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:
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/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Fourth Shift Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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and 0-11
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FOURTH SHIFT CORPORATION
INTERNATIONAL PLAZA
7900 INTERNATIONAL DRIVE
MINNEAPOLIS, MN 55425
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 7, 1997
TO THE SHAREHOLDERS OF FOURTH SHIFT CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of Fourth
Shift Corporation (the "Company") will be held on Wednesday, May 7, 1997, at the
Marriott City Center, 30 South Seventh Street, Minneapolis, Minnesota 55402 at
3:30 p.m., Minneapolis, Minnesota time, for the following purposes:
1. To elect three directors.
2. To approve amendments to the 1994 Employee Stock Purchase Plan to
increase the number of shares of the Company's common stock
available for issuance thereunder by 500,000 shares and to
increase to 75,000 shares the aggregate number of shares that may
be purchased in any single purchase period.
3. To transact such other business as may properly come before the
meeting.
Only holders of record of the Company's Common Stock at the close of
business on March 21, 1997 will be entitled to receive notice of and to vote at
the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN
TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you
later desire to revoke your proxy, you may do so at any time before it is
exercised.
BY ORDER OF THE BOARD OF DIRECTORS
Marion Melvin Stuckey, Chairman of the Board
Minneapolis, Minnesota
April 7, 1997
-------------------
IMPORTANT - PLEASE MAIL YOUR PROXY CARD PROMPTLY
IN ORDER THAT THERE MAY BE A PROPER REPRESENTATION
AT THE MEETING, YOU ARE URGED, WHETHER YOU OWN ONE
SHARE OR MANY, TO COMPLETE, SIGN AND MAIL YOUR PROXY.
-------------------
FOURTH SHIFT CORPORATION INTERNATIONAL PLAZA
7900 INTERNATIONAL DRIVE
MINNEAPOLIS, MN 55425
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of Fourth Shift Corporation (the
"Company") for use at the Annual Meeting of Shareholders to be held on May 7,
1997, at 3:30 p.m. Minneapolis time, at the Marriott City Center, 30 South
Seventh Street, Minneapolis, Minnesota 55402, and any adjournments thereof (the
"Annual Meeting"). Expenses in connection with the solicitation of proxies will
be paid by the Company. Proxies are being solicited primarily by mail, but, in
addition, officers and regular employees of the Company who will receive no
additional compensation for their services may solicit proxies by telephone,
telegraph or in person. This Proxy Statement and form of proxy enclosed are
being mailed to shareholders on or about April 7, 1997.
Those shares of the Company's Common Stock, $.01 par value (the "Common
Stock"), represented by proxies in the form solicited will be voted in the
manner directed by the holder of such shares, and, if no direction is made, such
shares will be voted for the election of the nominees for director named in this
Proxy Statement and for the approval of the other proposals discussed herein.
If a shareholder abstains from voting as to any matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such matter.
If a broker returns a "nonvote" proxy, indicating a lack of authority to vote on
such matter, then the shares covered by such nonvote shall be deemed present at
the meeting for purposes of determining a quorum but shall not be deemed to be
represented at the meeting for purposes of calculating the vote with respect to
such matter. Proxies may be revoked at any time before being exercised by
delivery to the Secretary of the Company of a written notice of termination of
the proxies' authority or a duly executed proxy bearing a later date.
A copy of the Company's Annual Report for the year ended December 31, 1996
is being furnished to each shareholder with this Proxy Statement.
Only the holders of the Common Stock whose names appear of record on the
Company's books at the close of business on March 21, 1997 will be entitled to
vote at the Annual Meeting. At the close of business on March 21, 1997, a total
of 9,684,104 shares of such Common Stock were outstanding, each share being
entitled to one vote.
ITEM 1--ELECTION OF DIRECTORS
NOMINEES
The Company's Articles of Incorporation provide for a "classified board" of
directors. The number of members of the Board of Directors is currently set at
eight, and the directors are divided into Class A (consisting of three
directors), Class B (consisting of two directors) and Class C (consisting of
three directors). Anton J. Christianson, Steve J. Lair and Robert M. Price are
the Class C directors whose terms expire at the Annual Meeting. The Board of
Directors has nominated Messrs. Christianson, Lair and Price for reelection to
the Board of Directors at the Annual Meeting for terms expiring at the annual
meeting in 2000. The other directors of the Company will continue in office for
their existing terms.
