def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section 240.14a-12 |
Perceptron, 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):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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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. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
47827 Halyard Drive
Plymouth, Michigan 48170-2461
(734) 414-6100 Facsimile: (734) 414-4700
October 3, 2008
Dear Perceptron Shareholder:
You are cordially invited to attend the 2008 Annual Meeting of Shareholders of Perceptron, Inc.
(Company) to be held on Tuesday, November 18, 2008, at 9:00 a.m., local time, at 47827 Halyard
Drive, Plymouth, Michigan 48170.
The attached notice of the meeting and Proxy Statement describe the items of business to be
transacted:
(a) The election of eight directors,
(b) The approval of an amendment to the Companys 2004 Stock Incentive Plan (2004 Stock
Plan) to increase, by 400,000, the shares of Common Stock available for grant under such plan and
re-approval of the Code Section 162(m) performance measures under such plan (the 2004 Plan
Proposal), and
(c) Such other business as may properly come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS BELIEVES THAT IT IS IMPORTANT THAT THE 2004 PLAN PROPOSAL BE ADOPTED SINCE
THERE ARE ONLY 9,784 SHARES OF COMMON STOCK AVAILABLE FOR FUTURE GRANT UNDER THE PLAN. WE NEED
YOUR VOTE FOR THE PROPOSAL IN ORDER TO PROVIDE THE COMPANY WITH ADDITIONAL SHARES OF COMMON STOCK
UNDER THE PLAN TO BE USED TO ATTRACT AND RETAIN KEY EXECUTIVES, TEAM MEMBERS AND NON-EMPLOYEE
DIRECTORS.
The Board of Directors believes that, to achieve the Companys objectives for growth and increased
profitability, the Company needs (i) to retain the top quality talent that currently exists at all
levels in the organization, (ii) to continue to strengthen its team in a number of key areas
through the addition of top talent and (iii) to motivate its team to achieve at the highest levels
of performance.
Our efforts to attract and retain key executives, team members and non-employee directors are
enhanced by providing our team with the opportunity to acquire the Companys Common Stock through
stock incentive plans such as the 2004 Stock Plan. The 2004 Plan Proposal allows the Company to
continue to provide equity incentives that are competitive with those offered by other companies
with which the Company competes for talent. In addition, the 2004 Stock Plan and the Employee
Stock Purchase Plan, by encouraging stock ownership, further align the interests of the Companys
team with those of the shareholders of the Company.
The Board of Directors believes that the 2004 Stock Plan provides significant benefit to the
Company for the following reasons:
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The 2004 Stock Plan is the Companys principal means of providing the team with
the long-term incentives necessary to drive the Companys growth strategy and create
intrinsic value for shareholders. Currently, there are only 9,784 shares of Common
Stock available for future grant under the 2004 Stock Plan. If the number of shares
available for grant under the 2004 Stock Plan is not increased, the Company will need
to use cash-based incentive programs to motivate the team, which we believe will not be
as effective as a stock-based plan like the 2004 Stock Plan. |
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Our current executive officers, all of whom have been appointed to those positions
in the last two years and in whom the Board of Directors has great confidence, hold
options to purchase only 347,300 shares of Common Stock, of which 88,500 shares were
in-the-money at September 26, |
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2008. This group of individuals will have tremendous impact on the Companys future
and need to be provided with continued long-term stock incentives. |
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By encouraging the team to acquire an ownership interest in the Company, the
plan further aligns the teams interest with those of shareholders. |
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We have active, hard-working and talented non-employee directors. The Board
and its committees held over 30 meetings in fiscal 2008, with all members attending in
excess of 75% of the total meetings of the Board and committees on which they serve.
The 2004 Stock Plan is the Companys only stock incentive plan available to
non-employee directors. The Company believes that these stock incentives are important
elements of the Companys efforts to attract and retain highly qualified outside
directors. |
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To date, non-employee directors have used all or a portion of their cash
director fees to purchase 53,766 shares of Common Stock under the Directors Stock
Purchase Rights Option of the 2004 Stock Plan. If the 2004 Plan Proposal is not
approved by shareholders, non-employee directors will no longer be permitted to elect
to receive Common Stock in lieu of their cash directors fees, discouraging them from
increasing their shareholdings in the Company. |
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The 2004 Stock Plan includes a vesting period requirement which requires
executive officers, directors and team members to contribute to the Companys success
over an extended period of time in order to benefit from the plan and tying their
financial futures to the financial interests of the Company. |
The enclosed Proxy Statement offers a more complete description of the 2004 Plan Proposal. The
Board of Directors encourages you to read the Proxy Statement carefully. We have also made
available a copy of our Annual Report for fiscal year 2008. We encourage you to read the Annual
Report, which includes information about our business and products, as well as our audited
financial statements.
You may have noticed changes in the way we are providing proxy materials to many of our
shareholders in connection with our 2008 Annual Meeting. This is because we have elected to
provide access to our proxy materials over the Internet under the Securities and Exchange
Commissions new notice and access rules. By providing our proxy materials over the Internet, we
hope to conserve natural resources and reduce the environmental impact of providing materials for
our Annual Meeting, expedite the delivery of this important information to you, and reduce our
printing and mailing costs. On or about October 6, 2008, we will mail to many of our shareholders
a Notice of Internet Availability of Proxy Materials containing instructions on how to access our
proxy statement and the Annual Report and vote electronically via the Internet. The notice also
contains instructions on how to receive a paper copy of your proxy materials. We will not be
mailing the notice to stockholders who have previously elected to receive notices and access the
proxy materials and vote completely electronically via the Internet or who have previously elected
to receive paper copies of the proxy materials.
After the formal business session at the Annual Meeting of Shareholders, there will be a report to
the shareholders on the progress of the Company along with a discussion period. I look forward to
seeing you at the Annual Meeting and hope you will make plans to attend. Whether or not you plan
to attend the meeting, I urge you to vote electronically via the Internet or by telephone, or, if
you requested paper copies of the proxy materials, please complete, sign, date and return the
accompanying proxy in the enclosed postage-paid envelope enclosed for your convenience so that as
many shares as possible may be represented at the meeting. No postage is required if the envelope
is mailed in the United States.
Sincerely,
/s/
Harry T. Rittenour
Harry T. Rittenour
President and Chief Executive Officer
47827 Halyard Drive
Plymouth, Michigan 48170
NOTICE OF THE 2008 ANNUAL MEETING OF SHAREHOLDERS
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TIME AND DATE
PLACE
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9:00 a.m., Eastern Time, on Tuesday, November 18, 2008
Perceptron Corporate Headquarters
47827 Halyard Drive
Plymouth, MI 48170 |
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ITEMS OF BUSINESS
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1. To elect eight directors to serve until the 2009
Annual Meeting of Shareholders and until their
successors are elected and qualified. |
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2. To approve an amendment to the Companys 2004 Stock Incentive Plan
(2004 Stock Plan) to increase, by 400,000, the shares of Common Stock
available for grant under such plan and re-approve the Code Section 162(m)
performance measures under such plan (the 2004 Plan Proposal), and |
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3. To transact such other business as may properly come before the meeting
or any adjournments thereof. |
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RECORD DATE
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In order to vote, you must have been a shareholder at the
close of business on September 26, 2008. |
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PROXY VOTING
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It is important that your shares be represented and voted at
the Annual Meeting. You can vote your shares electronically
via the Internet or by telephone or by completing and
returning the proxy card or voting instruction card if you
requested paper proxy materials. Voting instructions are
provided in the Notice of Internet Availability of Proxy
Materials, or, if you requested printed materials, the
instructions are printed on your proxy card and included in
the accompanying proxy statement. You can revoke a proxy at
any time prior to its exercise at the Annual Meeting by
following the instructions in the proxy statement. |
A certified list of shareholders entitled to vote at the meeting will be available for
examination by any shareholder during the meeting at the corporate offices at 47827 Halyard Drive,
Plymouth, Michigan 48170.
A copy of the 2008 Annual Report for the fiscal year ended June 30, 2008 and Proxy Statement
accompanies this notice.
By the Order of the Board of Directors
/s/
David W. Geiss
David W. Geiss
Vice President, General Counsel & Secretary
October 3, 2008
The vote of every shareholder is important, and your cooperation in promptly voting via the
Internet, by phone or by returning your marked, dated and signed proxy will be appreciated. The
proxy is revocable and will not affect your right to vote in person if you attend the meeting.
Your proxy will, however, help to assure a quorum and to avoid added proxy solicitation costs.
PERCEPTRON, INC.
2008 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
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PROXY STATEMENT
PERCEPTRON, INC.
2008 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON NOVEMBER 18, 2008
INTRODUCTION
This Proxy Statement and the accompanying Notice of the 2008 Annual Meeting of Shareholders,
2008 Annual Report and proxy card are furnished in connection with the solicitation of proxies by
the Board of Directors (Board) of Perceptron, Inc., a Michigan corporation (Company). The
proxies are being solicited for use at the 2008 Annual Meeting of Shareholders (Annual Meeting)
of the Company to be held at the corporate offices of the Company on Tuesday, November 18, 2008, at
9:00 a.m., local time, and at any adjournment of that meeting. The corporate offices of the
Company are located at 47827 Halyard Drive, Plymouth, Michigan 48170, and the Companys telephone
number is (734) 414-6100. The Company expects that this Proxy Statement and the accompanying
materials will be first sent or given to shareholders on or about October 6, 2008.
Only shareholders of record of the Companys Common Stock, $0.01 par value (Common Stock) at
the close of business on September 26, 2008 (Record Date) will be entitled to notice of and to
vote at the Annual Meeting or any adjournments thereof. Shareholders of record on the Record Date
are entitled to one vote per share on any matter that may properly come before the Annual Meeting.
As of the Record Date, there were 8,850,359 shares of Common Stock outstanding and entitled to
vote. The Company has no other class of stock outstanding. The presence, either in person or by
properly executed proxy, of the holders of a majority of the outstanding shares of Common Stock is
necessary to constitute a quorum at the Annual Meeting. See Share Ownership of Management and
Certain Shareholders for a description of the beneficial ownership of the Common Stock.
In accordance with rules and regulations recently adopted by the U.S. Securities and Exchange
Commission (the SEC), we have elected to provide access to our proxy materials to many of our
shareholders by providing such documents on the Internet, as referred to in the Notice of Internet
Availability of Proxy Materials (the Notice of Internet Availability). The Notice of the 2008
Annual Meeting of Shareholders, Proxy Statement, our 2008 Annual Report and form of proxy were
distributed and/or made available via the Internet to shareholders on or about October 6, 2008.
Important Notice Regarding Availability of Proxy Materials for the Shareholders Meeting to be
Held on November 18, 2008. The Notice of the 2008 Annual Meeting of Shareholders, Proxy Statement
and our 2008 Annual Report are available at http://materials.proxyvote.com/71361F.
The Notice of Internet Availability will also provide instructions for shareholders receiving
that notice on how to inform us to send future proxy materials to you electronically by email or in
printed form by mail. For record holders receiving a proxy card, the proxy card will provide
instructions on how to inform us to send future proxy materials to you electronically by email. If
you choose to receive future proxy materials by email, you will receive an email next year with
instructions containing a link to those materials and a link to the proxy voting site. Your
election to receive proxy materials by email or printed form by mail will remain in effect until
you terminate it. We encourage you to choose to receive future proxy materials by email. Doing so
will allow us to provide you with the information you need in a more timely manner, will save us
the cost of printing and mailing documents to you, and will help conserve natural resources.
Directors, officers and other employees of the Company may solicit, without additional
compensation, proxies by any appropriate means, including personal interview, mail, telephone,
courier service and facsimile transmissions. Although the Company does not anticipate retaining a
proxy solicitation firm to aid in solicitation of Proxies from its shareholders, if such a firm is
retained, it would be paid customary fees and would be reimbursed for out-of-pocket expenses.
Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries
which are record holders of the Companys Common Stock to forward proxy soliciting material to
1
the beneficial owners of such shares and the Company will reimburse such record holders for
their reasonable expenses incurred in connection therewith. The cost of soliciting proxies,
including the preparation, assembling and mailing of the Notice of Internet Availability, Notice of
the 2008 Annual Meeting of Shareholders, the Proxy Statement, the 2008 Annual Report and the
accompanying proxy card, as well as the cost of forwarding such material to the beneficial owners
of Common Stock, will be borne by the Company. Only one Notice of the 2008 Annual Meeting of
Shareholders, Proxy Statement and Annual Report, as applicable, will be delivered to multiple
shareholders sharing an address unless the Company has received contrary instructions from one or
more of the shareholders. Upon written or oral request from a shareholder who shares an address
with another shareholder, the Company shall deliver a separate copy of the Notice of the 2008
Annual Meeting of Shareholders, Proxy Statement and Annual Report. In the future, shareholders can
call or write the Company for a separate notice, annual report or proxy statement at (734) 414-6100
or 47827 Halyard Drive, Plymouth, MI 48170-2461. Similarly, those shareholders who share an
address and wish to receive only one copy of the notice, annual report or proxy statement when they
are receiving multiple copies can also call or write the Company at the number and address given
above.
Shares may be voted by record holders in four separate ways as follows: (i) by Internet at the
website listed on the proxy; (ii) by toll-free telephone at the telephone number listed on the
proxy; (iii) by completing and mailing the proxy, or (iv) by ballot at the Annual Meeting. Shares
represented by a duly executed proxy, unless previously revoked, will be voted at the Annual
Meeting in accordance with the instructions of the shareholder thereon if the proxy is received by
the Company before the close of business on November 17, 2008 or, in the case of Internet or
telephone voting, prior to 11:59 p.m. EST on November 17, 2008. Shares represented by a proxy
received after these times will be voted if the proxy is received by the Company in sufficient time
to permit the necessary examination and tabulation of the proxy before the vote of shareholders is
taken. IF NO INSTRUCTIONS ARE MADE, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS
NAMED IN THIS PROXY STATEMENT AND FOR THE APPROVAL OF THE 2004 PLAN PROPOSAL DESCRIBED IN THIS
PROXY STATEMENT. A proxy also gives Messrs. Harry T. Rittenour, John H. Lowry, III and David W.
Geiss discretionary authority, to the extent permitted by law, to vote all shares of Common Stock
represented by the proxy on any other matter that is properly presented for action at the meeting;
however, the Board does not intend to present any other matters at the Annual Meeting. Any proxy
given pursuant to this solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the
Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same shares and delivering it to the Secretary of the
Company at the Companys corporate offices at or before the Annual Meeting, (iii) voting again by
telephone or Internet (prior to 11:59 p.m. EST on November 17, 2008), since only a shareholders
latest vote will be counted, or, (iv) attending the Annual Meeting and voting in person, if the
shareholder is a shareholder of record (although attendance at the Annual Meeting will not in and
of itself constitute a revocation of a proxy).
If a shareholder owns shares through a bank or broker in street name, the shareholder may
instruct his or her bank or broker how to vote such shares. Broker non-votes occur when a bank,
broker or other nominee holder has not received voting instructions with respect to a particular
matter and the nominee holder does not have discretionary power to vote on that matter. The
election of directors is considered a routine matter, so a bank or broker will have discretionary
authority to vote such shares held in street name on that proposal. The 2004 Plan Proposal is not
considered a routine matter, so a bank or broker will not have discretionary authority to vote such
shares held in street name on that proposal. A broker non-vote may also occur if a broker fails to
vote shares for any reason.
Abstentions, and withheld votes with respect to the election of directors, are counted only
for purposes of determining whether a quorum is present at the 2008 Annual Meeting. Withheld votes
will be excluded entirely from the vote on the election of directors and will therefore have no
effect on the election. Directors are elected by a plurality of the votes cast, so that only votes
cast for directors are counted in determining which directors are elected. Approval of the 2004
Plan Proposal requires a majority of the votes cast on the matter. For purposes of determining the
number of votes cast with respect to the 2004 Plan Proposal, only those cast for or against are
included, and abstentions and broker non-votes are not counted for this purpose.
2
MATTERS TO COME BEFORE THE MEETING
PROPOSAL 1 ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will be asked to elect a Board of eight directors to hold
office, in accordance with the Bylaws of the Company, until the 2009 annual meeting and until the
election and qualification of their successors, or until their resignation or removal. The
following table sets forth information regarding the nominees for election to the Companys Board.
The Board recommends a vote FOR each of the nominees for election. The shares represented by
properly executed proxies will be voted in accordance with the specifications made therein.
PROXIES WILL BE VOTED FOR THE ELECTION OF SUCH NOMINEES UNLESS THE SPECIFICATION IS MARKED ON THE
PROXY INDICATING THAT AUTHORITY TO DO SO IS WITHHELD. If a nominee is unable to serve or, for good
cause, will not serve, the proxy confers discretionary authority to vote with respect to the
election of any person to the Board. The nominees receiving a plurality of votes cast at the
Annual Meeting will be elected to the Board. Shares may not be voted cumulatively for the election
of directors.
The nominees named below have been selected by the Board of the Company. Each of the nominees
is currently a director of the Company. The following information with regard to business
experience has been furnished by the respective nominees for director.
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Name and Age |
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Position, Principal Occupations and Other Directorships |
W. Richard Marz, 65
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Director since 2000 and Chairman of the Board since
January 2008. Mr. Marz is President of MMW Group, a
private technology consulting group he founded in
2006. From August 2005 to August 2006, he was a
technical consultant to LSI Corporation (LSI), and
prior to that time he was Executive Vice President,
Worldwide Strategic Marketing (December 2003 to August
2005) and Executive Vice President, Communications and
ASIC Technology (February 2002 to December 2003), of
LSI. LSI is a semiconductor manufacturer. Mr. Marz
also serves as a director of Lattice Semiconductor,
Inc. |
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David J. Beattie, 66
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Director since 1997. Mr. Beattie was President of
McNaughton McKay Electric Company (MME) from
February 2001 to December 2004. MME is a distributor
of industrial automation products and services. |
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Kenneth R. Dabrowski,
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Director since 1999. Mr. Dabrowski has been President
of the Durant Group, L.L.C., a management consulting
firm, since December 2000, and a partner with American
Industrial Partners, a New York based private equity
firm. He was a member of the faculty at Massachusetts
Institute of Technology from June 1999 to June 2004.
Mr. Dabrowski was Vice President, Quality and Process
Leadership, Ford Automotive Operations of Ford Motor
Company from September 1996 to January 1999. |
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Philip J. DeCocco, 70
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Director since 1996. Mr. DeCocco has been President
of Sturges House, Inc., a company founded by Mr.
DeCocco, since 1983. Sturges House, Inc. offers
executive recruiting and management consulting
services in human resources, strategic planning,
executive development and organization design and
development to various companies. |
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Robert S. Oswald, 67
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Director since 1996. Mr. Oswald has been Chairman,
Bendix Commercial Vehicle Systems, LLC, a manufacturer
of air brakes and other safety systems, since October
2003 and served as Chairman and Chief Executive
Officer from March 2002 to September 2003. Mr. Oswald
is also Chief Executive Officer and a director of
Paice, LLC, which is in the business of developing
hybrid electric power train technology. Mr. Oswald
was Chairman, President and Chief Executive Officer of
Robert Bosch Corporation, a manufacturer of automotive
components and systems, and a member of the Board of
Management of Robert Bosch, GmbH from July 1996 to
December 2000. Mr. Oswald also serves as a director
of Dura Automotive Systems, Inc.. |
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Name and Age |
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Position, Principal Occupations and Other Directorships |
James A. Ratigan, 60
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Director since 2003. Since May 2006, Mr. Ratigan has
served as Vice President and Chief Financial Officer
of Nitric BioTherapeutics, Inc., a privately held
specialty pharmaceutical, drug delivery systems and
biotechnology company. From August 2003 to April
2006, Mr. Ratigan was an independent consultant
providing consultative services to two specialty
pharmaceutical companies, a biotechnology company and
a private equity firm. From June 1997 to August 2003,
Mr. Ratigan was Executive Vice President, Chief
Financial Officer and Secretary of Orapharma, Inc., a
specialty pharmaceutical company that was acquired by
Johnson and Johnson, Inc. Mr. Ratigan was a director
of Perceptron from 1989 to 1996 and served as
Perceptrons Chief Operating Officer from May 1994 to
April 1996 and Chief Financial Officer from December
1993 to June 1996. |
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Harry T. Rittenour, 62
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Director since 2008. Since January 2008, Mr.
Rittenour has been President and Chief Executive
Officer of the Company. Prior to that he was Senior
Vice President Product Production and Quality of the
Company from May 2001 to January 2008. |
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Terryll R. Smith, 58
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Director since 1996. Mr. Smith has been President and
Chief Executive Officer of Water Security Corp., an
early stage technology start-up focused on drinking
water applications, since January 2007. He was
President and Chief Executive Officer of Novation
Environmental Technologies Inc., a water purification
company, from January 2000 to January 2007. |
Director Compensation for Fiscal 2008
The following table provides information as to compensation paid by Perceptron for services
rendered in all capacities to the Company and its subsidiaries during the fiscal year ended June
30, 2008 by the members of our Board of Directors, other than Mr. Rittenour, whose compensation is
described under Compensation of Executive Officers. All payments to members of the Board of
Directors set forth in the table are made pursuant to the standard director compensation
arrangements described under Standard Director Compensation Arrangements.
