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:
/ / Preliminary Proxy Statement (Revised)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE CHERRY CORPORATION
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE CHERRY CORPORATION
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ Fee paid with Preliminary Filing
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $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 transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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:
------------------------------------------------------------------------
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4) Date Filed:
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[LOGO]
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
708-662-9200
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 11, 1994
-----------------
To the Stockholders of
The Cherry Corporation:
Notice is hereby given that the annual meeting of stockholders of THE
CHERRY CORPORATION, a Delaware corporation, will be held at its corporate
offices, 3600 Sunset Avenue, Waukegan, Illinois, on Monday, July 11, 1994, at
4:00 p.m. local time, for the following purposes:
1. To elect seven directors of the Corporation to hold office for the
ensuing year.
2. To consider and act upon a proposal to amend Article Fourth of the
Company's Certificate of Incorporation, as amended, to (i) reclassify
the existing Common Stock of the Company as Class B Common Stock, (ii)
authorize a new class of non-voting common stock, designated as Class A
Common Stock, (iii) increase the number of authorized shares of Common
Stock from 10,000,000 to 30,000,000, consisting of 20,000,000 shares of
Class A Common Stock and 10,000,000 shares of Class B Common Stock, and
(iv) establish the rights, powers and limitations of the Class A Common
Stock and the Class B Common Stock.
3. To consider and transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 16, 1994, as
the record date for the determination of the holders of shares of the
Corporation's outstanding Common Stock entitled to notice of and to vote at
the annual meeting of stockholders. Each stockholder is entitled to one vote
per share on all matters to be voted on at the meeting.
By Order of the Board of Directors
DAN A. KING
SECRETARY
June 20, 1994
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH
REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
THE CHERRY CORPORATION
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
708-662-9200
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 11, 1994
-----------------
VOTING INFORMATION
This Proxy Statement is being mailed to stockholders of The Cherry
Corporation (the "Company") on or about June 20, 1994, and is furnished in
connection with the Board of Directors' solicitation of proxies for the annual
meeting of stockholders to be held on July 11, 1994, for the purpose of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Stockholders accompanying this Proxy Statement. If the form of proxy
which accompanies this Proxy Statement is executed and returned, it may be
revoked by the person giving it at any time prior to the voting thereof by
written notice to the Secretary, by delivery of a later dated proxy or by
requesting to vote in person at the meeting. Without extra compensation, certain
directors, officers and employees of the Company may make additional
solicitations in person or by telephone or telegraph. Expenses incurred in the
solicitation of proxies, including postage, printing and handling, and actual
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding documents to beneficial owners, will be paid by the Company.
Each stockholder is entitled to one vote for each share of the Company's
Common Stock held as of the record date. For purposes of the meeting, a quorum
means a majority of the outstanding shares. As of the close of business on May
16, 1994, the record date for stockholders entitled to vote at the annual
meeting, there were outstanding 4,664,098 shares of Common Stock, entitled to
one vote each. In determining whether a quorum exists at the meeting, all shares
represented in person or by proxy will be counted. A stockholder may, with
respect to the election of directors, (i) vote for the election of all named
director nominees, (ii) withhold authority to vote for all named director
nominees or (iii) vote for the election of all named director nominees other
than any nominee with respect to whom the stockholder withholds authority to
vote by so indicating in the appropriate space in the proxy. With respect to the
proposal to amend the Company's Certificate of Incorporation, as amended, a
stockholder may (i) vote for the proposal, (ii) vote against the proposal or
(iii) abstain from voting. Proxies properly executed and received by the Company
prior to the meeting and not revoked will be voted as directed therein on all
matters presented at the meeting. In the absence of a specific direction from
the stockholder, proxies will be voted for the election of all named director
nominees, each to hold office until the next annual meeting of stockholders or
until his successor is duly elected and qualified and for the proposal to amend
the Certificate of Incorporation.
Proxies relating to "street name" shares that are voted by brokers on some
but not all of the matters will be treated as shares present for purposes of
determining the presence of a quorum on all matters, but will be treated as
shares entitled to vote only as indicated below ("broker non-votes"). The
affirmative vote of the holders of a majority of the shares present in person or
by proxy at the meeting and entitled to vote is required in the election of
directors. Withholding authority to vote for a director nominee will in effect
count as a vote against the director nominee. Broker non-votes will have no
effect in the election of directors. The affirmative vote of the holders of a
majority of the outstanding shares is required for approval of the proposal to
amend the Company's Certificate of Incorporation, as amended. Abstentions and
broker non-votes in connection with this proposal will count as votes against
this proposal.
The Board of Directors knows of no other matter which may come up for action
at the meeting. However, if any other matter properly comes before the meeting,
the persons named in the proxy form enclosed will vote in accordance with their
judgment upon such matter.
Stockholders wishing to include proposals in the Company's proxy statement
and form of proxy for the 1995 annual meeting must submit such proposals so that
they are received by the Secretary of the Company at its Waukegan address by no
later than February 20, 1995.
The Annual Report to stockholders for the fiscal year ended February 28,
1994, accompanies this Proxy Statement. Additional copies of the Annual Report
may be obtained by writing to the Secretary of the Company.
STOCK OWNERSHIP INFORMATION
As of May 16, 1994, set forth below are (1) the only persons known to the
Company to beneficially own more than 5% of the outstanding Common Stock of the
Company, (2) the beneficial holdings of executive officers shown in the Summary
Compensation Table, and (3) the benefical holdings of all executive officers and
directors as a group. Except as set forth below, the address for such person or
group is the Company's Waukegan office.
NUMBER OF
NAME SHARES OWNED PERCENT
------------------------------------------------------------------------------ -------------------- -----------
(1) Walter L. Cherry and
Virginia B. (Mrs. Walter L.) Cherry........................................... 1,626,915(a)(b)(e) 34.9%
Peter B. Cherry............................................................... 1,398,702(b)(c)(e) 30.0%
FMR Corporation
82 Devonshire Street, Boston, MA 02109........................................ 629,600 13.5%
(2) Executive Officers in Summary Compensation Table.............................. 1,444,362(d) 30.9%
(3) All Officers and Directors as a Group (10 persons)............................ 2,834,750(e) 60.5%
<FN>
- - - ---------
(a) Mr. and Mrs. Cherry disclaim ownership of the shares held in each other's
name.
(b) The table includes 255,727 shares of Common Stock held by the Catherine C.
Moore Trust for the benefit of Catherine C. Moore, of which Virginia B.
Cherry and Peter B. Cherry (her son) are trustees with the power to vote
the Common Stock and to make dispositions. Mrs. Cherry and Mr. Cherry
disclaim beneficial ownership.
(c) The table includes 47,911 shares of Common Stock held by Mr. Cherry's wife
as trustee for their children, as to which shares Mr. Cherry disclaims
beneficial ownership. The table includes 22,500 shares of Common Stock
held by Act & Co., the nominee of Harris Trust and Savings Bank, in an
irrevocable trust for the benefit of the children of Mr. and Mrs. Walter
L. Cherry. The children have the power to vote and dispose of such stock.
The table also includes 712,000 shares of Common stock held by trusts for
the benefit of Walter L. Cherry and Virginia B. Cherry, of which Peter B.
Cherry (their son) is trustee with the power to vote the Common Stock and
to make dispositions.
(d) The total number of beneficially owned shares of Common Stock of the
Company for each of the Executive Officers listed in the Summary
Compensation Table is as follows: Peter B. Cherry, 1,398,702; Alfred S.
Budnick, 15,374; Grant T. Hollett, Jr., 12,250; Dan A. King, 8,414 and
Klaus D. Lauterbach, 9,622.
(e) The total number of shares of Common Stock of the Company for each of the
executive officers and directors includes shares held under options
exercisable within 60 days as follows: Walter L. Cherry, 2,000; Peter B.
Cherry, 2,000; Alfred S. Budnick, 8,666; Grant T. Hollett, Jr., 4,334; Dan
A. King, 3,001 and Klaus D. Lauterbach, 1,317.
Each director and executive officer of the Company is required to report to
the Securities and Exchange Commission, by specified dates, his or her
transactions in the Common Stock of the Company. During fiscal year 1994, Klaus
D. Lauterbach and Charles W. Denny each filed one such report after the
specified date.
2
ELECTION OF DIRECTORS
At the annual meeting of stockholders, seven directors, constituting the
entire Board of Directors of the Company, are to be elected to hold office until
the next annual meeting of stockholders or until their successors are duly
elected and qualified. Unless otherwise indicated on the proxy form, it is
intended that the proxies will be voted for the nominees listed below. It is
expected that these nominees will serve, but, if for any unforeseen cause any
such nominee should decline or be unable to serve, the proxies will be voted to
fill any vacancy so arising in accordance with the discretionary authority of
the persons named in the proxies unless otherwise indicated on the proxy form.
NOMINEES
The following information concerning the nominees has been furnished by the
nominees:
COMMON
FIRST STOCK OF PERCENT OF
PRINCIPAL OCCUPATION YEAR THE COMPANY COMMON STOCK
DURING LAST FIVE YEARS ELECTED OWNED OWNED
NAME AND AGE AND OTHER DIRECTORSHIPS DIRECTOR MAY 16, 1994 MAY 16, 1994
- - - --------------------------------- ------------------------------------------ --------- ------------ -------------
Peter B. Cherry (47)............. Chairman of the Board (1992) and 1977 1,398,702* 30.0%
President, 1982 and Chief Executive
Officer, 1986 and (prior to 1986) Chief
Operating Officer.