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect Messrs. Christianson, Lair and Price. If a
shareholder of record returns a proxy withholding authority to vote the proxy
with respect to any of the nominees, then the shares of the Common Stock covered
by such proxy shall be deemed present at the Annual Meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such nominee or nominees, but shall not be deemed to have been voted for such
nominee or nominees. The affirmative vote of a majority of the outstanding
shares of the Common Stock is necessary to elect each nominee. Cumulative
voting is not permitted in the election of directors. In the unlikely event
that any of the nominees is not a candidate for election at the Annual Meeting,
the persons named in the accompanying form of proxy will vote for such other
persons as the Board of Directors may designate. The Board of Directors has no
reason to believe that any nominee will not be a candidate for election.
The following information is furnished with respect to each nominee and
director as of January 31, 1997:
PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE EXPERIENCE FOR PAST FIVE YEARS
---- --- ---------------------------------
NOMINEE DIRECTORS: CLASS C - TERM EXPIRING 2000
Anton J. Christianson. . . . . . 44 Mr. Christianson has been a
Director of the Company since 1984.
He has been a principal of Cherry
Tree Investments, a venture capital
management firm, for more than five
years. He has also been a managing
partner of Cherry Tree Ventures II,
a Limited Partnership, a principal
shareholder of the Company ("Cherry
Tree"), since 1983. Mr.
Christianson also serves on the
Board of Directors of Transport
Corporation of America and TRO
Learning.
Steve J. Lair. . . . . . . . . . 50 Mr. Lair has been a director of the
Company since April 1997. He has
been the Senior Vice President
Marketing and Sales of Acer America
Corporation since March 1997. He
was Vice President, Worldwide
Marketing and Sales, Personal
Productivity Products, of Texas
Instruments, Inc. from April 1995
to March 1997; Vice President of
Marketing, Toshiba America
Information Systems from April 1992
to April 1995; and Vice President,
Dataquest Microcomputer Systems
Group from April 1988 to April
1992.
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PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE EXPERIENCE FOR PAST FIVE YEARS
---- --- ---------------------------------
Robert M. Price. . . . . . . . . 66 Mr. Price has been a director of
the Company since 1990. He has been
President of PSV, Inc., a
technology consulting business
located in Burnsville, Minnesota,
since 1990. From 1961 until 1990 he
served in various executive
positions, including Chairman and
Chief Executive Officer, with CDC.
Mr. Price also serves on the Board
of Directors of International
Multifoods Corporation, Tupperware
Incorporated, Affinity Technology,
Inc., Public Service Company of New
Mexico and Rohr Incorporated.
INCUMBENT DIRECTORS: CLASS A - TERM EXPIRING 1998
Marion Melvin Stuckey. . . . . . 58 Mr. Stuckey is the founder of the
Company and has been the Chief
Executive Officer and Chairman of
the Company since 1982. Prior to
forming the Company, Mr. Stuckey
was an executive officer of CDC
from 1975 to 1982. Prior to that
Mr. Stuckey served in various
sales, marketing and management
positions at IBM from 1960 to 1975.
Mr. Stuckey is also a director of
ULTRADATA Corporation, a computer
software company headquartered in
California.
Michael J. Adams . . . . . . . . 51 Mr. Adams has been a Director of
the Company since 1984. He has
been a senior partner of Adams &
Cesario, P.A., a law firm engaged
in a general business practice in
Minneapolis, for more than five
years.
David J. Allio . . . . . . . . 39 Mr. Allio has been a Director of
the Company since 1988. He has
been Director of Corporate
Development of V. Suarez & Company,
Inc. ("Suarez"), a diversified
distribution company based in San
Juan, Puerto Rico and a significant
shareholder of the Company, since
November 1989, and a Senior Vice
President of Marketing since June
1991. Prior to joining Suarez,
Mr. Allio was a Senior Associate
with Robert J. Allio & Associates,
Inc., an international management
consulting firm, from 1986 to
October 1989.
INCUMBENT DIRECTORS: CLASS B - TERM EXPIRING 1999
Jimmie H. Caldwell . . . . . . . 57 Mr. Caldwell has been President,
Chief Operating Officer and a
Director of the Company since 1984.
