SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Control Devices, Inc.
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Control Devices, Inc.
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CONTROL DEVICES, INC
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF ANNUAL MEETING
To the Shareholders of Control Devices, Inc:
You are hereby notified that the Annual Meeting of Shareholders of Control
Devices, Inc., an Indiana Company, will be held at Embassy Suites Hotel, 1050
Westbrook St., Portland, Maine, on Friday April 25, 1997 at 9:30 am (EST) for
the following purposes:
(1) To elect eight (8) directors for a term of one year.
(2) To ratify the Control Devices, Inc. Employee Stock Purchase Plan.
(3) To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the current fiscal year ending December 31,
1997.
(4) To transact such other business as may properly come before the
meeting.
The shareholders of record at the close of business on March 14, 1997, are
entitled to notice of and to vote at the meeting in person. PLEASE MARK, SIGN
AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. If you attend the meeting, you may, if you so desire,
withdraw your proxy and vote in person.
Jeffrey G. Wood
Secretary
Standish, Maine
March 18, 1997
1997 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
All shareholders of record on March 14, 1997, are entitled to vote at the
Annual Meeting to be held at Embassy Suites Hotel, 1050 Westbrook St.,
Portland, Maine, on the 25th day of April, 1997 at 9:30 am (EST). All
shareholders unable to attend such meeting who wish to vote their shares upon
the business to be transacted at such meeting are requested to mark, sign and
date the accompanying form of proxy and return it in the addressed, postage
paid envelope enclosed for your convenience. The proxy is revocable by you at
any time before it is voted, and the signing of the proxy will not affect your
right to vote in person if you attend the meeting. All proxies returned, and
not so revoked, will be voted in accordance with their terms.
As stated in the Notice, the matters to be considered at the meeting are the
election of eight directors, ratification of the Control Devices, Inc.
Employee Stock Purchase Plan, ratification of the appointment of independent
public accountants, and the transaction of such other business as may properly
come before the meeting.
The solicitation of the accompanying form of proxy is made on behalf of the
Board of Directors of the Company. The expense of the solicitation of the
proxies for this meeting will be borne by the Company. The solicitation will
be made through the use of the mail and by personal solicitation through
regular employees of the Company who will not be additionally compensated.
The mailing address of the principal executive offices of the Company is
Control Devices, Inc., 228 Northeast Road, Standish, Maine 04084. This Proxy
Statement and the enclosed form of proxy were first sent or given to
shareholders on approximately March 18, 1997.
OUTSTANDING SHARES
As of March 10, 1997, the Company had 4,963,249 common shares outstanding,
without par value. Each shareholder is entitled to one vote upon any proposal
submitted to the meeting for each share standing in the shareholder's name on
March 14, 1997.
PRINCIPAL SHAREHOLDERS
Set forth below is certain information concerning the only shareholders
known to the Company, as of March 10, 1997, to beneficially own 5% or more of
the Company's outstanding common shares.
NAME OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF OWNERSHIP OF CLASS
---------------- ----------------- --------
Ralph R. Whitney, Jr............................. 320,689(1) 6.5%
Massachusetts Mutual Life Insurance Co........... 999,995(2) 20.1%
State of Wisconsin Investment Board.............. 265,000 5.3%
- - --------
(1) Includes 80,172 shares owned by Mr. Whitney's wife, as to which Mr.
Whitney disclaims beneficial ownership. The address for Mr. Whitney is the
principal office of the Company.
(2) Includes 174,199 shares (3.5%) owned by MassMutual Corporate Investors,
57,999 (1.2%) shares owned by MassMutual Participation Investors, each of
which is a mutual fund managed by Massachusetts Mutual Life Insurance
Company, and 174,199 (3.5%) shares owned by MassMutual Corporate Value
Partners Limited, for which Massachusetts Mutual Life Insurance Company
acts as an investment advisor. Pursuant to a Security and Exchange
Commission Executive Order issued pursuant to Section 17(d) of the
Investment Company Act, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation Investors and
MassMutual Corporate Value Partners Limited must sell shares in proportion
to their respective holdings, unless the joint transaction committees of
the Boards of Trustees of MassMutual Corporate Investors and MassMutual
Participation Investors approve a disproportionate disposition of the
shares. Massachusetts Mutual Life Insurance Company disclaims beneficial
ownership of any shares in which it has no actual pecuniary interest. The
address of each of these shareholders is Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111.
