SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
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Check the appropriate box:
/ / Preliminary Proxy Statement
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Section 240.14a-12
DESTRON FEARING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
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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:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1/
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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.
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DESTRON FEARING CORPORATION
490 Villaume Avenue
South St. Paul, Minnesota 55075
(612) 455-1621
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 27, 1997
----------------------------
TO THE STOCKHOLDERS OF DESTRON FEARING CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Destron Fearing Corporation, a Delaware corporation (the
"Company"), will be held on Thursday, February 27, 1997 at 3:30 p.m.
(Minneapolis time) at The Marriott City Center, 30 South Seventh Street,
Minneapolis, Minnesota 55402 for the following purposes:
1. To elect three directors of the Company.
2. To ratify the appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ending September 30, 1997.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only holders of record of the Company's common stock at the close of
business on January 3, 1997 are entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
Each of you is invited to attend the Annual Meeting in person, if possible.
Whether or not you plan to attend in person, please mark, date and sign the
enclosed proxy, and mail it promptly. A return envelope is enclosed for your
convenience.
By Order of the Board of Directors
/s/ TJ Ahmann
Thomas J. Ahmann, SECRETARY
January 27, 1997
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WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE SIGN THE PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
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DESTRON FEARING CORPORATION
490 Villaume Avenue
South St. Paul, Minnesota 55075
(612) 455-1621
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PROXY STATEMENT
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SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board
of Directors of Destron Fearing Corporation, a Delaware corporation
("Company"), for use at the Annual Meeting of Stockholders ("Annual Meeting")
to be held on February 27, 1997, and any adjournment thereof. This Proxy
Statement and the accompanying form of proxy are being mailed to stockholders
on or about January 27, 1997.
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees
and fiduciaries to send proxies and proxy materials to their principals, and
the Company will reimburse them for their expense in so doing. In addition
to solicitation by mail, proxies may be solicited by telephone, telegraph or
personally.
VOTING AND REVOCATION OF PROXY
Only holders of record of the Company's common stock at the close of
business on January 3, 1997, the record date for the Annual Meeting, are
entitled to notice of and to vote at the Annual Meeting. On the record date,
11,643,982 shares of the Company's common stock were outstanding. Each share
of common stock entitles the holder thereof to one vote upon each matter to
be presented at the Annual Meeting. A quorum, consisting of a majority of the
shares of the Company's common stock entitled to vote at the Annual Meeting,
must be present in person or by proxy before action may be taken at the
Annual Meeting.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated, the shares
will be voted (i) FOR the election of the nominees for the Board of Directors
named in this Proxy Statement and (ii) FOR the ratification of the
appointment of Arthur Andersen LLP as independent auditors for the fiscal
year ending September 30, 1997. While the Board of Directors knows of no
other matters to be presented at the Annual Meeting or any adjournment
thereof, all proxies returned to the Company will be voted on any such matter
in accordance with the judgment of the proxy holders. If a proxy is returned
and the stockholder has abstained from voting on any matter, the shares
represented by such proxy will be considered present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote on
the matter, but will not be considered to have been voted in favor of such
matter.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
(a) giving written notice of such revocation to the Secretary of the Company
before or at the Annual Meeting, (b) delivering another written proxy bearing
a later date, or (c) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy).
PROPOSAL 1
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the
direction of its Board of Directors. The Company's Bylaws provide that the
Board of Directors shall consist of one or more members. The Board of
Directors currently consists of four members. Each Director is elected to
serve until the next annual meeting of stockholders or until their earlier
resignation, death or removal.
Stockholders will be asked at the Annual Meeting to elect three
Directors, as Mr. David M. Hyduke, who is now a Director of the Company, is
not standing for re-election. The Board has nominated the three individuals
named below to serve as Directors of the Company. Unless authority is
withheld, all proxies received in response to this solicitation will be voted
for the election of the nominees named below. Each of the nominees named
below is now a Director of the Company and has served continuously as a
Director since the month indicated. Such nominees collectively comprise the
entire Board. All nominees have indicated a willingness to serve if elected.
If any nominee becomes unable to serve prior to the Annual Meeting,
the proxies received in response to this solicitation will be voted for a
replacement nominee selected in accordance with the best judgment of the
proxy holders named therein.
