SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
TSI INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Items 22(a)(2) of Schedule A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
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TSI INCORPORATED
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
TSI INCORPORATED
-------------------------------------
To the Stockholders of TSI Incorporated:
PLEASE TAKE NOTICE that the Annual Meeting of stockholders of TSI Incorporated
will be held on Thursday, July 18, 1996, at 3:30 p.m., Central Daylight Time, at
the Corporate Offices, 500 Cardigan Road, Shoreview, Minnesota for the following
purposes:
I. To elect three directors of the Company.
II. To consider and act upon the matter of ratifying the appointment of
KPMG Peat Marwick LLP as the independent auditors of the Company for
the fiscal year ending March 31, 1997.
III. To consider and act upon the matter of adopting the Second Amended and
Restated Articles of Incorporation of the Company, which would increase
the number of authorized shares of Common Stock of the Company from
8,000,000 to 30,000,000, would revise language considering the
management of the Company to conform with current Minnesota law and
practice, and would make the language of the Articles gender neutral
and correct the Company's address.
IV. To transact such other business as may properly come before the
meeting.
Accompanying this Notice are a Proxy, Proxy Statement and a copy of the
Company's Annual Report for the fiscal year ended March 31, 1996. Whether or not
you expect to be present at the meeting, please sign and date the Proxy and
return it in the enclosed envelope provided for that purpose. The Proxy may be
revoked at any time prior to the time that it is voted. Only stockholders of
record at the close of business on May 31, 1996 will be entitled to vote at the
meeting.
By Order of the Board of Directors
Laura J. Cochrane
Secretary
June __, 1996
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TSI INCORPORATED
500 CARDIGAN ROAD
SHOREVIEW, MINNESOTA 55126
ANNUAL MEETING OF STOCKHOLDERS
JULY 18, 1996
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PROXY STATEMENT
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GENERAL
The Annual Meeting of stockholders of TSI Incorporated (the "Company") will be
held on Thursday, July 18, 1996 at 3:30 p.m., Central Daylight Time, at the
Corporate Offices, 500 Cardigan Road, Shoreview, Minnesota, for the purposes set
forth in the Notice of Annual Meeting of Stockholders.
The enclosed Proxy is solicited by the Board of Directors of the Company. Such
solicitation is being made by mail, and may also be made by directors, officers,
and regular employees of the Company personally or by telephone. Any Proxy given
pursuant to such solicitation may be revoked by the stockholder at any time
prior to the voting thereof by so notifying the Company in writing at the above
address, attention: Lowell D. Nystrom, Vice President and Treasurer, or by
appearing in person at the meeting. Shares represented by Proxies will be voted
as specified in such Proxies, and if no choice is specified, will be voted (1)
in favor of the Board of Directors' nominees named in this Proxy Statement, (2)
in favor of ratifying the appointment of KPMG Peat Marwick LLP as the
independent auditors of the Company for the current fiscal year and (3) in favor
of adopting the Second Amended and Restated Articles of Incorporation of the
Company, which would increase the number of authorized shares of Common Stock of
the Company from 8,000,000 to 30,000,000, would revise language considering the
management of the Company to conform with current Minnesota law and practice,
and would make the language of the Articles gender neutral and correct the
Company's address (see Exhibit A). Abstentions will be treated as shares present
for purposes of determining the presence of a quorum but as unvoted for purposes
of determining the approval of a matter submitted to the stockholders for a
vote. If a broker indicates on a Proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
shall not be considered as present and entitled to vote with respect to that
matter.
Common Stock, $.10 par value ("Common Stock"), of which there were ____________
shares outstanding on the record date, constitutes the only class of outstanding
voting securities issued by the Company. Each stockholder will be entitled to
cast one vote in person or by proxy for each share of Common Stock held by the
stockholder. Only stockholders of record at the close of business on May 31,
1996, will be entitled to vote at the meeting.
All of the expenses involved in preparing, assembling and mailing this Proxy
Statement and the material enclosed herewith will be paid by the Company. The
Company may reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners of stock. This Proxy Statement and accompanying form of
Proxy are being mailed to stockholders on or about June 24, 1996.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation establish the maximum number of
directors at nine and provide that the exact number of directors shall be
established by resolution by a majority of the entire Board of Directors. The
Board of Directors has adopted a resolution establishing the number of directors
at eight. There are presently eight directors serving on the Company's Board of
Directors.
All directors of the Company serve for a term of three years or until their
successors are elected and qualified. The three-year terms are staggered. The
terms of office of Leroy M. Fingerson and Donald M. Sullivan expire upon the
election of directors at the 1998 Annual Meeting of Stockholders; the terms of
office of Frank D. Dorman, Kenneth J. Roering and Lawrence J. Whalen expire upon
the election of the directors at the 1997 Annual Meeting of stockholders; and
the terms of office of John F. Carlson, Lowell D. Nystrom and James E. Doubles
expire upon the election of the directors at the 1996 Annual Meeting of
stockholders scheduled for July 18, 1996.
The Board of Directors recommends that Messrs. Carlson, Nystrom and Doubles be
re-elected to serve as directors of the Company, each for a term expiring at the
Annual Meeting of stockholders in 1999. Unless otherwise specified, proxies
solicited by the Board of Directors will be voted FOR the election of Messrs.
Carlson, Nystrom and Doubles as directors.
The election of each nominee requires the affirmative vote of the stockholders
holding at least a majority of Common Stock voting in person or by proxy at the
Annual Meeting. Although the Board of Directors has no reason to believe that
Mr. Carlson, Mr. Nystrom or Mr. Doubles will be unable to serve as a director,
if that contingency should occur, it is intended that the shares represented by
the proxies will be voted, in the absence of contrary indication, for any
substitute nominee designated by the Board of Directors, unless the Board
determines to reduce its size appropriately.