ELECTION OF DIRECTORS
Eight persons, all of whom are members of the present Board, are nominees
for election at the Annual Meeting as directors to hold office until the next
Annual Meeting or until their successors have been elected. If the enclosed
proxy is duly executed and received in time for the meeting and if no contrary
specification is made as provided therein, it is the intention of the persons
named therein to vote the shares represented thereby for those eight persons.
The eight persons who receive the largest number of votes are elected.
Abstentions, broker non-votes, and instructions to withhold authority to vote
on the enclosed proxy do not affect the total of votes otherwise cast for any
person. The eight persons elected will comprise the entire membership of the
Board of Directors of the Company. There will be no cumulative voting for the
election of directors. If any nominee shall be unable to serve, an event which
the Board of Directors does not anticipate, the proxy shall be voted for the
person designated by the Board to replace such nominee.
With respect to each of such nominees, the following information is
furnished:
RALPH R. WHITNEY, JR., 62, has been Chairman of the Board of the Company
since 1994. Mr. Whitney has been a principal of Hammond, Kennedy, Whitney &
Company , Inc. (HKW), a New York, New York financial intermediary and private
investment banking firm, since 1971. Mr.Whitney is also a director of Excel
Industries, Inc., Baldwin Technology Company, Inc., Adage, Inc., IFR Systems,
Inc., and Selas Corp. of America.
BRUCE D. ATKINSON, 56, has been President and a Director of the Company
since 1994, and has been Chief Executive Officer since 1995. Mr. Atkinson was
General Manager of the predecessor company from 1978 until 1994.
CHARLES M. BRENNAN, III, 55, has been a Director of the Company since 1994.
Mr. Brennan has been Chairman of the Board and Chief Executive Officer of the
MYR Group Inc., a specialty electrical and telecommunications contractor,
since 1989. Mr. Brennan is also a Director of UNR Industries, Inc.
JOHN D. COOKE, 56, has been a Director of the Company since 1994. Mr. Cooke
has been a Senior Vice President--Investments of Prudential Securities, Inc.
since 1991. For more than 5 years prior thereto he was Senior Vice President--
Investments of Thompson McKinnon Securities.
JAMES O. FUTTERKNECHT, JR., 50, has been a Director of the Company since
1995. Mr. Futterknecht has been Chairman of the Board, President and Chief
Executive Officer of Excel Industries Inc., an Elkhart, Indiana automotive
parts supplier, since 1995. Mr. Futterknecht was President and Chief Operating
Officer of Excel from 1993 to 1995, and Executive Vice President of Excel from
1990 to 1992.
ALAN O. MOSSBERG, 64, has been a Director of the Company since 1994. Mr.
Mossberg has been Chief Executive Officer and President of O.F. Mossberg &
Sons, Inc., a North Haven, Connecticut manufacturer of shotguns, for more than
5 years.
JOHN M. RAMEY, 44, has been a Director of the Company since 1994. Mr. Ramey
has been a principal of HKW since 1986 and sits on the Boards of several
private companies.
GLENN SCOLNIK, 45, has been a Director of the Company since 1994. Mr.
Scolnik has been a principal of HKW since 1993. Mr. Scolnik was a member of
the law firm of Sommer & Barnard, PC, Indianapolis, Indiana, for more than
five years prior to 1993, and was of counsel to such firm from 1993 to 1995.
Mr. Scolnik is a director of WavePhore, Inc., a data broadcasting company, and
sits on the Boards of several private companies.