Walter L. Cherry (77)............ Development Engineer as of January 10, 1953 1,626,915* 34.9%
1992, formerly Chairman of the Board and
(prior to 1986) Chief Executive Officer.
Alfred S. Budnick (56)........... Vice President of the Company and 1977 15,374 .3%
President of Cherry Semiconductor
Corporation.
Thomas L. Martin (72)............ President Emeritus of Illinois Institute 1979 2,200 .1%
of Technology. Mr. Martin was also a
director of Kemper Family of Funds until
December 1993.
Robert B. McDermott (66)......... Private Investor, formerly partner, law 1982 17,000 .4%
firm of McDermott, Will & Emery; Mr.
McDermott is also a director of Maynard
Oil Company.
Peter A. Guglielmi (51).......... Director, Tellabs, Inc. (voice and data 1993 -- --
communications equipment manufacturer)
and President, Tellabs International,
Inc. (1993), and Chief Financial Officer,
Tellabs, Inc. (1988).
Charles W. Denny (58)............ President and Chief Executive Officer, 1993 -- --
Schneider North America (1992) and
President and Chief Operating Officer,
Square D Company (electrical distribution
and industrial control products
manufacturer) (1992) and (prior to 1992)
Executive Vice President. Mr. Denny is
also a director of Woodhead Industries,
Inc.
<FN>
- - - ---------
* Includes shares of Common Stock owned by wives in the cases of Walter L.
Cherry (685,736 shares) and Peter B. Cherry (47,911 shares) each of whom
disclaims that he is the beneficial owner of any shares held by his wife;
reference is made to the footnotes under the table in "Stock Ownership
Information."
3
Because of their equity interests in the Company, Mr. and Mrs. Walter L.
Cherry and Peter B. Cherry may be deemed "control persons" as that term is used
under regulations of the Securities and Exchange Commission. Peter B. Cherry is
the son of Mr. and Mrs. Walter L. Cherry. There are no other family
relationships.
COMPENSATION
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the four other most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------
NUMBER OF
SHARES
UNDERLYING
ANNUAL COMPENSATION (1) STOCK ALL OTHER
--------------------------------- OPTIONS (4) COMPENSATION (2)(3)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#) ($)
- - - --------------------------------------------- --------- ---------- ---------- --------------- -------------------
Peter B. Cherry 1994 $ 301,111 $ 50,000 -- $ 10,743
Chairman of the Board and President 1993 228,711 -- -- 6,659
1992 229,899 -- 2,000 --
Alfred S. Budnick 1994 206,250 126,920 -- 7,356
Vice President of the Company and President 1993 192,506 89,408 1,000 6,665
of a Subsidiary 1992 176,666 42,481 3,500 --
Klaus D. Lauterbach 1994 286,527 23,728 -- --
Vice President of the Company and General 1993 282,911 33,843 950 --
Manager of a Subsidiary 1992 244,886 21,461 3,000 --
Grant T. Hollett, Jr. 1994 216,273 66,200 -- 9,314
Vice President of the Company and President 1993 201,639 61,176 1,500 5,754
of a Division 1992 176,461 30,600 5,000 --
Dan A. King 1994 128,579 31,100 -- 5,362
Treasurer, Secretary and Corporate 1993 106,817 21,600 1,000 3,056
Controller 1992 97,651 13,968 3,500 --
<FN>
- - - ---------
(1) Table excludes perquisites as amounts received do not exceed the lesser of
$50,000 or 10% of any of the named officers salary and bonus.
(2) In accordance with the revised rules on executive compensation disclosure,
amounts of All Other Compensation are excluded for the Company's 1992
fiscal year.
(3) Represents Company contributions under 401(k) and profit sharing plans.
(4) The Company did not grant any stock options in fiscal 1994.
4
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF
SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
VALUE OPTIONS AT MONEY OPTIONS AT
REALIZED FY-END (#) FY-END ($)
SHARES ACQUIRED ($) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) (1) UNEXERCISABLE UNEXERCISABLE (1)
- - - -------------------------------------- ----------------- ----------- ------------- -------------------
Peter Cherry.......................... 0 $ 0 1,334/666 $21,678/$10,822
Alfred Budnick........................ 0 0 7,167/1,833 113,717/26,158
Klaus Lauterbach...................... 1,316 12,106 0/1,634 0/23,023
Grant Hollett......................... 0 0 2,167/2,667 33,089/37,839
Dan King.............................. 0 0 1,500/1,834 23,003/26,176
<FN>
- - - ---------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise or end of fiscal 1994 multiplied by the applicable number of
shares.
BOARD OF DIRECTORS
The Board of Directors held four meetings in fiscal 1994. All directors were
present for at least 75% of the meetings for which they were in office, except
that Mr. Guglielmi attended one of two meetings for which he was in office.
Non-employee directors are paid an annual fee of $4,000, plus $2,000 for each
meeting they attend. Employee directors receive no compensation as such.
The Board of Directors has an Audit Committee and a Compensation Committee,
each composed of non-employee directors. The Committee Chairman receives $1,500
and the other members receive $500 for each meeting held. The Audit and
Compensation Committees held two meetings in fiscal 1994. The Board has no
Nominating Commmittee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENT
Pursuant to an agreement dated May 26, 1992 between Cherry Semiconductor
Corporation (CSC) and Mr. Budnick, CSC has agreed to compensate Mr. Budnick if
he is terminated within 5 years subsequent to a change in control of CSC. The
agreement provides for a payment of between one to three times Mr. Budnick's
annual salary depending upon the amount of time which has lapsed subsequent to
the change in control. In general, a change of control occurs if CSC is sold.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for the
Company's executive compensation policies. Subject to review by the full Board,
it annually determines the compensation to be paid to the executive officers of
the Company. The Committee is composed of outside directors.
OVERVIEW AND PHILOSOPHY
The executive compensation program is intended to provide overall levels of
compensation for the executive officers which are competitive for the industries
and the geographic areas within which they operate, the individual's experience,
and contribution to the long-run success of the Company. The Russell 3000 (see
Performance Graph) includes companies that operate in the industries which the
Committee considers. The Compensation Committee believes that services of great
value to the Company and its stockholders can be rendered in periods of business
adversity as well as in good times. The Committee believes that its task of
determining fair and competitive compensation is ultimately judgmental, even
though formulas are used to some extent as described below.
The program is composed of base salary, annual incentive compensation, and
other benefits generally available to all employees. As of February 28, 1994,
incentive stock options on 78,000 shares of the Company's stock were outstanding
but no options were granted during the fiscal year then ended.
5
BASE SALARY
The base salary for each executive is established to be competitive with
companies in the industries and geographic areas in which the Company competes.
Surveys from outside firms and consultants are used to help determine what is
competitive. In making annual adjustments to base salary, the Committee also
considers the individual's attainment of personal management objectives which
are ordinarily established at the beginning of the year, as well as any other
information which may be available as to the value of the particular
individual's past and prospective future services to the Company. This
information includes comments and performance evaluations by the Company's Chief
Executive Officer as to individuals other than himself. The Committee considers
all such data; it does not prescribe the relative weight to be given to any
particular component of such data.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation is largely determined by formulas in different
plans for each subsidiary or division of the Company. In all cases a major
component is dependent upon the subsidiary's or division's earnings. That
portion of the annual incentive not determined by formula is set by measuring
achievement of financial goals -- such as cash flow, working capital management,
and capital expenditures -- and other goals which ordinarily are established at
the beginning of the year.
LONG-TERM INCENTIVES
Incentive stock options were granted to executives in earlier years (but not
in fiscal 1994) because they directly relate the executive's earnings to the
stock price appreciation realized by the Company's stockholders over the option
period. Stock options also provide executives the opportunity to acquire an
ownership interest in the Company. The number of shares covered by each
executive's option was determined by factors similar to those considered in
establishing base salary.
The capability to grant new incentive stock options under the Stock Option
Plan expired in June 1992. As a result, the Committee may grant only
non-qualified stock options. No such options were granted in fiscal 1994. The
Committee has evaluated alternative long-term incentive plans, but to date has
not adopted any such plans.
In general, the Committee has believed that stock options should form a
secondary part of an executive's total compensation package, partly because the
price of the Company's stock may be subject, during the term of the option, to
competitive and other factors over which a particular executive may have little
or no control.
OTHER
Other benefits are generally those available to all other employees in the
Company, or a subsidiary, as appropriate. Together with perquisites, these
benefits did not exceed 10% of any executive's combined salary and bonus in
fiscal 1994.
COMPENSATION FOR THE PRESIDENT (CHIEF EXECUTIVE OFFICER)
The Committee applies the same standards in establishing the compensation of
the Company's Chief Executive Officer as are used for other executives. However,
there are several procedural differences. The Chief Executive Officer does not
submit an evaluation of his own performance, nor does he participate in the
review by the full Board on the amount and nature of his compensation as
determined by the Committee. Peter Cherry received a cash bonus of $50,000 based
on the Company's performance in fiscal year 1994 and his individual contribution
to the Company. The bonus was determined in its discretion by the Committee. In
arriving at its decision, the Committee considered the Company's earnings before
interest and taxes as a percent of average investment for the year, Mr. Cherry's
work in the development of competitive strategies for the Company's business and
his personal leadership. No specific weight was assigned to any of these
elements.
This report is submitted by the Compensation Committee of the Board of
Directors:
Robert B. McDermott, Chairman
Thomas L. Martin
Charles W. Denny
6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert McDermott was formerly a partner in the law firm of McDermott, Will &
Emery which provides legal services to the Company on a regular basis.