Prior to that time, Mr. Caldwell
served in various positions at
Control Data Corporation ("CDC"), a
multinational computer hardware,
peripherals and services company,
from 1964 to 1984 and held the
position of Vice President of
Operations for CDC's Peripheral
Products Company when he left to
join the Company.
Portia Isaacson. . . . . . . . . 54 Dr. Isaacson has been a director of
the Company since January 1994.
She is currently the President of
Dream IT, Inc., a consulting firm
that she founded in 1987 and that
is engaged in publishing business
information for the computer
industry. Prior to that time she
had been a founder and President of
Future Computing, a leading
computer market research firm.
-3-
MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors of
the Company held four meetings. All incumbent directors attended at least 75%
of the meetings of the Board, and all incumbent directors attended at least 75%
of those meetings of the committees of which they were members.
COMMITTEES
The Board of Directors of the Company has an audit committee which met four
times, a compensation committee which met four times, a strategy committee which
met one time, and a corporate governance committee which had no meetings during
1996. The audit committee reviews the Company's arrangements with its
independent public accountants and the substance of the audits. The Company's
compensation committee determines policy with respect to compensation to
executive management, specifically reviews the performance and establishes the
compensation to the Company's Chief Executive Officer, reviews compensation to
directors, and administers the Company's stock-based employee benefit plans.
The corporate governance committee monitors compliance of the board with legal
responsibilities, monitors charter documents for legal compliance, and
recommends frequency of board meetings. The strategy committee reviews
strategic decisions related to allocation of resources, market segmentation and
size, product strategy, and marketing strategy. Messrs. Adams, Price and Allio
are currently members of the Compensation Committee; Messrs. Christianson and
Adams are members of the Audit Committee; Messrs. Price and Christianson are
currently members of the Corporate Governance Committee; and Mr. Allio and Ms.
Isaacson are currently members of the Strategy Committee.
DIRECTOR COMPENSATION
For the fiscal year ended December 31, 1996, directors who were not also
officers or employees of the Company were entitled to receive an annual fee of
$1,000 per quarter plus $1,200 per Board Meeting, and $500 per committee meeting
attended. All directors are entitled to participate in the Company's 1994
Employee Stock Purchase Plan and to contribute all (subject to limitations in
such plan), or any portion, of the directors fees they receive to that plan.
During 1996, Mr. Adams, Mr. Allio, Ms. Isaacson and Mr. Price elected to
participate in the Employee Stock Purchase Plan and received 2,229, 2,056, 1,710
and 1,984 shares of common stock for directors fees contributed to such plan.
Directors who are not also officers or employees of the Company also
receive stock options to purchase 3,500 shares of common stock under the
Company's 1993 Stock Incentive Plan at the time of the annual meeting of
shareholders. In accordance with such plan, each of Mr. Adams, Mr. Allio, Ms.
Isaacson and Mr. Price received options to purchase 3,500 shares of common stock
at an exercise price of $6.50 per share on May 7, 1996.
Directors who provide consulting services to the Company may also receive
consulting fees of $2,500 per day. Only one director, Dr. Portia Isaacson who
received $65,550 for services rendered during the 1996 fiscal year, was
compensated for consulting services during 1996. Directors are also reimbursed
for the expenses they incur in attending meetings.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS ELECT THE NOMINEES
NAMED HEREIN TO THE TERMS AS DIRECTORS OF THE COMPANY DESCRIBED ABOVE. THE
PERSONS NAMED IN THE ACCOMPANYING PROXY INTEND TO VOTE THE PROXIES HELD BY THEM
IN FAVOR OF SUCH NOMINEES, UNLESS OTHERWISE DIRECTED. IF NO INSTRUCTION IS
GIVEN, THE ACCOMPANYING PROXY WILL BE VOTED FOR SUCH ELECTION. THE AFFIRMATIVE
VOTE OF A MAJORITY OF THE SHARES OF COMMON STOCK IS REQUIRED FOR THE ELECTION OF
EACH DIRECTOR.