2
EXECUTIVE OFFICERS
Furnished below is a summary of information identifying the executive
officers of the Company:
NAME AGE POSITION
---- --- --------
Bruce D. Atkinson....... 56 Chief Executive Officer and President
Jeffrey G. Wood......... 40 Vice President, Chief Financial Officer, Secretary and Treasurer
Michel Hauser-Kauff-
mann................... 54 Managing Director-RDI
- - --------
All of the above executive officers were elected by the Board on August 30,
1996.
Mr. Atkinson has been President since July 1994 and has been Chief Executive
Officer since June 1995. Mr. Atkinson was General Manager of the predecessor
company from 1978 until 1994.
Mr. Wood has been Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company since July 1994. Mr. Wood was Controller of the
predecessor company from 1990 until 1994.
Mr. Hauser-Kauffmann has been Managing Director of RDI since July 1996. Mr.
Kauffmann has been with RDI in various capacities for the last 25 years.
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers receive $16,000 per year
payable quarterly plus $1000 per Board meeting attended and $800 per committee
meeting if not held immediately prior to or subsequent to a regular Board
meeting. Non-employee directors are also granted options to purchase 1,000
common shares, at the fair market value on the date of grant, upon their
initial election and annually upon reelection. The options expire at the
earlier of one year after the termination of the director's Board membership
or ten years after the date of grant. Directors who are officers are not
compensated for their Board responsibilities.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met five times in 1996. The Board has an audit
committee, a compensation committee, a nominating committee and an executive
committee.
The purpose and function of the audit committee are to recommend the
engagement or discharge of independent public accountants; to review year-end
and interim financial statements prior to issuance; to review the services
being performed by the public accountants; and to make appropriate reports and
recommendations to the Board of Directors. Messrs. Brennan, Cooke, and Ramey
are members of the audit committee. The audit committee met once in 1996.
Messrs. Mossberg, Cooke, Scolnik and Whitney are members of the compensation
committee. The compensation committee formulates executive compensation for
the Company, and determines the compensation of all executive officers. The
compensation committee administers the Company's 1996 Stock Compensation Plan.
The Committee met twice in 1996.
Messrs. Whitney, Atkinson, Futterknecht, and Scolnik are members of the
executive and nominating committees. The executive committee did not meet in
1996. The nominating committee does not accept nominations from shareholders.
The nominating committee was formed in October 1996 and did not meet in 1996.
CERTAIN TRANSACTIONS
In April 1996, the Company acquired all of the issued and outstanding
capital stock of RDI for a total purchase price of $8,964,000. The Company
paid $6,964,000 in cash, delivered $1,108,000 aggregate principal
3
amount of its 8.0% Subordinated Promissory Notes and $892,000 aggregate
principal amount of its 6.5% Automatically Convertible Subordinated Promissory
Notes ("RDI Convertible Notes"). The price was determined in arms length
negotiations between the directors of the Company and the shareholders of RDI,
none of whom were officers of the Company at the time. Mr. Michael Hauser-
Kauffmann, General Manager of RDI, received from such consideration in
exchange for his shares of RDI a total of $1,285,515 in cash and $369,200 in
aggregate principal amount of RDI Convertible Notes. Mr. Hauser-Kauffmann's
RDI Convertible Notes were automatically converted upon the closing of the
Company's initial public offering into 41,022 Common Shares of the Company.
In conjunction with the Company's IPO in October 1996, proceeds were used to
repay MassMutual for long term debt which had been in place since the Business
was acquired from GTE in July 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
HKW provides management services and acquisition advice and assistance to
the Company. Messrs. Whitney, Ramey, Scolnik and Mr. Douglas H. Bagin and Mr.
Forrest E. Crisman, Jr. (directors of the Company prior to July 29, 1996) are
principals of HKW and each owns Common Shares. The Company pays HKW monthly
management fees of $15,000 and pays director fees to Messrs. Whitney, Scolnik,
and Ramey who are Directors of the Company. The management fees amounted to
$180,000 for the year ended December 31, 1996.
