SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[XX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRION, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[XX] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(I) 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 is 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:
<p>
Trion, Inc.
TRION, INC. Notice of Annual Meeting
of Shareholders
and Proxy Statement
Tuesday, April 21, 1998
10:00 A.M. (Local Time)
Dennis A. Wicker Civic Center
1801 Nash Street
Sanford, North Carolina
_____________________________________
Table of Contents Page
Notice of Annual Meeting of Shareholders. . . . . . . . . 2
Proxy Statement . . . . . . . . . . . . . . . . . . . . . 3
Shares Entitled to Vote . . . . . . . . . . . . . . . . . 3
Election of Directors . . . . . . . . . . . . . . . . . . 4
Security Ownership. . . . . . . . . . . . . . . . . . . . 7
Section 16(a) Beneficial Ownership Reporting Compliance . 8
Executive Compensation. . . . . . . . . . . . . . . . . . 8
Corporate Performance . . . . . . . . . . . . . . . . . .15
Service Agreement . . . . . . . . . . . . . . . . . . . .16
Shareholder Proposal. . . . . . . . . . . . . . . . . . .16
Independent Auditors. . . . . . . . . . . . . . . . . . .19
Shareholder Proposals for 1999 Annual Meeting . . . . . .19
Other Matters . . . . . . . . . . . . . . . . . . . . . .19
______________________________________________
1
<p>
TRION, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
The Annual Meeting of Shareholders of Trion, Inc. will be held at the
Dennis A. Wicker Civic Center, 1801 Nash Street, Sanford, North Carolina, on
Tuesday, April 21, 1998, at 10:00 A.M. (local time), for the following
purposes:
(1) To elect three directors to serve for a term of three years.
(2) To transact any and all other business which may properly come
before the meeting or any adjournment or adjournments thereof
including one shareholder proposal if properly presented.
A Proxy Statement containing information for shareholders is annexed
hereto and a copy of the Annual Report of the Company for the fiscal year
ended December 31, 1997 is enclosed herewith.
Shareholders who do not expect to attend the meeting and desire to have
their stock voted at the meeting are requested to sign the enclosed Proxy and
return the same in the enclosed envelope, which requires no postage if mailed
in the United States.
By Order of the Board of Directors,
March 13, 1998 C. J. Monsma
Sanford, North Carolina Secretary
2
<p>
TRION, INC.
P.O. Box 760
Sanford, North Carolina 27331-0760
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Trion, Inc. (the "Company"), to be voted
at the Annual Meeting of Shareholders of the Company to be held on Tuesday,
April 21, 1998, beginning at 10:00 A.M. (local time) (the "Annual Meeting"),
at the Dennis A. Wicker Civic Center, 1801 Nash Street, Sanford, North
Carolina, and at any and all adjournments thereof.
The only business which the Company intends to present, or knows that
others will present, at the Annual Meeting is the business specified in the
accompanying Notice of the Annual Meeting. However, if other matters are
properly presented at the Annual Meeting, such matters will be considered and
acted upon and the persons named in the Proxies being solicited will vote such
Proxies in accordance with their best judgment on such matters.
This Proxy Statement and the accompanying Notice and form of Proxy will
be mailed to shareholders on or about March 13, 1998.
SHARES ENTITLED TO VOTE
Shareholders of record at the close of business on March 2, 1998, will
be entitled to vote at the Annual Meeting. As of March 2, 1998 there were
outstanding 7,128,797 shares of the Company's common stock, par value $0.50
per share (the "Common Stock"). Shareholders are entitled to one vote per
share of Common Stock and, in the election of directors, have cumulative
voting rights; that is, each shareholder (or his proxies) is entitled to as
many votes as his shares represent times the number of directors to be elected
and may cast all such votes for a single nominee or distribute them among the
nominees as he (or his proxies) sees fit. The persons named in the Proxies
will allocate the cumulated votes represented by the Proxies in the manner
they deem proper in their best judgment. A shareholder voting by signing and
returning the Proxy may not specify a manner of allocation on the Proxy, but
must be present at the Annual Meeting and vote by ballot or specify a manner
of allocation in a proxy given to another person in order to have his votes
allocated in a particular manner.
The Company has a confidential voting By-law which provides that, at the
shareholder's election, an individual shareholder's votes on a proxy card will
not be disclosed to the Company other than in specified situations. The
Company's proxy cards will be collected and tabulated by the judge of election
for the Annual Meeting, First Union National Bank. The tabulator will forward
comments written on the proxy cards to the Company for management's
information, but information about individual shareholders' votes who have
checked the box on the proxy card to elect confidential voting will not be
communicated to the Company's management except in specified situations.
In the election of directors, the three candidates who receive the highest
number of votes actually cast will be elected. If your Proxy is specifically
marked as withholding authority to vote for one or more of the director
nominees listed on the Proxy, your shares will not be voted for the election
of the nominee(s) as to whom you have withheld authority to vote, and will be
voted for the election of the other
3
<p>
listed nominee(s), if applicable. Such votes withheld will not have the
effect of a "negative" vote with respect to the election of directors. Any
other proposal coming before the Annual Meeting generally will be approved and
authorized if it receives the affirmative vote of a majority of the votes
actually cast by shareholders entitled to vote on the proposal. Therefore,
abstentions, if any, from voting with respect to any such matter will not have
the effect of a "negative" vote with respect to such matter. In accordance
with Pennsylvania law, votes withheld from director nominees or abstentions
with respect to any other matter will be counted for purposes of determining
whether a quorum exists at the Annual Meeting.