-4-
ITEM 2--PROPOSAL TO APPROVE AMENDMENTS TO 1994 EMPLOYEE STOCK PURCHASE PLAN
In April 1994, the shareholders of the Company adopted the Company's 1994
Employee Stock Purchase Plan (as amended, the "Plan"), which reserved a total of
400,000 shares of the Company's Common Stock for sale to participating employees
and directors at a price per share equal to 85% of the lower of the fair market
value of the Common Stock on either the first or the last business day of the
six-month periods commencing January 1 and July 1 of each year (the "Purchase
Periods"). The purpose of the Plan is to provide a convenient and advantageous
means for all employees of the Company to make systematic purchases of the
Company's Common Stock, and to thereby develop a stronger incentive to work for
the continued success of the Company.
Employees who elect to participate in the Plan may direct the Company to
make payroll deductions of from 1% to 15% of their compensation during any
Purchase Period for the purchase of shares under the Plan. No participant may
purchase under the Plan (or any other plan qualifying under Section 423(b)(8) of
the Internal Revenue Code), during any Purchase Period, more than 10,000 shares
or shares having a market value exceeding $12,500, and the aggregate purchases
of all participating employees under the Plan in any Purchase Period currently
may not exceed 50,000 shares. Nonemployee directors of the Company may apply
their directors' fees to the purchase of shares under the Plan.
All employees of the Company who work more than 20 hours per week and have
been employed by the Company for more than 30 days are eligible to participate
in the Plan. Participants may withdraw from the plan at any time, but may not
re-enroll until commencement of the next Purchase Period. Upon termination of a
participant's employment for any reason other than retirement or death, his or
her participation in the Plan will terminate and the credit balance in the
participant's share purchase account will be paid in cash to the participant
within 30 days. In the event of a participant's death or approved retirement,
no further contributions will be made to his or her share purchase account, and
the credit balance in the account will, at the participant's election, either be
used to purchase shares of Common Stock as the end of the applicable purchase
period or paid in cash to the participant.
The Plan is administered by a committee (currently, the Compensation
Committee) comprised of two or more directors of the Company who are not
employees and who are "independent" within the meaning of Section 16b-3 of the
Securities Exchange Act of 1934 (the "Act"). The Plan may be amended by the
Board of Directors at any time, except that the Board cannot, without
shareholder approval, adopt any amendment that (i) would cause the Plan,absent
such approval, to cease to be subject to Rule 16b-3 under the Act, (ii) requires
shareholder approval under any rules of the National Association of Securities
Dealers, Inc., or (iii) permits the issuance of common stock before payment in
full therefor.
On January 21, 1997, the Company's Board of Directors approved, subject to
shareholder approval, an amendment to the Plan that will increase the number of
shares of the Company's Common Stock reserved for issuance thereunder by
500,000 shares, and increase to 75,000 the aggregate number of shares that may
be purchased in any single purchase period. Before the proposed amendment, a
total of 400,000 shares of Common Stock were reserved for issuance under the
Plan. At December 31, 1996, there remained 102,428 shares available for future
issuances under the Plan. Accordingly, assuming that employees participate to
the maximum extent allowed under the Plan, the current Plan reservation will be
inadequate to cover Plan purchases in the first half of 1998.
The Plan has generated significant interest among the Company's employees.
Employees have purchased the maximum number of shares allowed under the Plan
during each purchase period since the Plan's adoption. Because of period
limitations, the Company has issued been forced to reduce employee
-5-
participation and return a portion of plan contributions in cash at the end of
each purchase period. The Board of Directors believes that the Plan
significantly contributes to the feeling of ownership among employees and that
it is advisable and advantageous for the Company both to provide for an adequate
reservation under the Plan for the next six years and to increase the amount
that may be issued in any six month period meet the needs of Plan participants.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
PROPOSAL TO AMEND THE PLAN. THE PERSONS NAMED IN THE ACCOMPANYING PROXY INTEND
TO VOTE THE PROXIES HELD BY THEM IN FAVOR OF SUCH PROPOSAL, UNLESS OTHERWISE
DIRECTED. AN AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK OUTSTANDING AS OF THE RECORD DATE IS REQUIRED FOR THE APPROVAL OF
THE PROPOSAL.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT OF THE BOARD OF DIRECTORS
The Company's executive compensation policies are recommended and
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee consists of Robert Price, David Allio and Michael Adams,
independent, outside directors.
EXECUTIVE COMPENSATION POLICIES
The Company's objectives are to maximize shareholder value as well as to
ensure the stability and long-term success of the Company. Consistent
therewith, the Board of Directors has adopted the following standards and
policies relative to setting executive compensation:
- Total compensation should include a significant performance component
in addition to salary.