DIRECTOR COMPENSATION FOR FISCAL 2008
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All Other |
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Fees Earned or |
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Option Awards |
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Compensation |
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Total |
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W. Richard Marz(3)(4) |
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128,714 |
(5) |
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30,139 |
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0 |
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158,853 |
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David J. Beattie(4) |
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35,500 |
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13,957 |
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0 |
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49,457 |
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Kenneth R. Dabrowski(4) |
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42,000 |
(6) |
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13,957 |
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0 |
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55,957 |
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Philip J. DeCocco(4) |
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38,000 |
(7) |
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13,957 |
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0 |
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51,957 |
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Robert S. Oswald(4) |
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36,000 |
(8) |
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13,957 |
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0 |
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49,957 |
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James A. Ratigan(4) |
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41,000 |
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13,957 |
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0 |
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54,957 |
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Terryll R. Smith(4) |
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36,000 |
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13,957 |
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0 |
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49,957 |
|
|
|
|
(1) |
|
Represents the compensation cost incurred during fiscal year ended June 30, 2008 (fiscal
2008) associated with stock options awarded prior to June 30, 2008 under the 2004 Stock
Incentive Plan (the 2004 Stock Plan), calculated in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 123R, Share-Based Payment,
(FAS 123R). These amounts relate to options granted during the fiscal years ended June 30,
2008, 2007, and 2005. No options were granted during fiscal 2006. These amounts are based on
the grant date fair value of such awards expensed over the requisite vesting period, excluding
any forfeiture reserves recorded for these awards. There can be no assurance that the FAS
123R option award amounts shown above will ever be realized. The assumptions we used to
calculate stock option expense under FAS 123R are included in Note 9 to our audited
consolidated financial statements included in our Annual Reports on Form 10-K for the fiscal
years ended June 30, 2008, 2007 and 2005. |
4
|
|
|
(2) |
|
At June 30, 2008, the members of our Board of Directors, other than Mr. Rittenour, held the
following aggregate number of stock options: |
|
|
|
|
|
|
|
Number of Securities |
Name |
|
Underlying Options |
W. Richard Marz |
|
|
93,000 |
|
David J. Beattie |
|
|
28,000 |
|
Kenneth R. Dabrowski |
|
|
46,000 |
|
Philip J. DeCocco |
|
|
41,000 |
|
Robert S. Oswald |
|
|
22,000 |
|
James A. Ratigan |
|
|
34,000 |
|
Terryll R. Smith |
|
|
25,000 |
|
|
|
|
(3) |
|
During fiscal 2008, upon his appointment as the non-executive Chairman of the Board, Mr. Marz
received an award of an option to purchase 50,000 shares of Common Stock under the 2004 Stock
Plan. The grant date fair value of these option awards was $157,935. The assumptions we used
to calculate grant date fair value under FAS 123R are included in Note 9 to our audited
consolidated financial statements included in our Annual Report on Form 10-K for the fiscal
year ended June 30, 2008. |
|
(4) |
|
During fiscal 2008, each director, other than Mr. Rittenour, received an award of an option
to purchase 8,000 shares of Common Stock under the 2004 Stock Plan. The grant date fair value
of each of these option awards was $33,944. The assumptions we used to calculate grant date
fair value under FAS 123R are included in Note 9 to our audited consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008. |
|
(5) |
|
The director used $21,504 of his cash director fees to purchase 1,961 shares of the Common
Stock at the fair market value of the Common Stock on the date of purchase, pursuant to the
Directors Stock Purchase Rights Option of the 2004 Stock Plan described under Matters To Come
Before the Meeting Proposal 1 Election of Directors Standard Director Compensation
Arrangements below. |
|
(6) |
|
The director used all of his cash director fees to purchase 3,844 shares of the Common Stock,
at the fair market value of the Common Stock on the date of purchase, pursuant to the
Directors Stock Purchase Rights Option of the 2004 Stock Plan described under Matters To Come
Before the Meeting Proposal 1 Election of Directors Standard Director Compensation
Arrangements below. |
|
(7) |
|
The director used all of his cash director fees to purchase 3,490 shares of the Common Stock
at the fair market value of the Common Stock on the date of purchase, pursuant to the
Directors Stock Purchase Rights Option of the 2004 Stock Plan described under Matters To Come
Before the Meeting Proposal 1 Election of Directors Standard Director Compensation
Arrangements below. |
|
(8) |
|
The director used all of his cash director fees to purchase 3,306 shares of the Common Stock
at the fair market value of the Common Stock on the date of purchase, pursuant to the
Directors Stock Purchase Rights Option of the 2004 Stock Plan described under Matters To Come
Before the Meeting Proposal 1 Election of Directors Standard Director Compensation
Arrangements below. |
Standard Director Compensation Arrangements
Our standard compensation arrangements for our Board of Directors who are not our employees
(the Eligible Directors) are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Executive |
Type of Compensation |
|
Director |
|
Board Chair |
Board Annual Retainer |
|
$ |
20,000 |
|
|
$ |
100,000 |
|
Committee Chair Annual Retainers: |
|
|
|
|
|
|
|
|
Audit |
|
$ |
8,000 |
|
|
|
|
|
Other |
|
$ |
5,000 |
|
|
|
|
|
Committee Annual Retainers Per Committee |
|
$ |
3,000 |
|
|
|
|
|
5
The annual cash retainers identified above are paid quarterly on September 1, December 1,
March 1 and June 1. All Eligible Directors, other than the non-executive Board Chair for meetings
after August 15, 2008, receive $1,250 for each Board meeting attended. In addition, directors are
reimbursed for their out-of-pocket expenses incurred in attending Board and committee meetings.
Eligible Directors are also eligible to participate in the 2004 Stock Plan, which replaced the
Directors Stock Option Plan. The Management Development, Compensation and Stock Option Committee
(the Management Development Committee) or, if there is no such committee or similar committee,
the Board, administers the 2004 Stock Plan. Unless otherwise specified in the 2004 Stock Plan, the
Management Development Committee has the power to select the recipients of awards under the 2004
Stock Plan, including Eligible Directors, and has broad power to determine the terms of awards and
to change such terms in various ways subsequent to grant. The 2004 Stock Plan permits grants to
Eligible Directors of non-qualified stock options, restricted stock, restricted stock units, stock
appreciation rights, performance share awards, including cash, and deferred stock units at any time
prior to October 22, 2014. Except for a single incentive stock option grant of 10,000 options, the
Management Development Committee has only awarded non-qualified stock options under the 2004 Stock
Plan. The exercise price for a non-qualified stock option will be not less than 100% of the fair
market value of Common Stock on the date of grant. Fair market value means for purposes of
determining the value of Common Stock on the grant date the closing sale price of the Common Stock
on The Nasdaq Stock Markets Global Market (Nasdaq Global Market) on the grant date. On January
21, 2008, the date he was appointed the non-executive Chairman of the Board, Mr. Marz received
effective February 1, 2008, non-qualified stock options to purchase 50,000 shares, vesting
one-fourth on each of the first four anniversaries of the date of grant. On September 4, 2007,
each Eligible Director received
non-qualified stock options to purchase 8,000 shares, vesting
one-fourth on each of the first four anniversaries of the date of grant. The exercisability of
such options is accelerated in the event of the occurrence of certain changes in control of the
Company. See Compensation of Executive Officers Potential Payments Upon Termination or Change
in Control. In addition, such options become immediately exercisable in the event that the
Eligible Directors service on the Board is terminated by the Company, he is not re-nominated by
the Company to serve on the Board or, if re-nominated, is not re-elected, or voluntarily resigns
from the Board at the request of the Company. All options granted under the 2004 Stock Plan are
exercisable for a period of ten years from the date of grant, unless earlier terminated due to the
termination of the Eligible Directors service as a director of the Company.
The 2004 Stock Plan also permits Eligible Directors to purchase shares of Common Stock through
the 2004 Stock Plan in exchange for all or a portion of the cash fees payable to them for serving
as a director of the Company (Directors Stock Purchase Rights Option). By December 31 of each
year, a director must make his or her election to purchase shares of Common Stock in exchange for
all or a portion of a directors fees payable from December 1 of that year to December 1 of the
next year.
Directors fees are payable in cash on March 1, June 1, September 1 and December 1 of each
year. On each of these dates, we determine the number of shares of Common Stock each Director who
has elected to participate in the Directors Stock Purchase Rights Option has earned on that date.
This determination is made by dividing all directors fees payable on each of those dates which the
Director has elected to exchange for Common Stock, by the fair market value of the Common Stock on
that date. Any portion of the directors fees payable on each of those dates which the Director
has not elected to receive in Common Stock will be paid to the Director in cash. The fair market
value of the Common Stock will be determined by using the closing sale price of the Common Stock on
the Nasdaq Global Market on the grant date. We will issue share certificates for all shares of
Common Stock purchased in a calendar year by December 15th of such year unless a
director requests by written notice to receive his or her share certificate at any time during the
year.
CORPORATE GOVERNANCE
Board of Directors and Committees
The Board is responsible for direction of the overall affairs of the Company. Our directors
are elected to serve until their successors are elected. The Board and each committee thereof meet
formally from time to time and also take action by consent resolutions. During the fiscal year
ended June 30, 2008, the Board met a total of six times. All of the current directors who are
standing for re-election attended at least 75% of the total meetings of the Board, and of any
committee on which they served, held during the period in fiscal 2008 in which they served as
directors
6
or members of any such committees. Our policy is that each director is strongly encouraged to
attend the Annual Meeting of Shareholders if reasonably possible. All of the directors, except
one, attended the 2007 Annual Meeting of Shareholders.
The Board has delegated certain authority to an Audit Committee, a Management Development,
Compensation and Stock Option Committee and a Nominating and Corporate Governance Committee to
assist it in executing its duties. The Board has adopted charters for each of these Committees.
The charters are available on our website at www.perceptron.com. The Board determined that all of
the directors, other than Mr. Rittenour, are independent directors as defined in Marketplace Rule
4200(a)(15) of The Nasdaq Stock Market, Inc. (Nasdaq). Mr. Marz has served as non-executive
Chairman of the Board since January 2008 and presides over meetings of the Board of Directors and
independent directors. Mr. Beattie served as lead director until January 2008 and presided over
meetings of the independent directors while serving in that capacity. The composition and
principal functions of each Committee are as follows:
Audit Committee. The Audit Committee is currently comprised of three outside members of the
Board: Messrs. Oswald, Ratigan, who serves as Chairman, and Smith. The Board determined that all
of the members of the Audit Committee are independent as required by the rules of the Securities
and Exchange Commission (SEC) and Nasdaq listing standards for audit committee members. In
addition, the Board determined that Mr. Ratigan qualified as an audit committee financial expert
as defined by applicable SEC rules and that each of the Audit Committee members satisfies all other
qualifications for Audit Committee members set forth in the applicable Nasdaq rules. The Audit
Committee held twelve meetings in fiscal 2008.
On August 6, 2007 the Board approved and adopted the Audit Committees revised charter. The
Audit Committees primary responsibilities include the following:
|
(i) |
|
oversee the Companys financial reporting process on behalf of the
Board; |
|
|
(ii) |
|
review, appoint, compensate, retain and oversee the accounting firm to
be appointed as the Companys independent registered public accounting firm; |
|
|
(iii) |
|
review in advance the nature and extent of all services provided to
the Company by its independent registered public accounting firm; |
|
|
(iv) |
|
review the independence of the Companys independent registered public
accounting firm; |
|
|
(v) |
|
review the scope, purpose and procedures of the audit; |
|
|
(vi) |
|
review the Companys annual earnings press release, the audited
financial statements and the proposed footnotes to be included in the Companys
Annual Report on Form 10-K with management and the auditors; |
|
|
(vii) |
|
report annually to the Board whether the Audit Committee recommends to
the Board that the audited financial statements be included in the Companys Annual
Report on Form 10-K for filing with the SEC; |
|
|
(viii) |
|
review with such auditors its experience, findings and recommendations upon
completion of the audit and receive from the auditors their required communications
under generally accepted auditing standards; |
|
|
(ix) |
|
review the Companys quarterly earnings releases and financial
statements with management and the auditors; |
|
|
(x) |
|
review the Companys Quarterly Reports on Form 10-Q for filing with the
SEC; |
|
|
(xi) |
|
review the Companys proxy statement when authority is delegated by the
Board; |
|
|
(xii) |
|
review the adequacy of the Companys internal accounting procedures
and financial controls and managements report on internal control over financial
reporting required by applicable SEC rules; |
|
|
(xiii) |
|
oversee compliance by the Company with legal and regulatory requirements; |
|
|
(xiv) |
|
establish procedures for receipt, retention and handling of complaints
and concerns regarding financial matters; |
|
|
(xv) |
|
act as the Qualified Legal Compliance Committee; |
|
|
(xvi) |
|
review and approve any related party transactions; |
|
|
(xvii) |
|
monitor the Companys risk management activities; |
|
|
(xviii) |
|
review the performance of the finance and accounting department; and |
7
|
(xix) |
|
review and reassess annually the adequacy of the Audit Committees
charter and performance. |
Management Development, Compensation and Stock Option Committee. The Management Development,
Compensation and Stock Option Committee (Management Development Committee) is currently comprised
of three outside members of the Board: Messrs. Beattie, DeCocco, who serves as Chairman, and Marz.
On November 12, 2007, the Board approved and adopted the Management Development Committees
revised charter. The Management Development Committees primary responsibilities include the
following:
|
(i) |
|
review the Companys compensation programs and policies; |
|
|
(ii) |
|
establish and administer the compensation programs and policies for the
Companys CEO and other officers and key employees under its purview; |
|
|
(iii) |
|
administer the Companys stock-based compensation plans; |
|
|
(iv) |
|
review and recommend compensation for service on the Board; |
|
|
(v) |
|
provide a compensation committee report for inclusion in the Companys
proxy statement; |
|
|
(vi) |
|
monitor the Companys succession planning; and |
|
|
(vii) |
|
review and reassess annually the adequacy of the Management
Development Committees charter and performance. |
Eleven employees are currently under the purview of the Management Development Committee, including
all of the executive officers named in the Summary Compensation Table included herein. Mr.
Rittenour participates in meetings of the Management Development Committee and makes
recommendations with respect to the annual compensation of employees under the Committees purview.
The Management Development Committee reviews and approves the compensation of employees under its
purview other than Mr. Rittenour. The Management Development Committee separately determines the
compensation of Mr. Rittenour in executive session. The Management Development Committee held
eight meetings in fiscal 2008.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee (Nominating Committee) is currently comprised of three outside members of the Board:
Messrs. DeCocco, Dabrowski, who serves as Chairman, and Marz who served as Chairman until February
4, 2008. The Board determined that all members of the Nominating Committee are independent as
required by the Nasdaq listing standards for nominating committee members.
On November 12, 2007, the Board approved and adopted the Nominating Committees revised
charter. The Nominating Committees primary responsibilities include the following:
|
(i) |
|
establish criteria for the selection of new Board members; |
|
|
(ii) |
|
conduct searches and interviews for individuals qualified to become
Board members; |
|
|
(iii) |
|
make recommendations to the Board regarding director nominees to stand
for election as directors at each annual meeting of shareholders or to fill
vacancies on the Board; |
|
|
(iv) |
|
recommend to the Board the directors to serve on the standing
committees of the Board and the structure and functions of such committees; |
|
|
(v) |
|
develop policies and procedures for Board consideration of shareholder
recommendations of Board nominees and handling of shareholder proposals; |
|
|
(vi) |
|
develop a process for shareholders to communicate with the Board; |
|
|
(vii) |
|
advise the Board on corporate governance matters, including
development, review and assessment of corporate governance principles; |
|
|
(viii) |
|
oversee the Board and committee self-evaluation process; |
|
|
(ix) |
|
evaluate independence of each Board member; and, |
|
|
(x) |
|
review and reassess annually the adequacy of the Nominating Committees
charter and performance. |
The Nominating Committee may use various methods to identify director candidates, including
recommendations from existing Board members, management, shareholders, professionals and other
sources outside the Company, which could include third party search firms. The Nominating
Committee will evaluate and screen
8
the list of potential nominees and narrow the list to individuals they believe best satisfy
the needs of the Company, with a strong preference given to the continuation of the current Board
members. The Nominating Committee will conduct interviews and gather additional information
concerning the individuals. Based on the foregoing, the Nominating Committee will recommend to the
Board the number of members of the Board to be elected at the next annual meeting of shareholders
of the Company and the persons to be nominated for election to the Board. Director candidates need
not possess any specific minimum qualifications. Rather, a candidates suitability for nomination
and election to the Board will be evaluated in light of the portfolio of skills, experience,
perspective and background required for the effective functioning of the Board. Among the desired
qualities that the Nominating Committee will consider are: (i) high ethical character; (ii)
practical intelligence and judgment, an inquiring mind and a good range of problem solving skills;
(iii) independence; (iv) ability to work in a collaborative culture; (v) high-level leadership
experience and personal achievement; (vi) prior Board experience or experience advising or
reporting to Boards preferably of a publicly traded company; (vii) sufficient personal commitment
and time to devote to responsibilities as a director; and (viii) capacity and desire to represent
the balanced best interests of the shareholders as a whole.
The Nominating Committee will consider candidates recommended by shareholders using the same
procedures and standards utilized for evaluating candidates recommended by other sources except
that the Nominating Committee will not consider a director nominee proposed by a shareholder if (i)
the shareholder does not submit the required information timely (see Shareholder Proposals and
Nominees for 2009 Annual Meeting Shareholder Nominees); (ii) the shareholder or group of
shareholders proposing the director nominee do not beneficially own, in the aggregate, more than 5%
of the Companys Common Stock, with the Common Stock used to satisfy this requirement owned for at
least one year prior to the date of the recommendation, or (iii) the shareholder proposes as the
nominee himself or herself, or an affiliate or affiliated party. See Shareholder Proposals and
Nominees for 2009 Annual Meeting Shareholder Nominees for a description of the procedures to be
used by shareholders to submit recommendations of possible director nominees to the Nominating
Committee. The Nominating Committee held four meetings in fiscal 2008.
Shareholder Communications with the Board of Directors
Shareholders desiring to communicate with the Board or any individual director may send
communications to the Board in writing by mail addressed to the Board of Directors or an individual
director, c/o Vice President, General Counsel & Secretary, Perceptron, Inc., 47827 Halyard Drive,
Plymouth, MI 48170 or by e-mail addressed to boardofdirectors@perceptron.com.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics (Code of Ethics) that applies to the
Companys directors, executive officers and other employees. The Code of Ethics is available on
our website at www.perceptron.com. Shareholders may also obtain a written copy of the Code of
Ethics, without charge, by sending a written request to the Investor Relations Department,
Perceptron, Inc., 47827 Halyard Drive, Plymouth, Michigan 48170. We will disclose any amendments
to, or waivers from, the provisions of the Code of Ethics applicable to the directors or executive
officers on the Companys website.
Certain information relating to corporate governance matters can be viewed at
www.perceptron.com. There we make available, free of charge, our (i) charters for the Audit
Committee, Management Development, Compensation and Stock Option Committee and Nominating and
Corporate Governance Committee and (ii) Code of Ethics. We intend to post additional information
on this website from time to time as the Board adopts or revises policies and procedures. The
information found on our website is not part of this or any report we file with, or furnishes to,
the SEC.
9
Audit Committee Report
In accordance with its revised charter, which was approved and adopted by the Board on August
6, 2007, the Audit Committee provides assistance to the Board in fulfilling its responsibility to
the shareholders, potential shareholders and investment community relating to corporate accounting,
reporting practices of the Company and the quality and integrity of the accounting policies,
internal controls and financial reports of the Company. In doing so, it is the responsibility of
the Audit Committee to maintain free and open communication between the Board, the Companys
independent registered public accounting firm and the financial management of the Company.
The Companys management is primarily responsible for the preparation, presentation and
integrity of the Companys financial statements. The Companys independent registered public
accounting firm, Grant Thornton LLP, is responsible for performing an independent audit of the
Companys (i) financial statements and expressing an opinion as to the conformity of the financial
statements with generally accepted accounting principles, and (ii) internal control over financial
reporting in accordance with the auditing standards of the Public Company Accounting Oversight
Board (United States) and issuing a report thereon.
The Audit Committee received from the independent registered public accounting firm and
reviewed a formal written statement describing all relationships between the firm and the Company
that might bear on the firms independence consistent with Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as may be modified or supplemented,
discussed with the auditors any relationships that may impact their objectivity and independence
and satisfied itself as to the auditors independence.
The Audit Committee discussed with the independent registered public accounting firm the
matters required to be discussed by Statement on Auditing Standards No. 61, Communications with
Audit Committees, as may be amended or supplemented, and, with and without management present,
discussed and reviewed the results of the independent registered public accounting firms
examination of the financial statements and internal controls.
The Audit Committee reviewed and discussed with management and the independent registered
public accounting firm the audited financial statements of the Company as of and for the fiscal
year ended June 30, 2008, including the quality of accounting principles and significant judgments
affecting the financial statements and the results of Grant Thornton LLPs independent audits
described above.
The members of the Audit Committee are not engaged in the practice of auditing or accounting.
In performing its functions, the Audit Committee necessarily relies on the work and assurances of
the Companys management and the independent registered public accounting firm.
Based on the above-mentioned reviews and discussions with management and the independent
registered public accounting firm and in light of its role and responsibilities, the Audit
Committee recommended to the Board that the Companys audited financial statements as of and for
each of the last three years ended June 30, 2008 be included in the Companys Annual Report on Form
10-K for the year ended June 30, 2008 for filing with the Securities and Exchange Commission.
Further, the Audit Committee approved the engagement of Grant Thornton LLP as the Companys
independent registered public accounting firm for the fiscal year ended June 30, 2009.
|
|
|
AUDIT COMMITTEE:
|
|
James A. Ratigan, Chairman |
|
|
Robert S. Oswald |
|
|
Terryll R. Smith |
Management Development, Compensation and Stock Option Committee Interlocks and Insider
Participation
The Management Development Committee currently consists of Messrs. Beattie, DeCocco and Marz.