Brokers, banks and other nominee holders of Common Stock will be
requested to obtain voting instructions of beneficial owners of such Common
Stock registered in the nominee holders' names. All shares represented by a
duly completed Proxy submitted by a nominee holder on behalf of beneficial
owners will be counted for purposes of determining whether a quorum exists at
the Annual Meeting, whether or not such shares are actually voted by the
nominee holder with respect to all matters presented at the Annual Meeting.
Such shares will be voted to the extent instructed by the nominee holder, and
if such nominee holder fails to vote a beneficial owner's shares for a
particular matter, such shares will not have the effect of a "negative" vote
with respect to such matter.
ELECTION OF DIRECTORS
The By-laws of the Company provide that directors are to be elected in
three classes. At the Annual Meeting in each year, the shareholders elect for
a term of three years a successor or successors to the director or directors
whose term or terms expire in such year. At the Annual Meeting, the
shareholders will elect a class of three directors for a term expiring in
2001.
It is intended that the Proxies will be voted for the election of the
nominees listed below. Hugh E. Carr, Joseph W. Deering and Seddon Goode, Jr.
are currently serving as directors in the class to be elected at the Annual
Meeting. If a nominee is unable to serve for any reason not presently known,
a substitute will be nominated by the Board of Directors and the Proxies will
be voted for such substitute.
The following table lists information concerning the nominees for
election as directors and the continuing directors of the Company, including
the number of shares of Common Stock beneficially owned, directly or
indirectly, by each as of March 2, 1998. Unless otherwise indicated, the
holders of all shares shown in the table have sole voting and investment power
with respect to such shares, and hold less than 1% of the class.
Shares of
Name and Director Common Stock Percent of
Principal Occupation(1) Age Since Beneficially Owned(2) Class(2)(3)
(a) Nominees for director for terms to expire in 2001:
Hugh E. Carr (*)(**) 65 1968 466,000 6.28%
Former Chairman and
Chief Executive Officer,
Trion, Inc.
Sanford, NC (4)
4
<p>
Shares of
Name and Director Common Stock Percent of
Principal Occupation(1) Age Since Beneficially Owned(2) Class(2)(3)
Joseph W. Deering (***) 57 1995 7,601 --
Chairman, Trion, Inc. and
President, PMI
Food Equipment Group
(a division of Premark
International, Inc.),
manufacturer of commercial
food service products,
Troy, OH
Seddon Goode, Jr. (**)(***) 66 1979 83,075 1.12%
President, University
Research Park, a 501(c)(6)
corporation - real estate
developers,
Charlotte, NC (5)
(b) Continuing directors whose terms expire in 1999:
James E. Heins (***) 67 1981 13,833 --
Independent consultant-
communications,
Pinehurst, NC (6)
F. Trent Hill, Jr. (*) 45 1996 11,263 --
Chief Financial Officer,
Sonoco Products Company,
manufacturer of packaging
products,
Hartsville, SC (7)
Steven L. Schneider (**) 54 1993 220,290(9) 2.97%
President and Chief
Executive Officer,
Trion, Inc.,
Sanford, NC (8)
Shares of
Name and Director Common Stock Percent of
Principal Occupation(1) Age Since Beneficially Owned(2) Class(2)(3)
(c) Continuing directors whose terms expire in 2000:
Grant R. Meyers (*) 55 1976 271,913 3.66%
Partner, Target Sales
manufacturers' repre-
sentative organization,
Davie, FL (10)
Samuel J. Wornom III(*)(**) 55 1982 91,276(11) 1.23%
President, Nouveau
Properties, Inc.,
Sanford, NC (12)
5
<p>
(*) Member of audit committee
(**) Member of nominating committee
(***) Member of compensation committee
(1) There are no family relationships between any executive officers,
directors or persons nominated to become a director, except that Messrs.
Meyers and Carr are brothers-in-law. Except as otherwise indicated,
each director and nominee has held the principal occupation listed for
five years or more.
(2) These figures include shares owned by the immediate families (i.e.,
wives, minor children and relatives sharing the same home) of the
respective persons. Shares of Common Stock also include any shares
which each person has the right to acquire upon exercise of options
which are exercisable within sixty days of March 2, 1998.
(3) With respect to holdings of Common Stock, these percentages assume the
exercise of options exercisable within sixty days of March 2, 1998 owned
by the respective persons, but no other exercise, for each calculation.
(4) Mr. Carr is a director of the Sanford branch of Wachovia Bank of North
Carolina. Wachovia is the Company's principal banking affiliation. The
amount of shares of Common Stock beneficially owned by Mr. Carr includes
271,737 shares of Common Stock owned of record and beneficially by his
spouse, as to which she has sole voting and investment power and as to
which he disclaims beneficial ownership.
(5) Mr. Goode is a director of Riscorp, Inc.
(6) Mr. Heins is a director of BB&T Financial Corporation.
(7) Prior to assuming his current position in 1995, Mr. Hill was Vice
President-Finance in 1994 and Vice President-Industrial Products Division,
N.A. from 1990 through 1994 for Sonoco Products Company.
(8) Prior to joining the Company in May 1993, Mr. Schneider served as Group
President of Tomkins Industries, Inc., a diversified manufacturing company and
a subsidiary of Tomkins PLC.
(9) Includes 103,421 shares which Mr. Schneider has the right to acquire
within sixty days of March 2, 1998 upon the exercise of stock options. Also
includes 14,869 shares of Common Stock owned by the Trion Charitable
Foundation with respect to which Mr. Schneider shares the voting and
investment power as one of three co-trustees, but as to which he has no
economic interest.
(10) Mr. Meyers is also President of Scuba Marine Products, a manufacturer
and distributor of scuba diving and marine supplies and Vice President
of Island Trader Inc., a retail store in Key Largo, FL.
(11) Includes 35,000 shares which Mr. Wornom has the right to acquire upon
the exercise of stock options.
