make any determination to
issue shares of Common Stock based upon its judgment as to the best interests of
the shareholders and the Company. Although the Board of Directors has no present
intention of doing so, it could issue shares of Common Stock (within the limits
imposed by applicable law) that could make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. When in the judgment of the Board of Directors
such action would be in the best interests of the shareholders and the Company,
the issuance of shares of Common Stock could be used to create voting or other
impediments or to discourage persons seeking to gain control of the Company, for
example, by the sale of Common Stock to purchasers favorable to the Board of
Directors. The existence of the additional authorized shares could have the
effect of discouraging unsolicited takeover attempts. The issuance of new shares
could also be used to dilute the stock ownership of a person or entity seeking
to obtain control of the Company should the Board of Directors consider the
action of such person or entity not to be in the best interests of the
shareholders and the Company.
If the Articles Amendment is approved and adopted by the shareholders at
the Meeting, it will become effective upon the filing thereof by the Ohio
Department of State. It is anticipated that such filing will occur within 30
days following the Meeting.
REQUIRED VOTE AND BOARD RECOMMENDATION
Ohio law requires that the Articles Amendment be approved and adopted by
the affirmative vote of at least two-thirds of the outstanding shares of Common
Stock entitled to vote at the Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF PROPOSAL 2 to approve and adopt the Amendment to the Articles of
Incorporation to increase the number of shares of Common Stock which the Company
has authority to issue from 15,000,000 to 30,000,000, and the persons named in
the enclosed proxy (unless otherwise instructed therein) will vote such proxies
FOR Proposal 2.
15
<PAGE> 18
PROPOSAL 3:
AMENDMENT OF CODE OF REGULATIONS
TO PERMIT THE NUMBER OF DIRECTORS TO BE
FIXED OR CHANGED BY THE BOARD OF DIRECTORS
AS WELL AS BY THE SHAREHOLDERS
BACKGROUND AND DESCRIPTION OF PROPOSED AMENDMENT
Article II, Section 1 of the Company's Code of Regulations (or by-laws),
dealing with the size of the Company's Board of Directors, currently provides
that the Board will consist of such number of directors, not less than three nor
more than 12, as may be fixed from time to time by a majority vote of the shares
present at a meeting of shareholders. On June 16, 1999, the Board of Directors
unanimously approved and adopted, subject to approval and adoption by the
shareholders, an amendment to Article II, Section 1 of the Code of Regulations
which permits the number of directors to be fixed or changed by a majority vote
of the Board of Directors as well as by the shareholders (the "Code Amendment").
The Code Amendment would not eliminate or change the existing power of the
shareholders to fix or change the number of directors, nor would it change the
requirement that the Board have no fewer than three nor more than 12 directors.
The full text of the Code Amendment is as follows:
"ARTICLE II
"BOARD OF DIRECTORS
"SECTION 1. Number. The number of directors shall be not less than
three (3) nor more than twelve (12), as may be fixed or changed, from time
to time, by resolution duly adopted by either (a) a majority of the shares
which are represented at any annual meeting or special meeting called for
that purpose provided a quorum is present, or (b) the vote of a majority of
the Board of Directors. No reduction in the number of directors shall have
the effect of removing any director prior to the expiration of his term of
office."
The Board of Directors believes that it is in the best interests of the
Company to permit the Board, as well as the shareholders, to change the size of
the Board. The Board of Directors believes that the Code Amendment will afford
the Board flexibility to adjust the size of its membership as appropriate in the
circumstances in the future, without the necessity of waiting until the next
annual meeting of shareholders, or incurring the expense of calling a special
meeting of shareholders, in order to do so. For example, the Board may determine
that a smaller Board of Directors would facilitate communications among the
directors and increase the efficiency of the Board, or that a larger Board would
increase diversity of experience and points of view on the Board. The Board has
noted that many public companies have by-laws provisions permitting the Board to
change the size of the Board without shareholder action, and believes that the
shareholders' interests are served by the provisions of the Code Amendment which
fix the minimum and maximum number of directors and preserve the shareholders'
right to fix or change the number of directors as well.
REQUIRED VOTE AND BOARD RECOMMENDATION
The Company's Code of Regulations requires that the Code Amendment be
approved and adopted by the affirmative vote of at least 75% of the outstanding
shares of Common Stock entitled to vote at the Meeting. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3 to approve and adopt the Amendment to
the Code of Regulations to permit the number of directors of the Company to be
fixed or changed by the Board of Directors as well as by the shareholders, and
the persons named in the enclosed proxy (unless otherwise instructed therein)
will vote such proxies FOR Proposal 3.
16
<PAGE> 19
PROPOSAL 4:
AMENDMENT OF STOCK OPTION PLAN
TO PERMIT OPTION EXERCISES BY PERSONS WHO
ARE NO LONGER EMPLOYEES BUT CONTINUE TO
SERVE AS NON-EMPLOYEE DIRECTORS
BACKGROUND OF PLAN AND DESCRIPTION OF PROPOSED AMENDMENT
The Transmation, Inc. Amended and Restated 1993 Stock Option Plan (the
"Option Plan") was initially approved by the shareholders at the 1993 Annual
Meeting, and subsequently amended and restated as approved by the shareholders
or by the Board at various times. On June 16, 1999, the Board of Directors
approved an amendment to the Option Plan, adding a new Section 13(d) to the
Option Plan as described herein (the "Option Plan Amendment"), which is being
submitted to the shareholders for their approval and ratification at the Meeting
in accordance with the terms of the Option Plan.
The Option Plan currently provides that an option granted thereunder may be
exercised only while the option grantee is an employee of the Company and has
been an employee continuously since the option grant, and for stated periods
after death or termination of employment (see "DESCRIPTION OF OPTION PLAN AS
PROPOSED TO BE AMENDED--EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT" later in
this Proposal 4). Thereafter, the option terminates.
The Option Plan Amendment would instead treat an option grantee's
continuation of service, after employment termination, as a non-employee member
of the Board of Directors as continuation of an employment relationship with the
Company for the purpose of option exercisability. Thus, a person who is no
longer an employee of the Company but continues to serve as a non-employee
director would be able to exercise options previously granted to him under the
Option Plan during the continuation of his service on the Board, and for the
same stated periods after death or termination of director service (see
"DESCRIPTION OF OPTION PLAN AS PROPOSED TO BE AMENDED--EFFECT OF DEATH OR
TERMINATION OF EMPLOYMENT" later in this Proposal 4). However, any "Incentive
Stock Options" (as defined below) held by such person upon termination of his
full-time employment would automatically become "Nonstatutory Stock Options" (as
defined below) on the date on which his options would have otherwise terminated.
See "DESCRIPTION OF OPTION PLAN AS PROPOSED TO BE AMENDED--NATURE OF OPTIONS"
later in this Proposal 4.
The full text of the Option Plan Amendment is as follows:
"13. TERMINATION OF EMPLOYMENT.
"(D) For purposes of Section 12 [pertaining to the death of an option
grantee] and this Section 13 [pertaining to termination of employment], an
employment relationship shall be treated as continuing during the period
(if any) when a grantee is no longer an employee of the Company but
continues to serve as a non-employee member of the Board of Directors of
the Company; provided, however, that any Incentive Stock Options held by
such grantee on the date on which his full-time employment by the Company
terminates shall automatically become Nonstatutory Stock Options on the
date on which his Options would have terminated had he not continued to
serve as a non-employee member of the Board of Directors. Notwithstanding
the foregoing, a member of the Board of Directors of the Company who is not
a full-time employee of the Company shall not be eligible to receive any
Option grants."
The Option Plan is designed to provide incentives in the form of stock
options to eligible employees of the Company and its subsidiaries, and is
intended to motivate employees to excel in their work, influence employees to
align their prospects with that of the shareholders, and serve the Company as a
compensation vehicle that will help to attract, hire and retain superior
employees.
The Board of Directors believes that the Option Plan Amendment is in the
best interests of the Company and its shareholders because employees who
terminate their full-time employment with the Company but continue to serve the
Company as non-employee directors continue to provide important and valuable
services to the Company, albeit not as employees, and the Option Plan Amendment
would provide an incentive to continued Board service by such persons. The Board
believes that continued exercisability of previously granted options by
17
<PAGE> 20
such persons may facilitate succession planning among senior executives. The
Board further believes that the Option Plan Amendment is consistent with the
underlying purposes of the Option Plan, because it does not make option grants
available to non-employee directors, but simply makes previously granted options
continue to be exercisable by non-employee directors after termination of their
full-time employment with the Company.
As of the date hereof, the only persons who could benefit from the Option
Plan Amendment are Robert G. Klimasewski and Eric W. McInroy, who are the only
full-time employees of the Company who also serve on the Board of Directors. Mr.
Klimasewski currently holds exercisable and unexercisable options to purchase an
aggregate of 432,000 shares, and Mr. McInroy currently holds exercisable and
unexercisable options to purchase an aggregate of 254,500 shares. See "EXECUTIVE
COMPENSATION -- STOCK OPTIONS" above.
DESCRIPTION OF OPTION PLAN AS PROPOSED TO BE AMENDED
The following description of the Option Plan is qualified in its entirety
by reference to the full text of the Option Plan. In view of the comprehensive
summary of the Option Plan that follows, the Company believes that including the
full text of the Option Plan as a part of this proxy statement will not
substantially further enhance the shareholders' understanding of it and
therefore has elected not to include it herein. Any shareholder that wishes a
copy of the Option Plan may request one by writing to Transmation, Inc., 10
Vantage Point Drive, Rochester, New York 14624 (Attention: John A. Misiaszek,
Secretary).
SHARES AVAILABLE. The Option Plan provides for the granting of stock
options to purchase up to 1,900,000 shares of Common Stock (subject to
adjustment as described below). If any option granted under the Option Plan
expires or terminates without having been exercised in full, shares subject to
the unexercised portion of such option may again be available for other option
grants under the Option Plan.
NATURE OF OPTIONS. The Company may grant under the Option Plan both
incentive stock options within the meaning of section 422 of the Internal
Revenue Code ("Incentive Stock Options") and stock options that do not qualify
for treatment as Incentive Stock Options ("Nonstatutory Stock Options"). See
"DESCRIPTION OF OPTION PLAN AS PROPOSED TO BE AMENDED--FEDERAL INCOME TAX
CONSEQUENCES" later in this Proposal 4. The Company receives no consideration
for the grant of any options under the Option Plan.
Under the Option Plan Amendment, although an employment relationship would
be treated as continuing during the period (if any) when a grantee is no longer
an employee of the Company but continues to serve as a non-employee member of
the Board of Directors, any Incentive Stock Options held by such grantee on the
date on which his full-time employment by the Company terminates would
automatically become Nonstatutory Stock Options on the date on which his options
would have terminated had he not continued to serve as a non-employee member of
the Board.
TERM. The Option Plan will continue in effect until all shares of Common
Stock subject to issuance under options granted thereunder have been purchased
or expire unexercised, provided that no options may be granted under the Option
Plan after June 14, 2003.