NAME, AGE,
AND POSITIONS DIRECTOR PRINCIPAL OCCUPATION AND TERM OF
WITH THE COMPANY SINCE CERTAIN OTHER DIRECTORSHIPS DIRECTOR*
- ---------------------------- ------------- ---------------------------------------------------------- --------------
Leroy M. Fingerson--63, 1961 Chief Executive Officer of the Company since 1961 and 1998
Chairman, Chief Executive Chairman of the Company since 1986. President of the
Officer and a Director Company from 1961 to July, 1992.
Lowell D. Nystrom--60, Vice 1961 Vice President, Treasurer and Chief Financial Officer of 1999
President, Chief Financial the Company since 1961.
Officer, Treasurer and a
Director
Frank D. Dorman--61, 1961 Part-time employee of the Company, part-time Scientist, 1997
part-time employee and a University of Minnesota and Consultant--
Director Biomedicus-Medtronics for more than five years.
Donald M. Sullivan--60, 1977 President and Chief Executive Officer of MTS Systems 1998
Director Corporation, a manufacturer of factory automation and
testing equipment. Mr. Sullivan has been an officer of
MTS Systems Corporation for more than five years.
Mr. Sullivan is a director of MTS Systems Corporation and
ADC Telecommunications, Inc.
Lawrence J. Whalen--61, 1983 Retired. Mr. Whalen was Chief Executive Officer of 1997
Director Minneapolis Children's Medical Center, a tertiary care
pediatric hospital, from March, 1992 to June, 1994. From
April, 1991, to March, 1992, Management Consultant
specializing in medical products and high technology
businesses. From May, 1990, through April, 1991, Mr.
Whalen was Chief Executive Officer and Chairman of
Cascade Medical, Inc., a manufacturer of blood glucose
monitoring systems.
John F. Carlson--57, 1987 Self-employed. Mr. Carlson was Chairman and CEO of Cray 1999
Director Research, Inc. from 1993 to May, 1995, and an officer
and director of Cray Research, Inc., for more than five
years through May, 1995.
Kenneth J. Roering--54, 1987 Paul S. Gerot Chair in Marketing, Professor of Marketing 1997
Director in the Carlson School of Management at the University of
Minnesota for more than five years. Mr. Roering is a
director of Aretco Inc., Mountain Parks Financial
Corporation, Sheldahl Inc., and Transport Corporation of
America.
James E. Doubles--55, 1990 President and Chief Operating Officer of the Company 1999
President, Chief Operating since July, 1992; Executive Vice President and Chief
Officer and a Director Operating Officer of the Company from April, 1989 until
July, 1992.
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* Assuming the Reelection or Election of the Board's Nominees
John F. Carlson and Lawrence J. Whalen are members of the Board of Directors'
Audit Committee. Donald M. Sullivan is an alternate member of the Audit
Committee. During fiscal 1996, this Committee met two times. The functions of
the Audit Committee include recommending to the Board of Directors, subject to
stockholder approval, the independent auditors; reviewing the results of the
annual audit; reviewing the adequacy of accounting and financial controls; and
instructing the auditors, as deemed appropriate, to undertake special
assignments.
John F. Carlson, Kenneth J. Roering, Donald M. Sullivan and Lawrence J. Whalen
are members of the Committee of Outside Directors. During fiscal 1996, this
Committee met two times. The Committee of Outside Directors reviews and
recommends to the Board of Directors salaries and incentive compensation plans
for senior management. The Company's Stock Option Plan of 1992 in which employee
directors participate is also administered by the Committee of Outside
Directors.
During fiscal 1996, the Board of Directors of the Company met seven times.
During this period all directors except Lawrence J. Whalen attended 75% or more
of the aggregate of the total number of meetings of the Board of Directors and
all committees of the Board of Directors on which they served. Mr. Whalen
attended five of the seven board meetings and all of the meetings of committees
on which he serves. The Board of Directors does not have a nominating committee.
EXECUTIVE COMPENSATION
The following table shows, on an accrual basis, the aggregate compensation
received from the Company and its subsidiaries for the fiscal years ended March
31, 1996, 1995 and 1994, by each person who was an executive officer of the
Company (a total of three people) and whose total remuneration for fiscal 1996
exceeded $100,000:
TABLE OF SUMMARY COMPENSATION(1)
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------- ------------------------
Awards
------------------------
Number of Shares
Name and Underlying Stock All Other Compensation
Principal Position Year Salary ($) Options Granted ($)(2)
- --------------------------- -------------- ------------------------- --- ------------------------ ------------------------
Leroy M. Fingerson, 1996 208,549 3,678 9,867
Chairman & CEO 1995 198,009 2,544 9,814
1994 189,005 12,596 9,272
James E. Doubles, 1996 179,635 9,207 9,683
President & COO 1995 171,591 2,218 9,750
1994 164,803 3,135 8,326
Lowell D. Nystrom, Vice 1996 161,075 2,877 9,423
President & CFO 1995 154,234 1,990 9,448
1994 147,849 11,813 7,721
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1 No other annual compensation was paid, no restricted stock was awarded and
no payouts were made under any long term incentive compensation plan.
2 During fiscal 1996, the Company maintained a 401(k) profit sharing plan
(the TSI Incorporated Employee Retirement and Profit Sharing Plan) for
which substantially all regular employees of the Company and certain of its
subsidiaries who have been employed for at least one year are eligible.