- Salary should have a relationship to salaries in industry peer groups.
- Total compensation should be adequate to attract, motivate and retain
quality talent.
- Performance measures should relate to key characteristics accepted
within the software/high technology industry.
- Performance should be measured over time periods adequate to evaluate
a particular executive's contribution to results.
- Stock options and other awards should be integrated with other
elements of compensation to formulate a package that helps to align
executive compensation with stockholder interests.
As it did in 1995, in 1996 the Company retained an independent
compensation consulting firm that presented to the Committee statistical
compilations on executive compensation from a number of trade associations,
financial services and accounting sources which included companies in the
computer software industry, or in related high technology industries, of
similar size in terms of revenues and employment levels.
1996 EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program for 1996, like its
programs in prior years, was comprised of base salary, annual cash incentive
compensation, long-term incentive
-6-
compensation in the form of stock options, and various benefits, including
medical and retirement savings plans generally available to employees.
BASE SALARY. Base salaries for executive officers during 1996 were set at
levels designed to approximate industry average base salaries as established by
the statistical information provided by the Company's compensation consultant.
In some cases, the level of industry average base compensation for 1996
represented an increase over salaries in 1995. Mr. Stuckey's base salary was
increased from $230,000 to $260,000 from 1995 to 1996.
CASH INCENTIVE COMPENSATION. The Compensation Committee established a cash
bonus plan for executive officers at the beginning of 1996 similar to the plan
for 1995. The purpose of the bonus plan is to tie a substantial portion of
executive compensation to performance and, therefore, the plan establishes
eligibility primarily on the basis of corporate financial performance. The
factors included in the bonus plan for 1996 focused primarily on operating
income, revenue and in the case of one officer, on delivery dates for
development. The plan was designed to reward performance only if at least 75%
of targeted performance was achieved. In addition, individual objectives and
performance standards were established that formed the basis for a percentage
multiplier of the bonus.
Mr. Stuckey did not receive a cash bonus for services performed in 1996
under the bonus plan. The bonus pool was based on a percentage of operating
income and provided for no bonus if 75% of target was not achieved. The
absence of bonus reflects the performance in the third and fourth fiscal
quarters of 1996.
STOCK INCENTIVE COMPENSATION. The Company provides long-term incentive to
its executive officers primarily through the 1993 Stock Incentive Plan (the
"1993 Plan"). Vesting over a period of one to four years, options and
restricted stock have provided a significant incentive to remain with the
Company and to maximize the Company's performance. In 1995, the Compensation
Committee, with the assistance of its compensation consultant, examined
generally the parameters of the size of grants necessary to provide long-term
incentive to executives and determined in 1996 to limit annual grants to
approximately 20% of the shares reserved under the 1993 Plan.
Mr. Stuckey received options to purchase 20,000 shares of common stock
under the Company's stock incentive plan during 1996. Such options were
commensurate with the level of options granted to other executive officers.
BENEFITS. The Company provides medical and retirement savings benefits to
executive officers on terms generally available to employees. No executive
officer received perquisites in excess of 10% of salary during 1996.
SUMMARY
The Compensation Committee believes that the compensation program for
executive officers during the 1996 year was comparable to compensation programs
for similarly situated companies and that the aggregate compensation provided
under the program was appropriate.
Michael Adams
David Allio
Robert Price
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SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for the
last three fiscal years awarded to or earned by the Chief Executive Officer of
the Company and the four highest paid executive officers of the Company whose
salary and bonus earned in the fiscal year ended December 31, 1996 exceeded
$100,000 for services rendered.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- -----------------------------------------------
NAME OTHER AWARDS PAYOUTS ALL
AND ANNUAL RESTRICTED OTHER
PRINCIPAL COMPEN- STOCK LTIP COMPEN-
POSITION YEAR SALARY BONUS(1) SATION AWARDS(2) OPTIONS PAYOUTS SATION(3)
-------- ---- ------ -------- ------ ---------- ------- ------- ----------
Marion Melvin Stuckey 1996 $260,000 20,000 $10,625
Chairman and Chief 1995 $230,000 100,000 $7,500
Executive Officer 1994 $180,000 $4,778 $9,750
Jimmie H. Caldwell 1996 $200,000 20,000 $10,625
President and 1995 $180,000 34,000 $7,500
Chief Operating 1994 $140,000 $3,686 $9,750
Officer
Allen S. Peterson 1996 $170,000 20,000 $2,310
Executive Vice President 1995 $150,000 $76,260 19,000
1994 $120,000 $69,964 $51,000 14,000 $2,250
David G. Latzke 1996 $140,000 12,000 $3,133
Vice President, Secretary, 1995 $120,000 11,000
Chief Financial Officer 1994 $115,000 $3,416 $21,250 25,000 $1,643
and Treasurer
- --------------------------
(1) Includes cash bonuses paid in the following year with respect to services
performed in the years indicated.