ADMINISTRATION. The Option Plan is administered by the Compensation,
Benefits and Stock Options Committee of the Board of Directors (the
"Committee"). Each member of the Committee must be a disinterested director
within the meaning of Rule 16b-3 promulgated under the Exchange Act. Subject to
the express provisions of the Option Plan, the Committee has authority in its
discretion and without limitation (i) to determine the recipients of options,
whether an option is intended to be an Incentive Stock Option or Nonstatutory
Stock Option, the times of option grants, the number of shares subject to each
option, the exercise price of each option, the term of each option, the date
when each option becomes exercisable, and the vesting schedule of each option,
and (ii) to make all other determinations necessary or advisable for
administering the Option Plan, which determinations will be final and binding on
all persons.
ELIGIBILITY. Options under the Option Plan may be granted to all full-time
employees of the Company, as the Committee may select from time to time,
including those who are also officers or directors of the Company. The Option
Plan Amendment would make no change to this requirement that options under the
Option Plan may only be granted to full-time employees of the Company. As of
June 16, 1999, the Company had approximately 418 full-time employees eligible to
participate in the Option Plan.
18
<PAGE> 21
VESTING OF OPTIONS. Subject to prior expiration (as described below),
options granted under the Option Plan vest and become exercisable over a
four-year period from the date of grant, and only if the market price of the
Common Stock reaches certain specified levels for 20 of 30 consecutive days, as
follows:
FOR OPTIONS GRANTED DURING THE 1995 CALENDAR YEAR:
<TABLE>
<CAPTION>
IF THE MARKET VALUE THE OPTION WILL BE
OF A SHARE OF COMMON EXERCISABLE
STOCK EQUALS AT LEAST AFTER TO THE EXTENT OF
- --------------------- --------------- ------------------
<C> <S> <C>
$ 3.50 the grant date 25%
$ 6.00 January 1, 1996 25%
$ 8.00 January 1, 1997 25%
$10.00 January 1, 1998 25%
</TABLE>
FOR OPTIONS GRANTED DURING THE 1996 CALENDAR YEAR:
<TABLE>
<CAPTION>
IF THE MARKET VALUE THE OPTION WILL BE
OF A SHARE OF COMMON EXERCISABLE
STOCK EQUALS AT LEAST AFTER TO THE EXTENT OF
- --------------------- --------------- ------------------
<C> <S> <C>
$ 6.00 the grant date 25%
$ 8.00 January 1, 1997 25%
$10.00 January 1, 1998 25%
$10.00 January 1, 1999 25%
</TABLE>
FOR OPTIONS GRANTED DURING THE 1997 CALENDAR YEAR:
<TABLE>
<CAPTION>
IF THE MARKET VALUE THE OPTION WILL BE
OF A SHARE OF COMMON EXERCISABLE
STOCK EQUALS AT LEAST AFTER TO THE EXTENT OF
- --------------------- --------------- ------------------
<C> <S> <C>
$ 8.00 the grant date 25%
$10.00 January 1, 1998 25%
$10.00 January 1, 1999 25%
$10.00 January 1, 2000 25%
</TABLE>
FOR OPTIONS GRANTED DURING THE 1998 CALENDAR YEAR:
<TABLE>
<CAPTION>
IF THE MARKET VALUE THE OPTION WILL BE
OF A SHARE OF COMMON EXERCISABLE
STOCK EQUALS AT LEAST AFTER TO THE EXTENT OF
- --------------------- --------------- ------------------
<C> <S> <C>
$10.00 the grant date 25%
$12.00 January 1, 1999 25%
$15.00 January 1, 2000 25%
$19.00 January 1, 2001 25%
</TABLE>
FOR OPTIONS GRANTED DURING THE 1999 CALENDAR YEAR:
<TABLE>
<CAPTION>
IF THE MARKET VALUE THE OPTION WILL BE
OF A SHARE OF COMMON EXERCISABLE
STOCK EQUALS AT LEAST AFTER TO THE EXTENT OF
- --------------------- --------------- ------------------
<C> <S> <C>
$ 7.00 the grant date 25%
$11.00 January 1, 2000 25%
$15.00 January 1, 2001 25%
$19.00 January 1, 2002 25%
</TABLE>
19
<PAGE> 22
However, if and to the extent any of the market value requirements
described above are not satisfied, the balance of each option granted under the
Option Plan nevertheless becomes exercisable no later than the fourth
anniversary of its grant date.
TERMS AND CONDITIONS OF OPTIONS; OPTION PRICE. Except as described below,
the minimum option price of any option granted under the Option Plan is the
market value of the Common Stock on the grant date of the option, and the term
of the option, which is determined by the Committee, may not exceed ten years
from the grant date. On June 16, 1999, the market value of the Common Stock
(reflected by the last sale price thereof as reported by The Nasdaq Stock
Market) was $3.39 per share.
Notwithstanding the foregoing, in the case of an Incentive Stock Option
granted to any person owning stock possessing more than 10% of the voting power
of the Company, the option price must be at least 110% of the market value of
the Common Stock on the grant date, and the term of the option may not exceed
five years from the grant date. In addition, the aggregate fair market value
(determined as of the grant date) of the shares with respect to which Incentive
Stock Options are exercisable for the first time by any grantee during any
calendar year may not exceed $100,000.
An optionee may pay for the shares subject to the option by one or any
combination of the following methods, as determined by the Committee on the
option grant date: (i) in cash; (ii) by delivery of shares of Common Stock
(valued at its then market value) already owned by the optionee; or (iii) by the
Company withholding shares of Common Stock (valued at its then market value)
that would otherwise be delivered to the optionee upon such exercise.
EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT. In the event that an option
grantee dies while he is an employee of the Company, or within three months
after termination of employment, any options then outstanding may be exercised
by his estate or his beneficiaries within one year thereafter. During the
lifetime of a grantee, an option granted under the Plan is exercisable only
while he is an employee of the Company or its subsidiaries and has been an
employee continuously since the option grant date, or (i) within one year after
termination of employment in the case of the grantee's permanent and total
disability (as defined by the Option Plan) or (ii) within three months after
termination of his employment for any other reason. Any option that is
exercisable after death or termination of employment, as described above, is
exercisable only to the extent that the grantee would have otherwise been
entitled to exercise the option on the date of his death or employment
termination, as the case may be.
The Option Plan Amendment would treat an employment relationship as
continuing, for purposes of option exercisability, during the period (if any)
when a grantee is no longer an employee of the Company but continues to serve as
a non-employee member of the Board of Directors of the Company.
NON-TRANSFERABILITY. During the lifetime of an optionee, an option may be
exercised only by him, and options issued under the Option Plan may not be
transferred, whether voluntarily or otherwise. An option that is exercisable
after an optionee's death, as provided by the Option Plan, may be exercised by
the optionee's estate or by the beneficiaries under his will or the laws of
descent and distribution.
VESTING ACCELERATION. Under the Option Plan, all outstanding options not
then exercisable become immediately exercisable in full upon the occurrence of
certain defined events constituting a change in control of the Company.
ADJUSTMENTS. In the event of a merger, consolidation, recapitalization,
stock split or similar event, the aggregate number and kind of shares available
for options under the Option Plan, and the number and kind of shares covered by
each outstanding option and the price per share thereof, will be appropriately
adjusted by the Committee.
AMENDMENTS. The Board of Directors, without further shareholder approval,
may at any time further amend the Option Plan, provided that (except for
amendments made pursuant to the adjustment provisions described above), no
amendment may be made without the approval of the shareholders which would: (i)
increase the maximum number of shares that may be issued; (ii) reduce the
minimum option exercise price; (iii) change the class of individuals eligible to
receive options; (iv) extend the period for granting or exercising options;
20
<PAGE> 23
(v) reduce the market price requirements for option vesting; or (vi) otherwise
materially increase the benefits accruing to participants under the Option Plan.
In the event that any amendment to the Option Plan so requires approval by the
shareholders, then prior to such approval the Committee may grant conditional
options, which may not be exercised, transferred or encumbered prior to such
approval, and which will be automatically cancelled if the shareholders fail to
approve such amendment at their next meeting.
SECURITIES ACT REGISTRATION, ETC. The shares of Common Stock issuable upon
exercise of options granted under the Option Plan are registered under an
effective Registration Statement on Form S-8. The Option Plan is intended to
comply with Rule 16b-3 under the Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES. The following summarizes the federal
income tax consequences to participants and the Company of the grant and
exercise of Incentive Stock Options and Nonstatutory Stock Options under the
Option Plan. This discussion is merely a summary and does not purport to be a
complete description of the federal income tax consequences of the Option Plan.
This description does not cover state and local tax treatment of participation
in the Option Plan.
Incentive Stock Options: An employee who receives an Incentive Stock Option
under the Option Plan does not recognize any taxable income upon the grant of
such option. Similarly, the exercise of an Incentive Stock Option generally does
not give rise to federal income tax to the employee, provided that (i) the
federal "alternative minimum tax," which depends on the employee's particular
tax situation, does not apply, and (ii) the employee is employed by the Company
from the grant date of the option until three months prior to the exercise
thereof, except where such employment terminates by reason of disability (where
the three month period is extended to one year) or death (where this requirement
does not apply). If an employee exercises an Incentive Stock Option after these
requisite periods, the Incentive Stock Option will be treated as a Nonstatutory
Stock Option and will be subject to the rules described immediately below.
If, after exercising an Incentive Stock Option, an employee disposes of the
shares so acquired more than two years from the grant date of the option and
more than one year from the date of acquisition of the shares upon the exercise
of the option (the "applicable holding period"), the employee generally will
recognize a capital gain or loss equal to the difference, if any, between the
amount received for the shares and the exercise price. If, however, an employee
does not hold the shares so acquired for the applicable holding
period -- thereby making a "disqualifying disposition" -- the employee would
recognize ordinary income equal to the excess of the fair market value of the
shares at the time the Incentive Stock Option was exercised over the exercise
price; and the balance of any income received at the time of the disqualifying
disposition would be capital gain (provided the employee held such shares as a
capital asset at such time). If the disqualifying disposition is a sale or
exchange that would permit a loss to be recognized under the Internal Revenue
Code (were a loss in fact to be realized), and the sales proceeds are less than
the fair market value of the shares on the date of exercise, the employee's
ordinary income therefrom would be limited to the gain (if any) realized on the
sale.
Nonstatutory Stock Options: An individual who receives a grant of a
Nonstatutory Stock Option will not recognize any taxable income upon the grant.
However, the individual generally will recognize ordinary income upon exercise
of a Nonstatutory Stock Option in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price.
As a result of Section 16(b) of the Exchange Act, under certain
circumstances, the timing of income recognition may be deferred for any
individual who is an officer or director of the Company or the beneficial owner
of more than 10% of any class of equity securities of the Company.
Consequences to the Company: The Company will not be allowed a federal
income tax deduction upon the grant or exercise of an Incentive Stock Option or
the disposition, after the applicable holding period, of the shares acquired
upon exercise of an Incentive Stock Option. In the event of a disqualifying
disposition of shares acquired upon exercise of an Incentive Stock Option, the
Company generally will be entitled to a deduction in an amount equal to the
ordinary income included by the employee, provided that such amount constitutes
an ordinary and necessary business expense to the Company and is reasonable and
the limitations of Sections 280G and 162(m) of the Internal Revenue Code do not
apply.