Employees may make salary reduction contributions to the plan in accordance
with Section 401(k) of the Internal Revenue Code. For fiscal 1996, the
Company matched 50 percent of such contributions up to 3 percent of such
employee's compensation and 25 percent of such contributions over 3 percent
but not greater than 6 percent of such employee's compensation. In
addition, the Company makes annual profit-sharing contributions to the plan
as determined by the Board of Directors of the Company. For fiscal 1996,
the Company made a profit-sharing (retirement) contribution equal to 4
percent of compensation paid to all eligible employees. In total, for
fiscal 1996, the Company contributed $934,155 to the TSI Incorporated
Employee Retirement and Profit Sharing Plan, of which $527,781 was
contributed as the 4 percent of eligible compensation and $406,374 was
contributed as matching funds for salary reduction contributions by
employees. For fiscal 1996, the Company's profit-sharing and matching
contributions to the plan for Dr. Fingerson, Mr. Doubles and Mr. Nystrom,
were $9,867, $9,683, and $9,423, respectively.
(The Company also made payments of $684,669 for fiscal 1996 under the TSI
Cash Bonus Program based on a formula adopted by the Board of Directors
which specifies an amount equal to 15 percent of the pretax operating
earnings above 12 percent of non-cash assets employed, paid to all eligible
employees except executive officers and division managers who are eligible
to participate in the Management Performance Stock Option Plan.)
TABLE OF OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation For Option
Individual Grants Term(4)
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Number of Shares % of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted Fiscal Year ($/Sh)(3) Date 5% ($) 10% ($)
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Leroy M. 3,678(1) 3.1 17.25 Apr 5, 2003 25,829 60,192
Fingerson
James E. 6,000(2) 5.1 16.75 Jan 26, 2003 40,914 95,346
Doubles 3,207(1) 2.7 17.25 Apr 5, 2003 22,521 52,484
Lowell D. 2,877(1) 2.4 17.25 Apr 5, 2003 20,204 47,083
Nystrom
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1 Referenced options are grants of Management Performance Options which are
made after the Company's financial results for the fiscal year are
available, but relate to performance in the fiscal year to which this table
relates and are, therefore, disclosed herein. Such options are immediately
exercisable and were granted pursuant to the Management Performance Option
Plan under the Stock Option Plan of 1992.
2 Options were granted under the Stock Option Plan of 1992 with an exercise
price equal to the market price on the date of grant and become exercisable
in 331/3 percent annual installments commencing one year from the date of
grant.
3 The number, kind, and price of the shares subject to each outstanding
option will be proportionately and appropriately adjusted in the event of
any stock dividend, stock split, recapitalization, reclassification, or
similar change in the Company's outstanding securities.
4 Based on actual option term and annual compounding.
TABLE OF OPTION EXERCISES AND YEAR-END VALUE
Aggregated Options Exercises in Last Fiscal Year, and Year-End Option Value(1)
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at Fiscal Year End(1) at Fiscal Year End(2)
----------------------------------------- --------------------------------
Shares
Acquired Value Exercisable Unexercisable Exercisable Unexercisable
Name on Exercise (#) Realized ($) (#) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
Leroy M. 9,000 89,786 14,240 3,000 135,284 27,501
Fingerson
James E. 13,500 83,633 14,385 7,800 145,606 24,900
Doubles
Lowell D. 13,500 167,664 12,446 3,000 117,806 27,501
Nystrom
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1 Does not include Management Performance Options granted as of April 5,
1996, to the named executives based on their performance during fiscal
1996.
2 Represents the difference between the midpoint between the high and low
reported trades on the NASDAQ National Market System of the Company's
Common Stock on March 31, 1996, ($17.75), and the exercise price of the
options.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan of 1994 provides for the offering of
Common Stock of the Company to employees of the Company and certain of its
subsidiaries under the Plan at a price lower than current market price (not less
than 85 percent of the lesser of the fair market value of the Company's Common
Stock on the date the option is granted or on the date the option is exercised),
and provides for purchase of such shares through payroll deduction. During
fiscal 1996, stock options for an aggregate of 52,506 shares of Common Stock of
the Company were granted under this plan. During fiscal 1996, Mr. Doubles was
the only executive officer who participated in the plan. Mr. Doubles was granted
a stock option for 1,400 shares that has not yet been exercised.
DIRECTOR COMPENSATION
Each director who is not also an employee of the Company currently receives cash
compensation at a rate of $12,000 per year for serving on the Board. Under the
Company's Stock Option Plan of 1992, directors who are not employees of the
Company annually receive a non-statutory option, granted on the date of the
Company's annual meeting, to purchase 1,500 shares of Common Stock at the fair
market value at the date of the Company's Annual Meeting. During fiscal 1996,
the outside directors, Messrs. Sullivan, Whalen, Carlson, and Roering, were each
granted options to purchase 1,500 shares of Common Stock at an exercise price of
$9.56 per share.
REPORT OF THE COMMITTEE OF OUTSIDE DIRECTORS
The Committee of Outside Directors recommends to the Board the salary levels,
benefit programs and incentive compensation plans of all executive officers.
Committee members consist of the four outside board members.
To maintain a consistent philosophy of compensation throughout the Company,
almost all compensation programs apply to all employees of the Company. This is
based on the philosophy that Company success is based on the coordinated efforts
of all employees. As explained below, the only difference for executive officers
is that they do not participate in the profit sharing bonus. Instead, they have
a performance stock option program that provides rewards based on growth and
profitability.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with business
objectives and performance, and to enable the Company to attract, retain, and
reward employees who contribute to the long term success of the Company. The
Company's compensation program for executive officers is based on the same three
principles applicable to compensation decisions for all employees of the
Company:
THE COMPANY PAYS COMPETITIVELY.