During fiscal 2008, no member of the Management Development Committee served as an officer or
employee of the Company or any of its subsidiaries nor had any member of the Management Development
Committee formerly served as an officer of the Company or any of its subsidiaries. See Proposal 1
Election of Directors. During fiscal 2008, none of our executive officers served on the board
of directors or on the compensation committee of any other entity, any of whose executive officers
served either on our Board or on our Management Development Committee.
10
PROPOSAL 2 AMENDMENT TO THE 2004 STOCK INCENTIVE PLAN AND RE-APPROVAL OF
SECTION 162(m) PERFORMANCE GOALS UNDER 2004 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2
Proposed Amendment to the 2004 Stock Plan
The Company proposes to amend the 2004 Stock Incentive Plan (the 2004 Stock Plan) to
increase the total number of shares of Common Stock available for grant under such plan by 400,000
shares, from 600,000 to 1,000,000, and re-approve the performance goals included in the 2004 Stock
Plan pursuant to Internal Revenue Code of 1986, as amended (the Code), Section 162(m) (Code
Section 162(m)) (the 2004 Plan Proposal). The Board of Directors believes that the 2004 Stock
Plan Proposal will assist the Company in its efforts to attract and retain highly-qualified new
executives, team members, consultants and non-employee directors and provide incentive to the
Companys existing key executives, team members and non-employee directors.
The 2004 Plan Proposal is necessitated by the fact that there are insufficient shares of
Common Stock currently available under the 2004 Stock Plan for the Company to continue to grant
stock-based compensation to new and existing team members, consultants and non-employee directors.
As of September 26, 2008, there are only 9,784 shares available for future grant under the 2004
Stock Plan. The amendment, if approved by the shareholders of the Company, will permit the
continued use of stock-based compensation to attract new team members, consultants and non-employee
directors and to retain and provide incentive to the Companys existing team members, consultants
and non-employee directors. The 2004 Stock Plan has not been amended to add additional shares
since the Plan was adopted by shareholders on December 6, 2004. The Company has not made a
broad-based grant of stock options to team members since January 2007 and to executive officers,
other than for promotions and new hires, since June 2007.
The Companys team member compensation program reflects the Companys philosophy that
executive and team member compensation should be linked to performance. As a result, the Companys
Management Development Committee has historically favored stock-based compensation incentives for
the Companys executives and team members, such as stock options which permit the executives and
team members to buy a specified number of shares of Common Stock at the fair market value on the
date an option is granted. Such stock options gain value only if the price of the Common Stock
increases above the exercise price.
Further, the Company has a continuing need to attract highly qualified executive and team
member candidates to meet the Companys personnel requirements. The Company utilizes stock options
as part of a standard compensation package developed to attract such candidates.
If the 2004 Stock Plan is amended as proposed, the Company intends to continue to use stock
options and other stock-based compensation as a key component of its team member compensation
program as described above.
If the 2004 Plan Proposal is not adopted, the Company believes that the number of available
shares would be inadequate to meet the Companys needs and would significantly impede the Companys
ability to attract new executives, team members, and non-employee directors and to retain existing
key executives, team members and non-employee directors.
In addition to the foregoing, shareholders are being requested to re-approve the Code Section
162(m) performance measures under the 2004 Stock Plan described under Summary of the 2004 Stock
Plan Types of Awards Code Section 162(m) Awards and Performance Measures. If these
performance measures are re-approved, restricted stock, restricted stock units, performance shares
and performance share awards granted under the 2004 Stock Plan to certain executive officers of the
Company using these performance measures will qualify as exempt performance-based compensation
under Code Section 162(m).
Code Section 162(m) generally disallows the corporate tax deduction for certain compensation
paid in excess of $1,000,000 annually to each of the chief executive officer and the four other
most highly paid executive officers of publicly traded companies. However, awards that are payable
only upon attainment of performance measures
11
approved by shareholders are exempt from Code Section 162(m). Code Section 162(m) generally
requires such performance measures to be approved by shareholders every five years. Code Section
162(m) does not require shareholders to re-approve the stock option and stock appreciation right
requirements under Code Section 162(m) described under Summary of the 2004 Stock Plan Types of
Awards Stock Options and Summary of the 2004 Stock Plan Types of Awards Stock Appreciation
Rights.
The performance measures being presented to shareholders for re-approval are the same
performance measures originally approved by shareholders in connection with their approval of the
2004 Stock Plan on December 6, 2004. If the performance measures are approved by shareholders, the
Management Development Committee will continue to have the ability to grant to the chief executive
officer and the four other most highly paid executive officers restricted stock, restricted stock
awards, performance shares and performance shares awards under the 2004 Stock Plan that are exempt
from Code Section 162(m). To date, the Management Development Committee has not granted restricted
stock, restricted stock awards, performance shares or performance share awards, although they may
do so in the future. If the 2004 Plan Proposal is not approved by shareholders, the Management
Development Committee will still be able to grant these types of awards, but they will not be
exempt from Code Section 162(m). As a result, there will be a disincentive to the Management
Development Committee considering these types of awards because of the less favorable tax treatment
for the Company for these awards as compared to stock options and stock appreciation rights.
Of the 600,000 shares reserved under the 2004 Stock Plan, as of September 26, 2008, only 9,784
shares are available for future grants, 515,825 are reserved for outstanding grants under the 2004
Stock Plan, 20,626 shares have been issued upon exercise of stock options previously granted under
the 2004 Stock Plan and 53,766 shares have been or will be issued to non-employee directors in
exchange for all or a portion of the cash fees payable to them for serving as a director of the
Company pursuant to the Directors Stock Purchase Rights Option.
Required Vote
Approval of the 2004 Plan Proposal requires the affirmative vote of holders of a majority of
the shares properly cast on the matter. Abstentions will have the effect of a vote against
approval of the 2004 Plan Proposal and broker non-votes will have no effect.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE 2004 PLAN PROPOSAL UNLESS OTHERWISE INDICATED
ON THE PROXY.
The 2004 Stock Incentive Plan
The 2004 Stock Plan was adopted by the Board of Directors on October 22, 2004 and approved by
the shareholders on December 6, 2004. The 2004 Stock Plan expires on October 22, 2014. On October
2, 2008, the 2004 Stock Plan was amended and an amended and restated 2004 Stock Plan was adopted.
The amended and restated 2004 Stock Plan was amended on October 2, 2008 to increase the total
number of shares of Common Stock available for grant under such plan from 600,000 to 1,000,000.
Such amendment is being submitted to the shareholders for approval at the Annual Meeting.
As of September 26, 2008, an aggregate of 515,825 shares of Common Stock are reserved for
issuance upon the exercise of options granted under the 2004 Stock Plan, and an additional 400,000
shares will be reserved upon approval of the proposed amendment to the 2004 Stock Plan. If, for
any reason, an option lapses, expires or terminates without having been exercised in full, the
unpurchased shares covered thereby are again available for grants of options under the 2004 Stock
Plan.
The purpose of the 2004 Stock Plan is to (i) promote the best interests of the Company and its
shareholders by encouraging team members, consultants, and non-employee directors of the Company
and its subsidiaries to acquire an ownership interest in the Company, and (ii) enhance the ability
of the Company to attract, motivate and retain highly competent, effective and loyal team members,
consultants and non-employee directors in order to create intrinsic value for shareholders.
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The Company believes that equity is a key element of the Companys compensation package
because equity awards encourage loyalty to the Company and align the interests of team members,
consultants and non-employee directors directly with those of the Companys shareholders. The
amendment to the 2004 Stock Plan will allow the Company to continue to provide these individuals
with equity incentives that are competitive with those companies with which the Company competes
for talent.
The 2004 Stock Plan replaced the 1992 Stock Option Plan (the 1992 Plan) and the Directors
Stock Option Plan (the Directors Plan) and currently is the Companys only stock incentive plan.
Without the approval of the amendment to the 2004 Stock Plan, the Company will not, without
shareholder approval, be able to meet its future anticipated needs for stock incentive awards.
In addition to stock options, the 2004 Stock Plan allows for awards of stock appreciation
rights, restricted stock, restricted stock units, performance share awards and deferred stock
units. To date the Company has granted only stock options under the 2004 Stock Plan. However, the
Company believes that the 2004 Stock Plan will continue to enable it to design and grant different
types of stock awards that may be more effective in the future in attracting, motivating and
retaining key individuals essential for the Companys success. A broader plan such as the 2004
Stock Plan gives the Company greater flexibility to design and manage equity-based compensation to
meet the changing needs of its business over an extended period of time.
Moreover, if the amendment to the 2004 Stock Plan is not approved by shareholders, no further
stock incentive awards will be available for non-employee directors and non-employee directors will
no longer be able to elect to receive Common Stock in lieu of their cash directors fees. The
Company believes these stock incentives are important elements of the Companys compensation
package for non-employee directors and assist the Company in its efforts to attract and retain
highly qualified outside directors. Further, the Company believes that director stock awards and
stock purchase rights align non-employee directors interests and interests of the Companys
shareholders by encouraging
non-employee directors to acquire shares of Common Stock.
The closing price of a share of Common Stock on the Nasdaq Global Market on September 26, 2008
was $5.66. The proceeds received by the Company upon exercise of the awards of participants in the
2004 Stock Plan will be used for the general corporate purposes of the Company.
The
2004 Stock Plan is available on the Companys website at www.perceptron.com. A copy of
the 2004 Stock Plan along with the proposed amendment will be furnished to any shareholder upon
written request to the Companys Secretary at the Companys executive offices in Plymouth,
Michigan.
Eligible Participants
Participants in the 2004 Stock Plan shall be such employees (including employees who are
directors), non-employee directors or consultants of the Company and its subsidiaries as the
Management Development Committee in its sole discretion may select from time to time.
Summary of the 2004 Stock Plan
The following is a summary of key provisions of the 2004 Stock Plan. This summary does not
purport to be a complete description of all the provisions of the 2004 Stock Plan, and it is
qualified in its entirety by reference to the full text of the 2004 Stock Plan.
General. The 2004 Stock Plan provides for the grant of incentive stock options, non-qualified
stock options, restricted stock, restricted stock units, stock appreciation rights, performance
share awards, including cash, director stock purchase rights and deferred stock units at any time
prior to October 22, 2014. A total of 600,000 shares of Common Stock (1,000,000 shares of Common
Stock, if the 2004 Plan Proposal is approved by shareholders) have been set aside for issuance
under the 2004 Stock Plan, all of which may be granted as incentive stock options. This amount is
subject to adjustment for stock splits and certain other corporate events. Approximately 250 full
time employees and seven (7) non-employee directors of the Company are eligible to receive grants
under the 2004 Stock Plan.
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Administration. The Management Development, Compensation and Stock Option Committee (the
Management Development Committee) or, if there is no such committee or similar committee, the
Board of Directors, will administer the 2004 Stock Plan. Unless otherwise specified in the 2004
Stock Plan, the Management Development Committee has the power to select the recipients of awards
and, subject to Code Section 409A and the regulations thereunder (Code Section 409A), has broad
power to determine the terms of awards and to change such terms in various ways subsequent to
grant, including among others, accelerating the exercisability or vesting of awards or lapse of
transfer restrictions, waiving or modifying performance conditions and transfer restrictions, and
extending the post-termination exercise period of awards. Subject to the requirements of Code
Section 409A, the Management Development Committee may delegate to one or more officers or a
committee of such officers the authority to grant awards and to otherwise act with respect to
awards made to participants who are not officers or directors of the Company. In accordance with
current practice, the Management Development Committee has delegated such authority to the
President, within parameters set by the committee from time to time.
Repricing Prohibition
The 2004 Stock Plan does not permit the cancellation of outstanding options or stock
appreciation rights and the grant in substitution therefore of any new awards under the plan having
a lower exercise price or the amendment of outstanding options or stock appreciation rights to
reduce their exercise price without shareholder approval and compliance with the requirements of
Code Section 409A.
Types of Awards
Awards under the 2004 Stock Plan may be in the form of stock options (either incentive stock
options or non-qualified options), stock appreciation rights, restricted stock or restricted stock
units, performance share awards, director stock purchase rights and deferred stock units; or any
combination thereof. The terms of awards under the 2004 Stock Plan will generally be set forth in
an agreement between the Company and the recipient and will be determined by the Management
Development Committee, unless specified in the 2004 Stock Plan.
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Stock Options. Stock options represent the right to purchase shares of Common Stock
within a specified period of time at a specified price. Options granted under the 2004
Stock Plan may be (i) incentive stock options under Section 422 of the Code, or (ii)
non-qualified stock options. The exercise price for a stock option will be not less than
100% (110% for an incentive stock option granted to a 10% or more shareholder) of the fair
market value of Common Stock on the date of grant. The fair market value per share of the
Common Stock on September 26, 2008 was $5.66. Fair market value means the final reported
sales price (or, if there is no reported sale on such date, the final reported sales price
on the last preceding date for which such reported sales price exists) of the Common Stock
on the principal United States securities exchange on which the Common Stock may at the
time be listed on the grant date. The aggregate fair market value of the stock for which
any person may be granted incentive stock options which become exercisable for the first
time by such person in any calendar year cannot exceed the sum of $100,000 (determined on
the date such option is granted). No incentive stock option will be granted to a person
who is not an employee as defined in the applicable provisions of the Code and
regulations issued thereunder. An incentive stock option shall expire in ten years (five
years in the case of an incentive stock option granted to a 10% or more shareholder) after
the date of grant. No incentive stock options can be granted under the 2004 Stock Plan
after October 22, 2014, but options granted before that date may be exercised thereafter.
Options granted under the 2004 Stock Plan become exercisable and will expire at such times
as the Management Development Committee may determine; provided that options will expire
not later than ten years after grant. The maximum number of shares that may be subject to
option grants under the 2004 Stock Plan to any participant during any one fiscal year of
the Company is 200,000 shares of Common Stock (subject to adjustment for stock splits and
other corporate events). Payment for shares to be acquired upon exercise of options
granted under the 2004 Stock Plan may be made (i) in cash, (ii) by check, (iii) at the
discretion of the Management Development Committee, through a cashless exercise procedure
whereby the holder provides an option exercise notice to the Company and simultaneously
irrevocably instructs a broker to sell a sufficient number of shares from the option
exercise to pay the option exercise price and accompanying taxes, (iv) at the Management
Development Committees discretion, shares held by the holder for at least six months may
be tendered to the Company to pay the exercise price and tax |
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withholding obligations, if any, (v) any combination of the foregoing or (vi) other means
determined by the Management Development Committee. |
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Stock Appreciation Rights. A stock appreciation right is an award which provides the
holder with the ability to profit from the appreciation in value of a set number of shares
of the Common Stock over a set period of time. The 2004 Stock Plan provides for the grant
of two types of stock appreciation rights: tandem stock appreciation rights granted in
conjunction with a stock option which entitles the holder to exercise it as an option or as
an stock appreciation right and freestanding stock appreciation rights which are granted as
independent instruments and are not issued in conjunction with any options. The exercise
price for a stock appreciation right shall not be less than 100% of the fair market value
of the shares of Common Stock covered by the stock appreciation right on the grant date and
the per share exercise price subject to a tandem stock appreciation right will be the same
per share exercise price as the related option. Stock appreciation rights granted under
the 2004 Stock Plan become exercisable at such times as the Management Development
Committee may determine or as set forth in the related option and shall not have a term of
more than ten years. If a tandem stock appreciation right, a stock appreciation right
shall be exercisable only at such times and in such amounts as the related option may be
exercised. A tandem stock appreciation right shall terminate and cease to be exercisable
no later than the date on which the related option expires or is terminated or canceled.
Upon the exercise of a tandem stock appreciation right with respect to some or all of the
shares subject to such stock appreciation right, the related option shall be canceled
automatically as to the number of shares with respect to which the tandem stock
appreciation right was exercised. Upon the exercise of an option related to a tandem stock
appreciation right as to some or all of the shares subject to such Option, the related
tandem stock appreciation right shall be canceled automatically as to the number of shares
with respect to which the related option was exercised. The maximum number of shares that
may be subject to stock appreciation rights under the 2004 Stock Plan granted to any
participant during any one fiscal year of the Company is 200,000 shares of Common Stock
(subject to adjustment for stock splits and other corporate events). Upon exercise of a
stock appreciation right, a participant will be entitled to payment from the Company, in
cash, shares of Common Stock, or partly in each, as determined by the Management
Development Committee in accordance with any applicable terms of the agreement. |
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Restricted Stock Awards and Restricted Stock Units. Restricted stock is Common Stock
that is subject to risk of forfeiture or other restrictions that will lapse upon
satisfaction of specified conditions. Restricted stock units represent the right to
receive shares of Common Stock, or an equivalent value in cash, in the future, with the
right to future delivery of the shares or cash subject to a risk of forfeiture or other
restrictions that will lapse upon satisfaction of specified conditions. Restricted shares
and restricted stock units will initially be non-transferable but will become transferable
upon fulfillment of conditions established by the Management Development Committee at the
time of grant. An award of restricted stock or restricted stock units may also be subject
to vesting or other restrictions, which may include performance measures. All of the terms
relating to vesting or other restrictions, including performance measures, the length of
any performance period, and the termination of the restriction period relating to a
restricted stock award or restricted stock unit, will be determined by the Management
Development Committee and set forth in the agreement relating to such restricted stock
award or restricted stock unit. The holder of restricted shares will have rights as a
shareholder of the Company, including the right to vote and receive dividends with respect
to such shares. The holder of shares subject to a restricted stock unit will have no
rights as a shareholder of the Company until share certificates are issued by the Company,
but, at the discretion of the Management Development Committee, will have the right to
receive a credit equal to the cash dividends paid on the number of shares subject to the
restricted stock unit, which will be paid in additional shares of restricted stock
(Dividend Equivalent). |
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Performance Share Awards. The 2004 Stock Plan also provides for the grant of
performance share awards. A performance share award is a right, contingent upon the
attainment of performance measures within a specified performance period, to receive cash,
shares of Common Stock, which may be
restricted stock, or a combination of both. All of
the terms relating to the satisfaction of performance measures, the length of any
performance period, the amount of any performance share award granted, the amount of any
payment or transfer to be made pursuant to any performance share award, and any other terms
and conditions of any performance share award, will be determined by the Management
Development Committee and included in |
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an agreement between the recipient and the Company. Awards must be paid within 30 days
after the Management Development Committee certifies satisfaction of the performance goals.
The holder of performance share awards who receive the award in the form of restricted stock
will have rights as a shareholder of the Company, including the right to vote and receive
dividends with respect to such shares, but will be prohibited from transferring the stock
until the satisfaction of the performance measures. Performance share awards may also be
granted in the form of units providing the right to receive shares of Common Stock, or an
equivalent in cash, in the future. The holder of a performance share award unit will have
no right as a shareholder of the Company until share certificates are issued by the Company
and, at the discretion of the Management Development Committee, will have Dividend
Equivalent rights. |
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Directors Stock Purchase Rights. The 2004 Stock Plan also permits non-employee
directors to purchase shares of Common Stock through the 2004 Stock Plan in exchange for
all or a portion of the cash fees payable to them for serving as a director of the Company
(Directors Stock Purchase Rights Option). Under the terms of the 2004 Stock Plan,
eligible non-employee directors are also eligible for awards under the 2004 Stock Plan in
addition to their meeting fees. See Further Information Compensation of Directors and
Executive Officers Directors. |
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Under the Directors Stock Purchase Rights Option, non-employee directors may elect to use
all or a portion of their annual directors fees payable in cash to purchase Common Stock in
exchange for all or a portion of director fees payable from December 1 of that year to
December 1 of the next year. |
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Directors fees are payable in cash on March 1, June 1, September 1 and December 1 of each
year. On each of these dates, the Company will determine the number of shares of the Common
Stock each Director who has elected to participate in the Directors Stock Purchase Rights
Option has earned on that date. This determination will be made by dividing all directors
fees payable on each of those dates that the Director has elected to exchange for Common
Stock, by the fair market value of the Common Stock on that date. Any portion of the
directors fees payable on each of those dates that the Director has not elected to receive
in Common Stock will be paid to the Director in cash. The fair market value of the Common
Stock will be determined by the final reported sales price (or, if there is no reported sale
on such date, the final reported sales price on the last preceding date for which such
reported sales price exists) of the Common Stock on the principal United States securities
exchange on which the Common Stock may at the time be listed on the first day of the month
in which the quarterly payment date for directors fees falls. The Company will issue share
certificates for all shares of Common Stock purchased in a calendar year by December
15th of such year unless a director requests to receive his or her share
certificate at any time during the year by sending written notice to the Company. |
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If a director participating in the Directors Stock Purchase Rights Option dies, becomes
disabled, or ceases to be a director of the Company for any reason, the amount of such
directors accrued cash compensation that has not yet been issued in the form of Common
Stock will be paid to such director or his or her executor or other legal representative and
his or her right to receive further shares of Common Stock under the Directors Stock
Purchase Rights Option will terminate. |
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Deferred Stock Units. The 2004 Stock Plan permits participants designated by the
Management Development Committee who are among a select group of management or highly
compensated team member of the Company to elect to reduce compensation otherwise payable in
cash in exchange for a grant of deferred stock units (subject to minimums and maximums
imposed by the Management Development Committee and the requirements of Code Section 409A).
Participants have no voting rights with respect to deferred stock units until the issuance
of shares under the plan. Participants are entitled to Dividend Equivalents with respect
to cash dividends having a record date prior to the date on which deferred stock units are
settled (paid by crediting such participant with additional deferred stock units).