21
<PAGE> 24
A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the employee with respect to
his Nonstatutory Stock Option, provided that such amount constitutes an ordinary
and necessary business expense to the Company and is reasonable and the
limitations of Sections 280G and 162(m) of the Internal Revenue Code do not
apply.
OPTION PLAN BENEFITS
The following table sets forth the amount and dollar value of all options
granted under the Option Plan during Fiscal 1999 to the Named Executives and to
certain groups of individuals. Due to its nature, had the Option Plan Amendment
been in effect during Fiscal 1999, it would have had no effect on any of the
information set forth below.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF UNITS
----------------- ------------------- ----------------
<S> <C> <C>
ERIC W. MCINROY 0 35,000
President and
Chief Executive Officer
ROBERT G. KLIMASEWSKI 0 20,000
Chairman of the Board
BARRY F. WHARITY 0 50,000
President, Transcat Division
JOHN A. MISIASZEK 0 0
Vice President-Finance
ALL EXECUTIVE OFFICERS 0 105,000
ALL DIRECTORS WHO ARE NOT 0 0
EXECUTIVE OFFICERS
ALL EMPLOYEES WHO ARE NOT 0 78,760
EXECUTIVE OFFICERS OR DIRECTORS
</TABLE>
- ---------------
(1) The options were granted on various dates between April 21, 1998 and January
19, 1999 and have exercise prices ranging from $3.75 to $7.25 per share. The
exercise price of each option exceeded the market value of the Common Stock
on June 16, 1999 ($3.39 per share).
REQUIRED VOTE AND BOARD RECOMMENDATION
The affirmative vote of at least a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting is required for the approval and
ratification of the Option Plan Amendment. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE IN FAVOR OF PROPOSAL 4 to approve and ratify the Option Plan Amendment to
permit exercise of previously granted options by persons who are no longer
employees of the Company but continue to serve as non-employee directors of the
Company, and the persons named in the enclosed proxy (unless otherwise
instructed therein) will vote such proxies FOR Proposal 4.
PROPOSAL 5:
AMENDMENT OF DIRECTORS' WARRANT PLAN
TO PERMIT WARRANT EXERCISES FOR
90 DAYS AFTER CESSATION OF SERVICE
BACKGROUND OF PLAN AND DESCRIPTION OF PROPOSED AMENDMENT
The Transmation, Inc. Amended and Restated Directors' Warrant Plan (the
"Warrant Plan") was initially approved by the shareholders at the 1984 Annual
Meeting, and subsequently amended and restated as approved by the shareholders
or by the Board at various times. On January 19, 1999, the Board of Directors
approved an amendment to Section 7(a) of the Warrant Plan, as described herein
(the "Warrant Plan Amendment"), which is
22
<PAGE> 25
being submitted to the shareholders for their approval and ratification at the
Meeting in accordance with the terms of the Warrant Plan.
The Warrant Plan currently provides that upon a participating director's
cessation of service as a member of the Board of Directors for any reason other
than his death, all outstanding warrants then held by him expire on the date of
such cessation of service. The Warrant Plan Amendment would instead permit the
exercise of outstanding warrants for a period of 90 days after cessation of
service as a director, whereupon all outstanding warrants held by the director
would expire. In the case of a director's death while serving as a member of the
Board of Directors, the Warrant Plan now permits exercise of the director's then
outstanding warrants for a period of 90 days after the date of death, and this
provision would not be changed by the Warrant Plan Amendment. If approved by the
shareholders, the Warrant Plan Amendment will be effective retroactively to
February 1, 1999, as provided in the Board resolutions approving the Warrant
Plan Amendment, but no director has ceased service as a director between that
date and the date hereof.
The full text of the Warrant Plan Amendment is as follows:
"7. EARLY EXPIRATION OF WARRANTS.
"(a) CESSATION OF SERVICE. Upon a Participating Director's cessation
of service as a member of the Board of Directors for any reason other than
his death, only those Warrants (or portions thereof) that have vested by
the date of such cessation of service shall thereafter be exercisable by
the Participating Director or his legal representative, and such Warrants
must be exercised within 90 days after the date of such cessation of
service (but in no event after the expiration of the Warrant), whereupon
all such Warrants shall expire and be of no further force or effect."
The Warrant Plan is designed to attract, retain and compensate
highly-qualified individuals, who are not employed by the Company or any of its
subsidiaries, for service on the Company's Board of Directors and to allow them
to increase their ownership of the Company's Common Stock. The Warrant Plan
Amendment is intended to provide the Company's outside directors with rights
comparable to those available to employees under the Option Plan, which permits
the exercise of options for at least three months following termination of
employment with the Company.
DESCRIPTION OF WARRANT PLAN AS PROPOSED TO BE AMENDED
The following description of the Warrant Plan is qualified in its entirety
by reference to the full text of the Warrant Plan. In view of the comprehensive
summary of the Warrant Plan that follows, the Company believes that including
the full text of the Warrant Plan as a part of this proxy statement will not
substantially further enhance the shareholders' understanding of it and
therefore has elected not to include it herein. Any shareholder that wishes a
copy of the Warrant Plan may request one by writing to Transmation, Inc., 10
Vantage Point Drive, Rochester, New York 14624 (Attention: John A. Misiaszek,
Secretary).
ELIGIBILITY. Each member of the Company's Board of Directors who is not
employed by the Company or any of its subsidiaries and who is a member of the
Board of Directors on a "Grant Date" (as defined below) is eligible to
participate in the Warrant Plan. If a participating director subsequently
becomes employed by the Company or any subsidiary, warrants previously granted
to him pursuant to the Warrant Plan continue in full force and effect while he
remains a member of the Board, but he is not entitled to further grants under
the Warrant Plan. As of June 25, 1999, the Company had seven directors who were
not employed by the Company or any of its subsidiaries and who were therefore
eligible to participate in the Warrant Plan.
SHARES AVAILABLE FOR GRANTS. Under the Warrant Plan, up to 200,000 shares
of Common Stock are issuable upon the exercise of warrants granted thereunder.
Shares of Common Stock subject to warrants may be authorized but unissued shares
or previously issued shares reacquired by the Company. Shares subject to
issuance upon exercise of warrants will continue to be available for issuance if
the warrants for such shares are surrendered or lapse prior to exercise or
otherwise cease to be exercisable.
WARRANT GRANTS. The Warrant Plan provides for automatic, non-discretionary
grants to each participating director of warrants to purchase 4,000 shares of
Common Stock as of the day next following the conclusion of
23
<PAGE> 26
each Annual Meeting of the Company's shareholders (each a "Grant Date") until
all shares available for grants under the Warrant Plan are exhausted. The
Warrant Plan contains no limit on the aggregate number of warrants issuable to
any participating director. A participating director may elect to decline any
warrant grant, provided that the Company may not pay anything of value to such
director in lieu of the warrant grant. All warrants granted under the Warrant
Plan expire on the fifth anniversary of their Grant Date. The Company receives
no consideration for the grant of any warrants under the Warrant Plan.
EXERCISE PRICE. Each warrant is exercisable to purchase shares of Common
Stock at the market value per share of the Common Stock on the Grant Date. On
June 16, 1999, the market value of the Common Stock (reflected by the last sale
price thereof as reported by The Nasdaq Stock Market) was $3.39 per share.
VESTING OF WARRANTS. Subject to prior expiration (as described below),
warrants granted under the Warrant Plan vest and become exercisable over a
four-year period if the market price of the Common Stock reaches certain
specified levels. These levels are substantially similar to those fixed by the
Option Plan for stock options granted to employees during the same calendar
year. Such levels are set forth under "PROPOSAL 4--DESCRIPTION OF OPTION PLAN AS
PROPOSED TO BE AMENDED - VESTING OF OPTIONS" above.
However, if and to the extent any of such market value requirements are not
satisfied, the balance of each warrant granted under the Warrant Plan
nevertheless becomes exercisable no later than the fourth anniversary of its
Grant Date.
EARLY EXPIRATION OF WARRANTS. Upon the death of a participating director
while serving on the Board of Directors, his unexercised warrants are
exercisable by his legal representative for 90 days following the date of his
death, but only to the extent that the warrants had vested on the date of death
(and in no event following expiration of the warrant).
The Warrant Plan currently provides that if a participating director ceases
to serve on the Board of Directors for any reason other than his death, all
unexercised warrants held by him expire on the date of cessation of service.
Under the Warrant Plan Amendment, outstanding unexercised warrants would be
exercisable by the director for 90 days after cessation of service, but only to
the extent that the warrants had vested on the date of cessation of service (and
in no event following expiration of the warrant).
NON-TRANSFERABILITY. Warrants granted under the Warrant Plan are not
transferable other than by will or the laws of descent and distribution.
VESTING ACCELERATION. Under the Warrant Plan, all outstanding warrants not
then exercisable become immediately exercisable in full upon the occurrence of
certain defined events constituting a change in control of the Company.
ADJUSTMENTS. In the event of a merger, consolidation, recapitalization,
stock split or similar event, the aggregate number and kind of shares available
for warrant grants under the Warrant Plan, and the number and kind of shares
covered by each outstanding warrant and the price per share thereof, will be
appropriately adjusted.
ADMINISTRATION AND AMENDMENT. The Warrant Plan is administered by the Board
of Directors. The Warrant Plan may be terminated or amended by the Board of
Directors provided that any amendment that changes the timing of the grant of
warrants, the eligibility requirements for participating directors, the method
of determining the exercise price of warrants, the vesting schedule of warrants,
or the number of shares subject to warrants, may not be made more frequently
than once each six months unless otherwise necessary to comply with the Internal
Revenue Code or the Employee Retirement Income Security Act. In addition, the
shareholders must approve any amendment to the Warrant Plan that would
materially increase the benefits accruing to participating directors, increase
(other than pursuant to the adjustment provisions described above) the number of
shares that may be issued thereunder, or modify the requirements as to
eligibility for participation in the Warrant Plan.
SECURITIES ACT REGISTRATION, ETC. The shares of Common Stock issuable upon
exercise of warrants granted under the Warrant Plan are registered under an
effective Registration Statement on Form S-8. The Warrant Plan is intended to
comply with Rule 16b-3 under the Exchange Act.
24
<PAGE> 27
WARRANT PLAN BENEFITS
The following table sets forth the amount and dollar value of the warrants
granted under the Warrant Plan during Fiscal 1999 to the Named Executives and to
certain groups of individuals. Due to its nature, had the Warrant Plan Amendment
been in effect during Fiscal 1999, it would have had no effect on any of the
information set forth below.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
----------------- ---------------- ----------------
<S> <C> <C>
ERIC W. MCINROY 0 0
President and
Chief Executive Officer
ROBERT G. KLIMASEWSKI 0 0
Chairman of the Board
BARRY F. WHARITY 0 0
President, Transcat Division
JOHN A. MISIASZEK 0 0
Vice President-Finance
ALL EXECUTIVE OFFICERS 0 0
ALL DIRECTORS WHO ARE NOT
EXECUTIVE OFFICERS 0 24,000
ALL EMPLOYEES WHO ARE NOT
EXECUTIVE OFFICERS OR DIRECTORS 0 0
</TABLE>
- ---------------
(1) The exercise price of each warrant ($3.75 per share, that being the market
value of the Common Stock on August 19, 1998, the grant date of each
warrant) exceeded the market value of the Common Stock on June 16, 1999
($3.39 per share).
