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
/ / Confidential for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
VERNITRON CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
$125.00
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
[LETTERHEAD]
April 28, 1995
Dear Vernitron Stockholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Meeting of Stockholders on May 25, 1995, at 12:00 noon, at
the offices of Republic National Bank, Lower Level Conference Room, 452 Fifth
Avenue, New York, New York 10018.
The accompanying Notice of Annual Meeting and Proxy Statement describes the
proposals to be considered at the meeting.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend personally, please complete and mail the enclosed proxy
card in the return envelope.
Very truly yours,
Stephen W. Bershad
CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER
[VERNITRON LOGO]
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995
- - --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Vernitron Corporation (the "Company")
will be held on May 25, 1995 at 12:00 noon, at the offices of Republic National
Bank, Lower Level Conference Room, 452 Fifth Avenue, New York, New York 10018,
for the following purposes:
1. To elect three directors to the Board of Directors;
2. To ratify the selection of Arthur Andersen LLP as independent
accountants of the Company for the fiscal year ending December 31,
1995; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 28, 1995,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof. A list of such stockholders will be open for examination by any
stockholder for any purpose germane to the meeting, during ordinary business
hours, for ten days prior to the meeting at the offices of the Company, 645
Madison Avenue, New York, New York 10022.
Whether or not you expect to attend the meeting, it is important that your
shares be represented, regardless of the number of shares you hold.
Accordingly, you are encouraged to sign, date and return the enclosed proxy card
in the reply envelope provided as soon as possible.
By Order of the Board of Directors,
/S/ ELLIOT N. KONOPKO
ELLIOT N. KONOPKO
SECRETARY
April 28, 1995
[VERNITRON LOGO]
- - --------------------------------------------------------------------------------
PROXY STATEMENT
- - --------------------------------------------------------------------------------
This proxy statement, which is first being mailed to stockholders on or
about May 1, 1995, is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Vernitron Corporation (the "Company"),
645 Madison Avenue, New York, New York 10022, for use at the Annual Meeting of
Stockholders to be held at 12:00 noon, on May 25, 1995, and for all adjournments
thereof (the "Annual Meeting"), at the offices of Republic National Bank, Lower
Level Conference Room, New York, New York 10018.
Only stockholders of record at the close of business on April 28, 1995, the
record date for the Annual Meeting, will be entitled to notice of and to vote at
the Annual Meeting. As of the record date,12,538,012 shares of the Company's
common stock, par value $.01 per share ("Common Stock"), were outstanding and
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote.
A majority of the outstanding shares of Common Stock constitutes a quorum.
If a share is represented for any purpose at the meeting, it is deemed to be
present for all other matters. Abstentions and shares held of record by a
broker or its nominee ("Broker Shares") that are voted on any matter are
included in determining the number of votes present. Broker Shares that are not
voted on any matter will not be included in determining whether a quorum is
present. The election of each nominee for director, as set forth in Proposal
No. 1 below, and the ratification of the selection of Arthur Andersen LLP as
independent accountants, as set forth in Proposal No. 2 below, each requires the
affirmative vote of a majority of the votes cast.
Stockholders are encouraged to specify the way they wish to vote their
shares by marking the appropriate boxes on the enclosed proxy. Shares
represented by proxies that are properly executed and returned will be voted as
specified on the proxy. IF NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR
PROPOSALS 1 AND 2 DESCRIBED IN THIS PROXY STATEMENT. A stockholder may revoke a
proxy at any time before it is actually voted by delivering written notice of
revocation to the Secretary of the Company, by submitting a properly executed
proxy bearing a later date, or by attending the meeting and voting in person.
The Board of Directors does not intend to present any matters for a vote at
the meeting except the proposals described in this Proxy Statement. The persons
named in the proxy will, however, have discretionary voting authority regarding
any other business that may properly come before the meeting.