Settlement of deferred stock units is made by issuance of fully vested Common Stock. |
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Code Section 162(m) Awards and Performance Measures. In its discretion, the Management
Development Committee may designate any grant of restricted stock, restricted stock units
or performance share award to any 2004 Stock Plan participant as intended to satisfy the
requirements of Code Section 162(m). Restrictions on transfer relating to such restricted
stock, restricted stock units or performance share awards |
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will lapse upon satisfaction of written objective performance measures using one or more of
the following criteria: (i) revenue; (ii) gross margin; (iii) operating margin; (iv)
operating income; (v) pre-tax profit; (vi) earnings before interest, taxes, depreciation
and/or depreciation, (vii) net income; (viii) cash flow; (ix) expenses; (x) stock market
price; (xi) earnings per share; (xii) operating income per share; (xiii) return on
stockholder equity; (xiv) return on capital; (xv) return on net assets; (xvi) economic value
added; (xvii) market share; (xviii) return on investment; (xix) profit after tax; (xx)
product approval; (xxi) market capitalization; (xxii) new products; and (xxiii) research and
development activity. The restriction or performance period may be a one, two, three, four
or five fiscal year period, determined by the Management Development Committee. A
performance-based restricted stock award, restricted stock unit or performance share award
shall not be paid until the Management Development Committee has certified in writing that
the applicable performance measures have been attained. The performance measures criteria
stated above are required to be reapproved by shareholders of the Corporation, to the extent
required by Section 162(m) of the Code, which currently requires such reapproval at the
first shareholders meeting that occurs in the fifth year following the effective date of the
plan and, if the 2004 Plan Proposal is approved by shareholders, the first shareholders
meeting that occurs in the fifth year following the re-approval by the shareholders of the
performance measures. Dividends paid on Code Section 162(m) restricted stock or performance
share awards shall be automatically reinvested in additional shares of restricted stock. |
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No participant may be granted a Code Section 162(m) restricted stock, restricted stock unit,
performance share or performance share award unit during any one fiscal year of the Company
for more than 200,000 shares of Common Stock (subject to adjustment for stock splits and
other corporate events), or, if the performance share award unit is not based upon a set
number of shares of Common Stock, then no participant may receive a performance share award
unit that could result in such participant receiving more than $500,000 for each fiscal year
of the Company covered by the performance period for the award. |
Change in Control or Termination of Employment
Unless otherwise provided in the applicable agreement, any portion of an option or stock
appreciation right which is not yet exercisable, any portion of a restricted stock grant or
restricted stock unit which is not yet transferable and any portion of a performance share award
with respect to which performance measures have not yet been achieved will be forfeited if the
participant terminates employment or services for any reason.
Participants shall have the right within the period specified in the applicable agreement to
exercise an option or stock appreciation right to the extent it was exercisable and unexercised on
the date of the participants termination of employment or services, death, or disability, subject
to any other limitation on exercise in effect on the date of exercise; provided, however, that the
beneficial tax treatment of an incentive stock option may be forfeited if the option is exercised
more than (i) three months after a participants termination of employment, or (ii) one year after
the participants date of death or participants termination of employment due to disability.
Subject to the requirements of Section 162(m) and 409A, the Management Development Committee
has discretion under the 2004 Stock Plan to accelerate the exercisability of options and stock
appreciation rights, extend the exercise period of an option or stock appreciation right and waive
the restrictions or conditions applicable to restricted stock, restricted stock units or
performance share awards, in the event of a participants termination of employment or services,
death or disability.
The Management Development Committee in its discretion may provide in the applicable
agreements with participants or otherwise that in the event of a change in control of the Company,
as defined in the 2004 Stock Plan, or the occurrence of a change in control as determined by the
Management Development Committee, any or all of the following will occur: (i) any outstanding
option or stock appreciation right granted to participants immediately shall become fully vested
and exercisable in full, regardless of any installment provision applicable to such option or stock
appreciation right; (ii) the remaining restriction period on any shares of Common Stock subject to
a restricted stock grant or restricted stock unit immediately shall lapse and the shares shall
become fully transferable, subject to any applicable federal or state securities laws; (iii) all
performance goals and conditions shall be deemed to have been satisfied and all restrictions shall
lapse on any outstanding performance share awards granted to participants, and such awards shall
become payable in full; (iv), for purposes of any deferred stock unit granted to participants,
payments due under the deferred stock unit shall become immediately payable if the change in
control satisfies the
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requirements under Code Section 409A; or (v) such other treatment as the Management
Development Committee may determine. The Management Development Committee may, in its sole
discretion and without the consent of any participant, determine that, upon the occurrence of a
change in control, each or any option or stock appreciation right outstanding immediately prior to
the change in control shall be canceled in exchange for a payment with respect to each vested share
of Common Stock subject to such canceled option or stock appreciation right in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the change in control, or
(iii) other property which, in any such case, shall be in an amount having a fair market value
equal to the excess of the fair market value of the consideration to be paid per share of Common
Stock in the change in control transaction over the exercise price per share under such option or
stock appreciation right (the Spread). In the event such determination is made by the Management
Development Committee, the Spread (reduced by applicable withholding taxes, if any) shall be paid
to participants in respect of their canceled options and stock appreciation rights as soon as
practicable following the date of the change in control.
Assignments
Except as otherwise determined by the Management Development Committee, no award under the
2004 Stock Plan shall be assignable except by will or the laws of descent and distribution.
Adjustments
The shares of Common Stock under the 2004 Stock Plan and subject to any award under the Plan
shall be adjusted pro rata for stock dividends, stock splits, reverse stock splits and other
similar transactions.
In the event of a liquidation of the Company, the Management Development Committee may provide
for outstanding awards to become exercisable in full and all restrictions on such awards to lapse
and for such awards to terminate on the effective date of the liquidation.
In the event of a merger of the Company in which the Company is not the survivor, a reverse
triangular merger in which the Company becomes a subsidiary of another company, a sale of all or
substantially all of the assets of the Company or other similar transaction (a Corporate
Transaction), it is intended that the awards will be assumed by the acquirer, subject to the
requirements of Code Section 409A. If the awards are not assumed, subject to the requirements of
Section 409A, the awards shall become fully exercisable and all restrictions on such awards shall
lapse and the Management Development Committee may provide for such awards to terminate on a date
established by the committee.
Termination or Amendment
The 2004 Stock Plan shall continue in effect until the earlier of October 22, 2014, its
termination by the Board or the issuance of all shares under the plan. The Management Development
Committee may at any time discontinue granting awards under the 2004 Stock Plan.
The Management Development Committee may amend the 2004 Stock Plan, except that no amendment
may adversely affect the rights of any participant without his or her consent and no amendment
will, without the approval of the shareholders of the Company, and without complying with Code
Section 409A, materially increase the benefits accruing to participants under the 2004 Stock Plan,
increase the number of shares of Common Stock available under the 2004 Stock Plan, change the group
of persons eligible to receive awards, permit the repricing of options or stock appreciation rights
in a fashion prohibited as described under Repricing Prohibition above, or permit the granting of
options with exercise prices below fair market value. The 2004 Stock Plan and agreements issued
under the plan are subject to amendment, with or without notice to participants, on a prospective
or retroactive basis, including amendments that adversely affect the rights of participants, to the
extent necessary to comply with Code Section 409A.
So long as the Common Stock is listed on the Nasdaq Global Market, the Company will also be
subject to Nasdaq requirements that prohibit the Company from materially amending the 2004 Stock
Plan without the approval of shareholders.
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Federal Income Tax Consequences
The following discussion outlines the current federal income tax consequences of the 2004
Stock Plan but does not purport to be a complete analysis of all of the potential tax effects of
the 2004 Stock Plan. Applicable tax laws and their interpretations are subject to change at any
time and application of such laws may vary in individual circumstances. No information is provided
with respect to persons who are not citizens or residents of the United States, or foreign, state
or local tax laws, or estate and gift tax considerations. Each participant should rely on his or
her own tax counsel for advice regarding federal income tax treatment under the 2004 Stock Plan.
Incentive Stock Options. A participant who is granted an incentive stock option does not
recognize taxable income upon the grant or exercise of the option. However, the difference between
the fair market value of the Common Stock received on the date of exercise and the option exercise
price is a tax preference item that may subject the participant to alternative minimum tax. A
participant generally will receive long-term capital gain or loss treatment on the disposition of
shares acquired upon exercise of the option, provided that the disposition occurs more than two
years from the date the option is granted, and the participant holds the stock acquired for more
than one year. A participant who disposes of shares acquired by exercise prior to the expiration
of the forgoing holding periods recognizes ordinary income upon the disposition equal to the
difference between the option price and the lesser of the fair market value of the shares on the
date of exercise and the disposition price. Any appreciation between the fair market value of the
shares on the date of exercise and the disposition price is taxed to the participant as long or
short-term capital gain, depending on the length of the holding period. To the extent that the
participant recognizes ordinary income, the Company will receive a corresponding tax compensation
deduction.
Non-qualified Stock Options. A participant will not recognize income upon the grant of a
non-qualified stock option. Upon exercise, the participant will recognize ordinary income equal to
the excess of the fair market value of the Common Stock received on the date of exercise over the
price paid for the stock. The Company is entitled to a tax compensation deduction equal to the
ordinary income recognized by the participant. Any taxable income recognized by an employee
participant in connection with an option exercise is subject to income and employment tax
withholding. When the participant disposes of shares acquired by the exercise of an option, any
amount received in excess of the fair market value of the shares on the date of exercise will be
treated as long or short-term capital, depending upon the length of the holding period.
Stock Appreciation Rights. A participant will not recognize income upon the grant of a stock
appreciation right. Upon exercise, the participant will recognize ordinary income equal to the
cash or fair market value of the shares of Common Stock received from the exercise, which will be
subject to income and employment tax withholding for an employee participant. The Company will
receive a tax compensation deduction equal to the ordinary income recognized by the participant.
When the participant disposes of shares acquired by the exercise of a stock appreciation right, any
amount received in excess of the fair market value of the shares on the date of exercise will be
treated as long or short-term capital gain, depending upon the length of the holding period.
Restricted Stock and Restricted Stock Units. Generally, a participant who is granted
restricted stock or restricted stock units will not be taxed on the grant. However, the
participant will recognize ordinary income equal to the fair market value of the shares of Common
Stock or cash received when the restrictions lapse, at which time an employee participant also will
be subject to income and employment taxes. The Company will receive a compensation tax deduction
equal to the ordinary income recognized by the participant. If a participant receives a restricted
stock or restricted stock unit award before the restrictions have lapsed, while the award is
subject to a substantial risk of forfeiture, as defined in Section 83(b) of the Code, the
participant may elect to accelerate his or her tax obligation by submitting a Code Section 83(b)
election within 30 days after the grant date, pursuant to which the participant will be taxed on
the fair market value of the award as of the grant date, and the Company will receive a tax
compensation deduction as of the grant date equal to the ordinary income recognized by the
participant. Upon disposition of any shares received from a restricted stock or restricted stock
unit award, any excess over the fair market value of the shares when the restrictions lapsed (or
the fair market value of the shares when a Code Section 83(b) election was filed) will be subject
to long or short-term capital gain, depending upon the length of the holding period.
Performance Share Awards. Generally, a participant will not be taxed upon the grant of a
performance share award that is subject to restrictions or performance goals. However, the
participant will recognize ordinary income
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equal to the cash or fair market value of the Common Stock, or combination thereof, received
when the restrictions or other performance goals have been satisfied, at which time an employee
participant also will be subject to income and employment tax withholding. The Company will
receive a tax compensation deduction equal to the amount of ordinary income recognized by the
participant. A participant who receives a performance share award that is subject to a
substantial risk of forfeiture, as defined in Section 83 of the Code, may elect to accelerate his
or her tax obligation by submitting a Code Section 83(b) election within 30 days after the grant
date, pursuant to which the participant will be taxed on the fair market value of the award as of
the date of grant, and the Company will receive a tax compensation deduction as of the grant date
equal to the ordinary income recognized by the participant.
Deferred Stock Units. Generally, a participant will not be taxed on the grant of a deferred
stock unit. When a deferred stock unit ultimately is settled in shares or cash and distributed
from the 2004 Stock Plan, a participant will recognize ordinary income in the year of settlement
equal to the fair market value of the Common Stock or cash received, and an employee participant
will be subject to income and employment tax withholding on such amount at the time of settlement.
The Company will receive s tax compensation deduction equal to the ordinary income recognized by
the participant. Upon the sale of any shares received, any excess over the fair market value of
the shares on the settlement date will taxed to the participant as long or short-term capital gain,
depending upon the length of the holding period.
Directors Stock Purchase Rights. A Director who elects to purchase shares of Common Stock
under the 2004 Stock Plan using all or a part of his or her cash directors fees will recognize
ordinary income at each quarterly payment date equal to the fair market value of the shares
received, which generally will equal the cash directors fees used to purchase the shares. The
Company will receive a tax compensation deduction equal to the ordinary income recognized by the
Director. Upon the sale of shares received, any excess over the fair market value of the shares
recognized on the original quarterly payment date will be taxed to the Director as long or
short-term capital gain, depending upon the length of the holding period.
Code Section 162(m). Code Section 162(m) denies a federal income tax deduction for certain
compensation in excess of $1,000,000 per year paid to the Chief Executive Officer and the four
other most highly-paid executive officers of a publicly traded corporation. Certain types of
compensation, including compensation based on performance targets that are approved in advance by
shareholders, are excluded from the deduction limit. Awards of options and stock appreciation
rights under the 2004 Stock Plan are intended to be exempt from the deduction limits under Code
Section 162(m). At the discretion of the Management Development Committee, restricted stock,
restricted stock units and performance share awards may be granted under the 2004 Stock Plan in a
manner that exempts them from Code Section 162(m).
Code Section 409A. We have also structured the 2004 Stock Plan with the intention that it
comply with Section 409A of the Code which may impose additional taxes on our executives and other
team members for certain types of deferred compensation that are not in compliance with Section
409A. However, the Company does not generally assume responsibility for any additional tax,
interest or penalties under Code Section 409A arising out of payments under the 2004 Stock Plan.
New Incentive Plan Benefits
The future benefits or amounts that would be received under the 2004 Stock Plan by executive
officers and other team members are discretionary and are therefore not determinable at this time.
In addition, the benefits or amounts which would have been received by or allocated to such persons
for the last completed fiscal year if the 2004 Stock Plan had been in effect cannot be determined.
Aggregate Stock Options Granted Under the 2004 Stock Plan from Plan Inception
The following table lists each person named in the Summary Compensation Table under Further
Information Executive Compensation Summary Compensation Table, all director nominees, all
current executive officers as a group, all current directors (other than executive officers) as a
group, each associate of the foregoing persons, each other person who received or is to receive at
least five percent of the options under the 2004 Stock Plan, and all current team members of the
Company (other than executive officers) as a group, indicating, as of September 26, 2008, the
aggregate number and weighted average exercise price of options granted under the 2004 Stock Plan
to
20
each of the foregoing since the inception of the plan in 2004. The table does not include
options previously granted under the Companys 1992 Stock Option Plan, 1998 Stock Option Plan or
Directors Stock Option Plan. The table also does not include the following shares purchased by
non-employee Directors under the Directors Stock Purchase Rights Option: Mr. Marz 11,632 shares,
Mr. Dabrowski 14,479 shares, Mr. DeCocco 13,916 shares and Mr. Oswald 13,739 shares.
|
|
|
|
|
|
|
|
|
|
|
Option Shares |
|
|
|
|
Granted Under |
|
Weighted |
|
|
2004 Stock Plan |
|
Average |
Name and Principal Position |
|
From Plan Inception(1) |
|
Exercise Price($) |
Harry T. Rittenour, President and Chief Executive Officer |
|
|
127,500 |
(2) |
|
|
8.64 |
|
Paul J. Eckhoff, Senior Vice President Commercial Products Business Unit |
|
|
15,000 |
(3) |
|
|
8.92 |
|
Mark S. Hoefing, Senior Vice President Industrial Business Unit |
|
|
33,000 |
(4) |
|
|
9.25 |
|
John H. Lowry, III, Vice President Finance and Chief Financial Officer |
|
|
25,000 |
(5) |
|
|
9.90 |
|
Alfred A. Pease, former President and Chief Executive Officer |
|
|
55,000 |
(6) |
|
|
8.04 |
|
Wilfred J. Corriveau, former Senior Vice President Automotive Business |
|
|
25,000 |
(7) |
|
|
7.95 |
|
W. Richard Marz, Chairman of the Board, Director and Director Nominee |
|
|
66,000 |
(8) |
|
|
9.07 |
|
David J. Beattie, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
Kenneth R. Dabrowski, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
Philip J. DeCocco, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
Robert S. Oswald, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
James A. Ratigan, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
Terryll R. Smith, Director and Director Nominee |
|
|
16,000 |
(9) |
|
|
9.89 |
|
All Current Executive Officers as a Group (4 persons) |
|
|
200,500 |
|
|
|
8.92 |
|
All Current Directors (other than Executive Officers) as a
Group (7 persons) |
|
|
162,000 |
|
|
|
9.56 |
|
All Current Team Members (other than Executive Officers) as a Group |
|
|
110,825 |
|
|
|
8.58 |
|
|
|
|
(1) |
|
All options are non-qualified stock options, except that 10,000 shares held by Mr. Hoefing
are incentive stock options. The exercise price of all options is equal to 100% of the fair
market value of the Common Stock on the date of grant. |
|
(2) |
|
Options for 12,500, 15,000 and 100,000 shares held by Mr. Rittenour, become exercisable in
cumulative annual installments of 25% beginning January 2, 2007, June 1, 2008 and February 1,
2009, respectively, and expire on the earlier of January 1, 2016, May 31, 2017 and January 31,
2018, respectively, or, if earlier, one year after Mr. Rittenours death or permanent
disability or three months after Mr. Rittenours termination of employment. As of September
26, 2008, Mr. Rittenour held unexercised options for 127,500 shares of Common Stock under the
2004 Stock Plan, of which 10,000 options are exercisable. |
|
(3) |
|
Options for 15,000 shares held by Mr. Eckhoff, become exercisable in cumulative annual
installments of 25% beginning June 1, 2008 and expire on the earlier of May 31, 2017, or, if
earlier, one year after Mr. Eckhoffs death or permanent disability or three months after Mr.
Eckhoffs termination of employment. As of September 26, 2008, Mr. Eckhoff held unexercised
options for 15,000 shares of Common Stock under the 2004 Stock Plan, of which 3,750 options
are exercisable. |
|
(4) |
|
Options for 10,000, 5,000, 8,000 and 10,000 shares held by Mr. Hoefing, become exercisable in
cumulative annual installments of 25% beginning January 3, 2006, January 2, 2007, June 1, 2008
and April 1, 2009, respectively, and expire on the earlier of January 2, 2015, January 1,
2016, May 31, 2017 and March 31, 2018, respectively, or, if earlier, one year after Mr.
Hoefings death or permanent disability or three months after Mr. Hoefings termination of
employment. As of September 26, 2008, Mr. Hoefing held unexercised options for 33,000 shares
of Common Stock under the 2004 Stock Plan, of which 12,000 options are exercisable. |
|
(5) |
|
Options for 25,000 shares held by Mr. Lowry, become exercisable in cumulative annual
installments of 25% beginning July 2, 2008 and expire on the earlier of July 1, 2017, or, if
earlier, one year after Mr. Lowrys death or permanent disability or three months after Mr.