REQUIRED VOTE AND BOARD RECOMMENDATION
The affirmative vote of at least a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting is required for the approval and
ratification of the Warrant Plan Amendment. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE IN FAVOR OF PROPOSAL 5 to approve and ratify the Warrant Plan Amendment to
permit the exercise of warrants for a period of 90 days after cessation of
service as a director of the Company, and the persons named in the enclosed
proxy (unless otherwise instructed therein) will vote such proxies FOR Proposal
5.
PROPOSAL 6:
SELECTION OF INDEPENDENT AUDITORS
The firm of PricewaterhouseCoopers LLP, certified public accountants,
served as the independent auditors of the Company for Fiscal 1999. In addition
to the audit of the Fiscal 1999 financial statements, the Company engaged
PricewaterhouseCoopers LLP to perform certain services for which it was paid
professional fees. The Audit Committee of the Board of Directors considered the
possible effect of such professional services on the independence of
PricewaterhouseCoopers LLP and approved such services prior to their being
rendered.
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending March 31, 2000. This
selection will be presented to the shareholders for their approval at the
Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 6 to
approve and ratify this selection, and the persons named in the enclosed proxy
(unless otherwise instructed therein) will vote such proxies FOR Proposal 6. If
the shareholders do not approve this selection, the Board of Directors will
reconsider its choice.
25
<PAGE> 28
The Company has been advised by PricewaterhouseCoopers LLP that a
representative will be present at the Meeting and will be available to respond
to appropriate questions. In addition, the Company intends to give such
representative an opportunity to make any statements if he or she should so
desire.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order for any shareholder proposal to be included in the Company's proxy
statement to be issued in connection with the 2000 Annual Meeting of
Shareholders, the Company must receive such proposal at its principal executive
office (Transmation, Inc., 10 Vantage Point Drive, Rochester, New York 14624,
Attention: John A. Misiaszek, Secretary), no later than March 13, 2000.
OTHER MATTERS
As of the date hereof, the Board of Directors does not know of any other
matters that are to be presented for action at the Meeting. Should any other
matter come before the Meeting, however, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies with respect to such
matter in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
John A. Misiaszek
Secretary
Dated: July 9, 1999
26
<PAGE> 29
Appendix A
TRANSMATION, INC.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
INCLUDING ALL AMENDMENTS THROUGH AUGUST 19, 1997 AND
ALL ADJUSTMENTS (RETROACTIVELY APPLIED) AS OF JULY 22, 1997
1. PURPOSE.
The Transmation, Inc. 1993 Stock Option Plan, effective June 15, 1993,
amended and restated effective January 17, 1995, and again amended and restated
effective June 6, 1995 (the "Plan"), is designed to create an incentive for
executive and other employees of Transmation, Inc., an Ohio corporation (the
"Company"), and its subsidiaries, to remain in the employ of the Company and its
subsidiaries and to contribute to their success by providing the opportunity for
stock ownership. The Company may grant under the Plan both incentive stock
options within the meaning of Section 422 of the Internal Revenue Code
("Incentive Stock Options") and stock options that do not qualify for treatment
as Incentive Stock Options ("Nonstatutory Stock Options"). Unless expressly
provided to the contrary, all references herein to "Options" include both
Incentive Stock Options and Nonstatutory Stock Options.
2. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Stock Option
Committee") comprised of the members of the Compensation and Benefits Committee
of the Board of Directors of the Company (the "Compensation and Benefits
Committee"), which shall be comprised of two or more members of the Board of
Directors of the Company. The Stock Option Committee shall be a subcommittee of
the Compensation and Benefits Committee.
(b) Each member of the Stock Option Committee and each member of the
Compensation and Benefits Committee shall be a disinterested director of the
Company within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and at no time shall a
director serve on the Stock Option Committee or the Compensation and Benefits
Committee if he has been granted or awarded Options under the Plan at any time
during the one year prior to his service on such Committee, or during such
service.
(c) Subject to the express provisions of the Plan (including without
limitation the provisions of Section 8(b)), the Stock Option Committee shall
have the authority, in its discretion and without limitation:
(i) to determine the individuals to whom Options are granted,
whether an Option is intended to be an Incentive Stock Option or a
Nonstatutory Stock Option, the times when such individuals shall be
granted Options, the number of shares to be subject to each Option, the
term of each Option, the date when each Option shall become exercisable,
whether an Option shall be exercisable in whole or in part in
installments,
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<PAGE> 30
the number of shares to be subject to each installment, the date each
installment shall become exercisable, the term of each installment, and
the option price of each Option; and
(ii) to make all other determinations necessary or advisable for
administering the Plan;
provided, however, that notwithstanding any other provision of the Plan to the
contrary, all actions of the Stock Option Committee, including without
limitation the granting of Options under the Plan, shall be subject to the
approval of the Compensation and Benefits Committee, and any action taken by the
Stock Option Committee without such approval shall be null and void and of no
effect.
(d) The Stock Option Committee shall act by majority vote. Subject to
the proviso contained in Section 2(c), the decision of the Stock Option
Committee on any question concerning or involving the interpretation or
administration of the Plan shall, as between the Company and Option holders, be
final and conclusive. The Stock Option Committee and the Compensation and
Benefits Committee may consult with counsel, who may be counsel for the Company,
and shall not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
3. ELIGIBILITY.
(a) Participants in the Plan shall be selected by the Stock Option
Committee from among the full-time employees of the Company, including those who
are also directors or officers thereof. An employee on leave of absence may be
considered as still in the employ of the Company for purposes of eligibility for
participation in the Plan. All references in this Plan to employees of the
Company shall include employees of any parent or subsidiary of the Company, as
those terms are defined in Section 424 of the Internal Revenue Code.
(b) The right of the Company to terminate the employment of a Plan
participant at any time, with or without cause, shall in no way be restricted by
the existence of the Plan, any Option granted hereunder, or any stock option
agreement relating thereto.
4. NUMBER OF SHARES.
Subject to the provisions of Section 5, the total number of shares of
the Company's common stock, par value $.50 per share (the "Common Stock"), which
may be issued under Options granted pursuant to the Plan shall not exceed
1,900,000. Shares subject to the Plan may be either authorized but unissued
shares or shares that were once issued and subsequently reacquired by the
Company. If any Option is surrendered before exercise, or lapses without
exercise, or for any other reason ceases to be exercisable, the shares reserved
therefor shall continue to be available for the grant of Options under the Plan.
The Plan shall terminate on June 14, 2003, or the earlier dissolution of the
Company, and no Option shall be granted after such date.
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<PAGE> 31
5. ADJUSTMENT PROVISIONS.
In the event that:
(a) in connection with a merger or consolidation of the Company
or a sale by the Company of all or a part of its assets, the outstanding
shares of Common Stock are exchanged for a different number or class of
shares of stock or other securities of the Company, or for shares of the
stock or other securities of any other entity; or
(b) new, different or additional shares or other securities of
the Company or of another entity are received by the holders of Common
Stock, whether by way of recapitalization or otherwise; or
(c) any dividend in the form of stock is made to the holders of
Common Stock, or any stock split or reverse split pertaining to Common
Stock is effected;
then the Stock Option Committee shall make the appropriate adjustment to:
(i) the number and kind of shares or other securities that may be
issued upon exercise of Options yet to be granted;
(ii) the option price per share to be paid upon exercise of each
outstanding Option; and
(iii) the number and kind of shares or other securities covered
by each outstanding Option.
6. ANNUAL LIMITATION ON INCENTIVE STOCK OPTIONS.
The aggregate fair market value (determined as of the date the Option is
granted) of the shares with respect to which Incentive Stock Options are
exercisable for the first time by a grantee during any calendar year (under all
plans of the Company and any parent and subsidiaries of the Company) shall not
exceed $100,000.
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<PAGE> 32
7. OPTION PRICE.
(a) For purposes of the Plan, the term "Grant Date" shall mean the date
on which the grant of an Option is duly authorized by the Stock Option Committee
and approved by the Compensation and Benefits Committee. The option price at
which an Option shall be exercisable shall be at least the fair market value per
share of the Common Stock on the Grant Date of such Option. However, if an
Incentive Stock Option is granted to any person who would, after the grant of
such Option, be deemed to own stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or of any parent
or subsidiary of the Company (a "Ten Percent Shareholder"), the option price
shall be not less than 110 percent of the fair market value per share of the
Common Stock on the Grant Date of such Option.
(b) For purposes of the Plan, the fair market value per share of the
Common Stock on any date ("Fair Market Value") shall be the closing price of the
Common Stock on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading, and the closing price shall be the
last reported sale price regular way or, if no sale takes place on such date,
the average of the closing bid and closing asked prices regular way, as reported
by such exchange. If the Common Stock is not then so listed or admitted to
trading on a national securities exchange, then Fair Market Value shall be the
closing price of the Common Stock in the over-the-counter market as reported by
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), and the closing price shall be the last reported sale price regular
way or, if no sale takes place on such date, the average of the closing bid and
closing asked prices regular way, as reported by NASDAQ. If the Common Stock
closing price is not then reported by NASDAQ, then Fair Market Value shall be
the mean between the representative closing bid and closing asked prices of the
Common Stock in the over-the-counter market as reported by NASDAQ. If the Common
Stock bid and asked prices are not then reported by NASDAQ, then Fair Market
Value shall be the quote furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose. If no member of the National Association of Securities Dealers, Inc.
then furnishes quotes with respect to the Common Stock, then Fair Market Value
shall be determined by resolution of the Company's Board of Directors.
Notwithstanding the foregoing provisions of this Section 7(b), if the Board of
Directors shall at any time determine that it is impracticable to apply the
foregoing methods of determining Fair Market Value, then the Board of Directors
is hereby empowered to adopt any other reasonable method for such purpose.
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<PAGE> 33
8. TERM OF OPTIONS; EXERCISABILITY.
(a) Subject to the provisions of Section 18, the term of each Option
shall be determined by the Stock Option Committee, but in no event shall an
Option be exercisable, either in whole or in part, after the expiration of ten
years from the Grant Date of such Option. Notwithstanding the foregoing, an
Incentive Stock Option granted to a Ten Percent Shareholder shall not be
exercisable, either in whole or in part, after the expiration of five years from
the Grant Date of such Option. The Stock Option Committee and an Option holder
may at any time by mutual agreement terminate any Option held by such Option
holder.
(b) Subject to prior expiration or termination as provided by the Plan,
each Option shall vest and become exercisable over a four-year period, as set
forth in this Section 8(b).
(i) Each Option, if any, granted during the 1995 calendar year
shall vest and become exercisable as follows:
(A) 25 percent of the Option shall first become exercisable on
the date, if any, after the Grant Date on which Fair Market Value
shall have equaled or exceeded $3.50 per share for any 20 of 30
consecutive trading days;
(B) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1996 on which Fair
Market Value shall have equaled or exceeded $6.00 per share for any
20 of 30 consecutive trading days;
(C) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1997 on which Fair
Market Value shall have equaled or exceeded $8.00 per share for any
20 of 30 consecutive trading days; and
(D) the balance of the Option shall first become exercisable
on the date, if any, after January 1, 1998 on which Fair Market
Value shall have equaled or exceeded $10.00 per share for any 20 of
30 consecutive trading days.