(12) As of June 1997, Mr. Wornom is also a director of Capital Bank.
6
<p>
The Company has standing audit, compensation and nominating committees.
During 1997 the Board of Directors met five times; the audit committee met
twice; the compensation committee met twice; and the nominating committee did
not meet. Each of the directors attended at least 75% of the aggregate number
of meetings of the Board of Directors and of the committees on which he
served. The functions of the audit committee consist primarily of selecting
the Company's independent auditors and reviewing their independence; approving
the scope of annual or special audit activities and reviewing audit results;
monitoring financial reporting and accounting practices; and reviewing the
adequacy of the Company's system of internal accounting controls. The
functions of the compensation committee are to make recommendations to the
Board on all matters of policy and procedures relating to compensation of
executive management; to conduct an annual review of the performance of the
Company's executives and make recommendations to the Board regarding the level
and form of compensation to be awarded each executive, including the granting
of stock options; and to make reports and recommend actions to the Board
concerning compensation plans, including an annual Management Incentive Plan.
The functions of the nominating committee consist of making recommendations to
the Board concerning its size, the composition of its classes and candidates
for election as directors, including consideration of individuals recommended
by shareholders for election as a director. Any such recommendations,
together with the individual's qualifications and consent to be considered as
a nominee, should be sent to the Secretary of the Company for presentation to
the nominating committee.
Under current arrangements, the Chairman of the Board is paid an annual
retainer of 3,000 shares of Common Stock and all other non-employee directors
are paid an annual retainer of 1,500 shares of Common Stock. In addition, all
non-employee directors receive a fee of $600 for participation in each meeting
of the Board of Directors and each committee meeting. Each director has
$50,000 in life insurance coverage and $200,000 in travel and accident
coverage through the Company's group plans. Mr. Carr did not receive the
annual retainer for 1997 and during the period from January 1, 1997 through
September 30, 1997 he did not receive the meeting fees but did receive
compensation in his capacity as a consultant as described under "Service
Agreement."
SECURITY OWNERSHIP
Information concerning beneficial ownership of Common Stock by individual
directors and nominees, including S. L. Schneider, who is also named in the
Summary Compensation Table below, is set forth under "Election of Directors."
The following table sets forth the number of shares of Common Stock
beneficially owned by the other executive officers named in the Summary
Compensation Table and by the directors, nominees and executive officers of
the Company as a group (thirteen persons) on March 2, 1998:
Name Shares Beneficially Owned (1) Percent of Class (1)
- ---------------------- ----------------------------- -------------------
B. H. Boender 28,653 --
C. J. Monsma 22,820 --
C. A. Haynes 12,123 --
H. A. Rose 4,513 --
Directors and executive 1,264,678 17.03%
officers as a group
- -------------------------
7
<p>
(1) Includes shares which were deemed outstanding because the individuals had
the right to acquire them upon exercise of options which are exercisable
within sixty days of March 2, 1998 as follows: Mr. Boender, 18,653; Mr.
Monsma, 21,820; Mr. Haynes, 11,308; Mr. Rose, 4,513; and the group, 207,908.
The only person known to the Company to be the beneficial owner of more
than 5% of the Common Stock on March 2, 1998 is Hugh E. Carr, whose address is
318 Court Square, Suite A, Sanford, North Carolina 27330-5658. Information as
to Mr. Carr's beneficial ownership is set forth above under "Election of
Directors."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires the Company's directors and executive
officers to file reports with the Securities and Exchange Commission
indicating their holdings of and transactions in the Company's equity
securities and to provide copies of such reports to the Company. To the
Company's knowledge insiders of the Company complied with all such filing
requirements for 1997.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation during
1997 of the President and Chief Executive Officer of the Company and the other
executive officers of the Company whose salary and bonus exceeded $100,000 in
1997:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
--------------------------- ---------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All
Name and Annual Stock Underlying LTIP Other
Principal Year Salary Bonus Compensation Awards(s) Options Payouts Compensation
Position ($) ($) ($) ($) (#) ($) ($)(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S. L. Schneider 1997 205,500 119,796 N/A N/A 7,080 N/A 18,461
President and Chief 1996 197,600 27,960 N/A N/A 9,912 N/A 16,195
Executive Officer(2) 1995 190,000 45,410 N/A N/A 9,248 N/A 1,879
B. H. Boender 1997 106,250 60,818 N/A N/A 3,540 N/A 10,121
Vice President/Sales 1996 102,360 18,044 N/A N/A 5,280 N/A 8,896
Marketing 1995 98,800 26,592 N/A N/A 4,925 N/A 1,508
C. J. Monsma 1997 108,576 44,460 N/A N/A 3,540 N/A 10,028
Vice President and 1996 104,200 13,806 N/A N/A 5,008 N/A 9,065
Chief Financial 1995 99,996 18,946 N/A N/A 2,302 N/A 312
Officer
C. A. Haynes 1997 98,282 34,474 N/A N/A 3,540 N/A 7,691
Vice President 1996 94,050 12,609 N/A N/A 4,511 N/A 8,186
Engineering 1995 90,000 17,145 N/A N/A 2,121 N/A 281
H. A. Rose 1997 103,800 46,710 N/A N/A 3,540 N/A N/A (5)
Vice President/Sales 1996 95,833 11,553 N/A N/A 5,000(4) N/A N/A (6)
Marketing(3)
</TABLE>
_____________
8
<p>
(1) Represents the Company's contribution to the applicable 401(k) retirement
plans for the accounts of the named executive officers and, in 1997 and 1996,
amounts credited under the Non-Qualified Retirement and Savings Plan which
provides for an annual accrual equal to 7% of an eligible executives base
salary plus interest thereon. The amounts credited in 1997 and 1996,
respectively, under the Non-Qualified Retirement and Savings Plan were as
follows: Mr. Schneider - $16,086 and $14,275; Mr. Boender - $8,538 and
$7,395; Mr. Monsma - $8,498 and $7,528; and Mr. Haynes - $7,691 and $6,798.