Lowrys termination of employment. As of September 26, 2008, Mr. Lowry held unexercised
options for 25,000 shares of Common Stock under the 2004 Stock Plan, of which 6,250 options
are exercisable. |
|
(6) |
|
Options for 25,000 and 30,000 shares held by Mr. Pease, become exercisable in cumulative
annual installments of 25% beginning January 2, 2007 and June 1, 2008, respectively, and
expire on the earlier of January 1, 2016 and May 31, 2017, respectively, or, if earlier, one
year after Mr. Peases death or permanent disability or three months after Mr. Peases
termination of employment. As of September 26, 2008, Mr. Pease held unexercised |
21
|
|
|
|
|
options for 42,500 shares of Common Stock under the 2004 Stock Plan, of which 20,000 options are
exercisable. |
|
(7) |
|
Options for 15,000 and 12,500 shares held by Mr. Corriveau, became exercisable in cumulative
annual installments of 25% beginning January 2, 2007 and June 1, 2008, respectively, and
expired three months after Mr. Corriveaus termination of employment. As of September 26,
2008, there were no options that remained outstanding. |
|
(8) |
|
Options for 8,000, 8,000 and 50,000 shares held by Mr. Marz, become exercisable in cumulative
annual installments of 25% beginning September 1, 2007, September 4, 2008 and February 1,
2009, respectively, and expire on the earlier of August 31, 2016, September 3, 2017 and
January 31, 2018, respectively, or, if earlier, one year after Mr. Marzs death or permanent
disability or three months after Mr. Marz termination of services. As of September 26, 2008,
Mr. Marz held unexercised options for 66,000 shares of Common Stock under the 2004 Stock Plan,
of which 6,000 are exercisable. |
|
(9) |
|
Options for 8,000 and 8,000 shares held by Messrs. Beattie, Dabrowski, DeCocco, Oswald,
Ratigan and Smith, become exercisable in cumulative annual installments of 25% beginning
September 1, 2007 and September 4, 2008, respectively, and expire on the earlier of August 31,
2016 and September 3, 2017, respectively, or, if earlier, one year after Messrs. Beatties,
Dabrowskis, DeCoccos, Oswalds, Ratigans and Smiths death or permanent disability or three
months after Mr. Beatties, Dabrowskis, DeCoccos, Oswalds, Ratigans and Smiths
termination of services. As of September 26, 2008, Messrs. Beattie, Dabrowski, DeCocco,
Oswald, Ratigan and Smith held unexercised options for 16,000 shares of Common Stock under the
2004 Stock Plan, of which 6,000 are exercisable. |
Equity Compensation Plan Information
The following table gives information about the Companys Common Stock that may be issued upon
the exercise of options, warrants and rights under all of the Companys existing equity
compensation plans as of June 30, 2008, including the 2004 Stock Plan, the 1992 Stock Option Plan,
the Directors Stock Option Plan, the 1998 Global Team Member Stock Option Plan, and the Employee
Stock Purchase Plan (together, the Plans):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
Number of securities |
|
|
|
|
|
|
average exercise |
|
remaining available for |
|
|
Number of securities |
|
price of |
|
future issuance under |
|
|
to be issued upon |
|
outstanding |
|
equity compensation |
|
|
exercise of |
|
options, |
|
plans (excluding |
|
|
outstanding options, |
|
warrants |
|
securities |
Plan Category |
|
warrants and rights |
|
and rights |
|
reflected in column (a)) |
|
|
(a) |
|
(b) |
|
(c) |
Equity compensation plans approved by
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
2004 Stock Incentive Plan |
|
|
514,325 |
(1) |
|
$ |
9.00 |
|
|
|
16,038 |
|
1992 Stock Option Plan |
|
|
183,700 |
(2) |
|
$ |
4.05 |
|
|
|
|
|
Directors Stock Option Plan |
|
|
127,000 |
(2) |
|
$ |
4.50 |
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
|
(3) |
|
|
|
|
|
|
114,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of equity compensation plans
approved by shareholders |
|
|
825,025 |
|
|
$ |
7.21 |
|
|
|
130,776 |
|
Equity compensation plans not approved by
shareholders: 1998 Global Team Member
Stock Option Plan |
|
|
447,887 |
(4) |
|
$ |
6.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
1,272,912 |
|
|
$ |
6.88 |
|
|
|
130,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Awards under the 2004 Stock Plan may be in the form of stock options, stock appreciation
rights, restricted stock or restricted stock units, performance share awards, director stock
purchase rights and deferred stock units; or any combination thereof. |
|
(2) |
|
The 2004 Stock Plan replaced the 1992 Stock Option Plan and Directors Stock Option Plan
effective December 7, 2004. Further grants under these plans have been cancelled. |
22
|
|
|
(3) |
|
Does not include an undeterminable number of shares subject to a payroll deduction election
under the Employee Stock Purchase Plan for the period from July 1, 2008 until December 31,
2008, which will not be issued until January 2009. |
|
(4) |
|
The 1998 Global Team Member Stock Option Plan expired on February 25, 2008. No further
grants under this plan will be made. |
1998 Global Team Member Stock Option Plan
On February 26, 1998, the Companys Board approved the 1998 Global Team Member Stock Option
Plan (the 1998 Plan), pursuant to which non-qualified stock options may be granted to employees
who are not officers or directors or subject to Section 16 of the Securities Exchange Act of 1934,
as amended (the Exchange Act). The 1998 Plan has been amended by the Board on several occasions
thereafter. The 1998 Plan expired on February 25, 2008. No further grants under this plan will be
made. The expiration of the 1998 Plan does not affect any awards previously granted under the 1998
Plan.
The purpose of the 1998 Plan is to promote the Companys success by linking the personal
interests of non-executive employees to those of the Companys shareholders and by providing
participants with an incentive for outstanding performance. The 1998 Plan authorizes the granting
of non-qualified stock options only. The President of the Company administers the 1998 Plan and
has the power to set the terms of any grants under the 1998 Plan. The exercise price of an option
may not be less than the fair market value of the underlying stock on the date of grant and no
option has a term of more than ten years. All of the options that are currently outstanding under
the 1998 Plan become exercisable ratably over a four-year period beginning at the grant date and
expire ten years from the date of grant. If, for any reason, an option lapses, expires or
terminates without having been exercised in full, the unpurchased shares covered thereby are again
available for grants of options under the 1998 Plan. In addition, if the option is exercised by
delivery to the Company of shares previously acquired pursuant to options granted under the 1998
Plan, then shares of Common Stock delivered in payment of the exercise price of an option will
again be available for grants of options under the 1998 Plan.
The exercise price is payable in full in cash at the time of exercise; or in shares of Common
Stock, (but generally, only if such shares have been owned for at least six months or, if they have
not been owned by the optionee for at least six months, the optionee then owns, and has owned for
at least six months, at least an equal number of shares of Common Stock as the option shares being
delivered); or the exercise price may be paid by delivery to the Company of a properly executed
exercise notice, together with irrevocable instructions to the participants broker to deliver to
the Company sufficient cash to pay the exercise price and any applicable income and employment
withholding taxes, in accordance with a written agreement between the Company and the brokerage
firm (cashless exercise procedure).
Generally, if the employment by the Company of any optionee who is an employee terminates for
any reason, other than by death or total and permanent disability, any option which the optionee is
entitled to exercise on the date of employment termination may be exercised by the optionee at any
time on or before the earlier of the expiration date of the option or three months after the date
of employment termination, but only to the extent of the accrued right to purchase at the date of
such termination. In addition, the President of the Company has the discretionary power to extend
the date to exercise beyond three months after the date of employment termination. If the
employment of any optionee who is an employee is terminated because of total and permanent
disability, the option may be exercised by the optionee at any time on or before the earlier of the
expiration date of the option or one year after the date of termination of employment, but only to
the extent of the accrued right to purchase at the date of such termination. If any optionee dies
while employed by the Company and, if at the date of death, the optionee is entitled to exercise an
option, such option may be exercised by any person who acquires the option by bequest or
inheritance or by reason of the death of the optionee, or by the executor or administrator of the
estate of the optionee, at any time before the earlier of the expiration date of the option or one
year after the date of death of the optionee, but only to the extent of the accrued right to
purchase at the date of death.
The 1998 Plan provides for acceleration of vesting of awards in the event of a change in
control of the Company. See Compensation of Executive Officers Potential Payments Upon
Termination or Change in Control for a definition of change in control. The Board may amend or
terminate the 1998 Plan at any time without shareholder approval, but no amendment or termination
of the 1998 Plan or any award agreement may adversely
23
affect any award previously granted under the 1998 Plan without the consent of the
participant. The Nasdaq listing requirements prohibit the Company from amending the 1998 Plan to
add additional shares of Common Stock without shareholder approval.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
Principal Shareholders
The following table sets forth information with respect to beneficial ownership of the Common
Stock by each person known by us to be the beneficial owner of more than five percent of our
outstanding Common Stock. The number of shares reported is as of the dates indicated in the
footnotes below. The percentage of class is based on 8,850,359 shares of Common Stock outstanding
on September 26, 2008. The information as to each person has been furnished by such person.
|
|
|
|
|
|
|
|
|
Name and Address |
|
Amount and Nature of |
|
Percent |
of Beneficial Owner |
|
Beneficial Ownership(1) |
|
of Class |
Rutabaga Capital Management LLC
64 Broad Street, 3rd Floor
Boston, MA 02109 |
|
|
881,505 |
(2) |
|
|
9.96 |
|
Royce & Associates, LLC
1414 Avenue of the Americas
New York, NY 10019 |
|
|
737,900 |
(3) |
|
|
8.34 |
|
Nicusa Capital Partners, L.P.
17 State Street, 16th Floor
New York, NY 10004 |
|
|
577,952 |
(4) |
|
|
6.53 |
|
Signia Capital Management LLC
108 N. Washington Street, Suite 305
Spokane, WA 99201 |
|
|
520,637 |
(5) |
|
|
5.88 |
|
|
|
|
(1) |
|
Unless otherwise indicated below, each shareholder listed has sole voting and sole investment
power with respect to all shares beneficially owned by such person. |
|
(2) |
|
Based on a Holdings Report on Form 13F dated on August 4, 2008 and filed with the SEC, on
August 8, 2008, and its statement on Schedule 13G, dated and filed with the SEC on May 12,
2008, Rutabaga Capital Management LLC (Rutabaga) has sole power to dispose of 881,505
shares, sole power to vote 293,900 shares and shared power to vote 587,605 shares of Common
Stock. The Form 13F disclosed that Rutabaga owned 881,505 shares as of June 30, 2008. |
|
(3) |
|
Based on a Holdings Report on Form 13F, dated and filed with the SEC on August 11, 2008, by
Royce & Associates, LLC (Royce). The Form 13F disclosed that Royce owned 737,900 shares as
of June 30, 2009. |
|
(4) |
|
Based on a Holdings Report on Form 13F, dated and filed with the SEC on August 14, 2008, by
Nicusa Capital Partners, L.P. (Nicusa). The Form 13F disclosed that Nicusa owned 577,952
shares as of June 30, 2008. |
|
(5) |
|
Based on a Holdings Report on Form 13F, dated July 30, 2008 and filed with the SEC on July
31, 2008, Signia Capital Management LLC (Signia) has sole power to dispose of 520,637
shares, and sole power to vote 187,789 shares of Common Stock. The Form 13F disclosed that
Signia owned 520,637 shares as of June 30, 2008. |
Beneficial Ownership by Directors and Executive Officers
The following table sets forth information with respect to beneficial ownership of the Common
Stock by each of our directors and director nominees, the persons named in the Summary Compensation
Table and by all our directors and executive officers as a group as of September 26, 2008, unless
otherwise indicated. The information as to each person has been furnished by such person and,
except as where otherwise indicated, each person has sole voting power and sole investment power
with respect to all shares beneficially owned by such person.
24
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature |
|
|
Name of Beneficial Owner (1) |
|
Of Beneficial Ownership |
|
Percent of Class |
David J. Beattie (2)(3)
|
|
|
22,770 |
|
|
|
|
* |
Kenneth R. Dabrowski (2)(4)
|
|
|
94,513 |
|
|
|
1.06 |
% |
Philip J. DeCocco (2)(5)
|
|
|
72,341 |
|
|
|
|
* |
W. Richard Marz (2)(6)
|
|
|
67,098 |
|
|
|
|
* |
Robert S. Oswald (2)(7)
|
|
|
86,811 |
|
|
|
|
* |
James A. Ratigan (2)(8)
|
|
|
24,000 |
|
|
|
|
* |
Harry T. Rittenour (2)(9)
|
|
|
113,700 |
|
|
|
1.27 |
% |
Terryll R. Smith (2)(10)
|
|
|
15,000 |
|
|
|
|
* |
Paul J. Eckhoff (11)
|
|
|
13,750 |
|
|
|
|
* |
Mark S. Hoefing (12)
|
|
|
77,813 |
|
|
|
|
* |
John H. Lowry, III (13)
|
|
|
8,450 |
|
|
|
|
* |
Alfred A. Pease (14)
|
|
|
208,139 |
|
|
|
2.34 |
% |
Wilfred J. Corriveau (15)
|
|
|
416 |
|
|
|
|
* |
All current executive
officers and directors as a
group (11 persons)(3-13)(16)
|
|
|
596,246 |
|
|
|
6.49 |
% |
|
|
|
* |
|
Less than 1% of class |
|
(1) |
|
To the best of the Companys knowledge, based on information reported by such directors and
officers or contained in the Companys shareholder records. |
|
(2) |
|
Serves as a member of the Board of the Company. |
|
(3) |
|
Includes options to purchase 18,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(4) |
|
Includes options to purchase 36,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(5) |
|
Includes options to purchase 31,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(6) |
|
Includes options to purchase 33,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(7) |
|
Includes options to purchase 12,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(8) |
|
Represents options to purchase 24,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(9) |
|
Includes options to purchase 113,500 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(10) |
|
Represents options to purchase 15,000 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(11) |
|
Represents options to purchase 13,750 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(12) |
|
Includes options to purchase 35,300 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
|
(13) |
|
Includes options to purchase 6,250 shares of Common Stock, which are presently exercisable or
which are exercisable within 60 days of September 26, 2008. |
|
(14) |
|
Includes options to purchase 39,100 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. Mr. Pease resigned as
President, Chief Executive Officer and Chairman of the Board in January 2008. Mr. Pease
serves an advisory role to the Company. |
|
(15) |
|
Mr. Corriveaus employment as Senior Vice President Global Automotive terminated in
September 2007. |
|
(16) |
|
Includes options to purchase 337,800 shares of Common Stock, which are presently exercisable
or which are exercisable within 60 days of September 26, 2008. |
25
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors, executive (and certain other)
officers, and any persons holding more than ten percent of the Common Stock are required to report
their ownership of the Common Stock and any changes in that ownership to the SEC. Directors,
officers and greater than ten percent shareholders are required by the SEC to furnish us with
copies of all Section 16(a) reports they file. Specific due dates for these reports have been
established and we are required to report in this proxy statement any failure to file by these
dates during our last fiscal year. To our knowledge, all of these filing requirements were
satisfied during our last fiscal year by our officers, directors and ten percent shareholders. In
making this statement, we have relied solely on the written representations of our directors,
officers and ten percent shareholders and copies of the reports that have been filed with the SEC.
EXECUTIVE OFFICERS
The executive officers listed below were appointed by the Board and serve in the capacities
indicated. Executive officers are normally appointed annually by the Board and serve at the
pleasure of the Board.
|
|
|
Name and Age |
|
Position and Principal Occupations |
Harry T. Rittenour, 62
|
|
President and Chief Executive Officer of the
Company since January 2008. Mr. Rittenours
business experience is described under Proposal 1
Election of Directors. |
|
|
|
Paul J. Eckhoff, 46
|
|
Senior Vice President Commercial Products
Business Unit of the Company since March 2007 and
General Manager Commercial Products from October
2005 to March 2007. From November 2004 to April
2005, Mr. Eckhoff was Director, Product Management,
for Cooper Bussmann, Inc., a producer of circuit
protection devices. From 2001 to 2004, Mr. Eckhoff
held various positions including Director of
Marketing New Product Development of Delta
Machinery and Director of Asia Marketing and New
Product Development for the Tools Group of the
Porter-Cable, Delta Machinery and DeVilbiss brands
at Black & Decker Corporation, a global
manufacturing and marketer of power tools and
accessories. |
|
|
|
Mark S. Hoefing, 49
|
|
Senior Vice President Industrial Business Unit of
the Company since March 2008 and acting head of
Global Automotive Business Unit from September 2007
to March 2008. Mr. Hoefing was Vice President
Sales and Marketing of the Company from December
2004 until March 2008. Prior to that he was
Director Sales and Marketing of the Company from
March 2001 until December 2004. |
|
|
|
John H. Lowry, III, 61
|
|
Vice President Finance and Chief Financial
Officer of the Company since June 2007. He served
as Vice President and Chief Financial Officer of
Catuity Inc., a provider of information technology
software and services, from May 2000 to January
2007. |
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion & Analysis
General Philosophy. This Compensation Discussion and Analysis (CD&A) is intended to provide
information about our compensation objectives and policies for our principal executive officer, our
principal financial officer and our other named executive officers ( the NEOs) included in the
Summary Compensation Table. This CD&A is intended to place in perspective the compensation
information contained in the tables that follow this discussion.
Our objective is to provide a superior return to shareholders. To support this objective, we
believe that we must attract, retain and motivate top quality executive talent. Our executive
compensation program is a critical tool in this process.
26
Our executive compensation program consists of five components:
|
|
|
Base salary; |
|
|
|
|
Annual cash profit sharing incentive opportunities; |
|
|
|
|
Long-term incentives represented by stock-based awards; |
|
|
|
|
Employee benefits; and |
|
|
|
|
Severance and change in control benefits. |
Our compensation philosophy at all levels of the organization emphasizes performance-based
compensation. This is particularly true of our executive compensation program, which has been
designed to link executive compensation to Company performance through at-risk compensation
opportunities, providing significant reward to executives who contribute to our success. A
significant portion of our NEOs and other executives potential annual cash compensation is tied to
our profitability goals. We provide long-term incentives to our team through periodic stock
awards. Through stock awards to our NEOs and other executives, we have tied a significant portion
of their future compensation potential to the creation of long-term shareholder value. Further, we
believe that stock-based incentives for team members, in addition to providing an incentive for
their continued employment, more closely align their interests with those of the Company and its
shareholders.
Our approach to NEO base salaries is to ensure that they are competitive so that they are
effective in attracting and retaining a high quality executive team. Similarly, in designing our
employee benefit programs and severance and change in control benefits, we strive to offer benefits
consistent with the general practice of comparable companies.
We believe that compensation should be simple, straightforward and easily understood by the
recipients. As a result, our incentive compensation programs have generally been tied to a limited
number of key Company-wide performance metrics that can be objectively measured. As the Company
grows, particularly into new business segments, we recognize the need to revise our incentive plan
structure to properly motivate the executives in each business segment to improve the performance
of their business segment, yet continue to work as a team to achieve our Company-wide objectives.
During fiscal 2009, we intend to develop revised incentive plans to address these issues.
The Role of the Management Development Committee and Chief Executive Officer in the
Compensation Process. The Management Development Committee is responsible for the planning, review
and administration of our executive compensation program and stock-based executive compensation
programs. During the fiscal year ended June 30, 2008, all members of this Committee were
non-employee directors of the Company. The Management Development Committee generally meets in
conjunction with regularly scheduled Board meetings, although occasionally the Committee meets
between Board meetings at the request of the Chief Executive Officer to deal with more immediate
executive compensation matters.
The Management Development Committee generally reviews the components of executive
compensation on an annual basis to determine whether there should be any adjustments in base
salary, to establish the annual cash profit sharing incentive plan, to determine if stock-based
incentives should be granted and to review the terms of our other executive compensation programs.
Each year the Chief Executive Officer presents an evaluation of the performance of the NEOs and
other executive team members to the Management Development Committee. Based upon this evaluation,
the Chief Executive Officer makes recommendations to the Management Development Committee regarding
compensation for the NEOs and other executives, other than himself. The Chief Executive Officer
may make recommendations regarding changes in a particular NEO or other executives compensation
more frequently than annually as a result of changes in circumstances, such as the assumption of
increased executive level responsibilities. When setting each element of executive compensation,
the Management Development Committee also receives a numeric summary of the elements of all of the
executives compensation packages since their date of employment. The Management Development
Committee considers the recommendations of the Chief Executive
27
Officer, as well as the other information provided to them by the Company, and then
establishes compensation for the NEOs and other executives, either annually or periodically as the
need arises.
The Management Development Committee independently assesses the performance of the Chief
Executive Officer. Based upon that assessment, the performance of the Company and the Management
Development Committees decisions regarding the compensation of the other NEOs and executives, the
Management Development Committee independently establishes the compensation of the Chief Executive
Officer, without any recommendations from or participation by the Chief Executive Officer in that
process.
The Management Development Committee has not established a set percentage relationship between
the size of the Chief Executive Officers compensation package as compared to the other NEOs.
However, historically one of the factors considered by the Management Development Committee in
setting the Chief Executive Officers compensation is the level of compensation awarded to the
other NEOs for each element of compensation.
The base salary, annual cash profit sharing incentive opportunity, stock-based incentives and
other compensation terms for new executive officers are established by the Management Development
Committee based upon the recommendation of the Chief Executive Officer and the executives
qualifications, position and level of responsibility as compared with our other executives.
The Chief Executive Officer typically proposes the terms of an annual profit sharing plan to
the Management Development Committee for consideration. The Committee revises the plan as it deems
appropriate and approves the final plan, usually in the first quarter of the fiscal year.
The Management Development Committee generally reviews all elements of compensation as a whole
in establishing executive compensation. It does not have a pre-set formula for the proper mix of
the elements, other than the annual cash profit sharing incentive. In the case of our annual
profit sharing incentive, each of our team members, including the NEOs and other executives, have a
set target percentage of their base salary that can be earned as an annual cash profit sharing
incentive for achievement of Company-wide performance metrics.
Base Salary. The Management Development Committee recognizes the importance of a competitive
compensation structure in retaining and attracting valuable senior executives. Executive salary
levels are reviewed and established annually. The salaries received by our executives generally
reflect their levels of responsibility, our profitability and other factors, such as assessments of
individual performance and market practices.
In connection with Mr. Rittenours appointment as President and Chief Executive Officer of the
Company in January 2008, the Management Development Committee increased his base salary to
$230,000, in keeping with the increased responsibilities in his new position. Earlier in the year
the Management Development Committee had increased Mr. Rittenours base salary by 5.4% to $195,000.
In fiscal 2008, the Management Development Committee also approved a 4% increase in Mr.
Peases base salary. Base salary increases for the other NEOs in fiscal 2008 ranged from 5.0% to
6.25%. In addition, in fiscal 2008, the Management Development Committee increased Mr. Hoefings
base salary by 10% in connection with his appointment as Senior Vice President Global Automotive
Business Unit, in keeping with his increased responsibilities in his new position.
In each case, the size of the increase was based upon the Management Development Committees
view of the contribution of the NEO during the prior fiscal year to the achievement of our business
plan (and in the case of the NEOs, other than the Chief Executive Officer, with the recommendation
of the Chief Executive Officer).
Annual Profit Sharing/Non-Equity Incentive Plan. Our executive officers are eligible for
annual cash profit sharing incentive opportunities. Generally, at the beginning of each fiscal
year, the Management Development Committee develops a profit sharing plan applicable to all team
members, including the Chief Executive Officer of the Company, the other NEOs and our other
executives.
28
For fiscal 2008, the Management Development Committee adopted the Fiscal Year 2008 Profit
Sharing Plan, which applied to all team members of the Company, including Mr. Rittenour, Mr. Pease,
the other NEOs and our other executives.