The Company is committed to providing a pay program that helps attract and
retain the best people in the industry. To ensure that pay is competitive,
the Company regularly compares its pay practices with those of other
comparable companies and sets its pay parameters based on this review.
THE COMPANY PAYS FOR PERFORMANCE.
The performance based stock option program rewards executive officers based
on corporate growth and profitability. In addition to comparing salaries
with those of other comparable companies, salary levels are established by
considering corporate performance and individual factors that take into
account management effectiveness in areas not directly related to financial
performance.
THE COMPANY STRIVES FOR FAIRNESS IN THE ADMINISTRATION OF PAY.
The Company applies its compensation philosophy worldwide. The Company
strives to achieve a balance of the compensation paid to a particular
executive and the compensation paid to other executives both inside the
Company and at comparable companies.
COMPENSATION VEHICLES
The Company's compensation program includes cash and equity-based compensation.
It has permitted the Company to successfully attract and retain key employees,
the result being the ability to provide useful products and services to our
customers, to enhance shareholder value, to motivate technical innovation, to
foster teamwork, and to adequately reward employees.
LIMITS ON DEDUCTIBLE COMPENSATION PAYABLE TO EXECUTIVE OFFICERS
The Omnibus Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code of 1986, as amended (the "Code") limiting corporate deductions to
$1,000,000 for certain compensation paid to the chief executive officer and each
of the four other most highly compensated executives of publicly held companies.
The Company does not believe it will pay "compensation" within the meaning of
Section 162(m) to such executive officers in excess of $1,000,000 in the
foreseeable future. Therefore, the Company does not have a policy at this time
regarding qualifying compensation paid to its executive officers for
deductibility under Section 162(m), but will formulate a policy if compensation
levels ever approach $1,000,000.
CASH BASED COMPENSATION
SALARY
The Company sets base salary for all employees, including executive
officers, by considering the responsibilities of each position and
reviewing performance. Salaries are surveyed and compared with the
mid-ranges of the aggregate of base salary and annual bonus for competitive
positions in the market.
PROFIT SHARING/RETIREMENT
The Company provides an annual retirement contribution of four percent of
credited compensation for all employees, including executive officers, or
100 percent of the Company's pre-tax income for the fiscal year, whichever
is less. In addition, the Company provides matching contributions of 50
percent of employee salary reduction contributions up to 3 percent of such
employee's compensation and 25 percent of such contributions over 3 percent
but not greater than 6 percent of such employee's compensation.
EQUITY-BASED COMPENSATION
INCENTIVE STOCK OPTION PROGRAM
Approximately 15 percent of the Company's employees, including executive
officers, have incentive stock options, the number depending on
responsibility level and years of service. This program grants options each
year totaling about 1 percent of the outstanding stock.
MANAGEMENT PERFORMANCE STOCK OPTION PROGRAM
Executive officers participate in a Management Performance Stock Option
program. The number of shares available is based on the size of the Company
and the return on equity.
The intent of this program is to provide executive officers with a
consistent long-term incentive program where the reward depends both on the
performance of the Company for the current year (number of shares) and the
future performance of the Company (growth in value of shares). Under this
plan the number of shares available for executive officers depends on the
total sales level of the Company and the return on equity achieved for each
fiscal year. Granting of option shares begins at a level of 10 percent
return on equity and reaches a maximum at 25 percent return on equity. For
fiscal 1996, at a total sales level of $69.2 million, a maximum of 16,195
shares would have been available to grant to executive officers. Because
the actual average return on equity was 19.0 percent, the actual option
shares granted to executive officers was 9,762 shares.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
At a given date each year all employees who own less than 5 percent of the
Company's outstanding stock can set aside a certain percentage of their
salary for purchase of Company stock under a qualified Employee Stock
Purchase Plan. Twelve months later, the employee can use the money set
aside to purchase Company stock at 15 percent less than the market price at
the beginning of the year or at the end of the year, whichever is less.
Only one of the three executive officers was eligible to participate in
this plan in fiscal 1996.
RATIONALE FOR CEO COMPENSATION
Dr. Leroy M. Fingerson has been CEO of the Company since its founding in 1961.
Dr. Fingerson has substantial holdings in Company stock, aligning his interests
very closely with those of the shareholders. His base compensation is determined
using comparisons to industry data and he participates in exactly the same plans
as other key executives. The committee reviews the mid-ranges of executive
compensation survey data, current and historical Company performance and
establishes a base salary that is considered fair and equitable. His
participation in the Management Performance Stock Option Program provides
incentive compensation tied to Company performance that emphasizes long-term
growth of shareholder value. For fiscal 1996, Dr. Fingerson was granted stock
options for 3,678 shares of Company stock under this plan. A maximum of 6,101
shares could have been granted to him if return on investment had reached 25
percent.
COMMITTEE OF OUTSIDE DIRECTORS
Kenneth J. Roering, Chair
John F. Carlson
Donald M. Sullivan
Lawrence J. Whalen
STOCK PRICE PERFORMANCE GRAPH
Set forth on page nine is a line graph comparing the yearly percentage change in
the cumulative total shareholder's return on the Company's Common Stock with the
cumulative total return on the NASDAQ Stock Market (U.S.) and a Peer Group Index
for the period of five fiscal years starting April 1, 1991 and ending March 31,
1996. The Peer Group Index includes all the NASDAQ U.S. companies referenced
under the three digit SIC code number 382, Laboratory and Analytical
Instruments. A total of 114 companies fell into this category during the five
year period ended March 31, 1996, with 84 of these companies still active on
March 31, 1996. This Peer Group Index was selected by the Company because it
includes many similar companies engaged in comparable markets. Calculations and
preparation of index data were done for the Company by the Center for Research
in Securities Prices (CRSP) at the University of Chicago, using market value
weighted stock prices and assuming dividend reinvestments over the five year
period, as required by the Securities and Exchange Commission. The graph also
shows the appropriate broad market index, which is the NASDAQ Stock Market
(U.S.), as prepared by CRSP.