Mr. Douglas H. Bagin, Messrs. Mossberg and Whitney were members of the
compensation committee of the Board of Directors during the year ended
December 31, 1996. Mr. Bagin, who became a principal of HKW in 1996, resigned
from the Board on July 29, 1996.
Mr. Bagin was an executive officer of Maine Rubber Company ("MRC") during
1996. Mr. Whitney served as the Chief Executive Officer and Chairman of the
Board of MRC, and a member of the executive committee of the Board of
Directors of MRC, which performs the functions of a compensation committee.
Mr. Mossberg is an executive officer of O.F. Mossberg. Mr. Whitney is a
director and a member of the compensation committee of the Board of Directors
of O.F. Mossberg.
Mr. Scolnik also assists the Company in the management of its legal affairs
and is paid for such services. Such fees amounted to $94,152 in 1996. However,
over half such amount represents payment for services rendered by associated
co-council and a paralegal.
In conjunction with the Company's IPO in October 1996, proceeds were used to
repay Preferred Shares owned by Messrs. Brennan, Cooke, and Futterknecht in
the amount of $94,000 each.
4
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 14, 1997, information
regarding the beneficial ownership of common shares of the Company by each
director of the Company, each of the executive officers named in the Summary
Compensation Table below, and by all directors and executive officers as a
group.
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- - ------------------------ ----------------------- --------
SHARES
------
Ralph R. Whitney............................. 320,689(1) 6.5%
Bruce D. Atkinson............................ 153,846(2) 3.1%
Charles M. Brennan, III...................... 20,000 0.4%
John D. Cooke................................ 20,000 0.4%
James O. Futterknecht, Jr.................... 20,000(3) 0.4%
Alan I. Mossberg............................. 15,000(4) 0.3%
John M. Ramey................................ 160,345(5) 3.2%
Glenn Scolnik................................ 160,345 3.2%
Jeffrey G. Wood.............................. 102,564 2.1%
Michel Hauser-Kauffmann...................... 41,022 0.8%
All Executive Officers and Directors as a
Group (10 persons).......................... 1,013,811 20.4%
- - --------
(1) Includes 80,172 shares owned by Mr. Whitney's wife, as to which Mr.
Whitney disclaims beneficial ownership.
(2) Includes 75,000 shares owned by Mr. Atkinson's wife, as to which Mr.
Atkinson disclaims beneficial ownership.
(3) Includes 5,000 shares held by a revokable trust of which Mr. Futterknecht
is trustee, 5,000 shares held by a revokable trust of which Mr.
Futterknecht's wife is trustee, and 10,000 shares held by two irrevocable
trusts for the benefit of Mr. Futterknecht's children, all of such shares
as to which Mr. Futterknecht disclaims beneficial ownership.
(4) Represents shares owned by Mr. Mossberg's wife, as to which Mr. Mossberg
disclaims beneficial ownership.
(5) Includes 60,000 shares owned by Mr. Ramey's wife, as to which Mr. Ramey
disclaims beneficial ownership.
5
SUMMARY COMPENSATION TABLE
Furnished below is a summary concerning the compensation awarded and/or paid
in each of the last two years to the Company's Chief Executive Officer and
each other executive officer whose aggregate salary and bonus exceeded
$100,000 in 1996. Prior to 1996 the Company was not a reporting company
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act.
ANNUAL COMPENSATION
LONG TERM
NAME AND COMPENSATION
PRINCIPAL SECURITIES AWARDS ALL OTHER
POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS(#) (1)
--------- ---- --------- -------- --------------------- ---------
Ralph R. Whitney, Jr.... 1996 $ -- $ -- -- $15,000
Chairman 1995 $ -- $ -- -- $15,000
Bruce D. Atkinson....... 1996 $204,900 $95,818 45,000 $ 8,356
President and CEO 1995 $211,647 $81,300 0 $ 7,416
Jeffrey G Wood.......... 1996 $144,000 $67,339 30,000 $ 8,202
Vice President and CFO 1995 $145,248 $57,120 0 $ 7,189
Michel Hauser-Kauff-
mann................... 1996 $140,660(2) $ 0 14,000 $ 0
Managing Director-RDI
- - --------
(1) Represents director's fees paid to Mr. Whitney. Includes for Mr. Atkinson
and Mr. Wood the value of Company paid life insurance, and contributions
by the Company to the Company's deferred compensation and savings plan.