In November of 1993, WLC Investment Co. (owned entirely by Walter L. Cherry,
a Director and an employee of the Company) and VBC Investment Co. (owned
entirely by Virginia B. Cherry, the wife of Walter L. Cherry), (collectively the
"Holding Companies"), entered into an agreement with the Company by which the
Company acquired all shares of the Company's Common Stock owned by the Holding
Companies (175,000 shares each) in exchange for an identical number of shares of
such stock, and immediately thereafter the Holding Companies liquidated and
dissolved. The exchange and liquidation/dissolution of the Holding Companies
qualified as a tax-free reorganization to each of the parties, and a private
letter ruling to that effect has been obtained from the Internal Revenue
Service. The exchange did not constitute a change of control with respect to the
Company. The exchange did not increase the number of shares outstanding or the
capital accounts of the Company, because, upon receipt of the shares of the
Company from the Holding Companies, the Company immediately cancelled the shares
and returned them to the status of authorized but unissued shares of the Common
Stock of the Company. The Company did not assume any liability of the Holding
Companies or incur any expenses in connection with the transaction.
Walter L. Cherry, a Director of the Company, is an employee of the Company
and received $107,000 in fiscal 1994 for his services as an employee.
7
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock with the
cumulative total return of the Russell 3000 and the Russell 3000 Electrical
Equipment Industry indices for the period of five years commencing March 1, 1989
and ending February 28, 1994.
[GRAPHIC]
1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- ---------
The Cherry Corporation 100.0 48.8 35.9 64.9 189.6 170.0
Russell 3000 100.0 116.4 132.2 157.5 174.4 191.4
Russell 3000 Electrical Equipment Industry 100.0 128.3 142.8 172.7 196.1 213.1
<FN>
- - - ---------
(1) The Company has selected the Russell 3000 Electrical Equipment Industry as
one comparison of total stockholder return. The Company is included in
this industry index and believes that it provides a comparison as
prescribed by the Securities and Exchange Commission requirements. This
industry index is only computed quarterly on a calendar year basis and
therefore the indices shown above for this industry are as of March 31 of
the respective years. Although the Company's total return is based upon
its fiscal year end of the last day of February, it believes that any
difference that may result is not material.
(2) The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
8
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
DESCRIPTION OF THE AMENDMENT AND THE DISTRIBUTION
At the Annual Meeting the stockholders of the Company are also being asked
to consider and act upon a proposal (the "Proposal") to approve an amendment in
the form attached as Exhibit A (the "Amendment") to Article Fourth of the
Company's Certificate of Incorporation, as amended, which would (i) reclassify
the existing Common Stock of the Company (the "Existing Common Stock") as Class
B Common Stock, (ii) authorize a new class of non-voting common stock,
designated as Class A Common Stock, (iii) increase the number of authorized
shares of Common Stock from ten million (10,000,000) to thirty million
(30,000,000), consisting of twenty million (20,000,000) shares of Class A Common
Stock and ten million (10,000,000) shares of Class B Common Stock, and (iv)
establish the rights, powers and limitations of the Class A Common Stock and the
Class B Common Stock.
If the Amendment is adopted by the stockholders, the Board intends to
prepare and file a Certificate of Amendment to the Certificate of Incorporation
of the Company in accordance with the Amendment. The Amendment will be effective
immediately upon acceptance of filing by the Secretary of State of Delaware (the
"Effective Date"). The Board would then be free to issue Common Stock without
any further action on the part of the stockholders. Although the Board presently
intends to file the Certificate of Amendment, if the Proposal is approved by
stockholders, the resolution of stockholders will reserve to the Board the right
to defer or abandon the Proposal and not file such Certificate of Amendment even
if the Amendment is approved by the stockholders.
If the Board elects to file the Certificate of Amendment, promptly after the
Effective Date, the Board presently intends to authorize a distribution of one
share of Class A Common Stock for each share of Existing Common Stock
outstanding on the record date (the "Distribution"). The Distribution will be
essentially a two-for-one stock split. The record date for the Distribution (the
"Distribution Record Date") and the date of distribution of the Class A Common
Stock are expected to be established promptly after the Amendment is approved
and adopted by the stockholders. Stockholder approval of the Distribution is not
required by Delaware law and is not being solicited by the Proxy Statement and
there is no assurance that the Distribution will actually be effected.
Upon effectiveness of the Amendment, each outstanding share of Existing
Common Stock will automatically be converted into, and the certificate therefor
will be deemed to represent, one share of Class B Common Stock. The Existing
Common Stock certificates will no longer specify the correct designation.
As soon as practicable after the effectiveness of the Amendment, Harris
Trust and Savings Bank, the Company's transfer agent, will issue certificates
representing the Class A Common Stock and will mail a letter of transmittal (the
"Transmittal Letter") to each record holder of Existing Common Stock on the
Distribution Record Date. New certificates representing the Class B Common Stock
will be issued to the record holders of Class B Common Stock who deliver
properly executed Transmittal Letters accompanied by their certificates
representing shares of Existing Common Stock.
Under the provisions of the Amendment, the currently outstanding shares of
Existing Common Stock would be reclassified as Class B Common Stock and would
continue to have their present rights, powers and limitations. As more fully
described below, the new Class A Common Stock will have certain special
characteristics. In particular, the holders of Class A Common Stock as such will
not be entitled to vote on any matters except as otherwise provided or required
by law. At the time of the Distribution, there will be no change in the relative
voting power or equity of any stockholder of the Company, including members of
the family of Walter and Virginia Cherry (the "Cherry Family"), because the
Distribution will be made to all stockholders in proportion to the number of
shares of Existing Common Stock owned on the Distribution Record Date.
The Amendment has been unanimously approved by the Company's Board of
Directors. Each of the directors who is neither a member of the Cherry Family
nor an officer or employee of the Company voted to
9
approve the Amendment. The Board believes that the Amendment and the
Distribution are in the best interests of the Company and its stockholders and
recommends that you vote "FOR" the adoption of the Amendment. See "Reasons for
the Proposal; Recommendation of the Board of Directors."
BACKGROUND OF THE PROPOSAL
In recent years, a number of publicly held companies with majority or
controlling ownership by their founding families have adopted dual class
capitalization structures. Many companies which adopted dual class voting
structures adopted such plans prior to the adoption in 1988 of Rule 19c-4 of the
Rules and Regulations under the Securities Exchange Act of 1934. This Rule has
since been vacated by a Federal Appellate Court decision in 1990, but was
thereafter adopted as a rule of the NASD. Certain dual class structures adopted
prior to enactment of Rule 19c-4 had provisions which disenfranchised
stockholders by creating new classes of stock with greater voting rights per
share. Other dual class capitalization structures (including that proposed by
the Company) were intended to comply with Rule 19c-4, so as not to have a
disenfranchising effect on existing stockholders. In reviewing the Company's
capital structure and possible alternatives for the future, management, after
consultation with the Company's financial advisors and the Company's outside
legal advisors, determined that a structure which complies with Rule 19c-4
offered the Company a number of possible advantages that outweighed the
potential disadvantages, and management determined to present to the Board of
Directors the Proposal to establish a dual class capital structure.
Members of the Cherry Family together control approximately 60% of the
voting power of the Company. See "Stock Ownership Information." The Board
believes that the Cherry Family's voting power has been beneficial to the
Company. The Board of Directors believes that the management and operating
policies of the Company in recent years, which have been implemented in
substantial part due to the influence and control of members of the Cherry
Family, have contributed to the growth and success of the Company, and therefore
believes that the retention by members of the Cherry Family of their voting
power with respect to the Company is in the best interests of the Company and
its stockholders. However, since any stock sales by the Company would reduce the
Cherry Family voting power, preservation of that voting power limits the
Company's ability to sell stock in financings. Furthermore, members of the
Cherry Family have sought the ability to increase liquidity while maintaining
their influence in the Company.
At its regular meeting on October 7, 1993, management made a presentation to
the Board with respect to possible dual-class capital structures to enhance the
financial flexibility of the Company and its stockholders. The Company
considered high-low voting stock and convertible stock, but rejected these
structures due to applicable NASD rules. The Board of Directors also gave some
consideration to the issuance of preferred stock, but decided against it. At its
regular meeting on May 3, 1994, management provided the Board with copies of
preliminary proxy solicitation materials proposed to be filed with the SEC and
reviewed the proposal with the Company's financial advisors, Donaldson, Lufkin &
Jenrette Securities Corporation, and counsel, McDermott, Will & Emery. After
discussion of the Proposal's likely benefits and possible disadvantages, the
Board authorized adoption of the proposed Amendment and authorized management to
file the preliminary proxy materials with the SEC. At its regular meeting on
June 16, 1994, the Board of Directors called the annual meeting of stockholders
for July 11, 1994, and established May 16, 1994 as the record date for the
determination of stockholders entitled to vote at the annual meeting.
REASONS FOR THE PROPOSAL; RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT.
The Board believes that a capital structure having two classes of common
stock offers a number of potential benefits described below and that adoption of
the Proposal is in the best interests of the Company and all of its
stockholders. The Proposal enables the Company to issue Class A Common Stock or
securities convertible into Class A Common Stock for financing, acquisition and
compensation purposes without adversely affecting the voting percentage of any
stockholder, including the Cherry Family.
The Board has given due consideration to the Amendment and the Distribution
and has determined that the adoption of the Amendment would be in the best
interests of the Company and its stockholders.