Comparison of Five Year-cumulative Total Returns
Performance Graph for
TSI INCORPORATED
Prepared by the Center for Research in Security Prices
Produced on 04/24/96 including data to 03/29/96
[GRAPHIC OMITTED]
LEGEND
CRSP Total Returns Index for: 03/28/91 03/31/92 03/31/93 03/31/94 03/31/95 03/29/96
TSI INCORPORATED 100.0 82.3 75.3 106.2 117.8 231.8
Nasdaq Stock Market (US Companies) 100.0 127.5 146.5 158.1 175.9 238.9
NASDAQ Stocks (SIC 3820-3829 US Companies) 100.0 120.1 111.4 125.2 153.6 199.6
Lab apparatus & Analyt, Opt, Measuring, & Controlling Instr
NOTES:
A. The lines represent annual index levels derived from compounded daily returns
that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the annual interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 03/28/91.
PRINCIPAL SHAREHOLDERS
Information as to the name and holdings of each person known by the Company to
be the beneficial owner of more than 5% of its Common Stock as of May 31, 1996,
each director of the Company, each of the Company's executive officers named in
the Summary Compensation table in the Proxy Statement, and all executive
officers and directors of the Company as a group, is set forth below. Except as
indicated below, the Company believes that each of such persons has the sole (or
joint with spouse) voting and investment powers with respect to such shares:
Name and Address Amount of Common Percent
Title of Class of Beneficial Owner Stock Beneficially Owned of Class
- ----------------------------- ------------------------------- -------------------------------- ---------------------
Common Stock First Bank System, Inc. 593,300 _____
601 Second Ave. South
Minneapolis, MN 55402
Common Stock Leroy M. Fingerson 374,838(1) _____
500 Cardigan Road
Shoreview, MN 55126
Common Stock Lowell D. Nystrom 340,790(2) _____
500 Cardigan Road
Shoreview, MN 55126
Common Stock Frank D. Dorman 241,968(3) _____
301 Burntside Drive
Minneapolis, MN 55422
Common Stock James E. Doubles 50,685(4) _____
Common Stock Donald M. Sullivan 17,250(5) _____
Common Stock Kenneth J. Roering 13,875(5) _____
Common Stock Lawrence J. Whalen 12,750(5) _____
Common Stock John F. Carlson 10,500(5) _____
Common Stock All directors and executive 1,062,65(6) _____
officers as a group (8 persons)
- ---------------
1 Includes 14,240 shares of Common Stock which Dr. Fingerson has the right to
acquire by the exercise of stock options he holds under the Stock Option
Plan of 1992.
2 Includes 12,446 shares of Common Stock which Mr. Nystrom has the right to
acquire by the exercise of stock options he holds under the Stock Option
Plan of 1992.
3 Includes 3,000 shares of Common Stock which Mr. Dorman has the right to
acquire by the exercise of stock options he holds under the Stock Option
Plan of 1992.
4 Includes 14,385 shares of Common Stock which Mr. Doubles has the right to
acquire by the exercise of stock options he holds under the Stock Option
Plan of 1988 and the Stock Option Plan of 1992.
5 Includes 6,000 shares of common stock that each outside director has
options to acquire under the Stock Option Plan of 1992.
6 Includes 68,071 shares of Common Stock subject to stock options which are
exercisable within 60 days of the date of this Proxy Statement.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are also required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended March 31, 1996 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with.
AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP, who served as
independent auditors of the Company for the fiscal year ended March 31, 1996, as
independent auditors of the Company for the fiscal year ending March 31, 1997,
it being intended that such appointment would be presented for ratification to
the stockholders. In the event the stockholders do not ratify the appointment of
KPMG Peat Marwick LLP, the selection of other independent auditors will be
considered by the Board of Directors. The Board of Directors recommends that the
stockholders vote FOR ratification of the appointment of KPMG Peat Marwick LLP.
The affirmative vote of stockholders holding at least a majority of Common Stock
voting in person or by proxy at the Annual Meeting is necessary for approval.
Unless otherwise specified, proxies solicited by the Board of Directors will be
voted FOR ratification of the appointment of KPMG Peat Marwick LLP. A
representative of KPMG Peat Marwick LLP, who will have an opportunity to make a
statement if he or she so desires, will be present at the meeting and will be
available to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders of the Company intended to be presented at the
Company's next Annual Meeting of stockholders must be received by Lowell D.
Nystrom, Vice President of the Company, at the above address no later than
February 22, 1997, in order for any such proposals to be considered for
inclusion in the Company's Proxy Statement and form of Proxy relating to that
meeting.
ADOPTION OF SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
GENERAL
The Board of Directors has approved, and recommends that the shareholders adopt,
Second Amended and Restated Articles of Incorporation of the Company in the form
attached to this Proxy Statement as Appendix A (the "Second Amended and Restated
Articles"). The Second Amended and Restated Articles increase the number of
shares of Common Stock that the Company is authorized to issue from 8,000,000 to
30,000,000, incorporate gender neutral language, correct the address of the
Company's registered office, and clarify the provision relating to the
management of the Company by incorporating the current statutory language.