The expense of preparing, printing and mailing this Proxy Statement and the
related proxy solicitation material will be paid by the Company. Proxies are
being solicited principally by mail; but proxies may also be solicited
personally, by telephone and similar means by directors, officers and regular
employees of the Company without additional compensation. The Company will
reimburse brokerage firms and others for their expenses in forwarding proxy
solicitation materials to the beneficial owners of Common Stock.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors of not less than two
directors, as determined from time to time by resolution of the Board. The
Board currently consists of three directors. As noted above, proxies will be
voted, unless authority is withheld, FOR the election as directors of the three
nominees listed below, who are the current directors, to serve until the next
annual meeting of stockholders and until their respective successors shall be
duly elected and qualified. If any nominee should become unavailable for
election, proxies will be voted, unless authority is withheld, for an alternate
or alternates, if any, designated by the Board. The Board has no reason to
believe that any nominee will become unavailable for election.
The name, age and principal occupation of each nominee, the nominee's
length of service as a director of the Company, the names of the other public
companies of which the nominee is a director and certain other biographical
information are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
ALL NOMINEES (PROPOSAL NO. 1).
STEPHEN W. BERSHAD, 53
Chairman of the Board and Chief Executive Officer of the Company since
December 1986. Prior to joining the Company, he was a Managing Director of
Lehman Brothers and its predecessors, investment banking firms, where he held a
series of senior management positions. Mr. Bershad is a director of EMCOR
Group, Inc.
ANTHONY J. FIORELLI, JR., 65
President, Strategic Management Consulting Services, Inc., a management
consulting firm, since December 1985. Prior to that time, Mr. Fiorelli was
President and Chief Executive Officer of General Defense Corporation, a
diversified engineering and manufacturing company. Mr. Fiorelli has been a
director of the Company since February 1988.
ELIOT M. FRIED, 62
Mr. Fried has been a Managing Director of Lehman Brothers and its
predecessors, investment banking firms, since 1991. Prior to that time he was
Senior Executive Vice President of Lehman Brothers. Currently, he is Co-
Chairman of Lehman Brother's Investment Committee. Mr. Fried is a director of
American Marketing Industries, Inc., Bridgeport Machines, Inc., Energy Ventures,
Inc., Lear Seating Corporation, Sun Distributors, L.P. and Walter Industries
Inc. Mr. Fried has served as a Director of the Company since 1994.
The Board of Directors met 6 times during 1994. The Audit Committee, the
Compensation Committee and the Stock Incentive Plan Committee are the standing
committees of the Board.
2
The Audit Committee reviews internal and external audit procedures of the
Company. Mr. Fiorelli is a member of the Audit Committee. The Compensation
Committee oversees compensation policies of the Company. Its members are
Messrs. Bershad and Fiorelli. The Stock Incentive Plan Committee administers
the Vernitron Corporation Long-Term Stock Incentive Plan. Mr. Fiorelli is a
member of the Stock Incentive Plan Committee. The Audit Committee and the
Compensation Committee met once in 1994.
Each director attended all meetings of the Board and of the Committees on
which the director served.
The compensation of directors is fixed by the Board of Directors.
Directors who are not employees of the Company receive meeting fees of $2,500
for each Board meeting attended and $1,000 for each committee meeting attended
other than in connection with a Board meeting. Directors are reimbursed for
travel and other expenses incurred in the performance of their duties.
STOCK OWNERSHIP
DIRECTORS AND OFFICERS
The following table sets forth the number of shares of Common Stock
beneficially owned by the Company's directors individually, and by all directors
and officers as a group, as of March 31, 1995:
SHARES EXERCISABLE TOTAL
OWNED STOCK SHARES
DIRECTLY OR OPTION BENEFICIALLY PERCENT
INDIRECTLY (1) SHARES (2) OWNED OF CLASS
-------------- ---------- ------------ --------
Stephen W. Bershad . . . . . . . . . . . . . 5,685,157 42,000 5,727,158 45.2%
Anthony J. Fiorelli, Jr. . . . . . . . . . . 69,245 -- 69,245 (4)
Eliot M. Fried (3) . . . . . . . . . . . . . -- -- -- --
Directors and Executive Officers as a group
(5 persons). . . . . . . . . . . . . . . . . 5,754,402 72,000 5,826,402 46.2%
<FN>
- - ----------------
(1) Does not include 761,496 shares of Common Stock owned by the Vernitron
Corporation 401(K) Plan (the "401(K) Plan") as of March 31, 1995. Elliot N.