(2) Mr. Schneider is employed pursuant to an employment agreement described
under the caption "Compensation Agreements."
(3) Mr. Rose joined the Company on January 15, 1996.
(4) Mr. Rose was granted incentive stock options to purchase 5,000 shares of
Common Stock under the 1995 Option Plan in connection with his employment.
The exercise price per share of such options is $4.875. The options become
exercisable ratably over three years from the first anniversary of the date of
grant.
(5) Mr. Rose did not participate in the 401(k) retirement plan in 1997 and is
not a participant in the Non-Qualified Retirement and Savings Plan.
(6) Mr. Rose was not eligible to participate in the 401(k) retirement plan in
1996 and is not a participant in the Non-Qualified Retirement and Savings
Plan.
The following table sets forth information concerning stock option grants
during 1997 to the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN 1997
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants (1) Option Term
- ------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- --------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
S. L. Schneider 7,080 17.50 5.2500 2/11/02 10,269 22,693
B. H. Boender 3,540 8.75 5.2500 2/11/02 5,135 11,346
C. J. Monsma 3,540 8.75 5.2500 2/11/02 5,135 11,346
C. A. Haynes 3,540 8.75 5.2500 2/11/02 5,135 11,346
H. A. Rose 3,540 8.75 5.2500 2/11/02 5,135 11,346
</TABLE>
_____________
(1) All stock options reflected in the table were granted under the 1995
Option Plan and are incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986. The options become exercisable
ratably over three years from the first anniversary of the date of grant.
9
<p>
The following table sets forth information concerning the options exercised
during 1997 and the unexercised options held at December 31, 1997 by the
executive officers named in the Summary Compensation Table:
<TABLE>
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR END OPTION VALUES
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Value Options at Fiscal Options at Fiscal
on Realized Year-End (#) Year-End ($)(1)
Name Exercise # $ Exercisable Unexercisable Exercisable Unexercisable
---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
S. L. Schneider - - 94,674 16,771 141,010 193
B. H. Boender - - 14,071 8,702 2,080 103
C. J. Monsma - - 18,203 7,647 96 48
C. A. Haynes - - 7,917 7,255 88 44
H. A. Rose - - 1,666 6,874 - -
</TABLE>
_____________________
(1) Represents the difference between the exercise price of the options
and the closing sales price of the Common Stock as reported on the
NASDAQ National Market System on December 31, 1997 of $4.875 per share.
Pension Benefits
The Company maintains a noncontributory defined benefit retirement plan (the
"Plan") for all domestic employees of the parent Company, Trion, Inc., who
have completed one year of service with the Company and have reached the age
of 21.
Historically, benefits under the Plan were calculated for each participant on
two separate bases. With respect to any years of service prior to January 1,
1982, benefits were based on the participant's average monthly earnings during
the period from January 1, 1977 to December 31, 1981. With respect to years
of service beginning January 1, 1982, through December 31, 1995, benefits for
each participant were determined based on the individual's actual earnings,
and the annual amounts as calculated were aggregated. Beginning January 1,
1996, the Company amended the Plan to a cash balance basis.
Under the terms of the conversion to a cash balance pension plan, benefits are
based on hypothetical account balances. The benefit accrued by each
participant prior to January 1, 1996 was converted into an actuarially
equivalent cash balance amount. For 1996 and 1997, each participant will
accrue an additional benefit equal to 2.75% of eligible compensation and
interest will be credited on the hypothetical accounts at a rate fixed by the
Board of Directors. The rate for 1996 and 1997 was 6.5%. Eligible
compensation for purposes of the Plan includes salary and bonus, as referenced
in the Summary Compensation Table, subject to maximum annual compensation of
$150,000 which is indexed for inflation. For 1997, the maximum annual pension
payable under the Plan was $125,000.
The normal form of benefit payment as calculated is a straight life annuity
with joint and survivor options available. With the conversion to a cash
balance pension plan, lump sum distributions are also permitted.
10
<p>
The estimated annual benefit payable under the Plan at the normal retirement
age of 65 to the named executive officers is: Mr. Schneider - $8,631; Mr.
Boender - $5,505; Mr. Monsma - $3,595; Mr. Haynes - $2,995; and Mr. Rose -
$2,050.
On October 24, 1997, the Board of Directors approved a plan to freeze the Plan
effective December 31, 1997 and terminate the Plan, upon approval from the
Internal Revenue Service, no later than December 31, 1998. Upon termination,
all participants will become fully vested and will have the option to receive
a lump sum payment, an annuity or rollover of their accumulated benefit
balance. Currently, the Plan is overfunded and it is the intention of the
Company to distribute all excess assets to Plan participants.