INCREASE IN NUMBER OF SHARES AUTHORIZED
The Board of Directors believes that additional shares of Common Stock should be
available for issuance by the Board of Directors from time to time for proper
corporate purposes. The Company is currently authorized to issue up to 8,000,000
shares of Common Stock. As of March 30, 1996, there were 5,590,828 shares issued
and outstanding and an additional 739,583 shares were reserved for issuance in
connection with the Company employee benefit plans. The Second Amended and
Restated Articles would increase the number of authorized shares of Common Stock
to 30,000,000 shares.
The newly authorized shares of Common Stock will be issuable from time to time
by action of the Board of Directors for any proper corporate purpose, without
shareholder approval unless required by applicable law. These purposes include
financings, payment of stock dividends, subdivision of outstanding shares
through stock splits, employee stock options or bonuses, and corporate
acquisitions. Issuance of additional shares could have the effect, of course, of
diluting the percentage voting power of existing shareholders and, depending on
the consideration for which the shares were issued, could dilute earnings per
share. At the present time, the Company has no plans to issue the newly
authorized shares for any new financings.
The staff of the SEC's Division of Corporation Finance has taken the position
that a proposal to increase the amount of authorized capital stock could be
viewed to have an anti-takeover effect and requires companies to discuss certain
matters in connection with such proposals. The proposed amendment to the
Articles to increase the number of authorized shares of the Common Stock is not
intended to be an anti-takeover proposal. It was not prompted by an effort by
anyone to gain control of the Company, and the Company is not aware of any such
attempt.
If utilized by the Board of Directors as an anti-takeover measure, the
additional authorized shares could be issued to make more difficult, and thus
discourage, any attempt to change control of the Company through a tender offer
or other transaction if the Board were to determine that such an attempt was not
in the best interests of the Company. For example, additional shares of the
Common Stock could be sold in private placement transactions to persons, groups
or entities considered by the Board to support, or willing to agree to vote to
support, the Board's careful deliberation of any proposal in the best interests
of the Company and all of its shareholders, thereby diluting the voting strength
of any person or entity seeking to obtain control of the Company. The additional
shares authorized by the amendment would augment the Board's ability to issue
existing authorized but unissued shares of the Common Stock.
CLARIFYING THE MANAGEMENT PROVISION
The Company's Articles of Incorporation currently state that "the management of
this corporation shall be vested in a Board of Directors . . . ." The Minnesota
Business Corporations Act provides that "The business and affairs of a
corporation shall be managed by or under the direction of a board, . . . ." In
practice, the Company's officers manage the day to day affairs of the Company
under the direction of the Board. The Board, therefore, believes that the
Articles of Incorporation should be amended to include the statutory language
and to reflect current practice. The Second Amended and Restated Articles
reflect this change to Article VIII.
CERTAIN OTHER AMENDMENTS
In addition to the amendments set forth above, the Second Amended and Restated
Articles make the references in the Articles of Incorporation gender neutral and
correct the address of the registered office of the Company.
VOTE REQUIRED
The affirmative vote of the holders of at least 75% of the issued and
outstanding shares of Common Stock is required to approve the Second Amended and
Restated Articles. Abstentions and broker non-voted will not be counted as votes
cast on this matter. The Board of Directors recommends that the Second Amended
and Restated Articles be adopted. Unless otherwise specified, all proxies
solicited by the Board of Directors will be voted FOR adoption of the Second
Amended and Restated Articles.
OTHER MATTERS
The Board of Directors does not intend to bring before the meeting any business
other than as set forth in this Proxy Statement and has not been informed that
any other business is to be presented to the meeting. However, if any matters
other than those referred to above should properly come before the meeting, it
is the intention of the persons named in the enclosed Proxy to vote such Proxy
in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy in the envelope provided. The
signing of a Proxy will not prevent your attending the meeting and voting in
person.
By Order of the Board of Directors
Laura J. Cochrane
Secretary
June __, 1996
- --------------------------------------------------------------------------------
EXHIBIT A
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TSI INCORPORATED
ARTICLE I
The name of this corporation is TSI Incorporated.
ARTICLE II
This corporation has been formed for general business purposes.
ARTICLE III
The corporation shall have all of the powers granted or available under
the laws of the State of Minnesota and laws amendatory thereof and supplementary
thereto, including but not limited to the following:
1. The power to acquire, own, pledge, dispose of and deal in shares of
capital stock, rights, bonds, debentures, notes, trust receipts and other
securities, obligations, chooses in action and evidences of indebtedness or
interest issued or created by any corporation (including this corporation),
associations, firms, trusts or persons, public or private, or by the government
of the United States of America, or by any foreign government or by any state,
territory, province, municipality or other political subdivision or by any
governmental agency, domestic or foreign, and as owner thereof to possess and
exercise all the rights, powers and privileges of ownership, including the right
to execute consents and vote thereon and to do any and all acts and things
necessary or advisable for the preservation, protection, improvement and
enhancement in value thereof.
2. The power to aid in any manner any corporation, association, firm or
individual, any of whose securities, evidences of indebtedness, obligations or
stock are held by the corporation directly or indirectly, or in which, or in the
welfare of which, the corporation shall have any interest, and to guarantee
securities, evidences of indebtedness and obligations of other persons, firms,
associations and corporations.
3. The power to carry out all or any part of the purposes of this
corporation as principal or agent, or in conjunction, or as a partner or member
of a partnership, syndicate or joint venture or otherwise, and in any part of
the world to the same extent and as fully as natural persons might or could do.
ARTICLE IV
The duration of the corporation shall be perpetual.
ARTICLE V
The location and post office address of this corporation's registered
office in this state shall be 500 Cardigan Road, Shoreview, Minnesota
55126-3996.
ARTICLE VI
The minimum amount of stated capital of this corporation shall not be
less than One Thousand Dollars ($1,000.00).