NAME POSITIONS WITH THE COMPANY AGE DIRECTOR SINCE
- ---- -------------------------- --- --------------
Randolph K. Geissler President, Chief Executive 36 November 1993
Officer and Director
David A. Henderson Director 44 April 1994
Kenneth D. Larson Director 56 August 1994
STOCKHOLDER APPROVAL
The affirmative vote of a plurality of the shares of common stock
of the Company represented at the Annual Meeting either in person or by
proxy, assuming a quorum is present, is required for the election of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS AS SET FORTH IN
PROPOSAL 1.
2
INFORMATION CONCERNING DIRECTORS
AND EXECUTIVE OFFICERS
DIRECTORS
Each nominee for election to the Company's Board of Directors is
presently serving as a Director of the Company. The following discussion
sets forth certain information concerning the nominees for Directors of the
Company.
RANDOLPH K. GEISSLER has served as Chief Executive Officer of the
Company since November 12, 1993 and as Interim Chief Executive Officer from
March 1, 1993 until November 12, 1993 pursuant to a transition services
agreement in conjunction with the merger (the "Merger") of a wholly-owned
subsidiary of the Company and Fearing Manufacturing Co., Inc. ("Fearing") in
November 1993. See "Information Concerning Directors and Executive Officers
- -- Certain Transactions." Fearing is now a wholly-owned subsidiary of the
Company. Mr. Geissler is also the President and Chief Executive Officer of
Fearing, a position that he has held since 1987. Prior to 1987, he held a
variety of positions with Fearing, including sales representative, production
manager and director of research. Mr. Geissler also serves as a director of
Ashirus Corp.
DAVID A. HENDERSON has been a Director of the Company since April
1994. He has been the Managing General Partner of Founding Partners II
Limited Partnership ("Founding Partners") since April 1990. He was
previously an Executive Vice President of Cherry Tree Investment Company,
which manages approximately $87 million of venture capital funds; Chief
Executive Officer of a bank holding company with $400 million in assets; and
Chief Operating Officer of Republic Telcom Corporation. He currently serves
as a director of the following companies: Coda Music Technologies, Inc., The
Gift Certificate Center, Inc., Harmony Brook, Inc., Sustane Corporation,
Transline Communications, Inc., Ray Medica, Inc., and Visionics Corporation.
KENNETH D. LARSON has been a Director of the Company since August
1994. Mr. Larson joined Polaris Industries Inc. (formerly known as Polaris
Industries L.P.) ("Polaris") in September 1988 as Executive Vice
President/Operating Officer and was named President and Chief Operating
Officer and a Director in July 1989. Polaris is a publicly-held company that
designs, engineers, manufactures, and markets snowmobiles, all-terrain
vehicles (ATVs), and personal watercraft for recreational and utility use.
In addition to the Company and Polaris, Mr. Larson currently serves as a
director of Bossworks, Inc. and Featherlite Manufacturing, Inc.
Directors of the Company are elected annually to serve until the
next annual meeting of stockholders or until their earlier resignation, death
or removal. There is no family relationship between any of the directors or
executive officers of the Company.
BOARD COMMITTEES AND ACTIONS
During the twelve months ended September 30, 1996, the Board of
Directors met 16 times and adopted unanimous written actions in lieu of
meetings two times. Each nominee Director attended at least 75% of the total
number of meetings of the Board held during fiscal 1996 while he was a
Director.
The Compensation Committee of the Board of Directors, established
in August 1994, reviews and makes recommendations to the Board regarding
salaries, compensation and benefits of executive officers and senior
management of the Company and administers the Company's 1992 Employee Stock
Option Plan. The Compensation Committee met one time during fiscal 1996.
The members of the
3
Compensation Committee in fiscal 1996 were Kenneth D. Larson, Chairman, David
A. Henderson, and, until his resignation from the Board of Directors
effective November 2, 1995, Donald R. Brattain.
The Audit Committee of the Board of Directors, established in
August 1994, reviews the scope and results of the Company's annual audit and
other accounting related matters. The Audit Committee met two times during
fiscal 1996. The members of the Audit Committee in fiscal 1996 were David M.
Hyduke, Chairman, David A. Henderson, and, until his resignation from the
Board of Directors effective November 2, 1995, Donald R. Brattain.