Compensation Agreements
On March 31, 1993 the Company and Steven L. Schneider entered into an
employment agreement which was subsequently amended and restated on July 28,
1995 (the "Agreement") providing for his employment as President and Chief
Executive Officer for a three-year term commencing on May 24, 1993 (the
"Commencement Date"). The Agreement will be automatically extended for an
additional year on each anniversary date unless either party gives written
notice of termination at least 90 days prior to an anniversary date. The
Agreement provides for a base salary of $190,000 per year, subject to review
and adjustment by the Board of Directors or the Compensation Committee. The
initial Agreement also provided for the grant of options to purchase an
aggregate of 175,000 shares of the Common Stock described in more detail
below. In the event of Mr. Schneider's death, disability or resignation or
discharge by the Company other than a termination without cause (as described
below), the Company will pay him all accrued obligations including his base
salary through the date of termination, the amount of any accrued bonus and
incentive, deferred or other cash compensation, and all accrued benefits under
the Company's retirement, incentive and other benefit plans. In the event of
a termination without cause, he is entitled to receive the product of two
times the highest base salary during the term of the Agreement; a pro rata
incentive bonus equal to the full target award for the then current fiscal
year; all accrued benefits under the Company's retirement and other benefit
plans; and, for a period of two years, the Company shall arrange to provide
insurance coverage generally provided for other Company executives or until
such time as Mr. Schneider is provided with substantially equivalent benefits
by another employer. For this purpose, a termination without cause includes a
discharge by the Company without cause or a resignation by Mr. Schneider
within one year after a substantial reduction of Mr. Schneider's compensation
or duties, the giving of notice by the Company that it elects not to extend
the Agreement or a failure by the Company to cause a successor to assume the
Company's obligations under the Agreement. The Agreement provides that the
Company will indemnify Mr. Schneider to the fullest extent permitted by law
against claims relating to his service as a director, officer or employee of
the Company or any other enterprise for which he acts in such capacity at the
Company's request. Mr. Schneider has agreed that while employed by the
Company and for a period of two years following his resignation or discharge
for cause he will not directly or indirectly work for or participate in the
activities of any firm engaged in the manufacture or sale of products
competing with the Company.
On March 31, 1993 the Company and Mr. Schneider entered into a Stock Option
Agreement pursuant to which the Company granted to Mr. Schneider nonstatutory
stock options to purchase an aggregate of 175,000 shares of the Common Stock;
100,000 shares effective as of the Commencement Date at an exercise price of
$2.50 per share (the "1993
11
<p>
Options") and 75,000 shares effective as of May 24, 1994 at an exercise price
of $3.00 per share (the "1994 Options"). The fair market value of the Common
Stock at the time of grant of the options was $3.75 per share. The 1993
Options are exercisable in increments of 25,000 shares on each of the first
through the fourth anniversaries of the Commencement Date. The 1994 Options
are exercisable in increments of 25,000 shares on each of the second through
the fourth anniversaries of the Commencement Date.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors makes recommendations
to the Board of Directors concerning compensation plans for the Company
generally and the specific forms and levels of compensation for executive
officers of the Company. The Compensation Committee, which is comprised of
three members, each of whom is a non-employee director, makes the following
report on executive compensation:
Compensation Philosophy
The executive compensation policies established by the Board of Directors
are intended to provide compensation to the Company's executive officers at
competitive levels in order to attract and retain qualified executive
officers, to reward executive officers based on the Company's annual and
long-term performance, and to thereby enhance shareholder value. The
Compensation Committee views stock-based awards as an important means of
linking compensation to corporate performance and providing executive officers
with an added incentive to enhance shareholder value.
The Company will not be affected for the 1997 tax year by the limitation on
deductibility of executive compensation imposed by Section 162(m) of the
Internal Revenue Code of 1986, and it is not presently anticipated that
Section 162(m) will affect the Company's compensation deductions in future
years. The Compensation Committee intends to review this issue periodically.
Elements of Executive Compensation
Compensation of the Company's executive officers currently consists of the
following elements: base salary, cash payments under the Trion, Inc.
Management Incentive Plan as adopted for a particular year (the "Management
Incentive Plan"), and stock option awards, including awards under the 1995
Option Plan.
Base Salary. As to all executive officers other than the Chief Executive
Officer, the Compensation Committee establishes base salaries primarily on the
basis of the Chief Executive Officer's recommendations. The Chief Executive
Officer's approach to determining recommended base salary for a new executive
officer includes consideration of responsibilities of the position, the
candidate's experience, skills and expertise, prior accomplishments, current
compensation, competitive salary data including various national reports and
surveys and cost of living comparisons of new location versus old location.
In order to ensure that a new officer's base salary bears a reasonable
relation to the base salaries paid to others, the compensation levels of
existing executive officers are also considered. The primary factors
influencing the Chief Executive Officer's annual recommended changes in base
salaries for existing executive officers are his personal evaluation of
individual performances for the prior year including attainment of personal
objectives and goals, attainment of Company performance goals, the Company's
salary structure, competitive salary data including
12
<p>
various national reports and surveys and the prior year's national percentage
increase in the cost of living.
Management Incentive Plan. Each year a Management Incentive Plan is adopted
by the Board of Directors to provide executive officers and key management
employees with cash compensation commensurate with the level of attainment of
certain performance goals. Target amounts payable under the Management
Incentive Plan to individual executives are determined at the discretion of
the Board of Directors and amounts earned, if any, are paid annually early in
the succeeding year. Target incentive amounts are earned if certain pre-
established Company and individual performance goals are achieved. The
structure and elements of each year's Management Incentive Plan historically
have been similar from year to year. Company goals under the Management
Incentive Plan for 1997 were comprised of targeted amounts of net sales (40%)
and operating income (60%). Individual performance goals are established by
the executive officer to whom the individual reports, after consultation with
the individual.
The target amounts which may be earned by individual executive officers if
performance goals are achieved are set at a specified percentage of base
salary. The target percentages for 1997 for executive officers other than the
Chief Executive Officer ranged from 35% to 50% of base salary and were set by
the Board of Directors based on the Chief Executive Officer's recommendations.
The target percentage for the Chief Executive Officer was set at 50% for 1997
by the Board of Directors.