Konopko and Raymond F. Kunzmann, who are executive officers of the Company, are
the sole trustees of the 401(K) Plan and may be deemed to beneficially own such
shares, although each of them disclaims beneficial ownership of such shares.
Mr. Bershad owns 2,731,337 shares of Common Stock directly and 2,953,820 shares
of Common Stock indirectly through SWB Holding Corporation, of which he is the
sole shareholder and Chairman.
(2) Shares covered by stock options exercisable on March 31, 1995, or within 60
days thereafter.
(3) Eliot M. Fried is a Managing Director and a Co-Chairman of the Investment
Committee of Lehman, which may be deemed to beneficially own 2,318,705 shares of
Common Stock. See "Principal Stockholders" below. Mr. Fried disclaims
beneficial ownership of such shares.
(4) Less than 1% of the total Common Stock outstanding.
3
Mr. Bershad also directly owns, as of March 31, 1995, 128,635 shares of
$1.20 Cumulative Exchangeable Redeemable Preferred Stock, $.01 par value per
share ("Preferred Stock"), of the Company, constituting approximately 18.5% of
the outstanding shares of Preferred Stock. No other director or officer owns
any shares of Preferred Stock.
PRINCIPAL STOCKHOLDERS
The Company knows of no person who, as of March 31, 1995, beneficially
owned more than five percent of the Common Stock outstanding, except for Mr.
Bershad and except as set forth below.
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
Lehman Electric Inc. 2,318,705 shares 18.5%
World Financial Center
200 Vesey Street
New York, NY 10285
Victor A. Morgenstern 777,005 shares 6.2%
2 North LaSalle Street
Chicago, IL 60602
Vernitron Corporation 401(K) Plan 761,496 shares 6.1%
Vernitron Corporation
645 Madison Avenue
New York, NY 10022
Lehman Electric Inc., a Delaware corporation ("Lehman Electric"), is an
investment vehicle. Lehman Brothers Inc., a Delaware corporation ("Lehman
Brothers"), is a registered broker-dealer. Lehman Brothers Group Inc., a
Delaware corporation ("Group"), is a holding company and parent of Lehman
Electric. Lehman Brothers Holdings Inc., a Delaware corporation ("Holdings"),
through its domestic and foreign subsidiaries, is a full line securities firm.
It is the immediate parent of Lehman Brothers and Group. The foregoing entities
(other than Lehman Brothers) may be deemed to beneficially own the 2,318,705
shares of Common Stock directly owned by Lehman Electric. In the ordinary
course of its business on behalf of its customers, Lehman Brothers may purchase
and sell shares of Common Stock.
4
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation paid to the Company's executive
officers for services in all capacities for the three years ended December 31,
1994:
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ---------------- ALL OTHER
BONUS OTHER ANNUAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) COMPENSATION (# OF SHARES)(2) ($)(3)
- - --------------------------- ---- --------- ------- ------------ ---------------- ------------
Stephen W. Bershad . . . . . . . . 1994 262,500 150,000 -- 21,000 10,810
Chairman of the Board and 1993 262,500 -- -- -- 3,385
Chief Executive Officer 1992 262,500 150,000 -- -- 16,616
Edward M. Murchie (4). . . . . . . 1994 240,000 -- -- 121,000 8,474
President and Chief 1993 240,000 -- -- -- 470
Operating Officer 1992 240,000 105,000 -- -- 11,397
Elliot N. Konopko (5). . . . . . . 1994 175,000 55,000 -- 15,000 6,318
Vice President, General 1993 175,000 -- -- -- 3,338
Counsel and Secretary 1992 175,000 40,000 -- -- 5,534
Raymond F. Kunzmann (6). . . . . . 1994 120,000 28,000 -- 20,000 2,721
Vice President-Finance
and Controller
<FN>
- - ----------------
(1) Reflects payments under the Company's bonus plan, which is described in the
"Compensation Committee Report on Executive Compensation" beginning on page 9
of this proxy statement.
