Option Repricings, Executive Bonuses--Def 14A PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS FILED 4/9/97.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or to be paid by the
Company for 1996 to the Company's Chief Executive Officer and the other four
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
-------------- ALL OTHER
ANNUAL COMPENSATION SECURITIES COMPEN-
-------------------------- UNDERLYING SATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (2) (4)
---------------------------- ------ ----------- ----------- ------------- ---------
Stephen A. Aanderud
President and CEO 1996 $135,000 $65,299 25,750 (3) $2,250
1995 120,000 20,160 10,300 1,650
1994 81,747 19,130 16,480 --
Robert D. Martin
Vice President, 1996 90,000 38,591 48,925 (3) 1,209
Strategic Planning 1995 55,208 2,650 3,605 448
G. Edward Brightman
Vice President, 1996 90,000 32,445 18,540 (3) 988
Operations 1995 80,000 9,600 10,300 1,100
1994 66,000 15,444 --
Frank Bouton
Vice President, 1996 85,000 36,770 16,480 (3) 970
New Technologies 1995 80,000 11,520 6,180 1,100
1994 66,000 15,444 -- --
Kent E. Koski
Vice President, Finance
and Administration, 1996 90,000 25,956 49,440 (3) 1,424
CFO, Secretary 1995 51,846 4,977 41,200 --
-------------------------
(1) Cash bonuses are paid to executive officers of the Company based upon
their individual contributions to the Company and the Company's overall
performance. Bonuses for a given year are paid in the first quarter of the
following year.
(2) The number of shares reflects a 3% stock dividend declared by the Board of
Directors on January 21, 1997.
(3) Includes replacement options granted upon surrender of options granted in
1995. See "Repricing of Options."
(4) Consists of the Company's matching contribution under its 401(k) plan.
8
OPTION GRANTS
The following table sets forth information with respect to grants of stock
options to the Named Executive Officers during 1996.
OPTION GRANTS IN 1996
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SHARES TOTAL EXERCISE OF STOCK PRICE
UNDERLYING OPTIONS PRICE APPRECIATION FOR OPTION
OPTIONS GRANTED TO PER TERM (5)
GRANTED EMPLOYEES SHARE EXPIRATION --------------------------
NAME (1) (2) IN YEAR (1) (4) DATE 5% 10%
--------------------- ----------- ---------- -------- ---------- ----------- -----------
Stephen A. Aanderud 10,300 (3) 3.5 $4.733 2/13/06 $ 30,659 $ 77,695
15,450 5.2 5.340 5/21/06 51,884 131,484
Robert D. Martin 3,605 (3) 1.2 4.733 2/13/06 10,731 27,193
41,200 13.8 5.097 4/25/06 132,068 334,686
4,120 1.4 5.340 5/21/06 13,836 35,062
G. Edward Brightman 10,300 (3) 3.5 4.733 2/13/06 30,659 77,695
8,240 2.8 5.340 5/21/06 27,671 70,125
Frank M. Bouton 6,180 (3) 2.1 4.733 2/13/06 18,395 46,617
10,300 3.5 5.340 5/21/06 34,589 87,656
Kent E. Koski 41,200 (3) 13.8 4.733 2/13/06 122,634 310,780
8,240 2.8 5.340 5/21/06 27,671 70,125
-------------------------
(1) The number of shares and the exercise price reflect adjustments due to a
3% stock dividend declared by the Board of Directors on January 21, 1997.
(2) Options may terminate before their expiration dates if the optionee's
status as an employee or director is terminated. One-fourth of the shares of
Common Stock covered by each such option vests and becomes exercisable on each
of the first, second, third and fourth anniversaries of the grant date.
(3) Replacement options granted upon cancellation of options granted in 1995.
See "Repricing of Options."
(4) Based on the closing prices of the Common Stock as reported on The Nasdaq
National Market on the respective grant dates.
(5) This column shows the hypothetical gains or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and 10%
over the full 10-year term of the options. The assumed rates of appreciation
are mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock prices.
9
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding the year-end
value of options held by the Named Executive Officers. No options were
exercised by the Named Executive Officers during 1996.
AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
NUMBER OF SHARES SUBJECT TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 (1) DECEMBER 31, 1996 (2)
------------------------------ -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ------------- --------------- ------------- ---------------
Stephen A. Aanderud 98,880 25,750 $661,500 $ 59,375
Robert D. Martin -- 48,925 -- 113,125
G. Edward Brightman 57,680 18,540 404,250 44,500
Frank M. Bouton -- 16,480 -- 37,750
Kent E. Koski -- 49,440 -- 127,000
-------------------------
(1) Gives effect to the 3% stock dividend declared by the Board of Directors
on January 21, 1997.
(2) Calculated based on the difference between the option exercise price and
the closing price of the Common Stock on December 31, 1996 ($7.625 per share).
The potential values have not been, and may never be, realized. The underlying
options have not been, and may never be, exercised. Actual gains, if any, on
exercise will depend on the value of the Common Stock on the date of exercise.
Repricing of Options
On February 13, 1996, the Board of Directors cancelled certain options
issued in 1995 and granted replacement options. The following table sets forth
information with respect to cancellations and replacement grants of stock
options to all executive officers since the Company's inception.
TEN-YEAR OPTION REPRICINGS
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL
UNDERLYING STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING AT
REPRICED REPRICING REPRICING PRICE DATE OF
NAME DATE (1) (1) (1) (1) REPRICING
-------------------------- --------- ------------- ----------- ------------- ----------- -----------------
Stephen A. Aanderud 2/13/96 10,300 $4.733 $8.616 $4.733 9 yrs., 3 mos.
President & CEO
Robert D. Martin
Vice President, 2/13/96 3,605 4.733 8.495 4.733 9 yrs., 1 mo.
Strategic Planning
G. Edward Brightman
Vice President, 2/13/96 10,300 4.733 8.616 4.733 9 yrs., 3 mos.
Operations
Frank M. Bouton
Vice President, New 2/13/96 6,180 4.733 8.616 4.733 9 yrs., 3 mos.
Technologies
Kent E. Koski
Vice President,
Finance and
Administration, 2/13/96 41,200 4.733 8.616 4.733 9 yrs., 3 mos.
CFO, Secretary
-------------------------
(1) The number of shares and exercise prices reflect adjustments due to a 3%
stock dividend declared by the Board of Directors on January 21, 1997.
10
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
Options granted to executive officers of the Company under the Company's
1994 Stock Option Plan are an important part of their compensation. The award
of options is intended to align the interest of the executive officers and
employees with the long-range interest of the shareholders. During the fourth
quarter of 1995, a fundamental change occurred in the market in which the
company competes due to the entrance of a significant competitor, resulting in a
substantial decline in the market value of the Company's shares. As a result,
in the opinion of the Board of Directors, the underlying value of options
granted on March 23, 1995 and May 25, 1995 no longer provided the financial
incentive originally intended. In order to reestablish the incentive, the Board
of Directors decided to offer to issue new options to replace options granted in
1995. Most, but not all, option holders accepted the offer. Replacement
options were granted on February 16, 1996 at a price equal to fair market value
on that date to all officers and employees who elected to surrender their 1995
options for cancellation.
C. Norman Winningstad, Chairman
Robert L. Carter
Fredrick M. Stevens
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION *
It is the duty of the Compensation Committee to evaluate the performance of
management, review levels of compensation, and consider related matters.
The compensation policy of the Company, which is endorsed by the
Compensation Committee, is that a substantial portion of the annual compensation
of executive officers should be contingent upon the performance of the Company
and the individual executive officer as well. As a result, a substantial
portion of an executive officer's compensation is "at risk," with annual bonus
compensation constituting a significant portion of total compensation.
The 1996 base compensation for Stephen A Aanderud, the Company's President
and Chief Executive Officer, was established in January 1996 by the Board of
Directors upon recommendation of the Compensation Committee based on the
performance of the Company and Mr. Aanderud's contribution thereto during 1995.
For purposes of determining Mr. Aanderud's annual bonus for 1996 and base
compensation for 1997, the Compensation Committee reviewed in January 1997 the
Company's 1996 operating performance. The Compensation Committee noted that
under Mr. Aanderud's leadership, the following had been achieved by the Company
during 1996: (i) revenues increased to $30,821,000, a 58.7% increase over
1995; (ii) net income increased to $2,259,000, a 66.0% increase over 1995; and
(iii) earnings per share increased to $0.49, a 53.1% increase over 1995. All of
the performance factors achieved by the Company during 1996 exceeded the initial
1996 targets established by the Company.
C. Norman Winningstad, Chairman
Robert L. Carter
Frederick M. Stevens |