Incentive compensation can be earned at levels below and above the targeted
percentages of base salary, with the minimum and maximum amounts for 1997
being 0% and 150% of each individual's target percentage. Threshold and
maximum Company performance criteria are established in addition to the target
performance criteria, and actual percentages of base salary earned are
determined by proration based on the level of achievement within the range
between the threshold and maximum performance criteria. No payments are made
if the threshold criteria are not met.
Options. The grant of stock options is intended to provide long-term
performance-based compensation to executive officers of the Company. Options
also are intended to provide executive officers with an additional incentive
to increase and promote shareholder value.
The Chief Executive Officer recommended, and the Compensation Committee
approved, incentive stock option grants in 1997. Grants were based
on a pool of shares determined by the number of participants, with established
minimum and maximum numbers of shares if certain performance goals were
attained. The specific number of shares granted to individuals was provided
in the recommendation. The exercise price of the options is equal to the fair
market value of the Common Stock on the date of grant.
The Board of Directors has generally granted incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, and all
options granted in 1997 were incentive stock options. The Compensation
Committee also from time to time recommends that the Board of Directors award,
in its discretion, non-statutory stock options to executive officers,
particularly where a one-time grant involving a significant number of shares
is considered appropriate in connection with the recruitment of a new
executive to the Company, such as the options granted to the Company's Chief
Executive Officer in 1993 as described under the caption "Compensation
Agreements."
13
<p>
Compensation of Chief Executive Officer
Mr. Schneider's Employment Agreement as currently in effect and related
Stock Option Agreement are described under the caption "Compensation
Agreements."
As is the case for each of the Company's executive officers, Mr. Schneider's
compensation currently includes three primary components: base salary, cash
payments under the Management Incentive Plan and stock option awards. Mr.
Schneider's base salary was increased effective January 1, 1998, reflecting
the Company's and Mr. Schneider's performances during 1997. His target bonus
under the 1997 Management Incentive Plan was 50% of base salary, to be based
80% on Company performance and 20% on his individual performance goals.
Targeted Company performance goals established for 1997 at the end of 1996
were weighted 40% to net sales and 60% to operating income. 123% of the
Company's weighted performance goals and 92% of his individual performance
goals were achieved, resulting in Mr. Schneider being awarded 58.3% of base
salary as incentive compensation under the 1997 Management Incentive Plan.
The grant to Mr. Schneider in February 1997 of options to purchase 7,080
shares of Common Stock at an exercise price of $5.25 per share was determined
pursuant to the process described above under "Elements of Executive
Compensation - Options".
Joseph W. Deering, Chairman
Seddon Goode, Jr.
James E. Heins
14
<p>
CORPORATE PERFORMANCE
The following table represents a performance comparison of cumulative total
returns on the Company's Common Stock compared to the NASDAQ Market (U.S.
companies) and to NASDAQ Non-Financial Stocks for the period of five years
ended December 31, 1997.
The Company has chosen the latter index because it cannot reasonably
identify a peer group or specific industry index for comparison purposes.
Most of the Company's competitors are minor components of large enterprises or
are privately held.
" Date " " Company" " Market" " Market" " Peer" "Peer "
" " " Index " " Index " " Count " " Index" "Count"
"12/31/92", 100.000, 100.000, 3930, 100.000, 3232
"01/29/93", 104.000, 102.847, 3918, 102.687, 3224
"02/26/93", 90.000, 99.010, 3949, 97.549, 3256
"03/31/93", 116.000, 101.876, 3973, 100.184, 3289
"04/30/93", 124.000, 97.528, 4007, 96.043, 3316
"05/28/93", 124.000, 103.354, 4035, 103.812, 3340
"06/30/93", 136.000, 103.832, 4071, 103.920, 3371
"07/30/93", 160.000, 103.954, 4103, 103.039, 3401
"08/31/93", 156.000, 109.327, 4138, 109.075, 3439
"09/30/93", 144.000, 112.583, 4173, 112.039, 3474
"10/29/93", 164.000, 115.114, 4220, 115.546, 3505
"11/30/93", 164.000, 111.682, 4303, 112.153, 3581
"12/31/93", 160.000, 114.796, 4375, 115.458, 3646
"01/31/94", 200.000, 118.281, 4399, 119.329, 3664
"02/28/94", 176.000, 117.177, 4438, 118.095, 3708
"03/31/94", 204.000, 109.971, 4490, 109.918, 3759
"04/29/94", 188.000, 108.544, 4519, 107.393, 3781
"05/31/94", 188.000, 108.809, 4561, 106.564, 3819
"06/30/94", 184.000, 104.830, 4575, 101.359, 3833
"07/29/94", 164.000, 106.980, 4593, 104.021, 3848
"08/31/94", 176.000, 113.800, 4611, 111.114, 3860
"09/30/94", 176.000, 113.509, 4614, 111.412, 3864
"10/31/94", 184.000, 115.740, 4636, 114.657, 3875
"11/30/94", 172.000, 111.900, 4652, 110.908, 3896
"12/30/94", 148.000, 112.214, 4657, 111.021, 3905
"01/31/95", 160.000, 112.843, 4647, 110.629, 3910
"02/28/95", 200.696, 118.811, 4649, 116.331, 3916
"03/31/95", 194.675, 122.334, 4643, 120.445, 3917
"04/28/95", 188.654, 126.186, 4654, 124.767, 3922
"05/31/95", 193.324, 129.442, 4653, 127.627, 3929
"06/30/95", 189.296, 139.932, 4670, 139.273, 3950
"07/31/95", 177.213, 150.218, 4689, 149.898, 3963
"08/31/95", 202.023, 153.262, 4712, 151.865, 3976
"09/29/95", 202.023, 156.787, 4708, 155.282, 3977
"10/31/95", 185.861, 155.888, 4746, 153.701, 4013
"11/30/95", 166.339, 159.549, 4778, 156.587, 4043
"12/29/95", 166.339, 158.699, 4818, 154.727, 4094
"01/31/96", 170.396, 159.482, 4808, 155.842, 4099
"02/29/96", 191.303, 165.552, 4838, 162.755, 4135