(2) Reflects awards under the Company's Long-Term Stock Incentive Plan, which
is described under "Stock Incentive Plan" on page 6 of this proxy statement.
The exercise price of options granted prior to 1994 (covering 42,000 shares,
242,000 shares and 30,000 shares in the case of Messrs. Bershad, Murchie and
Konopko, respectively) were adjusted pursuant to the terms of the Incentive Plan
in 1994. See "Stock Incentive Plan."
(3) Reflects matching contributions under the Company's 401(K) Plan, described
under 401(K) Plan on page 6 of this proxy statement, and payments under the
Company's executive health insurance plan. Vernitron's executive health
insurance plan, which covers only executive officers, provides for the
reimbursement of deductible and coinsurance amounts and certain medical expenses
not covered under Vernitron's basic medical plans.
(4) Mr. Murchie's employment with the Company terminated on January 30, 1995,
at which time Mr. Bershad assumed the additional duties of President and Chief
Operating Officer. Under the terms of a severance agreement with the Company
entered into in connection with his termination of employment, the Company
agreed to pay Mr. Murchie his salary, and continue certain benefits, under
certain circumstances until April 26, 1996. Mr. Murchie's options to acquire up
to 363,000 shares of Common Stock, including options granted in 1994, terminated
unexercised following his termination of employment.
5
(5) Mr. Konopko has been Vice President, General Counsel and Secretary of the
Company since March 1990.
(6) Raymond F. Kunzmann was elected Vice President-Finance and Controller on
June 2, 1994. Prior to that time, he was Group Controller at Mannesmann Capital
Corporation, a diversified manufacturing company, from January 1994 until May
31, 1994, and was Controller and held other positions at Lear Siegler, Inc., a
diversified manufacturing/service company, from January 1987 until December
1993.
401(K) PLAN
Vernitron currently maintains a 401(K) Salary Reduction Plan (the "401(K)
Plan") which is intended to qualify under Sections 401(a) and 401(K) of the
Internal Revenue Code. All employees who are not members of collective
bargaining groups and who are 21 years of age or older are eligible to
participate in the 401(K) Plan on the first calendar day of the month
immediately following the month in which they complete 1,000 hours of service.
All eligible executive officers have elected to participate in the 401(K) Plan.
Eligible employees electing to participate in the 401(K) Plan may defer a
portion of their compensation on a pre-tax basis, by contributing a percentage
thereof to the 401(K) Plan. The minimum contribution is not less than 3% of
annual gross pay. The maximum is prescribed by the Tax Reform Act of 1986. The
limit for 1994 was $9,240 and will be $9,240 in 1995. Effective November 6,
1991, the Company elected to make the matching contribution in Common Stock of
the Company. The Company matched in stock each employee's 3% contribution in
1994. Eligible employees who elect to participate in the 401(K) Plan and whose
employment began prior to December 1, 1988 are 100% vested in the Company's
matching contribution when made. Eligible employees whose employment began on
and after December 1, 1988 are vested in the Company's matching contribution
according to the following schedule: less than 1 year of service - 0%; 1 year
of service - 20%; 2 years of service - 40%; 3 years of service - 60%; 4 years of
service - 80%; and 5 years of service - 100%.
STOCK INCENTIVE PLAN
The Vernitron Corporation Long-Term Stock Incentive Plan (the "Incentive
Plan") was approved by the stockholders in 1991. The Incentive Plan is
administered by the Stock Incentive Plan Committee (the "Committee"). The
Committee selects participants from among those executives and other key
employees of the Company and its subsidiaries who are in a position to
contribute materially to the success of the Company and determines the amounts,
times, forms, terms and conditions of grants.