ARTICLE VII
The total authorized capital stock of this corporation shall consist of
forty million (30,000,000) shares of common stock of the par value of ten cents
($.10) per share. Each holder of shares of common stock shall, at every meeting
of shareholders, be entitled to one vote in person or by proxy for each share of
stock held by such shareholder. All shares of common stock shall be equal in
every respect.
There shall be no cumulative voting. The shareholders of this
corporation shall have no pre-emptive or preferential rights to subscribe for or
purchase or receive any part of any unissued stock or securities of the
corporation, whether nor or hereafter authorized, or by any stock or securities
issued and thereafter acquired by this corporation.
ARTICLE VIII
The business and affairs of this corporation shall be managed by or
under the direction of a Board of Directors consisting of not more than nine (9)
persons. The exact number of directors within the maximum limitation specified
in the preceding sentence shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the entire Board of
Directors, but no decrease in the number of directors shall change the term of
any director at the time thereof. The Board of Directors shall be divided into
three classes, as nearly equal in number of directors as possible, as determined
by the Board of Directors. Each class shall be elected for a term expiring at
the annual meeting of shareholders held in the third successive year thereafter;
provided, however, that at the 1986 annual meeting of shareholders one class
shall be elected for a term expiring at the 1987 annual meeting of shareholders,
one class for a term expiring at the 1988 annual meeting of shareholders, and
one class for a term expiring at the 1989 annual meeting of shareholders. Each
director shall continue in office until the annual meeting of shareholders in
the year which his or her term expires and thereafter until his or her successor
is duly elected and qualified, unless a prior vacancy shall occur by reason of
his or her death, resignation or removal from office.
Newly created directorships resulting from any increase in the
authorized number of directors and any vacancies in the Board of Directors may
be filled (a) by the affirmative vote of a majority of the directors then in
office, even though less than a quorum, or (b) by the affirmative vote of the
holders of a majority of the shares present and entitled to vote for the
election of directors. Directors so chosen by the Board of Directors or the
shareholders to fill a vacancy or newly created directorship shall hold office
for a term expiring at the annual meeting of shareholders at which the term of
the class to which they have been appointed or elected expires.
Any director, or the entire Board of Directors, may be removed from
office at any time, with or without cause, but only by the affirmative vote of
the holders of at least 75% of the voting power of all of the shares of this
corporation entitled to vote for the election of directors.
The affirmative vote of the holders of at least 75% of the voting power
of all of the shares of this corporation entitled to vote for the election of
directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article VIII.
ARTICLE IX
The authority to make and alter the By-Laws of this corporation is
hereby vested in the Board of Directors of this corporation to the full extent
permitted by law, subject, however, to the power of the shareholders of this
corporation to repeal or alter such By-Laws.
Authority is hereby conferred upon and vested in the Board of Directors
of this corporation to accept or reject subscriptions for shares of its capital
stock, whether such subscriptions be made before or after its incorporation. The
Board of Directors shall have the authority to issue shares of stock and
securities of the corporation to the full amount authorized by these Articles of
Incorporation, and shall have the authority to grant and issue rights to convert
securities of the corporation into shares of stock of the corporation, options
to purchase shares or securities convertible into shares, warrants, and other
such rights or options, and to fix the terms, provisions and conditions of such
rights, options and warrants, including the option price or prices at which
shares may be purchased or subscribed for and the conversion basis or bases of
such rights, options and warrants.
ARTICLE X
Except as provided in Article VIII and Article XI of the Articles of
Incorporation, the shareholders of this corporation may, by a majority vote of
all shares issued, outstanding and entitled to vote:
1. Authorize the Board of Directors to sell, lease, exchange
or otherwise dispose of all, or substantially all, of its property and
assets, including its goodwill, upon such terms and conditions and for
such considerations, which may be money, shares, bonds, or other
instruments for the payment of money or other property, as the Board of
Directors deems expedient and in the best interests of the corporation;
2. Amend the Articles of Incorporation of this corporation for
any reason or lawful purpose, and in the event that any such amendment
adversely affects the rights of holders of shares of different classes,
the affirmative vote of a majority of each such class shall be
sufficient to adopt the amendment; and
3. Adopt and approve an agreement of merger or consolidation
presented to them by the Board of Directors.
ARTICLE XI
A. In addition to the requirements of any applicable statute, the
affirmative vote of shareholders holding not less than 75% of the outstanding
shares of "Voting Stock" (as hereinafter defined) shall be required for the
approval of any "Business Combination" (as hereinafter defined) involving this
corporation and for the approval or authorization by this corporation, in its
capacity as a shareholder, of any Business Combination involving a subsidiary of
this corporation which requires the approval or authorization of the
shareholders of the subsidiary, provided, however, that the 75% voting
requirement shall not be applicable if:
1. A majority of all of the "Continuing Directors" (as
hereinafter defined) by vote have expressly approved the Business
Combination; or
2. The Business Combination is a merger, consolidation,
exchange of shares or sale of all or substantially all of the assets of
this corporation and the cash to be received per share in the Business
Combination by holders of the common stock of this corporation (other
than the "Related Person", as hereinafter defined) is not less than the
highest per share price (including brokerage commissions, transfer
taxes, soliciting dealers' fees and dealer-management compensation)
paid by the Related Person in acquiring any of its holdings of this
corporation's common stock (with appropriate adjustments for
recapitalizations, stock splits, stock dividends and other changes to
the corporation's capital structure).