The Board of Directors presently does not have a nominating committee.
Nonemployee Directors of the Company each currently receives a $500
fee for each Board meeting he attends and an additional $500 for each meeting
he attends of a Board committee of which he is a member. Under this
arrangement, the following nonemployee Directors received the following
amounts during fiscal 1996: Mr. Henderson - $10,500; Mr. Hyduke - $10,000;
Mr. Larson - $8,500. In lieu of the Directors' fees, and as Chairman of the
Company, Mr. Brattain received compensation of $3,000 per month or a total of
$3,000 in fiscal 1996. Additionally, all Directors are reimbursed for
expenses incurred in attending meetings of the Board of Directors, the
Compensation Committee and the Audit Committee (but only if the meetings are
held on different days). Nonemployee Directors of the Company are granted
stock options in connection with their service as Directors. See
"Information Concerning Directors and Executive Officers -- Stock Option
Plans."
EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
The following discussion sets forth information about Messrs.
Thomas J. Ahmann, William J. Battista and Robert C. Calgren, who are
executive officers and members of senior management of the Company but are
not Directors.
NAME POSITIONS WITH THE COMPANY AGE EMPLOYED SINCE
- ---- -------------------------- --- --------------
Thomas J. Ahmann Vice President -- Finance, 57 July 1993
Chief Financial Officer,
Secretary and Treasurer
William J. Battista Vice President -- North 47 August 1993
American Sales
Robert C. Calgren Controller 50 August 1993
THOMAS J. AHMANN joined the Company as Vice President -- Finance, Chief
Financial Officer, Secretary and Treasurer in July 1993. Prior to that time,
he served as Vice President -- Finance and Chief Financial Officer of
SpectraScience, Inc., a company involved in medical laser technology. From
May 1990 to May 1991, Mr. Ahmann was an independent consultant who assisted
in the restructuring and liquidation of two publicly owned retailers of
residential building material operating under Chapter 11 of the federal
Bankruptcy Code.
WILLIAM J. BATTISTA has been Vice President -- North American Sales of
the Company since August 1993. He joined Fearing Corporation ("Fearing") in
October 1986, serving as Eastern Regional Sales Manager from October 1986 to
October 1989
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and as National Sales Manager from October 1989 to August 1993. Fearing was
acquired by the Company in a merger transaction effective in November 1993.
ROBERT C. CALGREN has been Controller of the Company since August 1993.
From February 1991 until August 1993, he served as Controller of Fearing.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to Randolph J.
Geissler, the President and Chief Executive Officer of the Company, for each
of the years ended September 30, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------------
Other Restricted
Annual Stock
Salary Bonus Compensation Awards(s) Options Other
Principal Position Year $ ($) ($) (1) ($) (#) Compensation(2)
- ------------------ ---- -------- ----- ------------ -------- ------ --------------
Randolph K. 1996 $127,404 N/A N/A N/A N/A $3,641
Geissler 1995 125,750 N/A N/A N/A N/A 3,624
Chief Executive 1994 113,500 N/A N/A N/A N/A 3,260
Officer and
President
___________________
(1) The aggregate amount of perquisites and other personal benefits, securities
or property received by Mr. Geissler was less than $50,000 or 10% of his
annual salary.
(2) Consists of contributions made by the Company under its Section 401(k)
Deferred Compensation Plan. See "Information Concerning Directors and
Executive Officers -- Retirement Savings Plan."
5
The following information is furnished with respect to stock options
exercised in fiscal 1996 and held as of September 30, 1996 by Mr. Randolph K.
Geissler:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
Number of Value of Unexercised
Unexercised Options at in-the-Money Options at
September 30, 1996(3) September 30, 1996(3)(4)
--------------------- ------------------------
Shares
Acquired Value Exercisable/ Exercisable/
on Exercise Realized(2) Unexercisable Unexercisable
Name (#) ($) (#) ($)
- ---------------------- ----------- ----------- --------------- ---------------
Randolph K. Geissler 0 0 45,000/50,000 $85,313/$32,813
____________________
(1) The information presented is as of and for the twelve months ended September
30, 1996.
(2) Consists of the difference between the exercise price of the options and the
closing sales price of the shares of common stock underlying the options as
of the date of exercise as quoted on The Nasdaq SmallCap Market and reported
by the National Association of Securities Dealers, Inc. ("NASD").