Grants may be in the form of options to purchase shares of Common Stock,
stock appreciation rights, restricted stock and performance units (collectively,
"stock incentives"). Grants may be made for up to 450,000 shares of Common
Stock of the Company in the aggregate. Stock appreciation rights may be granted
on a "free-standing" basis or in conjunction with all or a portion of the shares
covered by an option. Stock incentive awards are subject to such provisions as
the Committee determines and may be exercised at one time or in such
installments and at such prices over the balance of the exercise period as
determined by the Committee.
Each stock incentive is exercisable in whole or in part, prior to its
cancellation or termination, by written notice to the Company. If any option is
being exercised, such notice must be accompanied by payment in full of the
purchase price in cash or, if acceptable to the Committee, shares of Company
Common Stock or partly in cash and partly in such shares. Stock incentives are
not transferable except by will or by laws of descent and distribution.
6
In general, each stock incentive will terminate upon the earlier of (i) the
date fixed by the Committee when the stock incentive is granted or (ii) unless
determined otherwise by the Committee, termination of employment other than for
cause, to the extent the stock incentive was then exercisable, up to 90 days
after the participant's termination of employment. In the event of death or
termination due to disability, the stock incentive may be exercised to the
extent then exercisable for up to one year thereafter. If a participant's
employment is terminated for cause, however, his or her ability to exercise any
stock incentive is terminated.
The Company may make loans to such participants as the Committee, in its
discretion, may determine in connection with the exercise of options in an
amount up to the exercise price of the option plus any applicable withholding
taxes. In no event may any such loan exceed the fair market value, at the date
of exercise, of the shares covered by the option exercised.
Under the Incentive Plan, the Committee may determine, in the event of a
change of control of the Company, that all stock incentives which have not
terminated and which are then held by any participant will become immediately
exercisable. Any such determination by the Committee may be set forth in an
applicable option agreement or by resolution of the Committee.
Options outstanding under the Incentive Plan to acquire up to 117,000
shares were granted prior to 1994, including to Stephen W. Bershad (42,000
shares) and Elliot N. Konopko (30,000 shares). Options outstanding under the
Incentive Plan to acquire up to an additional 101,000 shares were granted in
1994 to certain new and current employees, including to Stephen W. Bershad
(21,000 shares), Elliot N. Konopko (15,000 shares) and Raymond F. Kunzmann
(20,000 shares). All options are exercisable to the extent of 40% thereof
within one year from the date of grant and an additional 30% each year
thereafter. All options are incentive stock options. All options terminate
seven years after the date of grant and are exercisable at $0.75 per share,
except that Mr. Bershad's options terminate five years after grant and are
exercisable at $0.83 per share. The exercise price for options granted prior to
1994 was adjusted from $2.00 to $0.75 per share ($2.20 to $0.83 per share in the
case of Mr. Bershad) pursuant to the Incentive Plan as a result of a rights
offering of Common Stock by the Company in 1994.
7
The following table contains information concerning the grant of stock
options to the named executive officers during 1994 under the Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (1) POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATIONS
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5% 10%
- - ---- ----------- ------------ ------------ ---------- -- ---
Stephen W. Bershad 21,000 21% 0.83 10/18/99 $6,405 $14,952
Elliot N. Konopko 15,000 15% 0.75 10/18/01 4,575 10,680
Raymond F. Kunzmann 20,000 20% 0.75 06/01/01 6,100 14,240
<FN>
- - ----------------
(1) The options were granted in October 1994 and have an exercise price equal
to the fair market value of the Common Stock on the date of grant. The options
vest over time and have a term of seven years, except for the options granted to
Mr. Bershad which expire five years from the date of grant, as described above.
Options to acquire up to 121,000 shares granted to Mr. Murchie in October 1994
terminated unexercised following his termination of employment in January 1995.
The exercise prices for options granted prior to 1994 to Messrs. Bershad and
Konopko (covering 42,000 shares and 30,000 shares, respectively) were adjusted
pursuant to the Incentive Plan as described above.