B. For purposes of this Article XI.
1. The term "Business Combination" shall mean:
(a) any merger or consolidation of this corporation
or a subsidiary of this corporation with or into a Related
Person;
(b) any sale, lease, exchange, transfer or other
disposition (in one transaction or in series of related
transactions), including, without limitation, a mortgage or
any other security device, of all or any "Substantial Part"
(as hereinafter defined) of the assets of this corporation
(including, without limitation, any voting securities of a
subsidiary of this corporation) or a subsidiary of this
corporation to a Related Person;
(c) any sale, lease, exchange, transfer or other
disposition (in one transaction or in a series of related
transactions) of all or any Substantial Part of the assets of
a Related Person to this corporation or a subsidiary of this
corporation;
(d) any issuance, sale, exchange, transfer or other
disposition of any securities of this corporation or a
subsidiary of this corporation to a Related Person (except
common stock issuable pursuant to the exercise of employee
options to purchase, for each employee, during any
twelve-month period, not more than one percent of the common
stock outstanding during such period), including without
limitation, any exchange of shares of this corporation or a
subsidiary of this corporation for shares of a Related Person
which, in the absence of this Article, would have required the
affirmative vote of at least a majority of the voting power of
the outstanding shares of this corporation entitled to vote or
the affirmative vote of this corporation in its capacity as a
shareholder of the subsidiary;
(e) any acquisition by this corporation or a
subsidiary of this corporation of any securities of a Related
Person or any securities of this corporation or a subsidiary
of this corporation from a Related Person;
(f) any recapitalization or reclassification of the
securities of this corporation or a subsidiary of this
corporation which would have the effect of increasing the
voting power of the Related Person;
(g) any plan or proposal for the liquidation of this
corporation proposed by or on behalf of a Related Person; and
(h) any agreement, contract or other arrangement
providing for any of the transactions described in this
definition of Business Combination.
2. The term "Related Person" shall mean and include any
"Person" (as hereinafter defined) which, together with its "Affiliates"
and "Associates" (as hereinafter defined), beneficially owns in the
aggregate 20% or more of the voting power of the Voting Stock, and any
Affiliate or Associate of any such Person. Beneficial ownership shall
be determined under Rule 13d-3 of the Securities Exchange Act of 1934,
as amended, as in effect on June 27, 1986; provided, however, a Person
shall also be deemed to be the beneficial owner of (a) any shares of
Voting Stock which such Person or any of its Affiliates or Associates
has the right to acquire at any time pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights,
warrants or options or otherwise, and (b) any shares of Voting Stock
beneficially owned by any other Person with which such Person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of the shares of Voting Stock.
3. The term "Person" shall mean any individual, corporation,
partnership or other person or entity.
4. The term "Affiliate", used to indicate a relationship to a
specified person, shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, such specified person.
5. The term "Associate", used to indicate a relationship with
a specified person, shall mean (a) any corporation or organization
(other than this corporation or a majority-owned subsidiary of this
corporation) of which such specified person is an officer or partner r
is, directly or indirectly, the beneficial owner or ten percent or more
of any class of equity securities, (b) any trust or other estate in
which such specified person has a substantial beneficial interest or as
to which such specified person serves as trustee or in a similar
fiduciary capacity, and (c) any relative or spouse of such specified
person, or any relative of such spouse, who has the same home as such
specified person or who is a director or officer of this corporation or
any of its parents or subsidiaries.
6. The term "Voting Stock" shall mean all outstanding shares
of capital stock of this corporation entitled to vote generally in the
election of directors. Each reference to a proportion of shares of
Voting Stock shall refer to such proportion of the votes entitled to be
case by such shares.
7. The term "Continuing Director" shall mean any person then
serving as a director of this corporation (a) who was a member of the
Board of Directors of this corporation on July 17, 1986, or (b) who
became a director after July 17, 1986 and whose election, or nomination
for election by this corporation's shareholders was approved by a
majority of all of the Continuing Directors, either by a specific vote
or by approval of the proxy statement issued by this corporation on
behalf of the Board of Directors in which such person is named as
nominee for director; provided, however, that in no event shall a
director who announces that he or she has a conflict of interest with
respect to, and refrains from voting on, the Business Combination in
question be deemed to be a Continuing Director for purposes of such
vote.
8. The term "Substantial Part" shall mean more than 25% of the
fair market value of the total assets of the corporation in question,
as of the end of its most recent fiscal year ending prior to the time
the determination is being made.
C. For the purposes of this Article XI, the Continuing Directors by a
majority vote shall have the power to make a binding determination as to: (i)
the number of shares of Voting Stock of this corporation that any person or
entity beneficially owns; (ii) whether a person or entity is an Affiliate or
Associate of another; (iii) whether the assets subject to any Business
Combination constitute a Substantial Part; (iv) whether any Business Combination
is one in which a Related Person has an interest; (v) whether the cash to be
received per share by holders of common stock of this corporation other than the
Related Person in a Business Combination is an amount at least equal to the
highest per share price paid by the Related Person; and (vi) such other matters
with respect to which a determination is required under this Article XI.
D. The affirmative vote of the holders of at least 75% of the
outstanding shares of Voting Stock of this corporation shall be required to
amend or repeal, or to adopt any provision inconsistent with this Article XI.
ARTICLE XII
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) liability based on a breach of the duty of
loyalty to the corporation or the shareholders; (ii) liability for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) liability under Sections 302A.559 or 80A.23 of the
Minnesota Statutes; (iv) liability for any transaction from which the director
derived an improper personal benefit; or (v) liability for any act or omission
occurring prior to the date when this Article becomes effective. If Chapter
302A, the Minnesota Business Corporation Act, hereafter is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director or the corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Chapter 302A, the Minnesota Business Corporation Act.
Any repeal or modification of this Article by the shareholders of the
corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such repeal or modification.