"03/29/96", 219.795, 166.101, 4877, 162.519, 4182
"04/30/96", 227.936, 179.882, 4922, 178.272, 4227
"05/31/96", 277.524, 188.141, 4980, 187.215, 4277
"06/28/96", 208.143, 179.660, 5033, 176.837, 4333
"07/31/96", 195.899, 163.658, 5065, 158.892, 4362
"08/30/96", 184.308, 172.828, 5089, 167.790, 4389
"09/30/96", 184.308, 186.048, 5095, 181.302, 4407
"10/31/96", 163.830, 183.993, 5137, 178.006, 4454
"11/29/96", 148.102, 195.367, 5178, 188.718, 4499
"12/31/96", 135.760, 195.192, 5175, 188.024, 4509
"01/31/97", 197.469, 209.064, 5160, 202.570, 4499
"02/28/97", 169.314, 197.505, 5169, 188.334, 4516
"03/31/97", 169.314, 184.612, 5168, 175.365, 4529
"04/30/97", 140.407, 190.384, 5153, 181.198, 4510
"05/30/97", 153.439, 211.969, 5146, 203.139, 4510
"06/30/97", 153.439, 218.452, 5130, 207.847, 4502
"07/31/97", 136.851, 241.510, 5125, 230.755, 4503
"08/29/97", 147.911, 241.142, 5114, 230.425, 4510
"09/30/97", 168.744, 255.404, 5104, 243.499, 4500
"10/31/97", 166.661, 242.129, 5112, 228.746, 4514
"11/28/97", 138.106, 243.326, 5128, 228.377, 4536
"12/31/97", 163.217, 239.527, 5076, 220.645, 4496
15
<p>
SERVICE AGREEMENT
On July 30, 1992, Hugh E. Carr, a director of the Company, resigned his
position as Chairman and Chief Executive Officer of the Company. In an
agreement dated October 30, 1992 between the Company and Mr. Carr, Mr. Carr
agreed to remain available to render consulting services to the Company
through September 30, 1997. It was also agreed that during this period Mr.
Carr would not have any financial interest in or make his services available
to any person or entity engaged in any business activity competing with the
Company. The Company agreed to compensate Mr. Carr in the amount of $12,500
per month and that he will be entitled to participate in all employee benefit
plans in which he previously participated, including the 1985 Option Plan.
The agreement also provided, among other things, for the regrant of a stock
option held by Mr. Carr and scheduled to expire December 10, 1992 covering
30,000 shares of Common Stock, with the exercise price to be set at market
value on the date of regrant ($3.75 per share).
Upon retirement on October 1, 1997, Mr. Carr was entitled to receive a
monthly pension supplement from the Company until his death sufficient to
bring his gross annual retirement benefits to $81,000 inclusive of the amount
of primary benefit to which Mr. Carr is entitled under the federal social
security laws then in effect and his gross retirement benefit under the
Company's pension plan. The annual amount of the supplement is $8,400.
SHAREHOLDER PROPOSAL
A shareholder proponent has notified the Company of the intention to
present the following proposal at the Annual Meeting. The name, address and
shareholdings of the proponent will be furnished by the Company promptly upon
receipt of any oral or written request therefor. The Board of Directors and
the Company accept no responsibility for the proposal and supporting
statement set forth below.
Proposal
BE IT RESOLVED: that the Amended and Restated By-Laws of Trion, Inc. as
amended through 19 April 1994 be additionally amended to provide that Article
III DIRECTORS Section 3.2. Number, Election, Term of Office which now reads:
The number of directors which shall constitute the whole Board of Directors
shall not be less than three or more than fifteen members as determined from
time to time by the Board of Directors. The directors shall be classified in
respect to the time for which they shall severally hold office by division
into three classes, and the term of office on one class shall expire at the
annual meeting of shareholders in each year. The number of members of each
class shall be determined from time to time by the Board of Directors;
provided that the membership of all classes shall be nearly equal in number as
possible. If, at any meeting of shareholders due to vacancy or vacancies, or
otherwise, directors of more than one such class are to be elected, each class
of directors to be elected at the meeting shall be elected in a separate
election. At each annual meeting each of the successors to the director or
directors of the class whose terms shall expire in that year shall be elected
for a term of three years and shall serve until his successor shall have been
duly elected and qualified or until his death, resignation or removal.
Directors need not be shareholders of the Corporation.
16
<p>
shall read:
The number of directors which shall constitute the whole Board of Directors
shall be not less than three nor more than eleven members as determined from
time to time by the Board of Directors. Each director shall serve for one (1)
year and the term of office shall expire at the annual meeting of the
shareholders each year. Nominees need not be shareholders of the Corporation
at the time of their initial nomination for election to the Board of
Directors.
Section 3.3. Vacancies which now reads:
.and each person so elected shall hold office until the next selection of the
class for which such director has been chosen,
shall read:
.and each person so elected shall hold office until the next annual meeting of
shareholders.
Supporting Statement
We believe it is time for Trion Shareholders to assert their rights and call
for annual election of our company's directors.
The reason often stated by proponents of a classified or staggered board of
directors (Trion's) is to provide continuity. With two thirds of the
directors guaranteed to retain their seats in any given year, the argument
goes, it is easier to plan and implement long range strategies.
However, because it is impossible to change a majority of the directors in a
single year, it is difficult for shareholders to change the direction of the
company in the event of poor performance. Classified boards preserve the
status quo. Lengthening directors' terms of office increases the likelihood
that incumbent directors will retain their position, regardless of their
performance.