10
Some stockholders, on the other hand, may believe that the Amendment and the
Distribution are disadvantageous to the extent that they may favor long-term
investors and may discourage takeovers of the Company. The Board, two of whom
are members of the Cherry Family and one who is an officer of the Company,
considered this factor in reaching their recommendation. The Board of Directors
believes that the Reclassification is advantageous to the Company's long-term
growth strategy to the extent that it may favor long-term investors and may
discourage takeovers of the Company. The Board suggests that each stockholder
carefully read and review the description of the Amendment and the Distribution
and certain effects thereof which are set forth below.
FINANCING FLEXIBILITY
The Company has followed, and continues to follow, a long-term strategy for
growth. The Board of Directors believes that this strategy will best maximize
the value of the Company and further believes that the voting power of the
Cherry Family has provided the stability and absence of disruption necessary to
best pursue this strategy. Implementation of the Proposal would provide the
Company with increased flexibility in the future to issue common equity in
connection with acquisitions and to raise equity capital or to issue convertible
debt as a means to finance future growth without diluting the voting power of
the Company's existing stockholders, including the Cherry Family. The Class A
Common Stock may also be used, rather than voting Class B Common Stock, for the
Company's stock benefit plans. The Company has not heretofore issued Common
Stock to finance its operations or acquisitions and has not used substantial
stock options in recent years as a means of retaining or compensating employees.
The Company has selected underwriters and currently anticipates conducting a
public offering of its Class A Common Stock, subject to the adoption of the
Amendment and completion of the Distribution. Any such public offering is
contingent on, among other things, approval of the Board of Directors, market
conditions, and determination as to the appropriate timing of such offering; and
there can be no assurances that such offering will occur. The offering by the
Company is anticipated to be in the range of 2.5 million to 3 million shares of
Class A Common Stock. The proceeds from the public offering will be used to pay
off existing bank debt and for general corporate purposes. The offering will be
made only by means of a prospectus complying with the requirements of the
Securities Act of 1933, as amended, and this Proxy Statement does not constitute
an offer to sell, or a solicitation of an offer to buy, any shares of Class A
Common Stock. If the public offering occurs, existing holders of the Common
Stock will experience a dilution of their percentage interests in the Company.
Although the Class B Common Stock may trade at a premium with respect to the
Class A Common Stock, as discussed below, the Amendment expressly permits the
Board to issue and sell shares of Class A Common Stock even if the consideration
which could be obtained by issuing or selling Class B Common Stock would be
greater.
STOCKHOLDER FLEXIBILITY
Under the Proposal, stockholders desiring to maintain their voting positions
will be able to do so even if they decide to sell or otherwise dispose of up to
50% of their equity interest in the Company. The proposed Amendment thus gives
all stockholders, including the Cherry Family, increased flexibility to dispose
of a portion of their equity interest in the Company and otherwise determine the
extent of their equity ownership without necessarily affecting their relative
voting power. In the past three years, members of the Cherry Family have made
intra-family gifts of the Existing Common Stock, have sold approximately 10,000
shares of the Existing Common Stock, and have made no additional purchases.
Members of the Cherry Family have indicated that they intend to continue making
gifts of Cherry Common Stock to various charities, family members and others
from time to time. Such gifts, if made, may be more significant than past gifts
and, if made outside the family, are more likely to be shares of Class A Common
Stock. However, members of the Cherry Family have informed the Board of
Directors that they have no present plans regarding the sale of any shares of
Cherry Common Stock. It is the present intention of members of the Cherry Family
to hold the shares of Class B Common Stock and to sell shares of Class A Common
Stock if they sell any shares.
In addition, stockholders who are interested in maintaining their voting
power in the Company might be more willing to sell or otherwise dispose of part
of their holdings if the sale or other disposition would not decrease their
relative voting power. That could result in increased trading of shares and
increased liquidity.
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Furthermore (subject to the Class A Protection provision described below), the
presence of two classes of the Company's Common Stock would allow any
stockholder to increase voting power without increasing its equity investment by
selling Class A Common Stock and buying Class B Common Stock. The Company does
not presently intend to issue any additional shares of Class B Common Stock.
CONTINUITY
The adoption of the Proposal should reduce the risk of a disruption in the
continuity of the Company's long-term plans and objectives that could otherwise
result if the members of the Cherry Family find it necessary to sell a
significant block of stock for diversification, to satisfy estate tax
obligations or for other reasons. Implementation of the Proposal would allow
members of the Cherry Family to continue to exercise control over a substantial
portion of the Company's voting power even if members of the Cherry Family chose
to reduce their total equity position significantly, and to exercise additional
estate planning flexibility by determining the succession of voting control
through gifts or bequests of Class B Common Stock to their heirs. Thus the
Proposal may provide a basis for continuity pursuant to such plans and
objectives, if and when such circumstances arise, and should reduce the risk
that the Company could at some future date be compelled to consider a sale of
the Company in an environment that could be dictated to the Company and the
Board by the financial circumstances of the members of the Cherry Family or by
third parties who may be anticipating or speculating about such circumstances.
KEY EMPLOYEES
Implementation of the Proposal should allow all employees to continue to
concentrate on other responsibilities without undue concern that the future of
the Company could be affected by real or perceived succession issues or an
unwanted takeover that could otherwise be triggered by any substantial
divestiture by the Cherry Family in the future. By reducing the uncertainty that
could result if members of the Cherry Family should dispose of a significant
block of voting Common Stock, the Proposal may, therefore, enhance the ability
of the Company to attract and retain highly qualified key employees.
BUSINESS RELATIONSHIPS
Implementation of the Proposal may enhance the existing and potential
business relationships of the Company with suppliers, customers and other
parties who may become concerned about changes in control of the Company in the
event the Cherry Family holdings are diluted.
CERTAIN POTENTIAL DISADVANTAGES OF THE PROPOSAL
While the Board of Directors has determined that implementation of the
Proposal is in the best interests of the Company and its stockholders, the Board
recognizes that implementation of the Proposal may result in certain
disadvantages, including the following:
CHANGE OF CONTROL IMPACT
Members of the Cherry Family currently own a significant portion of the
Existing Common Stock and collectively have effective voting control over the
Company. Regardless of whether the Proposal is implemented, the Cherry Family
will maintain the ability to keep or dispose of such voting control. As noted
above, however, implementation of the Proposal will allow members of the Cherry
Family to continue to exercise voting control even if some or all of them choose
to reduce their total equity position by more than 50%. Implementation of the
Proposal is likely to limit the future circumstances in which a sale or transfer
of equity by the Cherry Family could lead to a merger proposal or tender offer
that is not acceptable to the Cherry Family or a proxy contest for the removal
of incumbent directors. Consequently, the Amendment and the Distribution might
reduce the possibility that stockholders of the Company may sell their shares at
a premium over prevailing market prices and make it more difficult to replace
the current Board of Directors and management of the Company.
The Company is not aware of any current intention of members of the Cherry
Family to dispose of any significant amount of Common Stock of the Company or of
any existing or planned effort on the part of any party to accumulate material
amounts of the Company's Common Stock, or to acquire control of the Company by
means of a merger, tender offer, solicitation in opposition to management or
otherwise, or to change the Company's management.
12
STATE STATUTES
Some state securities statutes contain provisions which, due to the issuance
of Class A Common Stock, may restrict an offering of equity securities by the
Company or the secondary trading of its equity securities in such states.
However, due to exemptions or for other reasons, the Company does not believe
that such provisions will have a material adverse effect on the amount of equity
securities which the Company will be able to offer, or on the price obtainable
for such equity securities in such an offering, or in the secondary trading
market for the Company's equity securities.
ACQUISITION ACCOUNTING
The Class A Common Stock may not be used to effect a business combination to
be accounted for using the "pooling of interests" method. For such method to be
used, the Company would be required to issue shares of Class B Common Stock as
the consideration for the combination.
BROKERAGE COSTS; SECURITY FOR CREDIT
As typical in connection with any stock split, brokerage charges and stock
transfer taxes, if any, may be somewhat higher with respect to purchases and
sales of Common Stock after the Distribution, assuming transactions of the same
dollar amount, because of the increased number of shares involved.
The Company does not expect that the adoption of the Amendment and the
Distribution will affect the ability of holders of the common stock to use the
Class A Common Stock or Class B Common Stock as security for the extension of
credit by financial institutions, securities brokers or dealers.
INVESTMENT BY INSTITUTIONS
Implementation of the Proposal may affect the decision of certain
institutional investors that would otherwise consider investing in the Existing
Common Stock. The holding of non-voting common stock may not be permitted by the
investment policies of certain institutional investors.
INTERESTS OF CERTAIN PERSONS
The Cherry Family has an interest in the implementation of the Proposal
because, as noted above, the Proposal may enhance the ability of members of the
Cherry Family to retain voting control of the Company even if they dispose of a
substantial portion of their shares of Existing Common Stock. See "Reasons for
the Proposal; Recommendation of the Board of Directors."
DESCRIPTION OF THE CLASS A COMMON STOCK AND THE CLASS B COMMON STOCK
As indicated above, the Amendment will reclassify the Existing Common Stock
into Class B Common Stock and create a new Class A Common Stock. The rights,
powers and limitations of the Class A Common Stock and the Class B Common Stock
are set forth in full in the proposed Article Fourth of the Company's
Certificate of Incorporation. The full text of Article Fourth as proposed to be
amended is set forth as Exhibit A to this Proxy Statement and incorporated
herein by reference. The following summary should be read in conjunction with,
and is qualified in its entirety by reference to, such Exhibit A.
VOTING
Under the Company's Certificate of Incorporation as now in effect, each
share of Existing Common Stock has one (1) vote per share on all matters, and
holders of Existing Common Stock are entitled to vote for the election of all
directors and on all other matters submitted to the stockholders of the Company.