(3) The options were granted under the Company's 1992 Employee Stock Option
Plan. See "Information Concerning Directors and Executive Officers -- Stock
Option Plans." The options vest in equal amounts on a monthly basis over
four years during the term of employment with the Company and expire ten
years from the date of grant.
(4) Consists of the difference between the exercise price of the options and the
closing sales price of the shares of common stock underlying the options on
September 30, 1996 as quoted on The Nasdaq SmallCap Market and reported by
the NASD.
RETIREMENT SAVINGS PLAN
All non-bargaining unit personnel of the Company are eligible to
participate in the Company's Section 401(k) Deferred Savings Plan ("401(k)
Plan") established on January 1, 1989. Salary deferrals not in excess of 15%
of the participant's annual compensation up to the maximum permitted by the
Internal Revenue Code of 1986, as amended ("Code") (presently $9,500), may be
contributed to the trust for the 401(k) Plan and invested in various
investment funds. The 401(k) Plan permits, but does not require,
contributions by the Company on behalf of all participants in the 401(k) Plan
equal to $.50 for each $1.00 contributed by an employee up to a maximum
amount equal to 6% of the employee's wages. The contributions made under the
401(k) Plan by the Company during fiscal 1996 on behalf of the executive
officers in the Summary Compensation Table are described therein.
STOCK OPTION PLANS
1986 DIRECTOR AND EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
The Company adopted an incentive stock option plan on March 27, 1986
("1986 Plan"), which is administered by the Company's Board of Directors and
governed in accordance with the rules of the Vancouver Stock Exchange.
Pursuant to such rules, the total number of shares of common stock for which
options may be granted under the 1986 Plan may not exceed 10% of the issued
and vested shares
6
of the Company at the time of granting. The total number of shares that may
be reserved for issuance to any one individual pursuant to directors' and
employees' incentive stock options may not exceed 5% of the Company's issued
shares at the time of granting. During the twelve months ended September 30,
1996, no options were granted under the 1986 Plan. As of September 30, 1996,
there were no options outstanding under the 1986 Plan, and the Company is no
longer granting options under the 1986 Plan.
1992 EMPLOYEE STOCK OPTION PLAN
On July 31, 1992, the Company's stockholders approved the 1992 Employee
Stock Option Plan ("Employee Plan"). The purpose of the Employee Plan is to
advance the interests of the Company through the motivation, attraction and
retention of its employees. The Employee Plan authorizes the grant of
options to purchase an aggregate of 1,300,000 shares of common stock. All
persons who are employees of the Company, including directors who are
employees, are eligible to participate. The Employee Plan provides for the
grant of incentive (statutory) stock options ("ISOs"), as defined in Section
422 of the Code, and nonincentive (nonstatutory) stock options ("NSOs"). The
ISOs and NSOs issued under the Employee Plan are referred to herein as
"Options."
The Employee Plan provides that a committee of disinterested directors,
which is currently the Compensation Committee, will grant Options and
otherwise administer the Employee Plan. The principal criteria for
determining the number of shares upon which Options are granted to an
employee are the amount of cash compensation paid to such employee, the
employee's level of responsibility and the employee's job performance.
The exercise price of any ISO granted under the Employee Plan must at
least equal the fair market value of a share of common stock on the date on
which the Option is granted with certain exceptions applicable to employees,
if any, owning more than 10% of the Company's common stock. The Option price
of an NSO may be less than the fair market value on the date it is granted if
the Compensation Committee so determines. As determined by the Board of
Directors, the exercise price of an Option may be paid in cash, in shares of
the Company's common stock, by delivery of a promissory note, or by a
combination of such means of payment. To the extent that the aggregate fair
market value of the stock which may become issuable under an ISO in a
particular calendar year exceeds $100,000, such Options will be treated as
NSOs. An employee who is granted an ISO recognizes no taxable income when
the Option is exercised, although the exercise may generate alternative
minimum taxable income. An employee who disposes of stock received upon the
exercise of an ISO will recognize long-term capital gain on the disposition
unless the stock is disposed of within two years from the date of grant of
the ISO or within one year from the purchase of the stock under the ISO (a
"disqualifying disposition"), in which case the gain is taxable as ordinary
income. The Company generally receives no tax deduction for an ISO unless
the employee makes a disqualifying disposition of the stock. Upon exercise
of an NSO, the difference between the market value of the common stock on the
date of exercise and the Option price is taxable to the employee as ordinary
income. That amount generally is deductible by the Company in the same year.