(2) The amounts reported in this column represent the market value on the date
of grant, without giving effect to the diminution in value attributable to
the restrictions on such stock. In fiscal 1994, the Company awarded 6,000
and 2,500 shares of restricted stock to Messrs. Peterson and Latzke,
respectively, with vesting occurring at 50% per year beginning one year
from the date of grant.
(3) The amounts reported in this column for each of Mr. Stuckey and Mr.
Caldwell include Company contributions to the Company's 401(k) Plan in the
amounts of $2,250 for 1994 and $3,125 for 1996. All of the amounts
reported for Mr. Peterson and Mr. Latzke in this column represent
contributions to such plan. The amounts reported for each of Mr. Stuckey
and Mr. Caldwell for each of the three years also include $7,500 in
benefits from split-dollar life insurance policies.
STOCK OPTIONS
The Company maintains a 1989 Stock Option Plan and a 1993 Stock Incentive
Plan. No additional options under the 1989 plan were granted during 1996. The
Company may grant stock options, and other stock-based awards, to executive
officers and other employees and consultants of the Company under the 1993 Stock
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Incentive Plan. The following table sets forth information with respect to
options granted to the named executive officers in 1996:
OPTION GRANTS IN 1996
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS OPTIONS GRANTED EXERCISE APPRECIATION FOR
GRANTED TO EMPLOYEES PRICE PER EXPIRATION OPTION TERM (1)
------------------------------------------------------------------- ---------------------------
NAME (#) IN 1996 ($/SH) DATE 5%($) 10% ($)
- ---- ------- ---------------- ---------- ---------- ------- --------
Mr. Stuckey 20,000 9.3% $3.75 1/23/06 $47,167 $119,531
Mr. Caldwell 20,000 9.3% $3.75 1/23/06 $47,167 $119,531
Mr. Peterson 20,000 9.3% $3.75 1/23/06 $47,167 $119,531
Mr. Latzke 12,000 5.6% $3.75 1/23/06 $28,300 $71,718
- ----------------------------
(1) These amounts represent the realizable value of the subject options ten
years from the date of grant (the term of each option), without discounting
to present value, assuming appreciation in the market value of the
Company's common stock from the market price on the date of grant at the
rates indicated. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock, and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved.
The following table sets forth information with respect to the exercise of
options and the value of options held by executive officers as of December 31,
1996:
AGGREGATED FISCAL YEAR END OPTION VALUES
SHARES ACQUIRED NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ON EXERCISE VALUE OPTIONS AT END OF 1996(1) IN-THE-MONEY OPTIONS (2)
----------------------------- -------------------------------- -------------------------------
NAME OF OPTIONS REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------- ------------- -------- ----------- ------------- ----------- -------------
Mr. Stuckey 0 0 25,000 95,000 0 $40,000
Mr. Caldwell 20,000 $42,500 23,500 55,500 $21,250 $103,750
Mr. Peterson 18,750 $47,344 49,100 55,150 $95,975 $89,275
Mr. Latzke 0 0 15,750 37,250 $16,375 $58,875
- ----------------------------
(1) All of such options, except those issued to Mr. Stuckey in 1995 for 100,000
shares, which were granted with an exercise price in excess of fair market
value, are exercisable at a price equal to the fair market value of the
common stock on the date of grant.
(2) Represents the difference between the closing price of the Company's Common
Stock as reported on the Nasdaq National Market on December 31, 1996 and
the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS
Other than its 1993 Stock Incentive Plan, the Company does not maintain any
long-term incentive plans.