There is no provision in the Company's Certificate of Incorporation permitting
cumulative voting. Subject to the Class A Protection provision described below,
each share of Class B Common Stock will continue to entitle the holder thereof
to one (1) vote per share on all matters on which stockholders are entitled to
vote, including the election of directors. The Class A Common Stock will not
entitle the holder thereof to any votes, except as otherwise provided or
required by law. The Proposal will not affect the relative voting power of the
holders of shares of Existing Common Stock (to be reclassified as Class B Common
Stock).
After the Amendment and Distribution, actions submitted to a vote of
stockholders will generally be voted on only by holders of Class B Common Stock.
Under the Amended Certificate of Incorporation and the Delaware General
Corporation Law, only the affirmative vote of the holders of a majority of the
13
outstanding shares of Class B Common Stock entitled to vote will be required to
amend the Certificate of Incorporation or to authorize additional shares of
Common Stock; and the affirmative vote of the holders of two-thirds of the Class
B Common Stock will be required to approve any merger or consolidation of the
Company with or into any other corporation or a sale of substantially all its
assets or to approve the dissolution of the Company. (The two-thirds voting
requirement is not a substantive change. It already exists in Article Eighth.
The Proposal will make the requirements of Article Eighth applicable only to the
Class B Common Stock.) The holders of Class B Common Stock will elect the entire
Board of Directors. In addition, as permitted under the Delaware General
Corporation Law, the Amended Certificate of Incorporation will provide that the
number of authorized shares of the Common Stock of either class may be increased
or decreased, but not below the number of shares then outstanding, by the
affirmative vote of the holders of a majority of the Class B Common Stock.
Under the Delaware General Corporation Law, however, holders of Class A
Common Stock will be entitled to vote on proposals to change the par value of
the Class A Common Stock or to alter or change the powers, preferences or
special rights of the shares of Class A Common Stock, including the Class A
Protection provision, which may affect them adversely.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each share of Class A Common Stock and Class B Common Stock will be equal in
respect to dividends and other distributions in cash, stock or property
(including distributions in connection with any recapitalization and upon
liquidation, dissolution or winding up of the Company), except that (i) a
dividend or distribution in cash or property on a share of Class A Common Stock
may be greater than any dividend or distribution in cash or property on a share
of Class B Common Stock, and (ii) dividends or other distributions payable on
the Common Stock in shares of capital stock shall be made to all holders of
Common Stock and may be made (a) in shares of Class A Common Stock to the
holders of Class B Common Stock and to the holders of Class A Common Stock, (b)
in shares of Class B Common Stock to the holders of Class B Common Stock and in
shares of Class A Common Stock to the holders of Class A Common Stock, or (c) in
any other authorized class or series of capital stock to the holders of both
classes of Common Stock. In no event will either Class A Common Stock or Class B
Common Stock be split, subdivided or combined unless the other is
proportionately split, subdivided or combined.
Although the Board of Directors would have authority under the Amended
Certificate of Incorporation to pay dividends and make distributions on the
Class A Common Stock in amounts greater than on the Class B Common Stock, the
Board presently intends that, if any dividends are paid, both classes will be
paid on an equal share basis.
MERGERS AND CONSOLIDATIONS
Each holder of Class A Common Stock will be entitled to receive the same per
share consideration as the per share consideration, if any, received by any
holder of the Class B Common Stock in a merger or consolidation of the Company.
CLASS A PROTECTION
After implementation of the Proposal, voting rights disproportionate to
equity ownership could be acquired through acquisitions of Class B Common Stock.
The Company's financial advisors advised the Board that the Class B Common Stock
could therefore trade at a premium to the Class A Common Stock under certain
circumstances. In order to reduce or eliminate the economic reasons for the
Class B Common Stock and Class A Common Stock to trade at disparate market
prices and to give holders of Class A Common Stock the opportunity to
participate in any premium paid in the future for a significant block (10% or
more) of the Class B Common Stock by a buyer who has not acquired a
proportionate share of the Class A Common Stock, the Board, upon consultation
with the Company's financial and legal advisors, determined that the Amendment
would include the following two-pronged "Class A Protection" provision.
First, the Class A Protection provision seeks to prevent a person who has
crossed a certain ownership threshold from gaining control of the Company by
acquiring shares of Class B Common Stock without buying shares of Class A Common
Stock. Anyone who acquires more than 10% of the outstanding shares of
14
Class B Common Stock after the Effective Date and does not acquire a percentage
of the outstanding shares of Class A Common Stock at least equal to the
percentage of the shares of the Class B Common Stock that the person acquired
above the 10% threshold will not be allowed to vote those shares of Class B
Common Stock acquired in excess of the 10% level. For example, if a person
acquires 15% of the outstanding shares of Class B Common Stock after the
Effective Date but acquires no shares of Class A Common Stock, that person would
be unable to vote the 5% of the shares of Class B Common Stock acquired in
excess of the 10% threshold. The inability of the person to vote the excess
shares of Class B Common Stock will continue under the Amended Certificate of
Incorporation until such time as a sufficient number of shares of Class A Common
Stock have been acquired by the person that the requirements of the Class A
Protection provision have been satisfied.
The second prong of the Class A Protection provision is an "Equitable Price"
requirement. It is intended to prevent a person seeking to acquire control of
the Company from paying a discounted price for the shares of Class A Common
Stock required to be purchased by the acquiring person under the first prong of
the Class A Protection provision. The Amended Certificate of Incorporation
provides that an equitable price has been paid for the shares of Class A Common
Stock only when they have been acquired at a price at least equal to the greater
of (i) the highest per share price paid by the acquiring person, in cash or in
non-cash consideration, for any shares of Class B Common Stock acquired within
the 60-day periods preceding and following the acquisition of the shares of
Class A Common Stock or (ii) the highest closing market sale price of a share of
Class B Common Stock during the 30-day period preceding the acquisition of the
shares of Class A Common Stock. The value of any non-cash consideration will be
determined by the Board of Directors of the Company acting in good faith. The
highest closing market sale price of a share of Class B Common Stock will be the
highest closing sale price on the NASDAQ National Market System or such
securities exchange or other quotation system then constituting the principal
trading market for either class of the Common Stock. In the event that no
quotations are available, the highest closing market sale price will be the fair
market value during the 30-day period of a share of Class B Common Stock as
determined by the Board of Directors of the Company acting in good faith. The
Company believes that as a practical matter, a person seeking to acquire control
of the Company would have to buy the Class A and Class B Common Stock at
virtually the same time and the same price, as might occur in a tender offer, in
order to ensure that the acquiring person would be able to vote the shares of
Class B Common Stock acquired in excess of the 10% threshold.
Under the Class A Protection provision, an acquisition of shares of Class B
Common Stock would be deemed to include any shares that a person acquires
directly or indirectly, in one transaction or a series of transactions, or with
respect to which that person acts or agrees to act in concert with any other
person. Unless there are affirmative attributes of concerted action, however,
"acting or agreeing to act in concert with any other person" will not include
actions taken or agreed to be taken by persons acting in their official
capacities as directors or officers of the Company or actions by persons merely
because they are related by blood or marriage. Also, an acquisition of shares of
Class B Common Stock will not be deemed to include acquisitions by bequest or
inheritance, by operation of law, upon the death of any individual, or by any
other transfer without valuable consideration, including a gift that is made in
good faith and not for purposes of circumventing the Class A Protection
provision.
The Class A Protection provision will not apply to any increase in a
holder's percentage ownership of Class B Common Stock resulting solely from a
change in the total number of shares of Class B Common Stock outstanding as the
result of a repurchase of shares of Class B Common Stock by the Company since
the last date on which that holder acquired shares of Class B Common Stock.
Furthermore, the provision will not prevent the voting of shares of Class B
Common Stock which could otherwise be voted merely because the owner disposes of
Class A Common Stock. The Class A Protection provision also provides that to the
extent that the voting power of any Class B Common Stock cannot be exercised
pursuant to the provision, that Class B Common Stock will not be included in the
determination of the voting power of the Company for any purposes under the
Amended Certificate of Incorporation or under the Delaware General Corporation
Law.
15
LIMITED CONVERTIBILITY
Except as described below, neither the Class A Common Stock nor the Class B
Common Stock will be convertible into another class of Common Stock or any other
security of the Company.
The Class A Common Stock could be converted into Class B Common Stock on a
share-for-share basis by a resolution of the Board of Directors if, as a result
of the existence of the Class A Common Stock, either class of Common Stock is
excluded from trading on NASDAQ (or any national securities exchange on which
the Common Stock is then listed).
In addition, if at any time the number of outstanding shares of Class B
Common Stock as reflected on the stock transfer books of the Company falls below
10% of the aggregate number of outstanding shares of Class A Common Stock and
Class B Common Stock, then, immediately upon the occurrence of such event, all
the outstanding shares of Class A Common Stock shall be automatically converted
into shares of Class B Common Stock, on a share-for-share basis. For purposes of
the immediately preceding sentence, any shares of Class A Common Stock or Class
B Common Stock repurchased by the Company shall no longer be deemed
"outstanding" from and after the date of repurchase.
In the event of any such conversion of the Class A Common Stock,
certificates which formerly represented outstanding shares of Class A Common
Stock will thereafter be deemed to represent a like number of shares of Class B
Common Stock and all shares of Common Stock authorized by the Amended
Certificate of Incorporation will be deemed to be shares of Class B Common
Stock.
PREEMPTIVE RIGHTS
The Common Stock will not carry any preemptive rights enabling a holder to
subscribe for or receive shares of any class of stock of the Company or any
other securities convertible into shares of any class of stock of the Company.