During the twelve months ended September 30, 1996, options to purchase
235,000 shares were granted under the Employee Plan. As of September 30,
1996, there were Options to purchase 466,750 shares outstanding under the
Employee Plan at an average exercise price of $3.04 per share.
1992 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
On July 31, 1992, the Company's stockholders approved the Nonemployee
Director Stock Option Plan (the "Director Plan"). The Director Plan
authorizes the grant of options to purchase an aggregate of 300,000 shares of
the Company's common stock to Directors of the Company who are not employees
7
of the Company ("Nonemployee Directors"). The purpose of the Director Plan
is to advance the interests of the Company through the motivation, attraction
and retention of its Nonemployee Directors.
During the twelve months ended September 30, 1996, options to purchase
7,500 shares were granted under the Director Plan. As of September 30, 1996,
there were options to purchase 62,500 shares outstanding under the Director
Plan at an average exercise price of $2.48 per share.
Subject to the provisions of the Director Plan, it is administered by
the Compensation Committee of the Board of Directors, which determines the
terms of the options granted under the Plan and interprets the Director Plan.
Subject to the terms of the Director Plan, each option issued may
contain terms and provisions different from other options granted under the
Director Plan to the same optionee or other optionees. The Director Plan now
provides that upon election or appointment to the Company's Board of
Directors, each Nonemployee Director is automatically granted an option to
purchase 15,000 shares of the Company's common stock. After initial election
or appointment to the Board of Directors, each Nonemployee Director
automatically receives an option to purchase an additional 2,500 shares upon
each reelection to the Board of Directors.
The Director Plan provides that the exercise price is equal to the "fair
market value" of the common stock at the time the option is automatically
granted. Each option becomes exercisable during the term fixed by the Board
of Directors, with such term ending no later than ten years of the date of
grant of the option. Upon exercise of any option, payment for shares as to
which the option is exercised may be made in cash, in shares of the Company's
common stock having an aggregate fair market value on the date of exercise
which is not less than the exercise price of the option, by delivery of a
promissory note, or by any combination of cash, such shares, and a promissory
note, as the Board of Directors may determine.
If the Company or its stockholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, all options outstanding
under the Director Plan as of the day before the consummation of such sale,
liquidation, merger or reorganization, to the extent not exercised, will
become exercisable in full unless the Board has prescribed other terms and
conditions to the exercise of such options or otherwise has modified the
options.
If the term of a Nonemployee Director terminates for any reason other
than such individual's disability, any option then held by such optionee
under the Director Plan, to the extent then exercisable, will remain
exercisable after the termination of the Nonemployee Director's status as a
Director for a period of three months (but in no event beyond ten years from
the date of grant of the option). If the Director status of the Nonemployee
Director is terminated because the optionee is disabled within the meaning of
Section 22(e)(3) of the Code, any option then held by the optionee under the
Director Plan, to the extent then exercisable, will remain exercisable after
the termination of his status as a Director for a period of 12 months (but
again in no event beyond ten years from the date of grant of the option).
All options granted under the Director Plan are NSOs. Generally, upon
the grant of an NSO for which the exercise price is the fair market value of
the common stock on the date of grant, neither the Company nor the optionee
will experience any tax consequences. Upon exercise of an NSO granted under
the Director Plan, the optionee will realize ordinary income in an amount
equal to the excess of the fair market value of the shares of common stock
received over the exercise price paid by the optionee with respect to such
shares. The amount recognized as ordinary income by the optionee will
increase the optionee's basis in the stock acquired pursuant to the exercise
of the NSO. The Company will be
8
allowed a federal income tax deduction for the amount recognized as ordinary
income by the optionee upon the optionee's exercise of the NSO. Upon a
subsequent sale of the stock, the optionee will recognize short-term or
long-term gain or loss depending upon the holding period for the stock and
upon the stock's subsequent appreciation or depreciation in value.