SEVERANCE AGREEMENTS
The Company has severance agreements with Messrs. Stuckey, Caldwell,
Peterson and Latzke that provide for the payment to such executive officers of
severance benefits in the event such officers are terminated, or resign for
"good reason," within two years after a "change of control" of the Company.
Such severance benefits range from one to three times annual compensation
received by such executives averaged over the five years prior to termination.
Such agreements define change of control as the acquisition by any person or
persons acting in concert of 30% or more of the Company's voting stock, a change
of control required to be reported under the Securities Exchange Act of 1934, or
certain changes in the board composition in connection with a hostile contest
for control. The Company does not have any other employment agreement with an
executive officer named in the summary compensation table.
-9-
SHAREHOLDER RETURN
The graph set forth below compares the cumulative total shareholder return
on the common stock of the Company since July 14, 1993 (the day when the Common
Stock commenced trading on the Nasdaq National Market) with the cumulative total
return on a broad market index (the Nasdaq Index) and a peer group index (the
Nasdaq Computer and Data Processing Index). In each case, the cumulative return
is calculated assuming an investment of $100 on July 14, 1993, and reinvestment
of all dividends.
Nasdaq
National Nasdaq Computer &
Date Market Data Processing Fourth Shift
- -------- ----------- ------------------ ------------
7/14/93 $ 100 $ 100 $ 100
9/30/93 109.204199 102.164773 96.1538462
12/31/93 111.348418 103.122528 129.807692
3/31/94 106.665064 104.547875 111.538462
6/30/94 101.678955 102.309311 94.2307692
9/30/94 110.096882 113.90354 94.2307692
12/30/94 108.840893 125.189674 42.3076923
3/31/95 118.655055 140.92555 61.5384615
6/30/95 135.720646 167.034436 51.9230769
9/30/95 152.067639 182.462978 82.6923077
12/31/95 153.922904 190.657775 57.6923077
3/29/96 161.112892 199.611522 73.0769231
6/28/96 174.264928 221.873162 101.923077
9/30/96 180.4674 226.293995 115.384615
12/31/96 189.318089 235.347905 88.4615385
-10-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1997, information
regarding the ownership of Common Stock by (i) each director, (ii) each
executive officer named in the Summary Compensation Table, (iii) all directors
and executive officers (including the named individuals) as a group, and (iv)
any other shareholder who is known by the Company to own beneficially more than
5% of the outstanding Common Stock of the Company. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner Number(1) Percent
------------------------------------ --------- -------
Perkins Capital Management, Inc.(2). . . . . . . . . 1,663,737 17.2%
730 East Lake Street
Wayzata, MN 55391-1769
Hathaway & Associates, Ltd. (3). . . . . . . . . . . 870,000 9.3%
119 Rowayton Avenue
Rowayton, CT 06853
U. S. Bancorp (4). . . . . . . . . . . . . . . . . . 515,000 5.3%
111 S.W. Fifth Avenue
Portland, OR 97204
Marion Melvin Stuckey (5). . . . . . . . . . . . . . 669,074 6.9%
7900 International Drive
International Plaza
Minneapolis, MN 55420
Michael J. Adams (6) . . . . . . . . . . . . . . . . 83,035 *
David J. Allio (7) . . . . . . . . . . . . . . . . . 34,329 *
Anton J. Christianson. . . . . . . . . . . . . . . . 118,711 1.2%
Robert M. Price. . . . . . . . . . . . . . . . . . . 18,669
Portia Isaacson. . . . . . . . . . . . . . . . . . . 8,884 *
Jimmie H. Caldwell(8). . . . . . . . . . . . . . . . 259,364 2.7%
Allen S. Peterson. . . . . . . . . . . . . . . . . . 74,695 *
David G. Latzke(9) . . . . . . . . . . . . . . . . . 22,996 *
All executive officers and directors . . . . . . . . 1,289,757 13.1%
as a group (9 individuals)
__________
* Less than 1%
(1) Includes 3,375 shares for each of Messrs. Adams, Allio and Price and Dr.
Isaacson, 30,000 shares for Mr. Stuckey, 33,500 shares for Mr. Caldwell,
34,100 shares for Mr. Peterson, 18,750 shares for Mr. Latzke and 129,850
shares for all executive officers and directors as a group, of Common Stock
issuable upon the exercise of stock options which are either currently
exercisable or become exercisable within 60 days.