TRANSFERABILITY: TRADING MARKET
Like the Existing Common Stock, the Class A Common Stock and the Class B
Common Stock will be freely transferable. The Company is filing applications
with the NASD with respect to the Class A Common Stock and the Class B Common
Stock and, like the Existing Common Stock, it is expected that both such classes
will be listed for quotation on the NASDAQ National Market System. See "Certain
Effects of the Proposal -- Potential Changes in Law or Regulations."
INCREASE IN AUTHORIZED COMMON STOCK
The Company's Certificate of Incorporation, as amended, presently authorizes
10,000,000 shares, of the Existing Common Stock. The Amendment would increase
the total authorized number of shares of Common Stock from 10,000,000 to
30,000,000, authorizing the issuance of up to 20,000,000 shares of Class A
Common Stock and up to 10,000,000 shares of Class B Common Stock. After
implementation of the Proposal, approximately 4.7 million shares of Class A
Common Stock and 4.7 million shares of Class B Common Stock would be issued and
outstanding. Approximately 15.3 million shares of Class A Common Stock and 5.3
million shares of Class B Common Stock would therefore be available for issuance
from time to time for any proper corporate purpose, including stock splits,
stock dividends, acquisitions, stock option plans, funding of employee benefit
plans and public and private equity offerings. No further action or
authorization by the stockholders would be necessary prior to the issuance of
the additional shares of Class A Common Stock or Class B Common Stock authorized
pursuant to the Amendment unless applicable laws or regulations would require
such approval in a given instance.
The Amendment would not increase the number of shares of voting Common Stock
which could be issued, but would only authorize a larger number of shares of
Class A Common Stock. A larger amount of Class A Common Stock is necessary in
the event the Company effects any stock splits or stock dividends on the Common
Stock. The Board of Directors of the Company also believes that it is desirable
to have the additional authorized shares of Common Stock available for possible
future financing and acquisition transactions, and other general corporate
purposes. Having such additional authorized shares of Common Stock available for
issuance in the future will give the Company greater flexibility and may allow
such shares
16
to be issued without the expense and delay of a special stockholders' meeting.
The Company does not presently have any agreement, understanding, arrangement or
plans that would result in the issuance of any of the additional shares of
Common Stock to be authorized except as set forth in the Amendment and pursuant
to the Distribution. Unissued shares of Common Stock could be issued in
circumstances that would serve to preserve control of the Company's then
existing management. The Company's Amended Certificate of Incorporation will
permit the holders of a majority of the outstanding shares of the Class B Common
Stock to amend the Amended Certificate of Incorporation to increase the number
of authorized shares of Class A Common Stock or Class B Common Stock.
STOCKHOLDER INFORMATION
The Company will deliver to the holders of Class A Common Stock the same
proxy statements, annual reports and other information and reports as it
delivers to holders of Class B Common Stock.
CERTAIN EFFECTS OF THE PROPOSAL
EFFECTS ON RELATIVE OWNERSHIP INTEREST AND VOTING POWER
Because the Amendment provides that each whole share of Existing Common
Stock will be reclassified and changed into one share of Class B Common Stock,
and because the Distribution is to be made to all stockholders in proportion to
the number of shares of Class B Common Stock owned on the Distribution Record
Date by each stockholder, the relative ownership interest and voting power of
each holder of a whole share of Existing Common Stock will be the same
immediately after effectiveness of the Amendment and Distribution as it was
immediately prior thereto. Consequently, assuming that the members of the Cherry
Family retain the shares of Class B Common stock beneficially owned by them and
that the Company does not issue additional Class B Common Stock, the Amendment
will not alter the Cherry Family's present voting position in the Company.
Stockholders who sell their shares of Class B Common Stock after the
Distribution will lose a greater amount of voting control in proportion to
equity than they would have prior to the Distribution. At the same time,
stockholders desiring to maintain a long-term investment in the Company will be
free to continue to hold the Class B Common Stock and retain the benefits of the
voting power attached to such Common Stock.
As of the date of this Proxy Statement members of the Cherry Family had sole
or shared voting or dispositive power over an aggregate of approximately 2.8
million shares or approximately 60% of the outstanding Existing Common stock of
the Company. Accordingly, the Cherry Family will receive an aggregate of
approximately 2.8 million shares each of Class A Common Stock and Class B Common
Stock in connection with the Amendment and the Distribution.
If the Cherry Family, following the Distribution, were to sell all of the
shares of Class A Common Stock received in the Distribution, the Cherry Family
would still have approximately 60% of the voting power assuming no other change.
The foregoing is for illustrative purposes only and is in no way intended to
suggest that the Cherry Family has any intention of selling any or all of its
shares of Class A Common Stock or Class B Common Stock following the
Distribution. It is the present intention of members of the Cherry Family to
hold the shares of Class B Common Stock and to dispose of shares of Class A
Common Stock if they dispose of any shares.
EFFECT ON MARKET PRICE
The market price of shares of Class A Common Stock and Class B Common Stock
after the Distribution will depend, as before the adoption of the Amendment, on
many factors, including, among others, the future performance of the Company,
general market conditions and conditions relating to companies or industries
similar to that of the Company. Accordingly, the Company cannot predict the
prices at which the Class A Common Stock and Class B Common Stock will trade
following the adoption of the Amendment and the Distribution, just as the
Company could not predict the price at which the Existing Common Stock would
trade absent the Amendment and the Distribution. On June 14, 1994, the closing
price of the Existing Common Stock was $30 7/8 per share as reported on the
NASDAQ National Market System. As discussed above, under certain circumstances
the Class B Common Stock could trade at a premium compared to the
17
Class A Common Stock. However, after consultation with the Company's financial
and legal advisors, the Board of Directors included a Class A Protection
provision for the Class A Common Stock to reduce or eliminate the economic
reasons for the Class B Common Stock to trade at a premium compared to the Class
A Common Stock. Should a premium on the Class B Common Stock develop, the
Amendment expressly permits the Board to issue and sell shares of Class A Common
Stock even if the consideration which could be obtained by issuing or selling
Class B Common Stock would be greater. The Amendment also expressly permits the
Board to purchase shares of Class B Common Stock even if the consideration which
would be paid by purchasing Class A Common Stock would be less.
Because the market price of the Class B Common Stock is expected to be
approximately one-half of the price of the Existing Common Stock, it will be
possible to acquire more voting Common Stock for a given amount of consideration
after the Distribution. Therefore, subject to the requirement to purchase a
proportionate amount of Class A Common Stock under certain circumstances
pursuant to the Class A Protection provision discussed above, the Proposal would
permit stockholders, including the Cherry Family, to increase their relative
voting control at a lower cost. The Cherry Family has advised the Company that
it has no present plans to acquire any additional shares of Common Stock after
the Distribution.
TRADING MARKET
Upon effectiveness of the Amendment, approximately 4.7 million shares of
Class B Common Stock will be issued and outstanding. After the Distribution,
approximately 4.7 million shares of Class A Common Stock will be issued and
outstanding. To minimize dilution of voting power to existing stockholders, the
Company is more likely to issue additional Class A Common Stock than Class B
Common Stock in the future to raise equity, finance acquisitions or fund
employee benefit plans. Furthermore, members of the Cherry Family are more
likely to dispose of Class A Common Stock over time than Class B Common Stock.
Any such issuance of additional Class A Common Stock by the Company or
dispositions of Class A Common Stock by members of the Cherry Family or other
major stockholders may serve to further increase market activity in Class A
Common Stock relative to the Class B Common Stock.
EFFECT ON BOOK VALUE AND EARNINGS PER SHARE
Although the interest of each stockholder in the total equity of the Company
will remain unchanged as a result of the Distribution, the issuance of the Class
A Common Stock pursuant to the Distribution will, like any stock dividend, cause
the book value and earnings per share of the Company to be adjusted to reflect
the increased number of shares outstanding. Although effected in the form of a
dividend, for accounting purposes, the Distribution will have the same effect as
a two-for-one stock split.
FEDERAL INCOME TAX CONSEQUENCES
The Company believes that, in general, for federal income tax purposes (i)
neither the reclassification of Existing Common Stock into Class B Common Stock
nor the Distribution of Class A Common Stock will be taxable to a stockholder of
the Company, (ii) neither the Class A Common Stock nor the Class B Common Stock
will constitute "Section 306 stock" within the meaning of Section 306(c) of the
Internal Revenue Code of 1986, as amended, (iii) the cost or other basis of each
share of Existing Common Stock will be apportioned between the share of Class A
Common Stock and the new share of Class B Common Stock in proportion to the fair
market value of the shares of each class of stock on the date of the
Distribution, (iv) the holding period for each new share of Class A Common Stock
and Class B Common Stock will include such stockholder's holding period for the
old share of Existing Common Stock with respect to which the Class A Common
Stock and Class B Common Stock is distributed, and (v) no gain or loss will be
recognized on any subsequent conversion of shares of Class A Common Stock into
shares of Class B Common Stock. Gain or loss would be recognized, however, on
the subsequent sale of shares of Class A Common Stock and shares of Class B
Common Stock. Stockholders are urged to seek the advice of their own tax counsel
on this matter and on state income tax matters.
SECURITIES ACT OF 1933
Because the Existing Common Stock will be reclassified as Class B Common
Stock with essentially the same rights, powers and limitations, the
redesignation is not an "offer," "offer to sell," "offer for sale" or
18
"sale" of a security within the meaning of Section 2(3) of the Securities Act of
1933, as amended (the "Securities Act") and will not involve the substitution of
one security for another under Rule 145 thereunder. In addition, the
Distribution of the Class A Common Stock as a stock dividend will not involve a
"sale" of a security under the Securities Act or Rule 145. Consequently, the
Company is not required to register and has not registered the Class A Common
Stock or the Class B Common Stock under the Securities Act.