(ii) Each Option, if any, granted during the 1996 calendar year
shall vest and become exercisable as follows:
(A) 25 percent of the Option shall first become exercisable on
the date, if any, after the Grant Date on which Fair Market Value
shall have equaled or exceeded $6.00 per share for any 20 of 30
consecutive trading days;
(B) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1997 on which Fair
Market Value shall have equaled or exceeded $8.00 per share for any
20 of 30 consecutive trading days;
(C) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1998 on which Fair
Market Value shall have
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<PAGE> 34
equaled or exceeded $10.00 per share for any 20 of 30 consecutive
trading days; and
(D) the balance of the Option shall first become exercisable
on the date, if any, after January 1, 1999 on which Fair Market
Value shall have equaled or exceeded $10.00 per share for any 20 of
30 consecutive trading days.
(iii) Each Option, if any, granted during the 1997 calendar year
shall vest and become exercisable as follows:
(A) 25 percent of the Option shall first become exercisable on
the date, if any, after the Grant Date on which Fair Market Value
shall have equaled or exceeded $8.00 per share for any 20 of 30
consecutive trading days;
(B) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1998 on which Fair
Market Value shall have equaled or exceeded $10.00 per share for any
20 of 30 consecutive trading days;
(C) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1999 on which Fair
Market Value shall have equaled or exceeded $10.00 per share for any
20 of 30 consecutive trading days; and
(D) the balance of the Option shall first become exercisable
on the date, if any, after January 1, 2000 on which Fair Market
Value shall have equaled or exceeded $10.00 per share for any 20 of
30 consecutive trading days.
(iv) Each Option, if any, granted during the 1998 calendar year
shall vest and become exercisable as follows:
(A) 25 percent of the Option shall first become exercisable on
the date, if any, after the Grant Date on which Fair Market Value
shall have equaled or exceeded $10.00 per share for any 20 of 30
consecutive trading days;
(B) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 1999 on which Fair
Market Value shall have equaled or exceeded $12.00 per share for any
20 of 30 consecutive trading days;
(C) an additional 25 percent of the Option shall first become
exercisable on the date, if any, after January 1, 2000 on which Fair
Market Value shall have equaled or exceeded $15.00 per share for any
20 of 30 consecutive trading days; and
(D) the balance of the Option shall first become exercisable
on the date, if any, after January 1, 2001 on which Fair Market
Value shall have equaled or exceeded $19.00 per share for any 20 of
30 consecutive trading days.
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<PAGE> 35
(v) Notwithstanding the foregoing, if and to the extent that the
Fair Market Value requirements for exercisability set forth in this Section 8(b)
are not satisfied, then the balance of each Option heretofore or hereafter
granted shall nevertheless become exercisable on the fourth anniversary of the
Grant Date of such Option.
9. STOCK OPTION AGREEMENTS.
Each Option shall be evidenced by a written agreement which sets forth:
(a) the number of shares subject to the Option; (b) the option price; (c) the
vesting schedule of the Option; (d) the expiration date of the Option; (e) the
method of payment on exercise of the Option; (f) whether the Option is an
Incentive Stock Option or a Nonstatutory Stock Option; and (g) such additional
provisions, not inconsistent with the Plan, as the Stock Option Committee may
prescribe.
10. EXERCISE OF OPTIONS.
(a) Each Option, or any installment thereof, shall be exercised, whether
in whole or in part, by giving written notice to the Company at its principal
office, specifying the number of shares of Common Stock being purchased and the
purchase price being paid, and accompanied by payment in full of the purchase
price.
(b) An Option holder shall pay for the shares subject to the Option by
one or any combination of the following methods, as determined by the Stock
Option Committee on the Grant Date of the Option: (i) in cash, (ii) by delivery
of shares of Common Stock already owned by the Option holder, or (iii) by the
Company withholding shares of Common Stock that would otherwise be delivered to
the Option holder upon such exercise of the Option. Any shares of Common Stock
that are so delivered or withheld to pay the option price shall be valued at
Fair Market Value on the date of such Option exercise.
(c) The exercise of an Option shall be conditioned upon the Option
holder making arrangements satisfactory to the Stock Option Committee for the
payment to the Company of the amount of all taxes required by any governmental
authority to be withheld and paid over by the Company to the governmental
authority on account of the exercise. The payment of such withholding taxes to
the Company shall be made by one or any combination of the following methods, as
determined by the Stock Option Committee on the Grant Date of the Option: (i) in
cash, or (ii) by the Company withholding such taxes from any other compensation
owed to the Option holder by the Company or any of its subsidiaries.
11. NON-ASSIGNMENT.
Each Option by its terms shall provide that it is not transferable by
the grantee otherwise than by will or the laws of descent and distribution, and
that during the lifetime of the grantee, it is exercisable only by him.
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<PAGE> 36
12. DEATH OF GRANTEE.
In the event that a grantee shall die (i) while he is an employee of the
Company, or within three months after termination of such employment, and (ii)
prior to the complete exercise of Options granted to him under the Plan, then
any such remaining Options with exercise periods outstanding may be exercised,
in whole or in part, within one year after the date of the grantee's death and
then only:
(a) by the grantee's estate or by such person(s) to whom the
grantee's rights hereunder shall have passed under his will or the laws
of descent and distribution;
(b) to the extent that the grantee was entitled to exercise the
Option on the date of his death, and subject to all of the conditions on
exercise imposed hereby; and
(c) prior to the expiration of the term of the Option.
13. TERMINATION OF EMPLOYMENT.
(a) During the lifetime of a grantee, an Option shall be exercisable
only while he is an employee of the Company and has been an employee
continuously since the Grant Date of the Option, or within three months after
the date on which he ceases to be such an employee for any reason; provided,
however, that in the case of a grantee who is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the Internal Revenue Code), such
three-month period shall instead be one year.
(b) Any Option that is exercisable after termination of employment, as
provided by Section 13(a), shall be exercisable only to the extent that the
grantee would have been entitled to exercise the Option on the date of
termination of employment; and further, no Option shall be exercisable after the
expiration of the term thereof.
(c) For purposes of this Section 13, an employment relationship shall be
treated as continuing during the period when a grantee is on military duty, sick
leave or other bona fide leave of absence if the period of such leave does not
exceed 90 days or, if longer, so long as a statute or contract guarantees the
grantee's right to re-employment with the Company. When the period of leave
exceeds 90 days and the individual's right to re-employment is not so
guaranteed, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
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<PAGE> 37
14. ADDITIONAL REQUIREMENTS.
Each grant of an Option under the Plan, and (unless a Registration
Statement with respect thereto shall then be effective under the Securities Act
of 1933, as amended (the "Securities Act")) each issuance of shares of Common
Stock upon exercise of an Option, shall be conditioned upon the Company's prior
receipt of a duly executed letter of investment intent, in form and content
satisfactory to counsel for the Company, of the Option holder that such Option
and such shares are being acquired by such holder solely for investment and not
with a view to, or for sale in connection with, any distribution thereof, nor
with any present intention of selling, transferring or disposing of the same.
Any shares of Common Stock acquired by the holder upon exercise of the Option
may not thereafter be offered for sale, sold or otherwise transferred unless (a)
a Registration Statement with respect thereto shall then be effective under the
Securities Act, and the Company shall have been furnished with proof
satisfactory to it that such holder has complied with applicable state
securities laws, or (b) the Company shall have received an opinion of counsel in
form and substance satisfactory to counsel for the Company that the proposed
offer for sale, sale or transfer is exempt from the registration requirements of
the Securities Act and may otherwise be transferred in compliance with the
Securities Act and in compliance with any other applicable law, including all
applicable state securities laws; and the Company may withhold transfer,
registration and delivery of such securities until one of the foregoing
conditions shall have been met.
15. LISTING AND REGISTRATION.
The Company, in its discretion, may postpone the issuance and delivery
of shares upon any exercise of an Option until completion of such stock exchange
listing, or registration or other qualification of such shares under any state
or federal law, rule or regulation, as the Company may consider appropriate; and
may require any person exercising an Option to make such representations and
furnish such information as it considers appropriate in connection with the
issuance of the shares in compliance with applicable law, including without
limitation federal or state laws regulating the sale or issuance of securities.
Notwithstanding the foregoing, the Company shall be under no obligation
whatsoever to list, register or otherwise qualify any shares subject to Options
under the Plan.
16. RIGHTS AS A SHAREHOLDER.
No Option holder shall have any rights as a shareholder with respect to
the shares of Common Stock purchased by him pursuant to the exercise of an
Option until the date of the issuance to him of a stock certificate representing
such shares. No adjustment shall be made for dividends or for distributions of
any other kind with respect to shares for which the record date is prior to the
date of the issuance to the Option holder of a certificate for the shares.
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17. EFFECT OF ACQUISITION, REORGANIZATION OR LIQUIDATION.
Notwithstanding any provision to the contrary in this Plan or in any
agreement evidencing Options granted hereunder, all Options with exercise
periods then currently outstanding shall become immediately exercisable in full
and remain exercisable until their expiration in accordance with their
respective terms upon the occurrence of either of the following events:
(a) the first purchase of shares pursuant to a tender or exchange
offer which is intended to effect the acquisition of more than 50
percent of the voting power of the Company (other than a tender or
exchange offer made by the Company); or
(b) approval by the Company's shareholders of: (i) a merger or
consolidation of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any reclassification or
reorganization of the shares), (ii) a sale or disposition of all or
substantially all of the Company's assets, or (iii) a plan of complete
liquidation or dissolution of the Company.
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<PAGE> 39
18. CONDITIONAL OPTIONS.
Prior to approval and ratification of the Plan by the shareholders of
the Company, the Stock Option Committee may grant "Conditional Options" under
the Plan. In addition, in the event that any amendment to the Plan requires
approval and ratification by the shareholders, then prior to such approval and
ratification the Stock Option Committee may grant Conditional Options under the
Plan. Conditional Options may be granted under the Plan only under the following
conditions: (a) a Conditional Option shall be clearly identified as a
Conditional Option; (b) the grant of a Conditional Option shall be expressly
conditioned upon the approval and ratification of the Plan (or of the amendment
to the Plan, as the case may be) by the shareholders of the Company; (c) such
shareholder approval and ratification shall occur no later than the Annual
Meeting of Shareholders of the Company next following the effective date of the
Plan (or of the amendment to the Plan, as the case may be); and (d)
notwithstanding any other provision of the Plan, no holder of a Conditional
Option shall have any right to exercise such Option prior to such approval and
ratification of the Plan (or of the amendment to the Plan, as the case may be)
by the shareholders. Notwithstanding any other provision of the Plan, prior to
approval and ratification of the Plan (or of the amendment to the Plan, as the
case may be) by the shareholders of the Company, no holder of a Conditional
Option shall have any right to sell, assign, transfer, pledge or encumber the
Conditional Option, or the shares underlying the Conditional Option, except by
will or the laws of descent and distribution (unless, in the case of a holder
who is subject to the provisions of Section 16 of the Exchange Act, transfer by
will or the laws of descent and distribution would cause the Option to fail to
satisfy the requirements of a conditional option under Rule 16b-3 promulgated
under the Exchange Act). If the shareholders of the Company fail to approve and
ratify the Plan (or the amendment to the Plan, as the case may be) at such
Annual Meeting of Shareholders, then all Conditional Options granted hereunder
conditioned upon such approval and ratification shall be automatically cancelled
and shall immediately become null and void.