CONSULTANTS' STOCK OPTION PLAN
The Board of Directors adopted a Consultants' Stock Option Plan
("Consultants' Plan") on October 16, 1992. Under the Consultants' Plan,
options may be granted to consultants of the Company, including Directors of
the Company who are not employees, at such prices (which may be less than the
fair market value on the date of grant) and on such terms as the Board of
Directors or the Committee administering the Consultants' Plan approves at
the time of grant. Options granted under the Consultants' Plan do not
qualify as incentive stock options under the Code. The aggregate maximum
number of shares as to which options may be granted under the Consultants'
Plan is 500,000. During the twelve months ended September 30, 1996, no
options were granted under the Consultants' Plan. As of September 30, 1996,
there were options to purchase 105,000 shares outstanding under the
Consultants' Plan at an average exercise price of $2.06 per share.
CERTAIN TRANSACTIONS
In September 1994, the Company entered into agreements with certain
investors pursuant to which the investors loaned the Company a total
aggregate of $610,000 and the Company issued the investors 18-month notes
bearing interest at the rate of 12% per annum and warrants (the "Warrants")
to purchase a total aggregate of 183,000 shares of the Company's common
stock, which is the number of shares equal to 30% of the dollar amount of the
loans. The exercise price of the Warrants is $1.50 per share (which is equal
to the fair market value of the Company's common stock on the date of grant),
and the term of the Warrants is five years. The Warrants contain a so-called
"cashless exercise right," allowing a holder of the Warrants to apply any
difference between the exercise price of the Warrants and the fair market
value of the Company's common stock to the exercise of the Warrants, with a
proportionate reduction in the number of shares purchasable upon exercise of
the Warrants. Certain officers and directors of the Company participated in
this transaction on the same terms and conditions as other investors. Thomas
J. Ahmann, Vice President -- Finance, Chief Financial Officer, Secretary and
Treasurer of the Company, loaned the Company $25,000 and received Warrants to
purchase 7,500 shares of common stock of the Company. David M. Hyduke, a
Director of the Company, loaned the Company $30,000 and received Warrants to
purchase 9,000 shares of common stock. Donald R. Brattain, a former Director
of the Company, loaned the Company $100,000 and received Warrants to purchase
30,000 shares of common stock. In addition, Founding Partners II Limited
Partnership, an entity controlled by Mr. Brattain and Mr. David A. Henderson,
who is a Director of the Company, loaned the Company $100,000 and received
Warrants to purchase 30,000 shares of common stock. Mr. Ahmann exercised his
Warrants in full on June 26, 1995, on which the closing sales price of the
common stock as quoted on The Nasdaq SmallCap Market and reported by the NASD
was $8.250 per share.
In March 1993, the Company entered into an agreement with Randolph K.
Geissler for $40,000, on an annualized basis, to act as Interim Chief
Executive Officer of the Company. Effective November 12, 1993, the Company
entered into an Employment Agreement with Mr. Geissler, the Company's
President and Chief Executive Officer, which replaced the interim employment
agreement and provides for an annual base salary of $125,000 and an initial
term of employment expiring on November 12, 1995. The term will be extended
for successive one-year periods on November 12 of each year beginning in 1995
unless Mr. Geissler or the Company provides written notice to the other of
his or its intention not to extend. The Employment Agreement provides that
in the event of early termination by the Company for any reason other than
death, disability or termination for good cause during the initial two-year
term,
9
the Company will pay severance compensation in an amount equal to 24 months'
base salary. If the termination occurs after the initial two-year period,
the severance compensation will be equal to one and one-half months' base
salary for every year Mr. Geissler has been employed by the Company or by
Fearing up to a maximum of 24 months' base salary.
As of September 30, 1994, the Company had a term loan ("Term Loan") in
the total principal amount of $600,000 under which $600,000 was outstanding.