Because the Amendment and Distribution do not constitute a "sale" of either
Class A Common Stock or Class B Common Stock under the Securities Act,
stockholders will not be deemed to have purchased such shares separately from
the Existing Common Stock under the Securities Act and Rule 144 thereunder.
Shares of Class B Common Stock held immediately upon effectiveness of the
Amendment and shares of Class A Common Stock received in the Distribution, other
than any such shares held by "affiliates" of the Company within the meaning of
the Securities Act, may be offered for sale and sold in the same manner as the
Existing Common Stock without registration under the Securities Act. Affiliates
of the Company, including members of the Cherry Family, will continue to be
subject to the restrictions specified in Rule 144 under the Securities Act.
NASD CRITERIA
The Existing Common Stock is currently traded on the NASDAQ National Market
System and application is being made to trade the Class A Common Stock and the
Class B Common Stock on the NASDAQ National Market System. The Proposal is
intended to comply with the requirements of Rule 19c-4 (the "Rule") adopted in
July 1988 by the SEC under the Securities Exchange Act of 1934, as amended.
Although a federal appellate court vacated the Rule as a rule of the SEC, the
Rule has been adopted as a standard for listing on the NASDAQ National Market
System by the NASD. The effect of the Rule is to prohibit the quotation on the
NASDAQ National Market System of equity securities of an issuer if such issuer
"issues any class of security, or takes other corporate action, with the effect
of nullifying, restricting or disparately reducing the per share voting rights
of holders of an outstanding class or classes of common stock of such issuer . .
." The purpose of the Rule is to prohibit stock issuances and other corporate
actions that have a "disenfranchising effect" on existing stockholders.
The NASD has advised the Company that the issuance of non-voting Class A
Common Stock pursuant to the Proposal would not violate the Rule. The Company
presently anticipates that both the Class A Common Stock and the Class B Common
Stock will be traded on the NASDAQ National Market System. Future issuances of
Common Stock may be subject to the Rule and the Company may be required to seek
and obtain NASD approval in connection with such issuances.
EFFECT ON COMPENSATION PLANS
The only compensation plans that will be affected by the Proposal are the
Company's Incentive Stock Option Plan and the Company's Employee Stock Purchase
Plan. Outstanding options under the Incentive Stock Option Plan will be adjusted
appropriately to reflect the reclassification of Existing Common Stock and the
Distribution. The Incentive Stock Option Plan expired in 1992 so no future
options will be granted under such plan. All purchases made under the Employee
Stock Purchase Plan after calendar year 1994 will be for shares of Class A
Common Stock.
POTENTIAL CHANGES IN LAW OR REGULATIONS
In recent years, bills have been introduced in Congress that, if enacted,
would have prohibited the registration of common stock on a national securities
exchange or the trading of such common stock on NASDAQ if such common stock was
part of a class of securities which has no voting rights or carried
disproportionate voting rights. While these bills have not been acted upon by
Congress, there can be no assurance that such a bill (or a modified version
thereof) will not be introduced in Congress in the future. Legislation or other
regulatory developments could make the Company's Class A Common Stock and Class
B Common Stock ineligible for trading on national securities exchanges and for
trading on NASDAQ as a result of the Distribution. The Company is unable to
predict whether any such regulatory proposals will be adopted or whether they
will have such effect. If such legislation is adopted, however, it could include
"grandfather" provisions, in which event the Company might not be affected as to
any action already taken.
19
If legislation is adopted which would make either class of the Company's
Common Stock ineligible for trading on NASDAQ, or any national securities
exchange on which it is listed, the Amendment provides that the Board may
convert Class A Common Stock into Class B Common Stock on a share for share
basis.
GENERAL
EXPENSES
The costs of proceeding with the Proposal (such as transfer agent's fees,
printing, engraving and mailing costs, legal fees, investment banking fees,
solicitation fees, and NASD fees) will be charged against the Company's pre-tax
earnings. The approximate cost of proceeding with the Proposal is estimated to
be $300,000, inclusive of fees of financial and legal advisors.
FINANCIAL INFORMATION
The Company has furnished its financial statements to stockholders in its
1994 Annual Report, which accompanies this Proxy Statement. In addition, the
Company will promptly provide without charge to any stockholder, on the request
of such stockholder, an additional copy of the 1994 Annual Report and the
Company's most recent Form 10-K, as amended. Written requests for such copies
should be directed to the Secretary, The Cherry Corporation, 3600 Sunset Avenue,
Waukegan, Illinois 60087, or by telephone to (708) 662-3508.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the outstanding
Existing Common Stock is required for approval of the Amendment. Abstentions and
broker non-votes will count as votes against the Proposal. The Company has been
advised by members of the Cherry Family, who in the aggregate beneficially own
or have the power to vote approximately 60% of the outstanding Existing Common
Stock entitled to vote at the meeting, that they intend to vote in favor of
approval of the Amendment. As noted above, the Board of Directors recommends
that the shareholders vote "FOR" the Proposal and the adoption of the Amendment.
ACCOUNTING INFORMATION
The Company's Independent Public Accountants for fiscal 1994 were Arthur
Andersen & Co., and such firm is expected to have representatives at the annual
meeting of stockholders who will be available to respond to appropriate
questions at that time and have an opportunity to make a statement if they
desire to do so.
By Order of the Board of Directors
DAN A. KING
SECRETARY
June 20, 1994
20
EXHIBIT A
ARTICLE FOURTH OF THE CERTIFICATE OF INCORPORATION
OF THE CHERRY CORPORATION
AS PROPOSED TO BE AMENDED AND RESTATED
FOURTH: The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is thirty million (30,000,000) shares
which shall be divided into two classes as follows:
(a) Twenty Million (20,000,000) shares of Class A Common Stock of the
par value of one dollar ($1.00) per share; and
(b) Ten Million (10,000,000) shares of Class B Common Stock of the par
value of one dollar ($1.00) per share.
Upon a Certificate of Amendment of Restated Certificate of Incorporation
becoming effective pursuant to the General Corporation Law of the State of
Delaware (the "Effective Time"), and without any further action on the part of
the Corporation or its stockholders, each share of the Corporation's Common
Stock, $1.00 par value, then issued (including shares held in the treasury of
the Corporation), shall be automatically reclassified, changed and converted
into one (1) fully paid and non-assessable share of Class B Common Stock, $1.00
par value. Any stock certificate that, immediately prior to the Effective Time,
represents shares of Common Stock, $1.00 par value, will, from and after the
Effective Time, automatically and without the necessity of presenting the same
for exchange, represent that number of shares of Class B Common Stock equal to
the number of shares of Common Stock represented by such certificate prior to
the Effective Time. As soon as practicable after the Effective Time, the
corporation's transfer agent shall mail a transmittal letter to each record
holder who would be entitled to receive a share of Class B Common Stock.
The Class A Common Stock and Class B Common Stock are hereinafter
collectively referred to as the "Common Stock." The designations and powers,
preferences and rights, and the qualifications, limitations on restrictions
thereof, of the above classes of stock shall be as follows:
(a) RIGHTS. Except as otherwise required by law or as otherwise
provided in this certificate, each share of Class A Common Stock and each
share of Class B Common Stock shall have identical powers, preferences,
qualifications, limitations and other rights.
(b) DIVIDENDS. Subject to all of the rights of any class of stock
authorized after the effective date of this provision of Article Fourth
ranking senior to the Common Stock as to dividends, dividends may be paid
upon the Class A Common Stock and the Class B Common Stock as and when
declared by the Board of Directors out of funds and other assets legally
available for the payment of dividends. If and when dividends on the Class A
Common Stock and the Class B Common Stock are declared and payable from time
to time by the Board of Directors whether payable in cash, in property or in
shares of stock of the corporation, the holders of the Class A Common Stock
and the holders of the Class B Common Stock shall be entitled to share
equally, on a per share basis, in such dividends, except that (1) a dividend
or distribution in cash or property on a share of Class A Common Stock may
be greater than any dividend or distribution in cash or property on a share
of Class B Common Stock, and (2) dividends or other distributions payable on
the Common Stock in shares of any authorized class or series of capital
stock of the corporation may be made (i) in shares of Class A Common Stock
to the holders of Class A Common Stock and in shares of Class B Common Stock
to the holders of Class B Common Stock, (ii) in shares of Class A Common
Stock to the holders of Class A Common Stock and to the holders of Class B
Common Stock, or (iii) in any other authorized class or series of capital
stock to the holders of both classes of Common Stock.
(c) LIQUIDATION. In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary, and after
the holders of any class of stock authorized after the effective date of
this provision of Article Fourth ranking senior to the Common Stock as to
assets shall have been paid in full the amounts to which such holders shall
be entitled, or an amount sufficient to pay
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the aggregate amount to which such holders shall be entitled shall have been
set aside for the benefit of the holders of such stock, the remaining net
assets of the corporation shall be distributed pro rata to the holders of
both classes of the Common Stock.
(d) MERGER AND CONSOLIDATION. In the event of a merger or
consolidation of the corporation with or into another entity (whether or not
the corporation is the surviving entity), the holders of Class A Common
Stock shall be entitled to receive the same per share consideration as the
per share consideration, if any, received by any holder of the Class B
Common Stock in such merger or consolidation.