19. AMENDMENT OF PLAN.
The Plan may be amended at any time by the Board of Directors, provided
that (except for amendments made pursuant to Section 5) no amendment made
without the approval and ratification of the shareholders of the Company shall
increase the total number of shares which may be issued under Options granted
pursuant to the Plan, reduce the minimum option price, extend the latest date
upon which Options may be granted or shall be exercisable, change the class of
employees eligible to be granted Options, reduce the Fair Market Value
requirements for exercisability set forth in Section 8(b), or otherwise
materially increase the benefits accruing to participants under the Plan.
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20. NO RESERVATION OF SHARES.
The Company shall be under no obligation to reserve shares of Common
Stock or other securities to satisfy the exercise of Options. The grant of
Options hereunder shall not be construed as constituting the establishment of a
trust of such shares, and no particular shares shall be identified as optioned
or reserved for issuance hereunder. The Company shall have complied with the
terms of the Plan if, at the time of its delivery of shares upon the exercise of
any Option, it has a sufficient number of shares authorized and unissued, or
issued and held in its treasury, which may then be delivered under the Plan,
irrespective of the date on which such shares were authorized.
21. APPLICATION OF PROCEEDS.
The proceeds of the sale of shares of Common Stock by the Company under
the Plan will constitute general funds of the Company and may be used by the
Company for any purpose.
22. RULE 16B-3 QUALIFICATION.
Some or all of the Options granted under the Plan are intended to
qualify under Rule 16b-3 promulgated under the Exchange Act.
23. IN GENERAL.
(a) As used herein, the masculine pronoun shall include the feminine and
the neuter, as appropriate to the context.
(b) As used herein, the term "Section" shall mean the appropriate
Section of the Plan.
* * * * *
THE FOREGOING TRANSMATION, INC. AMENDED AND RESTATED 1993 STOCK OPTION PLAN WAS
DULY ADOPTED BY THE BOARD OF DIRECTORS OF TRANSMATION, INC. (THE "BOARD") ON
JUNE 6, 1995 AND DULY APPROVED AND RATIFIED BY THE SHAREHOLDERS OF TRANSMATION,
INC. (THE "SHAREHOLDERS") ON AUGUST 15, 1995. AMENDMENT NO. 1 AND AMENDMENT NO.
2 THERETO WERE EACH DULY ADOPTED BY THE BOARD ON JUNE 21, 1996 AND DULY APPROVED
AND RATIFIED BY THE SHAREHOLDERS ON AUGUST 20, 1996. AMENDMENT NO. 3 THERETO WAS
DULY ADOPTED BY THE BOARD ON FEBRUARY 17, 1997 AND DULY APPROVED AND RATIFIED BY
THE SHAREHOLDERS ON AUGUST 19, 1997. AMENDMENT NO. 4 THERETO WAS DULY ADOPTED BY
THE BOARD ON JUNE 19, 1997.
/S/ JOHN A. MISIASZEK
-----------------------------
JOHN A. MISIASZEK, SECRETARY
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<PAGE> 41
AMENDMENT NO. 5
TO THE
TRANSMATION, INC.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
EFFECTIVE JANUARY 19, 1999
WHEREAS, Transmation, Inc., an Ohio corporation (the "Company"), has
established the Transmation, Inc. Amended and Restated 1993 Stock Option Plan,
as heretofore amended (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 19 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the further amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan is hereby amended, effective January 19, 1999,
as follows:
1. Section 8(b)(v) of the Plan is hereby renumbered to be Section
8(b)(vi) of the Plan (with the substance of said Section 8(b)(vi), as so
renumbered, being unchanged and unaffected by this Amendment and continuing in
full force and effect).
2. A new Section 8(b)(v) is hereby added to Section "8. TERM OF
OPTIONS; EXERCISABILITY." of the Plan, to provide in its entirety as follows
(with the remainder of said Section 8 being unchanged and unaffected by the
amendment set forth in this Paragraph 2 and continuing in full force and
effect):
"(v) Each Option, if any, granted during the 1999
calendar year shall vest and become exercisable as follows:
"(A) 25 percent of the Option shall first
become exercisable on the date, if any, after the
Grant Date on which Fair Market Value shall have
equaled or exceeded $7.00 per share for any 20 of
30 consecutive trading days;
"(B) an additional 25 percent of the Option
shall first become exercisable on the date, if any,
after January 1, 2000 on which Fair Market Value
shall have equaled or exceeded $11.00 per share for
any 20 of 30 consecutive trading days;
"(C) an additional 25 percent of the Option
shall first become exercisable on the date, if any,
after January 1, 2001 on which Fair Market Value
shall have equaled or exceeded $15.00 per share for
any 20 of 30 consecutive trading days; and
<PAGE> 42
"(D) the balance of the Option shall first
become exercisable on the date, if any, after
January 1, 2002 on which Fair Market Value shall
have equaled or exceeded $19.00 per share for any
20 of 30 consecutive trading days."
3. Except as amended hereby, the Plan shall remain in full force
and effect in accordance with its terms.
THIS AMENDMENT NO. 5 TO THE TRANSMATION, INC. AMENDED AND RESTATED 1993
STOCK OPTION PLAN WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF DIRECTORS
OF THE COMPANY ON JANUARY 19, 1999.
/S/ JOHN A. MISIASZEK
------------------------------
JOHN A. MISIASZEK, SECRETARY
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<PAGE> 43
AMENDMENT NO. 6
TO THE
TRANSMATION, INC.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
EFFECTIVE JUNE 16, 1999
(SUBJECT TO SUBSEQUENT RATIFICATION BY THE SHAREHOLDERS)
WHEREAS, Transmation, Inc., an Ohio corporation (the "Company"), has
established the Transmation, Inc. Amended and Restated 1993 Stock Option Plan,
as heretofore amended (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 19 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the further amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan is hereby amended, effective June 16, 1999, as
set forth below; provided, however, that if the shareholders of the Company fail
to approve and ratify this Amendment at the next Annual Meeting of Shareholders,
then this Amendment shall be null and void and of no effect, and any amendments
to stock option agreements which are made pursuant to this Amendment shall be
automatically cancelled:
1. A new Section 13(d) is hereby added to Section "13.
TERMINATION OF EMPLOYMENT." of the Plan, to provide in its entirety as follows
(with the remainder of said Section 13 being unchanged and unaffected by this
Amendment and continuing in full force and effect):
"(d) For purposes of Section 12 and this Section 13, an
employment relationship shall be treated as continuing during the period
(if any) when a grantee is no longer an employee of the Company but
continues to serve as a non-employee member of the Board of Directors of
the Company; provided, however, that any Incentive Stock Options held by
such grantee on the date on which his full-time employment by the
Company terminates shall automatically become Nonstatutory Stock Options
on the date on which his Options would have expired had he not continued
to serve as a non-employee member of the Board of Directors.
Notwithstanding the foregoing, a member of the Board of Directors of the
Company who is not a full-time employee of the Company shall not be
eligible to receive any Option grants."
2. Except as amended hereby, the Plan shall remain in full force
and effect in accordance with its terms.
-3-
<PAGE> 44
THIS AMENDMENT NO. 6 TO THE TRANSMATION, INC. AMENDED AND RESTATED 1993
STOCK OPTION PLAN WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF DIRECTORS
OF THE COMPANY ON JUNE 16, 1999.
/S/ JOHN A. MISIASZEK
----------------------------------
JOHN A. MISIASZEK, SECRETARY
<PAGE> 45
Appendix B
TRANSMATION, INC.
AMENDED AND RESTATED DIRECTORS' WARRANT PLAN
INCLUDING ALL AMENDMENTS THROUGH JUNE 19, 1997 AND
ALL ADJUSTMENTS (RETROACTIVELY APPLIED) AS OF JULY 22, 1997
The Transmation, Inc. Directors' Warrant Plan, effective August 21, 1984
and amended and restated effective August 15, 1995 (this "Plan") is established
to attract, retain and compensate highly qualified individuals who are not
employees of Transmation, Inc., an Ohio corporation (the "Company"), or any of
its subsidiaries, for their service as members of the Board of Directors of the
Company (the "Board of Directors"), and to enable them to increase their
ownership of the Company's Common Stock, par value $.50 per share (the "Common
Stock"). As used herein, the term "Shares" shall mean the Common Stock or such
other securities, if any, as may result from an adjustment under Section 10.
1. ELIGIBILITY. Each member of the Board of Directors (including any
member elected after the effective date of this Plan) who (a) is not an employee
of the Company or any of its subsidiaries and (b) is a member of the Board of
Directors on a "Grant Date" (as hereinafter defined) (each, a "Participating
Director"), is eligible to participate in this Plan.
2. WARRANTS. All warrants granted under this Plan ("Warrants") shall be
non-statutory warrants to purchase Shares.
3. SHARES AVAILABLE. Subject to adjustment as provided by Section 10,
the total number of Shares that may be issued pursuant to Warrants granted
hereunder shall not exceed 200,000. Shares subject to Warrants may be either
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any Warrant is surrendered before exercise, or
lapses without exercise, or for any other reason ceases to be exercisable, in
whole or in part, the Shares reserved for the unexercised portion thereof shall
continue to be available for the grant of Warrants hereunder.
4. GRANTS OF WARRANTS.
(a) GRANTS OF WARRANTS. On each of the following dates, each
Participating Director shall automatically be granted a Warrant to purchase
4,000 Shares: the day next following conclusion of the Company's 1995 Annual
Meeting of Shareholders (the "1995 Grant Date"), the day next following
conclusion of the Company's 1996 Annual Meeting of Shareholders (the "1996 Grant
Date"), and the day next following conclusion of the Company's 1997 Annual
Meeting of Shareholders (the "1997 Grant Date") (each, a "Grant Date").
(b) ELECTION TO DECLINE WARRANT. Any Participating Director may,
by written notice received by the Company prior to the Grant Date of such
Warrant, elect to decline a Warrant, in which case such Warrant shall not be
granted to him; provided, however, that at no time shall the Company pay or
provide to such Participating Director anything of value in lieu of the declined
Warrant. In addition, any Participating Director may, by written notice
<PAGE> 46
received by the Company prior to the Grant Date of such Warrant, revoke a
previous election to decline a Warrant.
(c) EXPIRATION OF WARRANTS. Subject to earlier expiration as
provided by Section 7, each Warrant shall expire on the fifth anniversary of its
Grant Date, and to the extent any Warrant remains unexercised on such fifth
anniversary, it shall be forfeited.