As of that date, borrowings under the Term Loan bore interest at the rate of
15% per annum and were collateralized by certain future royalty payments and
a subordinated interest in the Company's inventories, equipment and
intangibles. This credit facility originally was extended to the Company as
a $750,000 revolving credit line ("Credit Line") in June 1993 by a group of
private investors ("Lenders"), including Mr. Donald R. Brattain, who is the
former Chairman and a former Director of the Company. As consideration for
extending the Credit Line, the Company issued to the Lenders warrants to
purchase a total aggregate of 75,000 shares of the Company's common stock at
an exercise price of $1.00 per share. The due date of the Credit Line was
extended in September 1993 and, in consideration of extending the due date,
the Company issued to the Lenders additional warrants to purchase a total
aggregate of 25,000 shares of common stock at an exercise price of $1.00 per
share. In November 1993, the amount available under the Credit Line was
reduced to $600,000 and the Credit Line was converted to the Term Loan
bearing interest at the rate of 15% per annum due on November 15, 1994. In
consideration of extending the Term Loan in November 1993, the Company issued
to the Lenders additional warrants to purchase a total aggregate of 60,000
shares of common stock at an exercise price of $1.00 per share. In November
1994, the term of the Credit Line was extended to November 15, 1995 and
additional warrants to purchase a total aggregate of 60,000 shares of common
stock at an exercise price of $1.75 per share were issued to the Lender. See
"Beneficial Ownership of Common Stock." The Credit Line was paid in full in
November 1995.
10
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of December 31, 1996
regarding the beneficial ownership of shares of common stock of the Company
by (i) each stockholder who is known by the Company to own more than 5% of
the Company's common stock, (ii) each executive officer named in the Summary
Compensation Table, (iii) each Director of the Company, and (iv) all
Directors and executive officers of the Company as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
common stock described below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES(1)
- ---------------- ------------------ ----------------------
Perkins Capital Management, Inc. 856,550(2) 7.4%
730 East Lake Street
Wayzata, MN 55391-1769
Randolph K. Geissler 577,297(3) 4.9%
Thomas J. Ahmann 65,041(4) *
David A. Henderson 52,500(5) *
William J. Battista 37,500(6) *
David M. Hyduke 29,000(7) *
Kenneth D. Larson 20,000(8) *
Robert C. Calgren 11,250(9) *
All executive officers and
Directors as
a group (six persons) 792,588(10) 6.6%
_____________________
* Less than 1%.
(1) Based on 11,643,982 shares outstanding as of December 31, 1996, which does
not include 1,210,329 shares of common stock issuable upon exercise of
stock options and warrants vested at December 31, 1996. However, each
figure showing the percentage of outstanding shares owned beneficially has
been calculated by treating as outstanding and owned the shares which
could be purchased by each beneficial owner within 60 days upon the
exercise of stock options and warrants.
(2) Consists of 562,100 shares with sole voting power and 856,550 shares with
sole dispositive power.
(3) Includes 80,416 shares issuable upon exercise of options held by Mr.
Geissler that were exercisable as of December 31, 1996 or that will
become exercisable within 60 days of that date.
(4) Includes 61,041 shares issuable upon exercise of options held by
Mr. Ahmann that were exercisable as of December 31, 1996 or that
will become exercisable within 60 days of that date.
(5) Includes 22,500 shares issuable upon exercise of options directly owned by
Mr. Henderson. Also includes 30,000 shares issuable upon exercise of
warrants owned of record by Founding Partners
11
II Limited Partnership, an entity controlled by Mr. Donald R. Brattain (a
former Director) and Mr. Henderson.
(6) Consists of 37,500 shares issuable upon exercise of options held by Mr.
Battista that were exercisable as of December 31, 1996 or that will become
exercisable within 60 days of that date.
(7) Consists of 20,000 and 9,000 shares issuable upon exercise of vested
options and warrants, respectively.
(8) Consists of 20,000 shares issuable upon exercise of vested options.
(9) Consists of 11,250 shares issuable upon exercise of options held by Mr.
Calgren that were exercisable as of December 31, 1996 or that will become
exercisable within 60 days of that date.
(10) Includes 280,458 shares issuable upon exercise of vested options and
warrants, or options that are exercisable within 60 days of December 31,
1996, held by all executive officers and Directors as a group.