The Fiscal Year 2008 Profit Sharing Plan provided that the Company would make a profit sharing
payout only if the Company achieved earnings per share (EPS) in excess of $0.35, which was the
target level established by the Board under the Fiscal Year 2008 Profit Plan (the EPS Bonus
Component). For performance in excess of that level, an increasing portion of each dollar of
Company pre-tax earnings above progressive earnings per share targets would be added to the profit
sharing pool, starting at $0.25 for achieving the approved Fiscal Year 2008 Profit Plan and
increasing to $0.35 at an EPS level in excess of $0.40, $0.40 at an EPS level in excess of $0.45
and $0.45 at an EPS level in excess of $0.50. There was no cap on the amount that could be added
to the pool, although the portion of each dollar of Company pre-tax earnings added to the pool
decreased to $0.20 once an EPS of $0.60 was reached. The Management Development Committee had the
discretion to adjust the Companys final EPS number upward or downward to reflect unusual events
occurring during the fiscal year. To date, the Committee has not adjusted the Companys final EPS
number under similar prior profit sharing plans and did not do so in fiscal 2008.
It was determined that the actual profit sharing pool earned under the fiscal 2008 plan would
be allocated among the team members, including the Chief Executive Officer and the other NEOs, as
determined by the Management Development Committee in its discretion, based upon the recommendation
of the Chief Executive Officer. Compared to other team members, the NEOs and other executives have
the highest percentage of their total cash compensation tied to the annual profit sharing plan due
to their higher level of responsibility and direct impact on our profitability. Generally, the
Chief Executive Officer has a target bonus potential of 60% of base salary and the other NEOs at
55% of base salary. In determining the amount to be allocated to executive officers, including
Messrs. Rittenour and Pease, in accordance with past practice, the Management Development Committee
intended to pay 10% of their profit sharing payout based upon the percentage increase in the stock
price of the Common Stock over a $10.10 stock price threshold, with a $3.00 increase representing
full achievement of this objective (the Stock Price Component). The Stock Price Component was
calculated comparing the average closing price of the Common Stock for the first three trading days
of fiscal 2008 to the average closing price of the Common Stock for the first three trading days of
fiscal 2007.
Our fiscal 2008 EPS and Stock Price Component were below the target level established in the
Fiscal Year 2008 Profit Plan and so no bonus was earned under the plan.
No discretionary bonuses were paid to Messrs. Rittenour or Pease or the other executive
officers in fiscal 2008.
Stock-Based Incentives. The 2004 Stock Plan permits the Management Development Committee to
grant stock appreciation rights, restricted stock, restricted stock units, performance share awards
and deferred stock units, in addition to incentive and non-qualified stock options.
The Management Development Committee periodically reviews the various stock-based incentive
alternatives available to the Company under the 2004 Stock Plan as part of its development of a
program to provide appropriate long-term incentives to the executive team and more closely align
their interests with the Company and its shareholders.
Based upon those reviews, the Management Development Committee determined to use grants of
non-qualified stock options as the Companys long-term stock incentive program for the executive
team. The Management Development Committee also has determined to continue its past practice of
using non-qualified stock options to motivate team members at other levels within the Company. In
reaching its decision, the Management Development Committee considered the tax impact of each
alternative form of stock grant on the Company and the team members, the accounting treatment of
each alternative, particularly under FAS 123R, the cash impact on the Company of each alternative
and the relevant level of incentive each alternative would provide team members. The decision to
use non-qualified stock options was principally based upon the Committees determination that
options provide greater incentive to team members because of the beneficial tax treatment for team
members as compared to other alternatives and because team members are more familiar with this form
of stock incentive. The use of non-qualified stock options will provide the Company with a tax
deduction upon exercise of the options not generally available with incentive stock options. The
Management Development Committee also believes that the use of non-
29
qualified stock options will allow them to develop an attractive stock incentive program,
while minimizing related accounting expense and maximizing the positive impact on the Companys
cash.
Stock option grants have historically been utilized by the Company as part of its compensation
program for all levels of team members, including the Companys executives. The Companys stock
option program permits team members to buy a specific number of shares of Common Stock in the
future, at the fair market value of such shares on the date the option is granted. Since stock
options gain value only if the price of the Common Stock increases above the option exercise price,
this use of stock option grants reflects the Companys philosophy of linking compensation to
performance. In addition, the Management Development Committee believes that stock option grants
to team members help to provide an incentive for their continued employment and otherwise more
closely align their interests with those of the Company and its shareholders. We also utilize
stock options as part of our standard compensation package developed to attract highly qualified
candidates to the Company.
Mr. Rittenour was granted options under the 2004 Stock Plan to purchase 100,000 shares of
Common Stock when he was appointed President and Chief Executive Officer of the Company in January
2008. Mr. Hoefing was granted options to purchase 10,000 shares of Common Stock upon his
permanent appointment as Senior Vice President Global Automotive Business Unit in March 2008.
These grants were made in light of each executives increased responsibilities in his new position.
The Management Development Committee also believed that an additional option grant to Messrs.
Rittenour and Hoefing was appropriate to continue to more closely align their interests with those
of our shareholders.
Mr. Lowry was granted options to purchase 25,000 shares of Common Stock upon his joining the
Company as Vice President Finance and Chief Financial Officer, which is consistent with the level
of options granted to other executive officers when they joined the Company.
No other stock grants were made to Messrs. Rittenour, Pease or the other executive officers in
fiscal 2008.
Options granted to Messrs. Rittenour, Hoefing and Lowry in fiscal 2008 become exercisable in
four equal annual installments, beginning one year from their date of initial grant, at an exercise
price equal to the fair market value of the Common Stock on the date of their initial grant. In
addition, any portion of these options that is not exercisable becomes exercisable immediately upon
a Change in Control of the Company as described under Compensation of Executive Officers
Potential Payments Upon Termination or Change in Control.
Options granted by the Company prior to fiscal 2007 generally become exercisable upon a Change
in Control of the Company only if they were not assumed by the acquirer or if the executive was
terminated by the acquirer following the Change in Control or by the executive for Good Reason
following the Change in Control. In fiscal 2007, the Management Development Committee changed its
prior practice and provided for options to become exercisable immediately upon a Change in Control
in order to provide executives with the appropriate incentives to act in the best interests of the
Company and its shareholders, without concern for their own personal interests, and to provide for
continuity of management during the pendency of a transaction that could result in a Change in
Control of the Company.
In the Management Development Committees view, cash severance compensation, which is intended
to provide compensation to an executive while he or she seeks alternative employment, generally
should be triggered only if the executives employment is actually terminated, not just because the
Company has been sold. However, stock incentive awards, like stock options, are intended to be
long-term compensation awards that are realized once the shareholders realize long-term value.
Since shareholders generally realize that long term value in connection with a Change in Control
transaction involving the Company, the Management Development Committee believes that the executive
should realize the benefits of their long-term compensation awards at the same time. Accordingly,
the Management Development Committee has determined that stock option grants should become fully
exercisable upon a Change in Control of the Company.
The Management Development Committee grants stock options to the NEOs, members of the Board of
Directors and other team members periodically as they deem appropriate, although generally not more
frequently than annually. The exercise price of each stock option grant is established based upon
the fair market of the Common Stock on the Grant Date, which typically is the first business day of
the month following the month in
30
which the grant was approved by the Management Development Committee. Because the Management
Development Committee generally meets just prior to the issuance of our quarterly or annual
earnings press release, the Grant Date has generally been within two to three weeks following the
announcement of an earnings press release by the Company.
Employee Benefits. We believe it is important to the retention of our team members that we
maintain a competitive benefit package at all levels within the Company. Further, we believe a
well designed employee benefit program further promotes the creation of value for our shareholders
by enhancing job productivity by encouraging our team members to maintain a healthy lifestyle and
providing a reasonable level of financial support in the event of an illness, injury or death.
All of our team members, including the NEOs and our other executives, receive customary
benefits such as medical, dental and vision plans, short and long term disability and group life
insurance. In addition, the NEOs and certain other executives receive enhanced life insurance
benefits, commensurate with their higher compensation levels.
We also maintain a 401(k) Profit Sharing Plan (the 401(k) Plan) in which all team members,
including the NEOs and our other executives, are eligible to participate on the same basis. All
team members are eligible to contribute up to 75% of their salaries on a pre-tax basis to the
401(k) Plan. For calendar year 2008, the annual maximum contribution limit was $15,500 for
employees under 50 years of age and $20,500 for employees 50 years of age or older. In addition,
the Board of Directors may authorize the Company, from time to time, to match a portion of the team
members contributions to the 401(k) Plan. The current approval is to match 50% of each team
members voluntary contribution to the 401(k) Plan, including those made by the NEOs and our other
executives.
To facilitate the performance of their management responsibilities, we provide certain key
employees selected perquisites, such as either a company paid automobile lease and related expenses
or allowance, reimbursement for monthly country club dues, relocation benefits to key employees
when they join us, and other personal benefits.
Severance Agreements. In fiscal 2005, the Board, upon recommendation of the Management
Development Committee, authorized the implementation of formal severance agreements for the
Companys executive officers. The terms of the severance agreements are described under
Compensation of Executive Officers Potential Payments Upon Termination or Change in Control.
The Board determined it appropriate to formalize the Companys general severance policies and
practices for its executive team and at the same time institute enhanced severance arrangements
payable in the event of a termination of the executives employment following a Change in Control
of the Company. The Board and Management Development Committee believe that the enhanced severance
arrangements are necessary in order to provide executives with the appropriate incentives to act in
the best interests of the Company and its shareholders, without concern for their own personal
interests, and to provide for continuity of management during the pendency of a transaction that
could result in a Change in Control of the Company. The Management Development Committee, in
developing its recommendations to the Board, consulted with an outside compensation consultant
hired by the Committee and the Companys outside legal counsel. Based upon the foregoing, the
Management Development Committee believes that the severance agreements contain terms and
conditions which are comparable to those used by other companies that are similar in size to the
Company.
The NEOs have all entered into our standard executive agreement not to compete, restricting
the executives right to compete with us for the longer of twelve months following the termination
of employment or the period post-termination during which we are required to make payments to the
executive, and standard employee proprietary information and inventions agreement, containing
confidentiality provisions and a two-year post-termination restriction on soliciting our employees.
We have the right to cease all further payments under the NEOs severance agreement in the event
that the NEO violates the executive non-competition agreement. The NEOs must sign a standard
release to receive payments under the severance agreements, including standard non-disparagement
provisions.
Payments under the severance agreements, when aggregated with any other golden parachute
amounts (defined under Code Section 280G as compensation that becomes payable or accelerated due to
a Change in Control) payable under any of our other plans, agreements or policies, currently can
not exceed the golden parachute cap under Code Sections 280G and 4999. See Compensation of
Executive Officers Compensation Discussion
31
and Analysis Golden Parachute Excise Tax below for a further discussion of our policy with
respect to golden parachute amounts.
During fiscal 2008, Mr. Pease retired as President and Chief Executive Officer of the Company
and Mr. Corriveau terminated employment as an executive officer of the Company. The terms of
agreements entered into with Messrs. Pease and Corriveau in connection with these events are
described under Compensation of Executive Officers Potential Payments Upon Termination or Change
in Control below.
Deductibility of Executive Compensation. Code Section 162(m) restricts the deductibility of
executive compensation paid to the chief executive officer and any of the four most highly
compensated executive officers at the end of the fiscal year to the extent such compensation
(including gains from the exercise of certain stock options) exceeds $1,000,000 in any year. There
are exceptions to the limitation for performance-based compensation that is based on
nondiscretionary, pre-established performance goals.
Our Board established certain restrictions on the granting of options under the 1992 Stock
Option Plan and the 2004 Stock Plan, which replaces the 1992 Stock Option Plan, so that
compensation realized in connection with the stock-based grants under both plans would be exempt
from the restrictions on deductibility under Section 162(m). The 1992 Stock Option Plan restricted
to 200,000 the number of shares of Common Stock that could be subject to options granted to any
salaried employee in any fiscal year. The 2004 Stock Plan restricts stock grants to any
participant in any fiscal year as follows: (i) up to 200,000 shares of Common Stock may be subject
to stock option grants, (ii) up to 200,000 shares of Common Stock may be subject to stock
appreciation right grants, (iii) up to 200,000 shares of Common Stock may be subject to restricted
stock awards, and (iv) up to 200,000 shares of Common Stock may be subject to performance share
awards. It is important to note that while these restrictions allow the Management Development
Committee continuing discretion in establishing executive officer compensation, they do limit such
discretion by restricting the size of stock awards which the Management Development Committee may
grant to any single individual. The permitted size of the stock awards to a single individual was
established based on the determination of the maximum number of shares which would be required to
be granted in any fiscal year to retain or attract a chief executive officer of the Company.
We do not believe that other components of our compensation program are likely to result in
payments to any executive officer in any year which would be subject to the restriction on
deductibility under Section 162(m). Accordingly, we believe that we have taken appropriate actions
to preserve the deductibility of most of the annual performance bonuses and long-term performance
incentive awards the Management Development Committee is likely to award in any given year. We
will continue to evaluate the advisability of qualifying future executive compensation programs for
deductibility under the Code.
The Management Development Committee recognizes the need to retain flexibility to make
compensation decisions that may not meet Section 162(m) standards to enable us to attract, retain
and motivate highly qualified executives. It has the authority to approve non-deductible
compensation in appropriate circumstances. Also, because of ambiguities and uncertainties as to
the application and interpretation of Section 162(m) and the related regulations and guidance, no
assurance can be given that compensation intended by us to satisfy the requirements for
deductibility under Section 162(m) will in fact do so.
Stock Option Expense. Beginning in fiscal year 2006, we were required under FAS 123R to
record compensation expense associated with stock awards to our employees, including the NEOs , as
more fully discussed in Note 9 to our audited consolidated financial statements included in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2008. As discussed above, the
Management Development Committee did consider the impact of FAS 123R in determining to use grants
of non-qualified stock options as our principal long-term incentive program for the executive team.
Further, the Management Development Committee does consider the amount of compensation expense
required to be recorded in determining the size of stock option grants to the Chief Executive
Officer and the aggregate grants made to the remainder of the executive team and team members
generally.
Golden Parachute Excise Tax. Code Section 280G imposes tax penalties on golden parachute
payments associated with a change in control of the Company to the extent they exceed a specified
level. These penalties include a 20% excise tax on executives receiving these excess payments and
the elimination of our tax deduction for these payments. Payments under our severance agreements
and from the acceleration of the exercisability of our
32
stock options in the event of a change of control of the Company are potentially subject to
these tax penalties. Currently, payments under our severance agreements are capped at an amount
that will not trigger the excise tax. There is no similar limitation on the acceleration of the
exercisability of stock options since we believe it is unlikely that the acceleration of options
alone would cause an executive to exceed the specified level. The Management Development Committee
recognizes the need to retain flexibility to make compensation decisions that may cause payments to
executives to exceed the levels specified in Code Section 280G to enable us to attract, retain and
motivate highly qualified executives. It therefore has the authority to approve compensation that
would exceed the specified level or to remove the cap contained in the severance agreements in
appropriate circumstances.
Deferred Compensation. We have also structured our executive compensation program with the
intention that it comply with or be exempt from Code Section 409A which may impose additional taxes
on our executives for certain types of deferred compensation that are not in compliance with or
exempt from Code Section 409A. In particular, we are in the process of amending our severance
agreements to modify certain definitions used in the agreements to track definitions used in Code
Section 409A and to provide for a six months suspension of severance payments to the extent
required to exempt such payments from imposition of additional taxes under Code Section 409A.
In addition, the Board, upon recommendation of the Management Development Committee, has
approved amendments to the 2004 Stock Plan so that grants under the plan comply with or are exempt
from Code Section 409A. These amendments include modifying certain definitions used in the plan to
track definitions used in Code Section 409A, eliminating the ability to make certain types of
grants that do not comply with Code Section 409A and which have not historically been used by us
and limiting the terms that can be included in certain types of grants to those that comply with
Code Section 409A. Generally, Code Section 409A has a limited impact on non-qualified stock option
grants, the form of grant used by us under the 2004 Stock Plan in the past. As a result, it is not
anticipated that these amendments will have a significant impact on grants under the 2004 Stock
Plan.
Since the Companys policy is to either comply with or exempt payments from Code Section 409A,
it does not generally assume responsibility for any additional tax, interest, or penalties under
Code Section 409A, although it has the authority to do so in appropriate circumstances. Also,
because of ambiguities and uncertainties as to the application and interpretation of Code Section
409A and the related regulations and guidance, no assurance can be given that compensation intended
by us to comply with or be exempt from Code Section 409A will in fact do so.
Report of the Management Development, Compensation and Stock Option Committee
The Management Development, Compensation and Stock Option Committee has reviewed and discussed
this Compensation Discussion and Analysis with management and, based on the review and discussions
with management, has recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
|
|
|
MANAGEMENT DEVELOPMENT,
|
|
Philip J. DeCocco, Chairman |
COMPENSATION AND STOCK
|
|
David J. Beattie |
OPTION COMMITTEE
|
|
W. Richard Marz |
33
Summary Compensation Table
The following table sets forth certain information as to compensation paid by us for services
rendered in all capacities to the Company and its subsidiaries during fiscal 2008 to (i) to
persons serving as our Chief Executive Officer at any time during fiscal 2008 and 2007, (ii) our
Chief Financial Officer, (iii) our executive officers (the named executive officers or NEOs)
and (iv) a former executive officer whose total compensation exceeded $100,000 at June 30, 2008.
Please see the Compensation Discussion and Analysis for additional detail regarding the Committees
compensation philosophy, practices and fiscal 2008 compensation decisions.
SUMMARY COMPENSATION TABLE FOR FISCAL 2008 AND 2007
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
Incentive Plan |
|
All Other |
|
|
Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Awards(1) |
|
Compensation(2) |
|
Compensation(3) |
|
Total |
Harry T. Rittenour,
|
|
|
2008 |
|
|
$ |
206,511 |
|
|
|
|
|
|
$ |
70,907 |
|
|
$ |
0 |
|
|
$ |
21,193 |
|
|
$ |
298,611 |
|
President and Chief Executive
Officer |
|
|
2007 |
|
|
$ |
182,333 |
|
|
|
|
|
|
$ |
57,146 |
|
|
$ |
0 |
|
|
$ |
11,369 |
|
|
$ |
250,848 |
|
Paul J. Eckhoff,
|
|
|
2008 |
|
|
$ |
163,333 |
|
|
|
|
|
|
$ |
24,268 |
|
|
$ |
0 |
|
|
$ |
20,707 |
|
|
$ |
208,308 |
|
Senior Vice President, Commercial
Products Business Unit |
|
|
2007 |
|
|
$ |
150,914 |
|
|
|
|
|
|
$ |
13,298 |
|
|
$ |
0 |
|
|
$ |
19,589 |
|
|
$ |
183,801 |
|
Mark S. Hoefing,
|
|
|
2008 |
|
|
$ |
205,910 |
|
|
|
|
|
|
$ |
24,324 |
|
|
$ |
0 |
|
|
$ |
20,417 |
|
|
$ |
250,651 |
|
Senior Vice President, Industrial
Business Unit |
|
|
2007 |
|
|
$ |
200,000 |
|
|
|
|
|
|
$ |
19,330 |
|
|
$ |
0 |
|
|
$ |
18,557 |
|
|
$ |
237,887 |
|
John H. Lowry III,
|
|
|
2008 |
|
|
$ |
190,000 |
|
|
|
|
|
|
$ |
22,164 |
|
|
$ |
0 |
|
|
$ |
16,079 |
|
|
$ |
228,243 |
|
Vice President Finance and Chief
Financial Officer |
|
|
2007 |
|
|
$ |
3,654 |
|
|
|
|
|
|
|
|
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,654 |
|
Alfred A. Pease,
|
|
|
2008 |
|
|
$ |
255,846 |
(4) |
|
|
|
|
|
$ |
85,165 |
|
|
$ |
0 |
|
|
$ |
612,025 |
|
|
$ |
953,036 |
|
Former President and Chief
Executive Officer (5) |
|
|
2007 |
|
|
$ |
322,283 |
|
|
|
|
|
|
$ |
160,363 |
|
|
$ |
0 |
|
|
$ |
41,392 |
|
|
$ |
524,038 |
|
Wilfred J. Corriveau,
|
|
|
2008 |
|
|
$ |
41,873 |
|
|
|
|
|
|
$ |
36,030 |
|
|
$ |
0 |
|
|
$ |
134,790 |
|
|
$ |
212,693 |
|
Former Senior Vice President,
Global Automotive (6) |
|
|
2007 |
|
|
$ |
228,167 |
|
|
|
|
|
|
$ |
56,989 |
|
|
$ |
0 |
|
|
$ |
12,843 |
|
|
$ |
297,999 |
|
|
|
|
(1) |
|
Represents the compensation cost incurred during fiscal 2008 associated with stock options
awarded prior to June 30, 2008 calculated in accordance with FAS 123R. These amounts relate to
options granted during the fiscal years ended June 30, 2008, 2007, 2006, 2005, and 2004).
These amounts are based on the grant date fair value of such awards expensed over the
requisite vesting period, excluding any forfeiture reserves recorded for these awards. There
can be no assurance that the FAS 123R option award amounts shown above will ever be realized.
The assumptions we used to calculate these amounts are included in Note 9 to our audited
consolidated financial statements included in our Annual Reports on Form 10-K for fiscal years
2008, 2007, 2006 and 2005 and, in the case of certain stock options held by Mr. Corriveau that
were modified in fiscal 2008, footnote 7 to the table under Compensation of Executive
Officers Grants of Plan-Based Awards for Fiscal 2008. |
|
(2) |
|
No profit sharing payments were earned under our Fiscal 2008 Profit Sharing Plan. As
discussed under Compensation of Executive Officers Compensation Analysis and Discussion
Annual Profit Sharing/Non-Equity Incentive Plan Compensation, the plan only provides for
annual profit sharing payments based on annual performance goals for fiscal 2008 which were
not achieved. |
|
(3) |
|
All Other Compensation in fiscal 2008 is comprised of (i) contributions made by us to the
accounts of the named executive officers under our 401(k) Plan with respect to fiscal 2008 as
follows: Mr. Rittenour $10,200; Mr. Eckhoff $5,364; Mr. Hoefing $7,750; Mr. Lowry $5,130; Mr.