5. EXERCISE PRICE. The price at which each Warrant shall be exercisable
shall be the fair market value per share (the "Market Value") of the Shares on
the Grant Date of such Warrant. For purposes of this Plan, the Market Value of
the Shares shall be the closing price of the Shares on the principal national
securities exchange on which the Shares are then listed or admitted to trading
(if the Shares are then listed or admitted to trading on any national securities
exchange), and the closing price shall be the last reported sale price regular
way or, in case no such sale takes place on such date, the last reported sale
price, regular way, so reported on the immediately preceding day on which a sale
takes place. If the Shares are not then so listed on a national securities
exchange, the Market Value of the Shares on any date shall be the closing price
(the last reported sale price regular way) in the over-the-counter market as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq"), if the closing price of the Shares is then reported
by Nasdaq. If the closing price of the Shares is not then reported by Nasdaq,
the Market Value of the Shares on any date shall be deemed to be the mean
between the representative closing bid and asked prices of the Shares in the
over-the-counter market as reported by Nasdaq. If the Shares are not then
reported by Nasdaq, the Market Value of the Shares on any date shall be as
furnished by any member of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose. If no member of the
National Association of Securities Dealers, Inc. furnishes quotes with respect
to the Shares, the Market Value shall be determined by such other reasonable
method as is adopted by resolution of the Board of Directors.
6. VESTING. Subject to prior expiration as provided by this Plan, each
Warrant shall vest and become exercisable over a four-year period, as set forth
in this Section 6.
(a) WARRANTS GRANTED ON 1995 GRANT DATE. Each Warrant granted on the
1995 Grant Date shall vest and become exercisable as follows:
(i) a Warrant to purchase 1,000 Shares shall first become
exercisable on the date, if any, after the 1995 Grant Date on which
the Market Value of the Common Stock shall have equaled or exceeded
$3.50 per share for any 20 of 30 consecutive trading days;
(ii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1996 on
which the Market Value of the Common Stock shall have equaled or
exceeded $6.00 per share for any 20 of 30 consecutive trading days;
(iii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1997 on
which the Market Value of
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<PAGE> 47
the Common Stock shall have equaled or exceeded $8.00 per share for
any 20 of 30 consecutive trading days; and
(iv) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1998 on
which the Market Value of the Common Stock shall have equaled or
exceeded $10.00 per share for any 20 of 30 consecutive trading days.
(b) WARRANTS GRANTED ON 1996 GRANT DATE. Each Warrant granted on the
1996 Grant Date shall vest and become exercisable as follows:
(i) a Warrant to purchase 1,000 Shares shall first become
exercisable on the date, if any, after the 1996 Grant Date on which
the Market Value of the Common Stock shall have equaled or exceeded
$6.00 per share for any 20 of 30 consecutive trading days;
(ii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1997 on
which the Market Value of the Common Stock shall have equaled or
exceeded $8.00 per share for any 20 of 30 consecutive trading days;
(iii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1998 on
which the Market Value of the Common Stock shall have equaled or
exceeded $10.00 per share for any 20 of 30 consecutive trading days;
and
(iv) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1999 on
which the Market Value of the Common Stock shall have equaled or
exceeded $10.00 per share for any 20 of 30 consecutive trading days.
(c) WARRANTS GRANTED ON 1997 GRANT DATE. Each Warrant granted on the
1997 Grant Date shall vest and become exercisable as follows:
(i) a Warrant to purchase 1,000 Shares shall first become
exercisable on the date, if any, after the 1997 Grant Date on which
the Market Value of the Common Stock shall have equaled or exceeded
$8.00 per share for any 20 of 30 consecutive trading days;
(ii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1998 on
which the Market Value of the Common Stock shall have equaled or
exceeded $10.00 per share for any 20 of 30 consecutive trading days;
(iii) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 1999 on
which the Market Value of
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<PAGE> 48
the Common Stock shall have equaled or exceeded $10.00 per share for
any 20 of 30 consecutive trading days; and
(iv) an additional Warrant to purchase 1,000 Shares shall first
become exercisable on the date, if any, after January 1, 2000 on
which the Market Value of the Common Stock shall have equaled or
exceeded $10.00 per share for any 20 of 30 consecutive trading days.
(d) WARRANTS GRANTED ON GRANT DATES IN 1998 AND THEREAFTER. Each
Warrant granted on a Grant Date in 1998 or thereafter shall vest and become
exercisable pursuant to schedules and Market Value requirements which are
substantially identical to those fixed by the Transmation, Inc. Amended and
Restated 1993 Stock Option Plan for options granted thereunder during the same
calendar year.
(e) ALL WARRANTS. Notwithstanding the foregoing, if and to the extent
that the Market Value requirements for exercisability set forth in this Section
6 are not satisfied, then the balance of each Warrant heretofore or hereafter
granted shall nevertheless become exercisable on the fourth anniversary of the
Grant Date of such Warrant.
7. EARLY EXPIRATION OF WARRANTS.
(a) CESSATION OF SERVICE. Upon a Participating Director's cessation
of service as a member of the Board of Directors for any reason other than his
death, all outstanding Warrants then held by him (whether or not currently
exercisable) shall, on the date of such cessation of service, expire and be of
no further force or effect.
(b) DEATH. Upon the death of a Participating Director while serving
as a member of the Board of Directors, only those Warrants (or portions thereof)
that have vested by the date of death shall thereafter be exercisable by his
legal representative, and such Warrants must be exercised within 90 days after
the date of death (but in no event after the expiration of the Warrant),
whereupon all such Warrants shall expire and be of no further force or effect.
8. LOSS OF ELIGIBILITY. If a Participating Director becomes an employee
of the Company or any of its subsidiaries, then all Warrants already granted to
him hereunder shall continue in full force and effect, in accordance with their
original terms, for so long as he remains a member of the Board of Directors,
but he shall be entitled to no further grants of Warrants hereunder.
9. METHOD OF EXERCISE. A Warrant shall be exercised by written notice to
the Company specifying the number of whole Shares to be purchased and
accompanied by full payment, in cash, for such Shares. A Warrant, to the extent
otherwise exercisable, may be exercised in whole or in part, provided that no
Warrant may be exercised for less than one whole Share. Upon determining that
compliance with this Plan has occurred, including compliance with such
reasonable requirements as the Company may impose pursuant to Section 11, the
Company shall issue certificates for the Shares purchased.
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<PAGE> 49
10. ADJUSTMENT PROVISIONS. In the event (but only in the event) that:
(a) in connection with a merger or consolidation of the Company
or a sale by the Company of all or a part of its assets, the outstanding
Shares are exchanged for a different number or class of shares of stock
or other securities of the Company, or for shares of the stock or other
securities of any other entity; or
(b) new, different or additional shares or other securities of
the Company or of another entity are received by the holders of Shares;
or
(c) any dividend in the form of stock is paid to the holders of
Shares, or any stock split or reverse split pertaining to the Shares is
effected;
then appropriate adjustments shall be made to:
(i) the number and kind of shares or other securities that may be
issued upon exercise of Warrants not yet granted (including the numbers
of shares set forth in Sections 3 and 4(a));
(ii) the exercise price per share to be paid upon exercise of each
outstanding Warrant; and
(iii) the number and kind of shares or other securities covered by
each outstanding Warrant.
11. TAXES; COMPLIANCE WITH LAWS.
(a) TAXES. The Company, if necessary or desirable, may pay or
withhold the amount of any tax attributable to any Shares deliverable under this
Plan, and the Company may defer making delivery until it is reimbursed or
indemnified to its satisfaction for that tax.
(b) SECURITIES LAWS COMPLIANCE. Each grant of a Warrant hereunder,
and (unless a Registration Statement with respect thereto shall then be
effective under the Securities Act of 1933, as amended (the "1933 Act")) each
issuance of Shares upon exercise of a Warrant, shall be conditioned upon the
Company's prior receipt of a duly executed letter of investment intent, in form
and content satisfactory to counsel for the Company, of the Warrant holder that
such Warrant and such Shares are being acquired by such Warrant holder solely
for investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of selling, transferring or
disposing of the same. Any Shares acquired by the Warrant holder upon exercise
of the Warrant may not thereafter be offered for sale, sold or otherwise
transferred unless (i) a Registration Statement with respect thereto shall then
be effective under the 1933 Act, and the Company shall have been furnished with
proof satisfactory to it that such Warrant holder has complied with applicable
state securities laws, or (ii) the Company shall have received an opinion of
counsel in form and substance satisfactory to counsel for the Company that the
proposed offer for sale, sale or transfer is exempt from the
-5-
<PAGE> 50
registration requirements of the 1933 Act and the Shares may otherwise be
transferred in compliance with the 1933 Act and in compliance with any other
applicable law, including all applicable state securities laws; and the Company
may withhold transfer, registration and delivery of such securities until one of
the foregoing conditions shall have been met. Unless a Registration Statement
with respect thereto shall then be effective under the 1933 Act, each
certificate representing Shares issued upon exercise of a Warrant shall bear an
appropriate legend reflecting the foregoing. Warrants are exercisable, and
Shares can be delivered under this Plan, only in compliance with all applicable
federal and state laws and the rules of all stock exchanges or trading markets
on which the Shares are listed or traded at any time. A Warrant may not be
exercised, and Shares may not be issued under any Warrant, until the Company has
obtained the necessary consent or approval (if any) of every regulatory body,
federal or state, having jurisdiction over such matters as the Company deems
advisable.
12. ADMINISTRATION AND AMENDMENT OF PLAN. This Plan shall be
administered by the Board of Directors. This Plan may be terminated or amended
by the Board of Directors as it deems advisable; provided, however, that any
amendment that changes the timing of the grant of Warrants, the eligibility
requirements for Participating Directors, the method of determining the exercise
price of Warrants, the vesting schedule or expiration dates of Warrants, or the
number of Shares subject to Warrants, shall not be made more frequently than
every six months unless otherwise necessary to comply with the Internal Revenue
Code of 1986, as amended, the Employee Retirement Income Security Act of 1974,
as amended, or any regulations thereunder. In addition, the shareholders of the
Company must approve any amendment that would materially (a) increase the
benefits accruing to Participating Directors under this Plan, (b) increase
(other than pursuant to Section 10) the number of securities that may be issued
under this Plan, or (c) modify the requirements as to eligibility for
participation in the Plan. No amendment of this Plan may revoke or alter in a
manner adverse to a Participating Director any Warrants then outstanding.
13. NON-TRANSFERABILITY. No Warrant granted under this Plan is
transferable other than by will or the laws of descent and distribution. During
a Participating Director's lifetime, a Warrant may be exercised only by him.
14. NO ADDITIONAL RIGHTS. Except as provided in this Plan, no
Participating Director shall have any claim or right to be granted a Warrant
under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any person any right to continue to serve as a member of the
Board of Directors. No person, estate or other entity shall have any rights as a
shareholder of the Company with respect to Shares subject to Warrants until a
certificate for such Shares has been delivered to the person exercising the
Warrant in accordance with the terms of this Plan.
15. WARRANT CERTIFICATES. Each Warrant shall be evidenced by a written
warrant certificate which sets forth (a) the number of Shares subject to the
Warrant, (b) the exercise price, (c) the vesting schedule of the Warrant, (d)
the expiration date of the Warrant, and (e) such additional provisions, not
inconsistent with the Plan, as the Board of Directors may prescribe.