SECTION 16 (A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
As required by rules adopted by the Securities and Exchange Commission
("SEC") under Section 16 of the Securities Exchange Act of 1934, directors
and executive officers of the Company are required to file with the SEC an
Initial Report of Beneficial Ownership on Form 3 within a certain period
after becoming an executive officer or director stating the number of shares
of Class A Common Stock owned, a Report of Change in Beneficial Ownership on
Form 4 to report transactions in the Company's common stock, and an Annual
Statement of Beneficial Ownership of Securities on Form 5 to report other
transactions in securities of the Company that are not required to be
reported on a Form 4. Based upon the Company's review of such Forms
furnished to it by the directors and executive officers required to file such
Forms, the Company believes that, with the exception of isolated incidents of
late filings reported by the Company in previous Proxy Statements, all of
these filing requirements have been satisfied.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP as
independent auditors for the fiscal year ending September 30, 1997, subject
to the ratification of the holders of the Company's common stock. If the
holders of the common stock do not ratify the selection of Arthur Andersen
LLP, other independent accountants will be considered and selected by the
Board of Directors. All proxies received in response to this solicitation
will be voted in favor of the ratification of the appointment of Arthur
Andersen LLP as the Company's independent accountants, unless other
instructions are indicated thereon. A representative of Arthur Andersen LLP
will be present at the Annual Meeting, will have an opportunity to make a
statement if he or she desires to do so, and will be available to respond to
appropriate questions from stockholders.
Arthur Andersen LLP served as the Company's independent auditors for the
fiscal years ended September 30, 1994, 1995 and 1996.
All proxies received in response to this solicitation will be voted in
favor of the ratification of the appointment of the independent auditors,
unless other instructions are indicated thereon.
12
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the shares of common stock of the
Company represented at the Annual Meeting either in person or by proxy,
assuming a quorum is present, is required to ratify the appointment of Arthur
Andersen LLP as independent auditors for the Company for the year ending
September 30, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
AS SET FORTH IN PROPOSAL 2.
PROPOSALS OF STOCKHOLDERS
Any stockholder wishing to have a proposal considered for inclusion in
the Company's proxy solicitation materials for the 1998 Annual Meeting of
Stockholders must set forth such proposal in writing and file it with the
Secretary of the Company no later than September 22, 1997.
OTHER BUSINESS
At the date of this Proxy Statement, management knows of no other
business that may properly come before the Annual Meeting. However, if any
other matters properly come before the meeting, the persons named in the
enclosed form of proxy will vote the proxies received in response to this
solicitation in accordance with their best judgment on such matters.
FINANCIAL INFORMATION
The Company's Report to Shareholders for fiscal 1996 and the Company's
balance sheets as of September 30, 1994, 1995 and 1996 and related statements
of income, changes in stockholders' equity and cash flows for the periods
ended September 30, 1995 and 1996, accompanies these materials. In addition,
the Company will provide without charge to any stockholder solicited hereby,
upon written request of such stockholder, a copy of its Annual Report on Form
10-KSB for the year ended September 30, 1996. Requests should be directed to
the Chief Financial Officer, Destron Fearing Corporation, 490 Villaume
Avenue, South St. Paul, Minnesota 55075.
13
PROXY
DESTRON FEARING CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 27, 1997
The undersigned, revoking all prior proxies, hereby appoints Randolph K.
Geissler and Thomas J. Ahmann, and either of them, as proxy or proxies, with
full power of substitution and revocation, to vote all shares of common stock of
Destron Fearing Corporation (the "Company") of record in the name of the
undersigned at the close of business on January 3, 1997, at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held on Thursday, February 27,
1997, or at any adjournment thereof, upon the following matters:
1. Election of the following directors: Randolph K. Geissler, David A.
Henderson, Kenneth D. Larson
/ / FOR ALL NOMINEES / / WITHHOLD FOR ALL NOMINEES
FOR ALL NOMINEES EXCEPT THE FOLLOWING:
(Mark no box and write the name(s) of the nominee(s) withheld in the space
provided below.)
_____________________________________________________________________________
(CONTINUED ON REVERSE SIDE)
2. Ratification of appointment of Arthur Andersen LLP as independent auditors
for fiscal 1997.
/ / For / / Against / / Abstain
3. In their discretion, the Proxies are authorized to vote upon such matters as
may properly come before the Annual Meeting, or any adjournments thereof.
Please mark, date, sign, and mail this proxy promptly in the enclosed
envelope.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2. The Board of Directors recommends a vote FOR
Proposals 1 and 2.
Please sign your name exactly as it appears below. In the case of shares
owned in joint tenancy or as tenants in common, all should sign. Fiduciaries
should indicate their title and authority.
Dated: _________________, 1997.
_______________________________
_______________________________
_______________________________
Signature(s)