(e) VOTING. (1) Except as otherwise expressly provided with respect to
any other class of stock and except as otherwise may be required by law or
this certificate, the Class B Common Stock shall have the exclusive right to
vote for the election of directors and for all other purposes and each
holder of Class B Common Stock shall be entitled to one vote for each share
of Class B Common Stock held. Except as expressly provided in this
certificate and except as otherwise required by law, the Class A Common
Stock shall have no voting rights.
(2) The Class A Common Stock shall be entitled to vote separately as a
class only with respect to (i) proposals to change the par value of the
Class A Common Stock, (ii) other amendments to this certificate that alter
or change the powers, preferences or special rights of the Class A Common
Stock so as to affect them adversely, and (iii) such other matters as may
require class voting under the Delaware General Corporation Law.
(3) The number of authorized shares of Class A Common Stock and Class B
Common Stock may be increased or decreased (but not below the number of
shares then outstanding) by the affirmative vote of the holders of a
majority of the Class B Common Stock.
(f) STOCK SPLITS. The corporation may not split, divide or combine the
shares of either class of Common Stock unless, at the same time, the
corporation splits, divides or combines, as the case may be, the shares of
the other class of Common Stock in the same proportion and manner.
(g) CONVERSION. (1) All outstanding shares of Class A Common Stock may
be converted into shares of Class B Common Stock on a share-for-share basis
by a resolution of the Board of Directors if, as a result of the existence
of the Class A Common Stock, either the Class A Common Stock or Class B
Common Stock is, or both are, excluded from trading on the NASD National
Market System, or, if such shares are listed on a national securities
exchange, from trading on the principal national securities exchange on
which such securities are traded.
(2) All outstanding shares of Class A Common Stock shall be immediately
converted into shares of Class B Common Stock on a share-for-share basis if
at any time the number of outstanding shares of Class B Common Stock as
reflected on the stock transfer records of the corporation falls below 10%
of the aggregate number of outstanding shares of Class A Common Stock and of
Class B Common Stock. For purposes of the immediately preceding sentence,
any shares of Common Stock repurchased by the corporation shall no longer be
deemed "outstanding" from and after the date of repurchase.
(3) In the event of any conversion of the Class A Common Stock pursuant
to subdivision (g)(1) or (g)(2), certificates which formerly represented
outstanding shares of Class A Common Stock will thereafter be deemed to
represent a like number of shares of Class B Common Stock and all authorized
shares of Common Stock shall consist of only Class B Common Stock.
(4) For purposes of this subsection (g) of this Article Fourth, the term
"person" means a natural person, company, government, or political
subdivision, agency or instrumentality of a government, or other entity.
"Beneficial ownership" shall be determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"), or any successor regulation. The formation or existence of a "group"
shall be determined pursuant to Rule 13d-5(b) under the 1934 Act or any
successor regulation.
(h) (1) A Person, as defined in clause (6) of paragraph (h) of this
Article Fourth, who after the Effective Time, acquires any shares of Class B
Common Stock may not exercise the voting power of that
A-2
number of the shares of Class B Common Stock so acquired that are deemed to
be excess Class B Shares for purposes of this paragraph (h). An acquisition
of shares of Class B Common Stock hereunder shall be deemed to include any
shares of Class B Common Stock that a Person acquires, directly or
indirectly, in one transaction or in a series of transactions, or with
respect to which the Person acts or agrees to act in concert with any other
Person. The number of shares of Class B Common Stock deemed hereunder to be
excess Class B Shares shall be determined by application of the following
formula:
(i) the percentage which the number of shares of Class B Common Stock
acquired by the Person since the Effective Time, bears to the aggregate
number of outstanding shares of Class B Common Stock;
(ii) minus 10%;
(iii) minus the percentage which the number of shares of Class A
Common Stock acquired at an equitable price by that Person after the
Effective Time bears to the aggregate number of outstanding shares of
Class A Common Stock;
(iv) times the aggregate number of outstanding shares of Class B
Common Stock.
For purpose of this determination, any shares of Class A Common Stock or
Class B Common Stock repurchased by the Company since the last date on which
a Person acquired any shares of Class A Common Stock or Class B Common Stock
(whether in treasury or retired) shall be deemed still to be outstanding.
Determination of excess Class B Shares shall be made as of the date that a
Person, directly or indirectly, alone or with others, otherwise would seek
to exercise or direct the exercise of voting power with respect to those
Class B Shares.
(2) Shares of Class A Common Stock shall have been acquired at an
equitable price for purposes of clause (1) of this paragraph (h) only if
they were acquired at a price at least equal to the higher of:
(i) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the acquiring Person
for any shares of Class B Common Stock acquired by that Person within
either 60 days before or 60 days after the shares of Class A Common Stock
were acquired; or
(ii) the highest closing sale price during the 30-day period
immediately before the shares of Class A Common Stock were acquired of a
share of Class B Common Stock on the NASDAQ National Market System, or,
if the shares of Class B Common Stock are not quoted on the NASDAQ
National Market System, on the principal United States national
securities exchange on which the shares of Class B Common Stock are
listed, or, if the shares of Class B Common Stock are not listed on any
United States national securities exchange, or, if no quotations are
available, the fair market value during such 30-day period of a share of
Class B Common Stock as determined in good faith by the Board of
Directors of the Company.
If any of the consideration given by the Person for any share of Class B
Common Stock under subclause (i) of this clause (2) was other than cash, the
value of such non-cash consideration shall be as determined in good faith by
the Board of Directors of the Company.
(3) An acquisition of a share of Class B Common Stock shall not include
for the purposes of clause (1) of this paragraph (h) an acquisition by
bequest or inheritance, by operation of law upon the death of any
individual, or by any other transfer without valuable consideration,
including a gift that is made in good faith and not for the purpose of
circumventing this paragraph (h).
(4) Unless there are affirmative attributes of concerted action, acting
or agreeing to act in concert with any other Person shall not include for
purposes of clause (1) of this paragraph (h) actions taken or agreed to be
taken by Persons acting in their official capacities as directors or
officers of the Company or actions by Persons related by blood or marriage.
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(5) To the extent that the voting power of any share of Class B Common
Stock cannot be exercised pursuant to this paragraph (h), that share of
Class B Common Stock shall not be included in the determination of the
voting power of the Company for any purpose under this Certificate of
Incorporation or the Delaware General Corporation Law.
(6) For purposes of this subsection (h) of this Article Fourth, the term
"Person" means a natural person, company, government, or any political
subdivision, agency or instrumentality of a government, or other entity.
(i) NO PRE-EMPTIVE RIGHTS. No stockholder of this corporation shall by
reason of his holding shares of any class have any pre-emptive or
preferential right to purchase or subscribe to any shares of any class of
this corporation, now or hereafter to be authorized, or any notes,
debentures, bonds, or other securities convertible into or carrying options
or warrants to purchase shares of any class, now or hereafter to be
authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or other securities, would adversely affect the dividend
or voting rights of such stockholder, other than such rights, if any, as the
Board of Directors, in its discretion from time to time may grant and at
such price as the Board of Directors in its discretion may fix; and the
Board of Directors may issue shares of any class of this corporation, or any
notes, debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, without offering any
such shares of any class, either in whole or in part, to the existing
stockholders of any class.
(j) ISSUANCES AND REPURCHASES OF COMMON STOCK. (1) The Board of
Directors shall have the power to issue and sell all or any part of any
class of stock herein or hereafter authorized to such persons, firms,
associations or corporations, and for such consideration as the Board of
Directors shall from time to time, in its discretion, determine, whether or
not greater consideration could be received upon the issue or sale of the
same number of shares of another class, and as otherwise permitted by law.
(2) The Board of Directors shall have the power to purchase any class of
stock herein or hereafter authorized from such persons, firms, associations
or corporations, and for such consideration as the Board of Directors shall
from time to time, in its discretion, determine, whether or not less
consideration could be paid upon the purchase of the same number of shares
of another class, and as otherwise permitted by law.
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Preliminary Copy
THE CHERRY CORPORATION PROXY
3600 SUNSET AVENUE, WAUKEGAN, ILLINOIS 60087
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES
RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
(IF THE STOCK IS REGISTERED IN THE
NAME OF MORE THAN ONE PERSON, THE
PROXY SHOULD BE SIGNED BY ALL NAMED
HOLDERS. IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, CORPORATE OFFICIAL, ETC.,
PLEASE GIVE FULL TITLE AS SUCH.)
________________________(SIGNATURE)
DATED:______________________, 1994
_______________________(Signature)
The undersigned hereby appoints Walter L. Cherry and Peter B. Cherry, and
each of them, as proxies, each with full power of substitution, to represent and
to vote, as designated below, all of the undersigned's Common Stock in The
Cherry Corporation at the annual meeting of stockholders of The Cherry
Corporation to be held on Monday, July 11, 1994, and at any adjournment thereof,
with the same authority as if the undersigned were personally present.
1. Election of Directors / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary) nominees listed below
WALTER L. CHERRY, PETER B. CHERRY, ALFRED S. BUDNICK, THOMAS L. MARTIN, JR.,
ROBERT B. MCDERMOTT, PETER A. GUGLIELMI, CHARLES W. DENNY
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- - - --------------------------------------------------------------------------------
2. Approval of proposal to amend Article Fourth of the Certificate of
Incorporation, as amended, in the form attached as Exhibit A to the Proxy
Statement -- recommended by the board of directors / / FOR / / AGAINST / / ABSTAIN
- - - ------------------------------------------------------------------------------------------------------------------------
3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND PROPOSAL 2.
(PLEASE DATE AND SIGN ON REVERSE SIDE.)