-6-
<PAGE> 51
16. RULE 16b-3 QUALIFICATION. Some or all of the Warrants granted under
this Plan are intended to qualify under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
17. IN GENERAL. As used herein, the masculine pronoun shall include the
feminine and the neuter, and the singular shall include the plural, as
appropriate to the context. As used herein, the term "Section" means the
appropriate Section of this Plan.
18. EFFECTIVE DATE. This Plan shall become effective immediately upon
its due ratification by the shareholders of the Company.
* * * * * *
THE FOREGOING TRANSMATION, INC. AMENDED AND RESTATED DIRECTORS' WARRANT
PLAN WAS DULY ADOPTED BY THE BOARD OF DIRECTORS OF TRANSMATION, INC. (THE
"BOARD") ON JUNE 6, 1995 AND DULY APPROVED AND RATIFIED BY THE SHAREHOLDERS OF
TRANSMATION, INC. (THE "SHAREHOLDERS") ON AUGUST 15, 1995. AMENDMENT NO. 1
THERETO WAS DULY ADOPTED BY THE BOARD ON JUNE 21, 1996 AND DULY APPROVED AND
RATIFIED BY THE SHAREHOLDERS ON AUGUST 20, 1996. AMENDMENT NO. 2 THERETO WAS
DULY ADOPTED BY THE BOARD ON JUNE 19, 1997.
/S/ JOHN A. MISIASZEK
------------------------------------
JOHN A. MISIASZEK, SECRETARY
-7-
<PAGE> 52
AMENDMENT NO. 3
TO THE
TRANSMATION, INC.
AMENDED AND RESTATED DIRECTORS' WARRANT PLAN
EFFECTIVE JANUARY 20, 1998
(SUBJECT TO SUBSEQUENT RATIFICATION BY THE SHAREHOLDERS)
WHEREAS, Transmation, Inc., an Ohio corporation (the "Company"), has
established the Transmation, Inc. Amended and Restated Directors' Warrant Plan,
as last amended effective June 19, 1997 (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 12 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the further amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan and all warrant certificates now outstanding
are hereby amended, effective January 20, 1998, as set forth below; provided,
however, that if the shareholders of the Company fail to approve and ratify this
Amendment at the next Annual Meeting of Shareholders, then this Amendment shall
be null and void and of no effect, and all such amendments to warrant
certificates shall be automatically and retroactively cancelled:
1. A new Section "19. EFFECT OF ACQUISITION, REORGANIZATION OR
LIQUIDATION" is hereby added to the Plan to provide in its entirety as follows:
"19. EFFECT OF ACQUISITION, REORGANIZATION OR LIQUIDATION.
Notwithstanding any provision to the contrary in this Plan or in
any warrant certificate evidencing Warrants granted hereunder,
all Warrants with exercise periods then currently outstanding
shall become immediately exercisable in full and remain
exercisable until their expiration in accordance with their
respective terms upon the occurrence of either of the following
events:
"(a) the first purchase of shares pursuant to a tender or
exchange offer which is intended to effect the acquisition of
more than 50 percent of the voting power of the Company (other
than a tender or exchange offer made by the Company); or
"(b) approval by the Company's shareholders of: (i) a
merger or consolidation of the Company with or into another
corporation (other than a merger or consolidation in which the
Company is the surviving corporation and which does not result
in any reclassification or reorganization of the shares), (ii)
a sale or disposition of all or substantially all of the
Company's assets, or (iii) a plan of complete liquidation or
dissolution of the Company."
<PAGE> 53
2. Except as amended hereby, the Plan shall remain in full force
and effect in accordance with its terms.
THIS AMENDMENT NO. 3 TO THE TRANSMATION, INC. AMENDED AND RESTATED
DIRECTORS' WARRANT PLAN WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF
DIRECTORS OF THE COMPANY ON JANUARY 20, 1998, AND APPROVED AND RATIFIED BY THE
SHAREHOLDERS OF THE COMPANY ON AUGUST 18, 1998.
/S/ JOHN A. MISIASZEK
------------------------------------
JOHN A. MISIASZEK, SECRETARY
-2-
<PAGE> 54
AMENDMENT NO. 4
TO THE
TRANSMATION, INC.
AMENDED AND RESTATED DIRECTORS' WARRANT PLAN
EFFECTIVE AUGUST 1, 1998
(SUBJECT TO SUBSEQUENT RATIFICATION BY THE SHAREHOLDERS)
WHEREAS, Transmation, Inc., an Ohio corporation (the "Company"), has
established the Transmation, Inc. Amended and Restated Directors' Warrant Plan,
as last amended effective January 20, 1998 (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 12 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the further amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan is hereby amended, effective August 1, 1998, as
set forth below; provided, however, that if the shareholders of the Company fail
to approve and ratify this Amendment at the next Annual Meeting of Shareholders,
then this Amendment shall be null and void and of no effect:
1. Section 4(a) of Section "4. GRANTS OF WARRANTS" of the Plan is
hereby amended to provide in its entirety as follows (with the remainder of said
Section 4 being unchanged and unaffected by this Amendment and continuing in
full force and effect):
"(a) GRANTS OF WARRANTS. On each of the following
dates (each, a "Grant Date"), each Participating Director shall
automatically be granted a Warrant to purchase 4,000 Shares: the
day next following conclusion of the Company's 1995 Annual
Meeting of Shareholders (the "1995 Grant Date"), the day next
following conclusion of the Company's 1996 Annual Meeting of
Shareholders (the "1996 Grant Date"), the day next following
conclusion of the Company's 1997 Annual Meeting of Shareholders
(the "1997 Grant Date"), and the day next following conclusion of
each Annual Meeting of Shareholders of the Company held in 1998
and thereafter, until the Shares available pursuant to Section 3
are exhausted."
2. Except as amended hereby, the Plan shall remain in full force
and effect in accordance with its terms.
-3-
<PAGE> 55
THIS AMENDMENT NO. 4 TO THE TRANSMATION, INC. AMENDED AND RESTATED
DIRECTORS' WARRANT PLAN WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF
DIRECTORS OF THE COMPANY ON JANUARY 20, 1998, EFFECTIVE AUGUST 1, 1998, AND
APPROVED AND RATIFIED BY THE SHAREHOLDERS OF THE COMPANY ON AUGUST 18, 1998.
/S/ JOHN A. MISIASZEK
----------------------------------
JOHN A. MISIASZEK, SECRETARY
-4-
<PAGE> 56
AMENDMENT NO. 5
TO THE
TRANSMATION, INC.
AMENDED AND RESTATED DIRECTORS' WARRANT PLAN
EFFECTIVE FEBRUARY 1, 1999
(SUBJECT TO SUBSEQUENT RATIFICATION BY THE SHAREHOLDERS)
WHEREAS, Transmation, Inc., an Ohio corporation (the "Company"), has
established the Transmation, Inc. Amended and Restated Directors' Warrant Plan,
as last amended effective August 1, 1998 (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 12 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the further amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan is hereby amended, effective February 1, 1999,
as set forth below; provided, however, that if the shareholders of the Company
fail to approve and ratify this Amendment at the next Annual Meeting of
Shareholders, then this Amendment shall be null and void and of no effect:
1. Section 7(a) of Section "7. EARLY EXPIRATION OF WARRANTS" of
the Plan is hereby amended to provide in its entirety as follows (with the
remainder of said Section 7 being unchanged and unaffected by this Amendment and
continuing in full force and effect):
"(a) CESSATION OF SERVICE. Upon a Participating
Director's cessation of service as a member of the Board of
Directors for any reason other than his death, only those
Warrants (or portions thereof) that have vested by the date of
such cessation of service shall thereafter be exercisable by the
Participating Director or his legal representative, and such
Warrants must be exercised within 90 days after the date of such
cessation of service (but in no event after the expiration of the
Warrant), whereupon all such Warrants shall expire and be of no
further force or effect."
2. Except as amended hereby, the Plan shall remain in full force
and effect in accordance with its terms.
THIS AMENDMENT NO. 5 TO THE TRANSMATION, INC. AMENDED AND RESTATED
DIRECTORS' WARRANT PLAN WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF
DIRECTORS OF THE COMPANY ON JANUARY 19, 1999, EFFECTIVE FEBRUARY 1, 1999.
/S/ JOHN A. MISIASZEK
-------------------------------
JOHN A. MISIASZEK, SECRETARY
-5-
<PAGE> 57
TRANSMATION, INC.
PROXY
The undersigned hereby appoints ERIC W. MCINROY and JOHN A. MISIASZEK, and
each of them, proxies for the undersigned with full power of substitution, to
vote all shares of the Common Stock of TRANSMATION, INC. (the "Company") owned
by the undersigned at the Annual Meeting of Shareholders to be held at the
Hutchison House, 930 East Avenue, Rochester, New York, on Tuesday, August 17,
1999 at 12:00 noon, local time, and at any adjournment or adjournments thereof,
reserving to such proxies the right to vote such shares cumulatively to elect
the maximum number of nominees:
1. Election of Directors.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below (except as marked to the [ ] WITHHOLD AUTHORITY to vote for all nominees listed
contrary). below.
</TABLE>
Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME LISTED BELOW.
Angelo J. Chiarella E. Lee Garelick Harvey J. Palmer
2. Proposal to approve and adopt an amendment to the Company's Articles of
Incorporation which increases the number of shares of the Company's
authorized Common Stock from 15,000,000 shares to 30,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve and adopt an amendment to the Company's Code of
Regulations which permits the number of directors of the Company to be fixed
or changed by the Board of Directors as well as by the shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve and ratify an amendment to the Transmation, Inc. Amended
and Restated 1993 Stock Option Plan which permits exercise of previously
granted options by persons who are no longer employees of the Company but
continue to serve as non-employee directors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Proxy -- continued from other side)
5. Proposal to approve and ratify an amendment to the Transmation, Inc. Amended
and Restated Directors' Warrant Plan which permits the exercise of warrants
for a period of 90 days after cessation of service as a director of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Proposal to approve and ratify the selection of PricewaterhouseCoopers LLP as
the Company's independent auditors for the fiscal year ending March 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
This Proxy will be voted as specified by the undersigned. This proxy revokes any
prior proxy given by the undersigned. UNLESS AUTHORITY TO VOTE FOR ONE OR MORE
OF THE NOMINEES IS SPECIFICALLY WITHHELD ACCORDING TO THE INSTRUCTIONS, A SIGNED
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS AND, UNLESS
OTHERWISE SPECIFIED, FOR EACH OF THE OTHER FIVE PROPOSALS LISTED HEREIN AND
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. The undersigned acknowledges
receipt with this Proxy of a copy of the Notice of Annual Meeting and Proxy
Statement dated July 9, 1999, describing more fully the proposals set forth
herein.
Dated:................. , 1999
..............................
..............................
Signature(s) of shareholder(s)
Please date and sign name
exactly as it appears hereon.
Executors, administrators,
trustees, etc. should so
indicate when signing. If the
shareholder is a corporation,
the full corporate name should
be inserted and the proxy
signed by an officer of the
corporation, indicating his
title.