Boards of Directors should be accountable to the shareholders. If management
and the board have long-term strategies that serve shareholders best
interests, they should have no problem persuading a majority of the
shareholders to support them each year and continuity will be preserved. If
they do not, they should be replaced - as quickly as possible.
In a world of dynamic competition, the longer it takes to redirect a company
plodding down the wrong path, the greater the chance that misguided strategies
will cripple, if not destroy, a once competitive enterprise.
Annual election of Trion, Inc.'s Board of Directors is in the best interest of
our company's shareholders. We urge you to VOTE FOR THIS PROPOSAL.
Recommendation of the Board Against the Proposal
The Board of Directors firmly believes that a classified board structure
strikes the right balance between the need of the Company and the shareholders
for continuity and stability and the need for the Board of Directors to be
accountable to shareholders.
17
<p>
Board accountability is a function of the selection of responsible,
experienced and respected directors and not of whether they serve one or
three-year terms. The Company's annual elections at which approximately one-
third of the Board is elected provide shareholders the regular opportunity to
make a significant change in the composition of the Board, without leaving the
Company devoid of experienced and knowledgeable directors.
The Company's Board plays a critical role in strategic planning and corporate
policy-making. Substantial prior experience with the business and affairs of
the Company is a key factor affecting a director's ability to contribute in
these areas. The Company's classified Board structure helps assure stability
and an environment in which corporate decision-making can occur deliberately
and with insight regarding the Company's business.
A classified board structure, where a majority of the Board at any one time
will have prior experience with the Company, is of particular benefit to the
Company since virtually all of the Company's executive officers have been
with the Company less than five years and the Company otherwise operates with
a relatively small staff.
Individuals who will make significant contributions to corporate boards and
will agree to serve are increasingly difficult to find. The classified Board
helps the Company attract to the Board and retain prominent and well-qualified
individuals willing to commit the time and dedication necessary to understand
the Company, its operations and its competitive environment.
As a classified board, the Board can represent more effectively the interests
of all of the Company's shareholders, including responding to circumstances
created by demands or actions by a minority shareholder or group.
A classified board reduces the possibility of a sudden and surprise takeover
of control of the Board. Since the Company's shareholders are entitled to
cumulate their votes in the election of directors, if all eight directors were
to be elected at one shareholder meeting as proposed, the holders of Common
Stock in the range of one-third of the outstanding shares could elect a
majority of the Board, based on the likely number of shares which would be
voted in a contested election. Eliminating the Company's classified Board
could lead to control of the Company by a minority of shareholders, who might
have plans or goals for the Company which may not be in the best interests of
all shareholders.
The Board of Directors believes that a classified Board best serves the
Company, the shareholders and those with whom the Company does business, and
accordingly recommends that shareholders vote "AGAINST" this proposal.
18
<p>
INDEPENDENT AUDITORS
The independent auditors selected by the Company for the current fiscal
year and the fiscal year ended December 31, 1997, are Ernst & Young LLP,
Raleigh, North Carolina, representatives of which will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do
so. They will be available to respond to appropriate questions at that time.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal of shareholders intended to be presented for consideration at
the 1999 Annual Meeting must be received no later than November 13, 1998, by
the Secretary of the Company for inclusion in the Company's proxy statement
and form of proxy relating to the 1999 Annual Meeting.
OTHER MATTERS
The solicitation of Proxies is made on behalf of the Board of Directors of
the Company and the cost thereof will be borne by the Company. In addition to
soliciting Proxies by mail, directors, officers and employees of the Company,
without receiving additional compensation therefore, may solicit Proxies by
telephone, telegram, in person or by other means. Arrangements also will be
made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of Common Stock
held of record by such persons and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
All Proxies received pursuant to this solicitation will be voted as
directed and, if no direction is given, will be voted FOR all nominees named
herein and AGAINST the shareholder proposal. Such Proxies will be voted in
the discretion of the Proxies on any other matter properly presented at the
meeting. Shareholders who execute Proxies may revoke them by giving notice in
writing to the Secretary of the Company at the principal executive office of
the Company, which notice must be received before the Proxies are voted.
By Order of the Board of Directors,
March 13, 1998 C. J. Monsma
Secretary
19
<p>
ANNUAL MEETING PROXY CARD
PROXY TRION, INC.
P.O. Box 760
Sanford, NC 27331-0760
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Samuel J. Wornom III and Steven L.
Schneider, and each of them, Proxies with power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all
the shares of common stock of Trion, Inc. held of record by the undersigned
at the close of business on March 2, 1998, at the Annual Meeting of
Shareholders to be held on April 21, 1998, at 10:00 A.M. (local time) at the
Dennis A. Wicker Civic Center, 1801 Nash Street, Sanford, North Carolina, and
any adjournments thereof.
The Board of Directors recommends a vote "FOR" all nominees identified in
Proposal 1.
1. ELECTION OF DIRECTORS
- - FOR election as Directors of the - - WITHHOLD AUTHORITY
following nominees identified in to vote for all nominees.
the Proxy Statement:
Hugh E. Carr, Joseph W. Deering and Seddon Goode, Jr.
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided:
______________________________________________________________________________
The Board of Directors recommends a vote "AGAINST" Proposal 2.
2. SHAREHOLDER PROPOSAL
- - FOR - - AGAINST - - ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(over)
==============================================================================
- - The undersigned desires to elect voting confidentiality, to the extent
applicable under the Trion, Inc. By-laws.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES IDENTIFIED IN PROPOSAL 1 AND AGAINST PROPOSAL 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
Dated:__________________, 1998
Signature
Signature
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