Pease $10,250; and Mr. Corriveau $1,708, (ii) the dollar value of any life insurance premiums
we paid in fiscal 2008 with respect to term life insurance for the benefit of the named
executives as follows: Mr. Rittenour $4,242; Mr. Eckhoff $1,128; Mr. Hoefing $567; |
34
|
|
|
|
|
Mr. Lowry $884; and Mr. Corriveau $2,718, (iii) the dollar value of any life insurance premiums
through June 30, 2009 with respect to term life insurance for the benefit of Mr. Pease estimated
at $9,900, (iv) payments for a car allowance made in fiscal 2008 for the benefit of Messrs.
Rittenour and Corriveau, (v) payments for a car allowance through June 30, 2009 for the benefit
of Mr. Pease totaling $25,500, (vi) payments to Mr. Pease through June 30, 2009 relating to
reimbursement of monthly country club dues, (vii) the aggregate incremental cost to the Company
in fiscal 2008 for personal and business use by Messrs. Eckhoff, Hoefing, Lowry, Pease and
Corriveau of a company leased automobile including insurance, gasoline and maintenance expenses,
(viii) relocation payments to Mr. Eckhoff in fiscal 2008 relating to reimbursement of temporary
living expenses incurred, (ix) continuation of salary payments to Mr. Pease through June 30,
2009 totaling $488,094, (x) continuation of salary payments to Mr. Corriveau for six months
totaling $115,884, (xi) payments to Mr. Pease made in fiscal 2008 relating to reimbursement of
legal fees incurred in connection with the negotiation of his Employment and Amended and
Restated Severance Agreement, (xii) continuation of health benefits for Mr. Pease following his
retirement totaling $50,159, and (xiii) continuation of health benefits for Mr. Corriveau
following his termination of employment. SEC rules require costs of commuting and other uses
not directly and integrally related to our business to be disclosed as compensation to the
executive. Because we do not track automobile use in this way, the automobile related costs
included in the table for Messrs. Eckhoff, Hoefing, Lowry, Pease and Corriveau represent 100
percent of our actual expenditures for both personal and business use of the leased automobiles. |
|
(4) |
|
Represents payments of base salary to Mr. Pease until January 21, 2008 and accrued payments
due Mr. Pease totaling $149,625 relating to supplemental compensation for services rendered
during fiscal 2008 after January 21, 2008 payable in January 2009. |
|
(5) |
|
Mr. Pease retired as President, Chief Executive Officer and Chairman of the Board on January
21, 2008. He maintains an advisory role to the Company. |
|
(6) |
|
Mr. Corriveaus employment with the Company terminated on September 6, 2007. |
35
Grants of Plan-Based Awards
The following table sets forth information concerning each grant of a plan-based award made to
a NEO during fiscal year 2008.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Possible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
Payments |
|
|
|
|
|
|
|
|
|
Option Awards: |
|
Exercise |
|
|
|
|
Under Non- |
|
|
|
|
|
Date Approved |
|
Number of |
|
Price of |
|
Grant Date |
|
|
Equity |
|
|
|
|
|
by Management |
|
Securities |
|
Option |
|
Fair Value |
|
|
Incentive Plan |
|
|
|
Development |
|
Underlying |
|
Awards |
|
of Option |
Name |
|
Awards(1) |
|
Grant Date(2) |
|
Committee(2) |
|
Options(3) |
|
($/Sh)(4) |
|
Awards(5) |
Harry T. Rittenour |
|
$ |
108,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/2008 |
|
|
|
01/21/2008 |
|
|
|
100,000 |
|
|
|
8.81 |
|
|
$ |
315,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Eckhoff |
|
$ |
88,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Hoefing |
|
$ |
110,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/01/2008 |
|
|
|
03/21/2008 |
|
|
|
10,000 |
|
|
|
12.68 |
|
|
$ |
43,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Lowry III |
|
$ |
104,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/02/2007 |
|
|
|
06/05/2007 |
|
|
|
25,000 |
|
|
|
9.90 |
|
|
$ |
89,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alfred A. Pease |
|
$ |
195,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wilfred J. Corriveau |
|
$ |
126,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09/06/2007 |
|
|
|
09/06/2007 |
|
|
|
6,250 |
(6) |
|
|
6.71 |
(7) |
|
$ |
5,029 |
(7) |
|
|
|
(1) |
|
The amount reported in this column is the amount that would have been paid under our Fiscal
2008 Profit Sharing Plan if the Management Development Committee had awarded the NEOs their
full target profit sharing potential for the fiscal year, which was 57.2% of Mr. Rittenours,
60% of Mr. Peases, and 55% of the other NEOs base salary level at the beginning of fiscal
year 2008. Profit sharing payments under the Fiscal 2008 Profit Sharing Plan were to be
allocated among the team members, including Messrs. Rittenour and Pease and the other NEOs, as
determined by the Management Development Committee in its discretion. We did not have
threshold or maximum payment levels under the Fiscal 2008 Profit Sharing Plan. Profit sharing
payments were to start once the minimum performance standard was satisfied (EPS of $0.35) and
there was no cap on the level of payments that could be earned above the target level,
although profit sharing payments were earned at a lesser percent ($0.20 per dollar of pre-tax
earnings) once the target profit sharing potential was earned. No bonuses were earned or paid
under the plan. See Compensation of Executive Officers Compensation Discussion and
Analysis Annual Profit Sharing/Non-Equity Incentive Plan. |
|
(2) |
|
All awards under the 2004 Stock Plan are granted upon approval of the Management Development
Committee. During fiscal 2008, the Management Development Committee only granted stock
options under the 2004 Stock Plan. Awards made in fiscal 2008 became effective (the Grant
Date) on the first business day of the month following the month in which the grant was
approved by the Management Development Committee. The exercise price of the option award was
set based upon the Grant Date as described in Note 4 below. |
|
(3) |
|
Twenty-five percent of the option becomes exercisable on each anniversary of the date of
grant. The options shares become immediately exercisable in the event of change in control as
described under |
36
|
|
|
|
|
Compensation of Executive Officers Potential Payments Upon Termination or Change in
Control. These options expire ten years from their date of grant or, if earlier, one year
after the optionees death or permanent disability or three months after the optionees
termination of employment. |
|
(4) |
|
The exercise price of these stock option awards under the 2004 Stock Plan was set at the
average closing sales price of the Common Stock on the Nasdaq Global Market for the five
consecutive trading days on the Nasdaq Global Market immediately preceding the Grant Date. |
|
(5) |
|
The amounts reported in this column, other than for Mr. Corriveau, represent the grant date
fair value of the entire award under FAS 123R. The assumptions we used to calculate these
amounts are included in Note 9 to our audited consolidated financial statements included in
our Annual Report on Form 10-K for the fiscal year ended June 30, 2008. |
|
(6) |
|
Effective upon Mr. Corriveaus termination of employment, we modified a single grant of an
existing option award by accelerating the exercisability of options to purchase 6,250 shares
of Common Stock under the 2004 Stock Plan. The following is a list of Mr. Corriveaus stock
options that were modified. The Original Exercise Price of the Option Awards listed below was
determined at the Original Grant Date based on the fair market value of the Common Stock at
that time. The closing market price of the Common Stock on September 5, 2007, the effective
date of the modification to Mr. Corriveaus stock options, was $12.00. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original Exercise |
|
Number of Shares Subject |
|
|
Number of |
|
Price of Option |
|
to Acceleration of |
Grant Date |
|
Underlying Options |
|
Awards ($/Sh) |
|
Exercisability |
11/05/2004 |
|
|
12,500 |
|
|
|
6.71 |
|
|
|
6,250 |
|
|
|
|
(7) |
|
The amount reported in this column represents the incremental change in fair value under FAS
123R of Mr. Corriveaus existing stock options as a result of the acceleration of the
exercisability of options to purchase 6,250 shares of Common Stock under the 2004 Stock Plan.
The assumptions we used to calculate this amount are included in Note 9 to our audited
consolidated financial statements included in our Annual Report on Form 10-K for the fiscal
year ended June 30, 2008, but were revised to reflect, as of the date of Mr. Corriveaus
termination from employment, the current common stock price, common stock price volatility,
risk free rate of return and the expected option term assumptions required under FAS 123R to
determine the fair value expense of this stock option modification. |
Employment Agreements
None of our executive officers, including Mr. Rittenour, has an employment agreement with us,
other than the agreements discussed under Compensation of Executive Officers Potential Payments
Upon Termination or Change in Control.
Our former President and Chief Executive Officer, Mr. Pease served pursuant to the terms of an
employment agreement. Mr. Peases agreement provided for an annual base salary, subject to
increase at the discretion of the Management Development Committee, reimbursement of reasonable
monthly club dues, benefits comparable to the Companys other executive officers, including life,
disability and health insurance and the use of a Company leased automobile, an annual performance
bonus target level of 60% of his base salary and other personal benefits. Mr. Pease retired as
President and Chief Executive Officer in January 2008. For a description of arrangements entered
into with Mr. Pease in connection with his retirement as President and Chief Executive Officer, see
Compensation of Executive Officers Potential Payments Upon Termination or Change in Control.
For a description of material modifications to a single grant of a stock option held by Mr.
Corriveau in connection with their termination of employment with us, see Compensation of
Executive Officers Potential Payments Upon Termination or Change in Control.
37
Outstanding Equity Awards at Fiscal Year-End
The following table provides information with respect to unexercised options held by the NEOs
as of June 30, 2008.
OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
|
|
|
|
|
Options (#) |
|
Options (#) |
|
Option Exercise |
|
Option |
Name |
|
Exercisable |
|
Unexercisable |
|
Price |
|
Expiration Date(1) |
Harry T. Rittenour |
|
|
|
|
|
|
100,000 |
(2) |
|
$ |
8.81 |
|
|
|
01/31/2018 |
|
|
|
|
3,750 |
|
|
|
11,250 |
(3) |
|
$ |
8.92 |
|
|
|
05/31/2017 |
|
|
|
|
6,250 |
|
|
|
6,250 |
(4) |
|
$ |
6.98 |
|
|
|
01/01/2016 |
|
|
|
|
18,750 |
|
|
|
6,250 |
(5) |
|
$ |
6.71 |
|
|
|
09/30/2014 |
|
|
|
|
25,000 |
|
|
|
|
|
|
$ |
1.42 |
|
|
|
09/02/2012 |
|
|
|
|
18,000 |
|
|
|
|
|
|
$ |
1.24 |
|
|
|
01/01/2012 |
|
|
|
|
15,500 |
|
|
|
|
|
|
$ |
1.53 |
|
|
|
01/01/2011 |
|
|
|
|
10,000 |
|
|
|
|
|
|
$ |
3.94 |
|
|
|
05/31/2010 |
|
|
|
|
10,000 |
|
|
|
|
|
|
$ |
3.99 |
|
|
|
09/02/2009 |
|
Paul J. Eckhoff |
|
|
3,750 |
|
|
|
11,250 |
(3) |
|
$ |
8.92 |
|
|
|
05/31/2017 |
|
|
|
|
10,000 |
|
|
|
10,000 |
(6) |
|
$ |
7.27 |
|
|
|
11/30/2015 |
|
Mark S. Hoefing |
|
|
|
|
|
|
10,000 |
(7) |
|
$ |
12.68 |
|
|
|
03/31/2018 |
|
|
|
|
2,000 |
|
|
|
6,000 |
(3) |
|
$ |
8.92 |
|
|
|
05/31/2017 |
|
|
|
|
2,500 |
|
|
|
2,500 |
(4) |
|
$ |
6.98 |
|
|
|
01/01/2016 |
|
|
|
|
7,500 |
|
|
|
2,500 |
(8) |
|
$ |
7.22 |
|
|
|
01/02/2015 |
|
|
|
|
10,000 |
|
|
|
|
|
|
$ |
6.69 |
|
|
|
05/31/2014 |
|
|
|
|
3,300 |
|
|
|
|
|
|
$ |
6.97 |
|
|
|
02/09/2014 |
|
|
|
|
3,000 |
|
|
|
|
|
|
$ |
2.08 |
|
|
|
01/01/2013 |
|
|
|
|
7,000 |
|
|
|
|
|
|
$ |
1.73 |
|
|
|
12/01/2012 |
|
John H. Lowry III |
|
|
|
|
|
|
25,000 |
(9) |
|
$ |
9.90 |
|
|
|
07/01/2017 |
|
Alfred A. Pease |
|
|
7,500 |
|
|
|
22,500 |
(3) |
|
$ |
8.92 |
|
|
|
05/31/2017 |
|
|
|
|
|
|
|
|
12,500 |
(4) |
|
$ |
6.98 |
|
|
|
01/01/2016 |
|
|
|
|
|
|
|
|
12,500 |
(5) |
|
$ |
6.71 |
|
|
|
09/30/2014 |
|
|
|
|
19,100 |
|
|
|
|
|
|
$ |
6.50 |
|
|
|
09/01/2013 |
|
Wilfred J. Corriveau |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Options expire on the date indicated or, if earlier, one year after the
optionees death or permanent disability or three months after the optionees
termination of employment. |
|
(2) |
|
One quarter of these shares will vest on each of February 1, 2009, 2010, 2011 and 2012. |
|
(3) |
|
One third of these shares will vest on each of June 1, 2009, 2010 and 2011. |
|
(4) |
|
One half of these shares will vest on each of January 2, 2009 and 2010. |
|
(5) |
|
These shares will vest on October 1, 2008. |
|
(6) |
|
One half of these shares will vest on each of December 1, 2008 and 2009. |
|
(7) |
|
One quarter of these shares will vest on each of April 1, 2009, 2010, 2011 and 2012. |
|
(8) |
|
These shares will vest on January 3, 2009. |
|
(9) |
|
One quarter of these shares will vest on each of July 2, 2008, 2009, 2010 and 2011. |
38
Option Exercises and Stock Vested
The following table provides information with respect to options exercised by the NEOs during
fiscal 2008.
OPTION EXERCISES DURING FISCAL 2008
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of Shares |
|
Value Realized |
Name |
|
Acquired on Exercise |
|
on Exercise (1) |
Harry T. Rittenour |
|
|
24,000 |
|
|
$ |
122,694 |
|
Paul J. Eckhoff |
|
|
0 |
|
|
|
|
|
Mark S. Hoefing |
|
|
3,000 |
|
|
$ |
31,770 |
|
John H. Lowry III |
|
|
0 |
|
|
|
|
|
Alfred A. Pease |
|
|
377,114 |
|
|
$ |
2,602,197 |
|
Wilfred J. Corriveau |
|
|
93,875 |
|
|
$ |
756,408 |
|
|
|
|
(1) |
|
Calculated by multiplying the number of shares acquired upon exercise by the closing price of
the Common Stock on the Nasdaq Global Market on the exercise date less the exercise price of
the option. |
Potential Payments Upon Termination or Change in Control
We have entered into severance agreements with Messrs. Rittenour, Eckhoff, Hoefing, and Lowry.
Under the terms of Mr. Rittenours severance arrangement, in the event that we terminate his
employment without Cause, he will be paid an amount of cash severance equal to one times his
current annual base salary, as in effect immediately prior to his termination, a prorated portion
of any bonus he would have earned for the year of termination had Mr. Rittenour been employed at
the end of the applicable bonus period, and continuation of Company-provided health, welfare and
automobile benefits for one year. Under the terms of Messrs. Eckhoff, Hoefing and Lowrys
severance agreements, in the event their employment is terminated without Cause, they will be paid
an amount of severance equal to six months of their current annual base salary, as in effect
immediately prior to their termination, a prorated portion of any bonus they would have earned for
the year of termination had they been employed at the end of the applicable bonus period, and
continuation of Company-provided health, welfare and automobile benefits for six months. All
severance payments and benefits will be paid or provided over the period during which we are
required to provide the benefit.
The severance agreements also provide that, if the employment of our executive officers are
terminated for any reason other than death, disability or cause, or they resign for Good Reason,
six months prior to or within two years after a Change in Control, in lieu of the severance
described in the prior paragraph, Mr. Rittenour will be entitled to an amount of severance equal to
two times his current annual base salary, as in effect immediately prior to his termination, a
prorated portion of his target bonus for the year of termination, based on the number of days
worked in the year of termination, continuation of Company-provided health benefits until Mr.
Rittenour becomes eligible for Medicare benefits and welfare and automobile benefits for two years
and continued coverage under director and officer liability insurance policies, and Messrs.
Eckhoff, Hoefing and Lowry will be entitled to an amount of severance equal to one times their
current annual base salary, as in effect immediately prior to their termination, a prorated portion
of their target bonus for the year of termination, based on the number of days worked in the year
of termination, continuation of Company-provided health, welfare and automobile benefits for one
year and continued coverage under director and officer liability insurance policies. Base salary
and bonus severance payments will be paid in a lump sum at the time of termination of employment
and other benefits will be provided over the period during which we are required to provide the
benefit. The special severance expires three years from the date of the severance agreement,
except that such expiration date shall be extended for consecutive one year periods, unless, at
least 180 days prior to the expiration date, we notify the executive in writing that we are not
extending the term of these provisions.
The NEOs have all entered into our standard executive agreement not to compete, restricting
the executives right to compete with us for the longer of twelve months or the period in which we
are required to make payments to
39
the executive, and standard employee proprietary information and inventions agreement,
containing confidentiality provisions and a two-year restriction on soliciting our employees. We
have the right to cease all further payment under the NEOs severance agreements in the event that
the NEO violates the executive non-competition agreement. The NEOs must sign a standard release to
receive payments under the severance agreements, including standard non-disparagement provisions.
Payments under the severance agreements, when aggregated with any other golden parachute
amounts (defined under Code Section 280G as compensation that becomes payable or accelerated due to
a Change in Control) payable under this agreement or any of our other plans, agreements or
policies, shall not exceed the golden parachute cap under Code Sections 280G and 4999.
Agreements relating to stock options granted under the 2004 Stock Plan to each of the
executive officers named in the Summary Compensation Table, as well as stock options granted under
the 2004 Stock Plan to our other officers beginning in fiscal 2006, provide that such options
become immediately exercisable in the event of a Change in Control.
Agreements relating to stock options granted under the 1992 Plan to each of the executive
officers named in the Summary Compensation Table, as well as stock options granted under the 1992
Plan and stock options granted under the 2004 Stock Plan prior to fiscal 2006 to our other
officers, also provide that such options become immediately exercisable in the event that the
optionees employment is terminated without Cause, or there is a diminishment of the optionees
responsibilities, following a Change in Control of the Company or, if, in the event of a Change in
Control, such options are not assumed by the person surviving the Change in Control or purchasing
the assets in the Change in Control.
Change in Control for purposes of the severance agreements, the 2004 Stock Plan and the 1992
Plan is generally defined as:
|
|
|
A merger of the Company in which the Company is not the survivor, |
|
|
|
|
A share exchange transaction in which our shareholders own less than 50% of the
stock of the survivor, |
|
|
|
|
The sale or transfer of all or substantially all of our assets, or |
|
|
|
|
Any person, or group of persons who agree to act together to acquire, hold, vote or
dispose of the Common Stock, acquires more than 50% of the Common Stock. |
Cause is generally defined as the executives:
|
|
|
Personal dishonesty in connection with the performance of services for us, |
|
|
|
|
Willful misconduct in connection with the performance of services for the Company, |
|
|
|
|
Conviction for violation of any law involving (A) imprisonment that interferes with
performance of duties or (B) moral turpitude, |
|
|
|
|
Repeated and intentional failure to perform stated duties, after written notice is
delivered identifying the failure, and it is not cured within 10 days, or |
|
|
|
|
Breach of a fiduciary duty to the Company. |
Good Reason is generally defined as the occurrence of any of the following events without
the executives written consent, if the executive terminates employment within one year following
the occurrence of such event:
40
|
|
|
Reassignment of the executive to substantial duties materially inconsistent with his
or her position, duties, responsibilities and status immediately prior to the Change in
Control, |
|
|
|
|
Substantial diminution in the executives position, duties, responsibilities or
status with the Company immediately prior to the Change in Control, |
|
|
|
|
Reduction in the executives base salary or targeted incentive bonus in effect
immediately prior to the Change in Control, |
|
|
|
|
Failure to continue the executives participation in any bonus, stock or other
incentive plans in effect immediately prior to the Change in Control (or comparable
successor plans), |
|
|
|
|
Discontinuance or reduction in benefits to the executive under any retirement plan,
welfare plan, fringe benefit or perquisites maintained by the Company immediately prior
to the Change in Control (without the implementation of comparable successor benefits), |
|
|
|
|
Required relocation of the executives principal place of employment more than 50
miles from his or her place of employment prior to the Change in Control, or |
|
|
|
|
Breach of any provision in the severance agreements, provided that the breach is not
cured within 10 days following written notice by the executive of the breach. |
The fact that we are no longer a publicly traded company or the executive no longer has duties
and responsibilities associated exclusively with a publicly traded company, such as SEC or stock
exchange reporting responsibilities or investor or analyst relations responsibilities, does not
trigger the executives right to terminate employment for good reason.