The following table provides information with respect to the named
executive officers concerning options that have been repriced in 1994 pursuant
to the Incentive Plan. During the past ten years, the Company has not repriced
options, except in 1994, and has not granted stock appreciation rights (SARs).
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL
UNDERLYING OF STOCK AT PRICE AT OPTION TERM
OPTIONS/ TIME OF TIME OF REMAINING
SARS REPRICING OR REPRICING OR NEW AT DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME (1) DATE AMENDED (#) ($) ($) PRICE ($) AMENDMENT
- - ---- ---- ----------- ------------ ------------ --------- ------------
Stephen W. Bershad 8/12/94 42,000 0.75 2.20 0.83 2 years
Elliot N. Konopko 8/12/94 30,000 0.75 2.00 0.75 4 years
<FN>
- - ------------
(1) Options to acquire up to 242,000 shares of Common Stock held by Mr. Murchie
were repriced in 1994 but expired unexercised following his termination of
employment in January 1995.
8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation.
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies which
seek to enhance the profitability of the Company, and thus shareowner value, by
aligning closely the financial interests of the Company's senior managers with
those of its shareowners. In furtherance of these goals, the Company relies to
a large degree on annual bonus and longer-term stock incentive compensation to
attract and retain executive officers and other key employees and to motivate
them to perform to the full extent of their abilities. Both types of incentive
compensation are not guaranteed and are variable and closely tied to corporate,
business unit and individual performance in a manner designed to encourage a
sharp and continuing focus on building profitability and shareowner value. The
annual bonus and stock incentive compensation is more closely tied to the
Corporation's success in achieving significant financial and other performance-
oriented goals. The Committee considers the total compensation (earned or
potentially available) of each of the executive officers and the other senior
managers in establishing each element of compensation. Eligible persons must be
employed by the Company at the time bonus compensation is awarded.
In evaluating the performance and setting the incentive compensation of the
Chief Executive Officer, the Committee has taken note of management's efforts in
completing a financial restructuring in 1994, restructuring the Company's
businesses to adjust for the decline in its defense business and in effectively
directing the Company's operations under the difficult economic conditions in
the Company's served markets over the last two fiscal years, as well as the
Company's results of operations during such period.
In its review of other senior management performance and compensation for
1994, the Committee has also taken into account management's consistent
commitment to the long-term success of the Company through development of new or
improved products, the implementation of significant cost reductions, resulting
in increased efficiencies and continued debt reduction.
Based on its evaluation of these factors, the Committee believes that the
senior management of the Company is dedicated to achieving significant
improvements in long-term financial performance and that the compensation
policies the Committee has implemented and administered have contributed to
achieving this management focus.
During each fiscal year, the Committee considers the desirability of
recommending to the Long-Term Stock Incentive Committee granting senior
executives, including executive officers, awards under the Incentive Plan, which
provides the flexibility to grant longer-term incentives in a variety of forms,
including performance units, stock options, stock appreciation rights and
restricted stock. In 1994 the Long Term Stock Incentive Committee, upon the
recommendation of the Committee, granted options to acquire up to 61,000 shares
of Common Stock to current employees and 40,000 shares to new employees. As
required pursuant to the Incentive Plan, the Long-Term Stock Incentive Committee
revised the exercise price of options granted pursuant to the Incentive Plan
prior to 1994 as a result of the rights offering of Common Stock completed in
July 1994 to reflect the fair market value of the Common Stock following the
rights offering. The Long-Term Incentive Committee's
9
determination was based on the trading prices of the Common Stock prior to and
following the consummation of the rights offering. See "Stock Incentive Plan".
Members of the Compensation Committee
Stephen W. Bershad
Anthony J. Fiorelli, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bershad, a member of the Compensation Committee, is Chairman of the
Board and Chief Executive Officer of the Company. Mr. Fiorelli's consulting
firm was paid a fee for consulting services of approximately $50,000 in 1994.