(2) Based upon information contained in the Schedule 13G of Perkins Capital
Management, Inc. ("PCM") dated February 4, 1997, includes, 500,000 shares
owned by The Perkins Opportunity
-11-
Fund, an affiliate of PCM, over which PCM has disposition and voting
power. PCM has voting power over 229,100 of the remaining shares.
(3) Based upon information contained in the Schedule 13G of Hathaway
&Associates, Ltd. dated January 10, 1994.
(4) Based upon information contained in the Schedule 13G of U. S. Bancorp
(the"Bank") dated February 13, 1997, includes 254,300 shares beneficially
owned by Qualivest Capital Management, Inc., a wholly-owned subsidiary of
the Bank, and 262,700 shares held by the Trust Group of the Bank. The Bank
has disposition power with respect to 257,200 of such shares.
(5) Includes 168,863 shares held by a corporation for which Mr. Stuckey is the
President, sole director and sole shareholder.
(6) Includes 1,827 shares owned by Mr. Adams' minor children, 4,550 shares
owned by Mr. Adams' wife, and 5,814 shares held in a self-directed HR-10
account. Does not include 21,560 shares representing Mr. Adams' pro rata
interest in a limited partnership in which he is a limited partner.
(7) David J. Allio is an officer of V. Suarez & Company but disclaims any
beneficial ownership of shares held by Suarez. The shares listed as
beneficially owned by Mr. Allio and by all executive officers and directors
as a group do not include shares held by Suarez.
(8) Includes 5,554 shares and options to purchase 300 shares owned by Mr.
Caldwell's wife. Mr. Caldwell disclaims beneficial ownership of these
shares.
(9) Includes 200 shares owned by Mr. Latzke's minor children.
Under federal securities laws, the Company's directors and officers, and
any beneficial owner of more than 10% of a class of equity securities of the
Company, are required to report their ownership of the Company's equity
securities and any changes in such ownership to the Securities and Exchange
Commission (the "Commission") and the securities exchange on which the equity
securities are registered. Specific due dates for these reports have been
established by the Commission, and the Company is required to disclose in this
Proxy Statement any delinquent filing of such reports and any failure to file
such reports during the fiscal year ended December 31, 1996. Based on
information contained in their forms 3, 4 and 5, all directors, officers and
beneficial holders of 10% of the Company's securities timely filed such reports
during 1996.
-12-
RELATIONSHIP WITH ACCOUNTANTS
Arthur Andersen LLP have served as the Company's independent public
accountants for more than five years and will serve as the Company's independent
public accountants for the year ending December 31, 1997. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions from shareholders.
GENERAL
The Board of Directors of the Company does not know of any matters other
than those described in this Proxy Statement which will be acted upon at the
Annual Meeting. In the event that any other matters properly come before the
meeting calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment on such
other matters.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the annual meeting of
shareholders held in 1998 must be received at the Company's principal executive
offices, International Plaza, 7900 International Drive, Minneapolis, MN 55425
before December 5, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
Marion Melvin Stuckey, Chairman of the Board
Dated: April 7, 1996
-13-
FOURTH SHIFT CORPORATION
PROXY FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints M.M. Stuckey and J.H. Caldwell, and each of
them, with full power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Fourth
Shift Corporation to be held on May 7, 1997, and at all adjournments thereof, as
specified below on the matters referred to, and, in their discretion, upon any
other matters which may be brought before the meeting:
1. ELECTION OF CLASS C DIRECTORS: / / FOR all nominees (EXCEPT AS / / WITHHOLD AUTHORITY
MARKED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES
TO WITHHOLD AUTHORITY TO VOTE FOR A SPECIFIC NOMINEE, PLACE A LINE THROUGH EACH
NOMINEE'S NAME BELOW:
Anton J. Christianson, Steve J. Lair, Robert M. Price
2. APPROVAL OF AMENDMENTS TO 1994 EMPLOYEE STOCK PURCHASE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. TO VOTE WITH DISCRETIONARY AUTHORITY ON ANY OTHER BUSINESS AS MAY PROPERLY BE PRESENTED AT THE MEETING.
(CONTINUED ON REVERSE SIDE)
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 ALL DIRECTORS NAMED IN ITEM 1 AND FOR PROPOSAL 2.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated ______________________, 1997
__________________________________
Signature
__________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.