On January 21, 2008 the Company announced the retirement of Alfred A. Pease as President and
Chief Executive Officer. In addition, on January 21, 2008, the Company and Mr. Pease entered into
an Employment and Amended and Restated Severance Agreement (the Employment Agreement). Pursuant
to the Employment Agreement, Mr. Pease will receive his base salary through June 30, 2009,
supplemental compensation based upon the number of days that he provides services to the Company
following his retirement, health benefits until he becomes eligible for Medicare coverage and
welfare benefits and certain other benefits during the salary continuation period. Mr. Pease
currently maintains an advisory role to the Company.
Mr. Corriveau is also a party to a severance agreement similar to the other NEOs (other than
Mr. Rittenour). He received his base salary for six months following termination of employment on
September 6, 2007, reimbursement of the cost to elect COBRA coverage under our medical, dental and
vision plans and $900 monthly automobile allowance until March 6, 2008, pursuant to the terms of
his severance agreement. He was eligible for a prorated portion of any bonus he would have earned
for fiscal year 2008, however, no bonus was earned. In addition, we agreed to pay, and in fact
paid, Mr. Corriveau $57,500 on September 5, 2008 and accelerated the exercisability of options to
purchase 6,250 shares of Common Stock under the 1992 Plan.
The payments and benefits to each NEO under the provisions of their severance agreements and
stock option agreements in the event of the termination of their employment with the Company and/or
a Change in Control of the Company are estimated to aggregate the following amounts. The estimate
assumes that the termination of employment and/or Change in Control occurred on June 30, 2008,
except as otherwise noted.
41
ESTIMATED AGGREGATE PAYMENTS UNDER SEVERANCE AGREEMENTS AND STOCK OPTION
AGREEMENTS UPON TERMINATION OF EMPLOYMENT AND/OR CHANGE IN CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Payment |
|
|
|
|
|
|
Name |
|
Benefit |
|
Prior to Change in Control |
|
|
Following Change in Control |
|
|
|
|
|
Voluntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination |
|
|
|
|
|
by NEO or |
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
Voluntary Termination by |
|
|
By NEO, For Good |
|
|
|
|
|
For Cause |
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
NEO, Without Good |
|
|
Reason, or Involuntary |
|
|
|
|
|
Termination |
|
|
Without |
|
|
|
|
|
|
|
|
|
|
Reason, or For Cause |
|
|
Termination By |
|
|
|
|
|
By |
|
|
Cause By |
|
|
No Termination |
|
|
Termination |
|
|
Company, Other Than |
|
|
|
|
|
Company |
|
|
Company (1) |
|
|
of Employment |
|
|
By Company |
|
|
For Cause (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquirer |
|
|
|
|
|
|
Acquirer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquirer |
|
|
Does Not |
|
|
Acquirer |
|
|
Does Not |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumes |
|
|
Assume |
|
|
Assumes |
|
|
Assume |
|
|
Whether or Not |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Acquirer Assumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
Options |
|
|
Options |
|
|
Options |
|
|
Stock Options |
|
Harry T. Rittenour |
|
Cash Payment |
|
$ |
0 |
|
|
$ |
230,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
565,820 |
|
|
|
Stock Options (3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
11,063 |
|
|
$ |
23,813 |
|
|
$ |
11,063 |
|
|
$ |
23,813 |
|
|
$ |
23,813 |
|
|
|
Benefits |
|
$ |
0 |
|
|
$ |
56,280 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
58,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
286,280 |
|
|
$ |
11,063 |
|
|
$ |
23,813 |
|
|
$ |
11,063 |
|
|
$ |
23,813 |
|
|
$ |
648,388 |
|
Paul J. Eckhoff |
|
Cash Payment |
|
$ |
0 |
|
|
$ |
85,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
258,000 |
|
|
|
Stock Options (3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
14,800 |
|
|
$ |
0 |
|
|
$ |
14,800 |
|
|
$ |
14,800 |
|
|
|
Benefits |
|
$ |
0 |
|
|
$ |
11,768 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
23,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
96,768 |
|
|
$ |
0 |
|
|
$ |
14,800 |
|
|
$ |
0 |
|
|
$ |
14,800 |
|
|
$ |
296,336 |
|
Mark S. Hoefing |
|
Cash Payment |
|
$ |
0 |
|
|
$ |
110,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
330,000 |
|
|
|
Stock Options(3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
4,425 |
|
|
$ |
8,250 |
|
|
$ |
4,425 |
|
|
$ |
8,250 |
|
|
$ |
8,250 |
|
|
|
Benefits |
|
$ |
0 |
|
|
$ |
11,722 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
23,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
121,722 |
|
|
$ |
4,425 |
|
|
$ |
8,250 |
|
|
$ |
4,425 |
|
|
$ |
8,250 |
|
|
$ |
361,694 |
|
John H. Lowry, III |
|
Cash Payment |
|
$ |
0 |
|
|
$ |
95,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
294,500 |
|
|
|
Stock Options (3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
Benefits |
|
$ |
0 |
|
|
$ |
11,881 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
23,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
106,881 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
318,262 |
|
Alfred A. Pease |
|
Cash Payment(4) |
|
$ |
0 |
|
|
$ |
975,719 |
|
|
$ |
934,825 |
|
|
$ |
934,825 |
|
|
$ |
934,825 |
|
|
$ |
934,825 |
|
|
$ |
934,825 |
|
|
|
Stock Options (3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
22,125 |
|
|
$ |
47,625 |
|
|
$ |
22,125 |
|
|
$ |
47,625 |
|
|
$ |
47,625 |
|
|
|
Benefits(4) |
|
$ |
0 |
|
|
$ |
103,189 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
107,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
1,078,908 |
|
|
$ |
956,950 |
|
|
$ |
982,450 |
|
|
$ |
956,950 |
|
|
$ |
982,450 |
|
|
$ |
1,089,739 |
|
Wilfred J. Corriveau |
|
Cash Payment(5) |
|
$ |
0 |
|
|
$ |
173,384 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
Stock Options(5) (6) |
|
$ |
0 |
|
|
$ |
34,188 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
Benefits(5) |
|
$ |
0 |
|
|
$ |
14,475 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
222,047 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
In preparing the above estimates, other than for Messrs. Pease and Corriveau, we assumed
that no portion of the annual bonus was payable since no bonus was earned for fiscal 2008,
valued the executive life insurance and automobile benefits, with no reimbursement for
gasoline or maintenance, at the actual cost incurred by the Company in fiscal 2008 for such
benefits, and valued the health and welfare plan benefits, other than executive life
insurance, at the per employee cost of such benefits calculated using the assumptions used for
financial reporting purposes under generally accepted accounting principles for fiscal 2008. |
|
(2) |
|
In preparing the above estimates, other than for Messrs. Pease and Corriveau, we assumed
that the executive would receive his full target bonus for the year of termination, valued the
executive life insurance and automobile benefits, with no reimbursement for gasoline or
maintenance, at the actual cost incurred by the Company in fiscal 2008 for such benefits, and
valued the health and welfare plan benefits, other than executive |
42
|
|
|
|
|
life insurance, at the per employee cost of such benefits calculated using the assumptions used
for financial reporting purposes under generally accepted accounting principles for fiscal 2008. |
|
(3) |
|
Calculated by multiplying the number of shares underlying unexercisable options the
exercisability of which is accelerated, and the exercise price of which is less than such
closing price, by $8.75, the closing price of the Common Stock on the Nasdaq Global Market on
June 30, 2008 less the exercise price of such option. |
|
(4) |
|
Mr. Pease retired on January 21, 2008 as President and Chief Executive Officer but maintains
an advisory role to the Company. Pursuant to an Employment and Amended and Restated Severance
Agreement (the Employment Agreement), Mr. Pease will receive (i) his base salary through
June 30, 2009, (ii) supplemental compensation based upon the number of days that he provides
services to the Company following his retirement, (iii) health benefits until he becomes
eligible for Medicare coverage, (iv) the dollar value of any life insurance premiums not to
exceed $9,900 through June 30, 2009 with respect to term life insurance for the benefit of Mr.
Pease, (v) payments for a car allowance through June 30, 2009 for the benefit of Mr. Pease
totaling $25,500, (vi) payments through June 30, 2009 relating to reimbursement of monthly
country club dues, and (vii) payments made in fiscal 2008 relating to reimbursement of legal
fees incurred in connection with the negotiation of his Employment and Amended and Restated
Severance Agreement. He was eligible for a prorated portion of any bonus he would have earned
for fiscal 2008, although no such bonus was earned. In the event that a Change in Control
occurred on June 30, 2008, in lieu of (i) and (ii) above and a prorated portion of his fiscal
2008 bonus, Mr. Pease would have received $785,200 and the dollar value of life insurance
premiums through January 21, 2010 estimated at $14,000. |
|
(5) |
|
Mr. Corriveaus employment with the Company terminated on September 6, 2007. He received
his base salary for six months, a cash payment of $57,500 on September 5, 2008, a $900 per
month car allowance for six months and continuation of health and welfare benefits through
March 6, 2008. He was eligible for a prorated portion of any bonus he would have earned for
fiscal 2008, although no such bonus was earned. We accelerated the exercisability of options
to purchase 6,250 shares of Common Stock (the Corriveau Accelerated Options). |
|
(6) |
|
Calculated by multiplying the 6,250 of Corriveau Accelerated Options by $12.18, the closing
price of the Common Stock on the Nasdaq Global Market on September 6, 2007, less the exercise
price of the option. |
RELATED PARTY TRANSACTIONS
Although we do not have a written policy with regard to the approval of transactions between
the Company and its executive officers and directors, such transactions are subject to the
limitations on conflicts of interest contained in the Companys Code of Ethics and are generally
discouraged by the Company. To the extent any such transactions are proposed, they would be
subject to approval by the Audit Committee of the Board of Directors in accordance with the Audit
Committees charter, applicable law and the Nasdaq Stock Market® Marketplace Rules, which require
that any such transactions required to be disclosed in our proxy statement be approved by a
committee of independent directors of our Board of Directors.
43
INDEPENDENT ACCOUNTANTS
General
The accounting firm of Grant Thornton LLP (Grant Thornton) has been appointed by the Audit
Committee to audit our consolidated financial statements for the fiscal year ended June 30, 2009.
Grant Thornton has served as our independent accountants since March 8, 2002. Representatives of
Grant Thornton are expected to be at the Annual Meeting and to be available to respond to
appropriate questions. Such representatives will have the opportunity to make a statement at such
meeting if they desire to do so.
Policy for Pre-Approval of Audit and Non-Audit Services
The Audit Committee has adopted a policy regarding audit and non-audit services that may be
provided by our independent accountants. The policy sets forth the procedures and conditions
pursuant to which services proposed to be performed by the independent accountants must be
pre-approved. The policy provides that the Audit Committee will consider whether services to be
performed by the independent accountant are consistent with the SECs rules on auditor
independence. In particular, the policy expressly names all services the independent accountant
may not perform and, in the case of other services, requires the Audit Committee to consider
whether the independent auditor is the best positioned to provide the most effective and efficient
service.
The policy provides that the Audit Committee will review and pre-approve annually, and
periodically thereafter as required, the services proposed to be provided by the independent
accountant in the categories of audit services, audit related services, tax services and all other
services. In addition, the Audit Committee is to determine the appropriate ratio of audit, audit
related and tax services to all other services. The Audit Committee has delegated to the chairman
of the Audit Committee and, if he or she is unavailable, another member of the Audit Committee,
authority to pre-approve audit and non-audit services proposed to be performed by the independent
registered public accounting firm not previously approved by the Audit Committee. Under the
policy, the Audit Committee is to be informed on a timely basis of services actually rendered by
the independent accountant, including those pre-approved by a member of the Audit Committee. The
Chief Financial Officer of the Company is to immediately report to the Chairman of the Audit
Committee any breach of the policy.
All of the services described below under audit fees, audit-related fees, tax fees and all
other fees arising in fiscal 2008 and 2007 were approved by the Audit Committee pursuant to its
pre-approval policies and procedures prior to the service being provided. None of the
audit-related fees or tax fees described below arising in fiscal 2008 and 2007 were approved by the
Audit Committee after the initiation of such services pursuant to an exemption from the SECs
requirements relating to approval of these types of services by the Audit Committee prior to the
provision of the service under Section 2.01(c)(7)(i)(C) of SEC Regulation S-X.
Fees Paid to Independent Registered Public Accounting Firm
Audit Fees. The aggregate fees and expenses billed by Grant Thornton for professional
services rendered for the audit of our annual consolidated financial statements and internal
controls over financial reporting and reviews of the consolidated financial statements included in
our Forms 10-Q and other regulatory filings were $548,117 during fiscal 2008 and $179,786 during
fiscal 2007.
Audit-Related Fees. The aggregate fees and expenses billed by Grant Thornton for professional
services rendered for audit-related fees in fiscal 2008 were $6,000 and related to providing
services to the Board regarding executive management changes and in fiscal 2007 were $1,000 and
related to providing fiscal 2005 401(k) work papers for review by the Companys new 401(k)
auditors, Mathew, Reich, Perna and Rotter.
Tax Fees. The aggregate fees and expenses billed by Grant Thornton for preparation of federal
and state tax returns and miscellaneous tax-related services and advice were $20,806 in fiscal 2008
and $91,771 in fiscal 2007.
All Other Fees. Grant Thornton did not render any other services for the Company in fiscal
2008 and 2007.
The Audit Committee of the Board does not consider the provision of the services described
above by Grant Thornton to be incompatible with the maintenance of Grant Thorntons independence.
44
SHAREHOLDER PROPOSALS AND NOMINEES FOR 2009 ANNUAL MEETING
Shareholder Proposals
Shareholder proposals intended to be presented at the 2009 annual meeting which are eligible
for inclusion in our proxy statement for that meeting under Rule 14a-8 promulgated under the
Exchange Act, must be received by the Secretary of the Company at 47827 Halyard Drive, Plymouth, MI
48170, no later than June 5, 2009 in order to be considered for inclusion in our proxy statement
relating to that meeting. In order to curtail controversy as to the date on which a proposal was
received by us, it is suggested that proposals be submitted by certified mail, return receipt
requested.
Shareholder proposals intended to be presented at the 2009 annual meeting which are not
eligible for inclusion in our proxy statement for that meeting under Rule 14a-8 are considered
untimely under Rule 14a-5 promulgated under the Exchange Act unless received by the Secretary of
the Company at the Companys offices no later than August 24, 2009 and we expect the persons named
as proxies for the 2009 annual meeting to use their discretionary voting authority, to the extent
permitted by law, with respect to any proposal considered untimely at the 2009 annual meeting.
Shareholder Nominees
Shareholders desiring to recommend candidates for consideration and evaluation by the
Nominating and Corporate Governance Committee for the 2009 Annual Meeting should submit such
recommendations in writing to the Nominating and Corporate Governance Committee, c/o General
Counsel, Perceptron, Inc., 47827 Halyard Drive, Plymouth, MI 48170 no later than May 16, 2009.
The recommendation should be accompanied by the following: (i) the name, address, e-mail
address (if any), and telephone number of the shareholder, the number of shares of the Companys
Common Stock beneficially owned by the shareholder and proof of the shareholders beneficial
ownership of the Companys Common Stock by one of the means set forth in Item 7(d)(2)(ii)(L) of SEC
Schedule 14A; (ii) the name, address, e-mail address (if any) and telephone number of the proposed
nominee and the number of shares of the Companys Common Stock beneficially owned by the nominee;
(iii) a detailed description of the proposed nominees business, professional, public, academic,
scientific or technological experience and other qualifications for Board membership, including the
name and address of other businesses for which the proposed nominee has provided services, or for
which he or she has served as a director, in the last five years, a description of the proposed
nominees specific experience in such position and the proposed nominees academic achievements;
(iv) a description of any potential conflicts between the interests of the Company and its
shareholders and the proposed nominee; (v) a written agreement by the proposed nominee to serve as
a member of the Companys Board if nominated and elected; and (vi) a written representation by the
shareholder and the proposed nominee that the proposed nominee is not an affiliate or affiliated
party with respect to the shareholder. The General Counsel will forward any recommendations to the
Nominating and Corporate Governance Committee. The nominating shareholder and proposed nominee may
be requested to provide additional information regarding the shareholder or the proposed nominee
and to attend one or more interviews, in each case, as requested by the Board or Nominating and
Corporate Governance Committee.
See Corporate Governance Board of Directors and Committees for a description of the
standards used by the Nominating and Corporate Governance Committee to evaluate candidates
recommended by shareholders.
OTHER MATTERS
At the date of this Proxy Statement, the Board is not aware of any matters to be presented for
action at the Annual Meeting other than those described above. However, if any other matters
requiring a shareholder vote properly come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy in accordance with their best judgment, to the
extent permitted by law, on such matters.
45
ANNUAL
MEETING OF SHAREHOLDERS OF
PERCEPTRON, INC.
November 18, 2008
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PROXY VOTING INSTRUCTIONS
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MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
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TELEPHONE
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Call toll-free 1-800-PROXIES
(1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries and follow the instructions. Have your proxy card available when you call.
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INTERNET - Access www.voteproxy.com and follow
the on-screen instructions. Have your proxy card
available when you access the web page.
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IN PERSON -
You may vote your shares in person by attending the Annual Meeting.
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COMPANY NUMBER
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You may enter your voting instructions at 1-800-PROXIES in the United States or 1-718-921-8500 from foreign countries or www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date.
â Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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ELECTION OF DIRECTORS Directors recommend a vote for the following nominees to hold office until the Annual Meeting of Shareholders in 2009.
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APPROVAL OF THE AMENDMENT TO, AND PERFORMANCE MEASURES UNDER, THE 2004 STOCK INCENTIVE PLAN Directors recommend the approval of the amendment to, and performance measures under, Perceptron, Inc.s 2004 Stock Incentive Plan, as described in the Notice Of Annual Meeting of Shareholders and Proxy Statement dated October 3, 2008. |
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David J. Beattie Kenneth R. Dabrowski |
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WITHHOLD AUTHORITY FOR ALL NOMINEES
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Philip J. DeCocco W. Richard Marz |
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FOR ALL EXCEPT (See instructions below) |
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Robert S. Oswald James A. Ratigan Harry T. Rittenour Terryll R. Smith |
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Brokers executing proxies should indicate the number of shares with respect to which authority is conferred by this Proxy if less than all shares held as nominees are to be voted.
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PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to
withhold, as shown here:
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If no choice is specified, this proxy will be voted for the election of the Companys nominees as Directors (including the election of any person for the Board of Directors where a nominee named in the Proxy Statement is unable or, for good cause, will not serve) and for the approval of the amendment to, and performance measures under, Perceptron, Inc.s 2004 Stock Incentive Plan.
Discretionary authority is hereby conferred as to any other matters as may properly come before the Annual Meeting. The undersigned acknowledges receipt of the 2008 Annual Report, and the Proxy Statement and Notice of said meeting both dated October 3, 2008.
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of
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Signature of Shareholder |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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ANNUAL MEETING OF SHAREHOLDERS OF
PERCEPTRON, INC.
November 18, 2008
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
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Please detach along perforated line and mail in the envelope provided.
â
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111808
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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1.
ELECTION OF DIRECTORS Directors recommend a vote for the following nominees to hold office until the Annual Meeting of Shareholders in 2009.
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FOR |
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APPROVAL OF THE AMENDMENT TO, AND PERFORMANCE MEASURES UNDER, THE 2004 STOCK INCENTIVE PLAN Directors recommend the approval of the amendment to, and performance measures under, Perceptron, Inc.s 2004 Stock Incentive Plan, as described in the Notice Of Annual Meeting of Shareholders and Proxy Statement dated October 3, 2008. |
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FOR ALL NOMINEES |
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NOMINEES: |
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David J. Beattie Kenneth R. Dabrowski |
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WITHHOLD AUTHORITY FOR ALL NOMINEES
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Philip J. DeCocco W. Richard Marz |
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FOR ALL EXCEPT (See instructions below) |
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Robert S. Oswald James A. Ratigan Harry T. Rittenour Terryll R. Smith |
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Brokers executing proxies should indicate the number of shares with respect to which authority is conferred by this Proxy if less than all shares held as nominees are to be voted.
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PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to
withhold, as shown here:
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If no choice is specified, this proxy will be voted for the election of the Companys nominees as Directors (including the election of any person for the Board of Directors where a nominee named in the Proxy Statement is unable or, for good cause, will not serve) and for the approval of the amendment to, and performance measures under, Perceptron, Inc.s 2004 Stock Incentive Plan.
Discretionary authority is hereby conferred as to any other matters as may properly come before the Annual Meeting. The undersigned acknowledges receipt of the 2008 Annual Report, and the Proxy Statement and Notice of said meeting both dated October 3, 2008.
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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PERCEPTRON, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PERCEPTRON, INC.
The undersigned shareholder hereby appoints HARRY T. RITTENOUR, JOHN H. LOWRY, III and DAVID
W. GEISS, or any one of them, the attorney and proxies of the undersigned, with power of
substitution, to vote all shares of common stock of Perceptron, Inc. standing in the name of the
undersigned at the close of business on September 26, 2008 at the Annual Meeting of Shareholders
of Perceptron, Inc. to be held on Tuesday, November 18, 2008 at 9:00 a.m., local time, and at any
and all adjournments thereof, with all the powers the undersigned would possess if then and there
present.
The shareholder instructs the proxies to vote as specified on this proxy on the matters
described in the Proxy Statement dated October 3, 2008. Proxies will be voted as instructed.
ELECTRONIC ACCESS TO FUTURE DOCUMENTS
If you would like to receive future shareholder communications over the Internet exclusively, and
no longer receive any material by mail please visit http://www.amstock.com. Click on Shareholder
Account Access to enroll. Please enter your account number and tax identification number to log
in, then select Receive Company Mailings via E-Mail and provide your e-mail address.
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SEE REVERSE |
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(Continued and to be signed on the reverse side)
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