STOCK PRICE PERFORMANCE GRAPH
The information in the foregoing report and the following graph shall not
be incorporated by reference (by any general statement incorporating this proxy
statement by reference or otherwise) into any prior or future filing under the
Exchange Act or the Securities Act of 1933, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The following graph shows the value of a $100 investment in Common Stock
from August 30, 1991 through December 31, 1994, as of such dates, with a similar
investment in the NASDAQ Non-Financial Stock Index and the S&P High Technology
Composite Index. The NASDAQ Non-Financial Stock Index is an index comprising
all non-financial common shares traded on the NASDAQ National Market and the
NASDAQ Small-Cap Market. The S&P High Technology Composite Index is an index
comprising common shares of companies in the aerospace/defense, communications
equipment, electronics and office equipment and supplies industries. Both the
NASDAQ Non-Financial Stock Index and the S&P High Technology Composite Index are
calculated on a total return basis to include the reinvestment of dividends.
The Common Stock was first quoted on NASDAQ on August 14, 1991.
10
[Line Graph]
8/30/91 12/27/91 6/30/92 12/31/92 6/30/93 12/31/93 6/30/94 12/30/94
- - ----------------------------------------------------------------------------------------------------------------------------------
Vernitron Common Stock $100 $ 88 $ 91 $ 91 $ 91 $ 31 $ 59 $ 35
- - ----------------------------------------------------------------------------------------------------------------------------------
NASDAQ Non-Financial
Index $100 $114 $104 $125 $129 $142 $124 $135
- - ----------------------------------------------------------------------------------------------------------------------------------
S&P High Technology
Composite Index $100 $104 $ 97 $109 $122 $133 $124 $143
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
- - ----------------
(1) On July 20, 1994 the Company issued an additional 7,352,942 shares of
Common Stock to existing stockholders at $0.34 per share pursuant to a rights
offering of Common Stock. Prior to the rights offering, there were 5,185,070
shares of Common Stock outstanding. Based on the $0.75 per share average of the
closing bid and asked prices of the Common Stock quoted on NASDAQ as of December
31, 1994, the value of Common Stock purchased in the rights offering increased
by 120% from July 20, 1994 to December 31, 1994. During the same period, the
NASDAQ Non-Financial Stock Index and S&P High Technology Composite Index
increased by 6% and 17%, respectively.
11
AGREEMENTS WITH DIRECTORS AND OFFICERS
The Company has entered into indemnification agreements with its directors
and certain officers in order to induce them to continue to serve as directors
and officers of the Company, indemnifying them for any and all liabilities
incurred by them arising out of their service as directors or officers, other
than liabilities arising out of conduct which has been determined in a final
adjudication to constitute bad faith or a knowing violation of law or receipt by
such person of an improper personal benefit. The rights to indemnification
under such agreements are in addition to any rights to indemnification contained
in the Company's Certificate of Incorporation or By-Laws, which provide for
indemnification under certain circumstances. The Company has agreed to pay Mr.
Konopko up to six months' base compensation and certain other benefits in the
event of his termination by the Company other than for cause.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors, upon
the recommendation of its Audit Committee, has selected Arthur Andersen LLP as
independent accountants to audit the consolidated books and accounts of the
Company for the period beginning January 1, 1995, and ending December 31, 1995.
A representative of Arthur Andersen LLP will be present at the meeting and will
have the opportunity to make a statement and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR
ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE INDICATED PERIOD
(PROPOSAL NO. 2).
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
Any holder of Common Stock who wishes to present a proposal for inclusion
in the Company's proxy statement for the next annual meeting of shareholders
must comply with the rules and regulations of the Securities and Exchange
Commission then in effect. Such proposal must be received by the Secretary of
the Company at 645 Madison Avenue, New York, New York, 10022 no later than
December 16, 1995, in order to be considered for inclusion in the Company's
proxy statement for the next annual meeting.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's annual report on Form 10-K for 1994, as filed with
the Securities and Exchange Commission, will be provided to stockholders without
charge upon receipt of a written request to: Investor Relations, Vernitron
Corporation, 645 Madison Avenue, New York, NY 10022.
April 28, 1995
12