(2) Includes Company paid compensation from April 1, 1996 (date of acquisition
of RDI) to December 31, 1996.
OPTIONS
The following table shows the options to purchase common shares granted to
the named executive officers in 1996 pursuant to the Company's 1996 Stock
Compensation Plan.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE($) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- ------------- --------------
Ralph R. Whitney, Jr.... -- -- -- -- -- --
Bruce D. Atkinson....... 45,000(1) 20.0 10.5625 10/25/2006 $ 299,000 $ 758,000
Jeffrey G. Wood......... 30,000(2) 13.3 10.5625 10/25/2006 $ 199,000 $ 505,000
Michel Hauser-Kauff-
mann................... 14,000(3) 6.2 9.00 10/2/2006 $ 79,000 $ 201,000
- - --------
(1) Options become exercisable in 9,465 share increments on October 26, 1997,
January 1, 1998, January 1, 1999, January 1, 2000, and 7,140 on January 1,
2001.
(2) Options become exercisable in 9,465 share increments on October 26, 1997,
January 1, 1998, January 1, 1999, and 1,605 on January 1, 2000.
(3) Options for 11,111 shares become exercisable on October 2, 1997 and 2,889
become exercisable on January 1, 1998.
6
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
UNDERLYING UNEXERCISED OPTIONS THE MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
- - ---- ------------------------------ ----------------------------
Bruce D. Atkinson....... 0/45,000 0/109,700(1)
Jeffrey G. Wood......... 0/30,000 0/73,100(1)
Michel
Hauser-Kauffmann........ 0/14,000 0/56,000(1)
- - --------
(1)Based on the December 31, 1996 closing price of $13.00 per share.
HAUSER-KAUFFMANN EMPLOYMENT AGREEMENT
The terms of Michael Hauser-Kauffmann's employment with RDI are governed by
(i) his written employment agreement dated January 10, 1986, with amendments
dated March 23, 1993 and March 29, 1996 (the "Employment Agreement"), and (ii)
by the provisions of French law and the National Metal Workers' collective
bargaining agreement.
The Employment Agreement provides that Mr. Hauser-Kauffmann will receive a
gross annual base salary of FF 975,000 (approximately $188,000 at December 31,
1996 exchange rates), plus an annual bonus payment of up to FF 487,500
(approximately $94,000). The amount of bonus payment will depend on whether
Mr. Hauser-Kauffmann satisfies certain performance objectives set annually by
management. In addition to his base salary and bonus payment, Mr. Hauser-
Kauffmann receives the use of a company car, health insurance and supplemental
retirement benefits. The Employment Agreement provides for a contractual
severance payment to Mr. Hauser-Kauffmann if RDI terminates the Employment
Agreement for any reason (other than for serious professional misconduct)
prior to March 29, 1998. The amount of the contractual severance payment is
equal to two years salary and bonus.
In addition, Mr. Hauser-Kauffmann benefits from the provisions of French
labor law, and the National Metal Workers' collective bargaining agreement
(Convention Collective de la Metallurgie; the "Collective Bargaining
Agreement"), which applies to numerous French companies whose businesses
relate to metal products, including RDI. Both French labor law and the
Collective Bargaining Agreement provide for a minimum notice period prior to
dismissal of an employee and for the payment of termination indemnities. In
addition to these termination indemnities, French law also provides for the
payment of damages if the dismissal is without "real and serious cause."
In general, if Mr. Hauser-Kauffmann is dismissed before March 29, 1998, he
would receive a severance payment under his Employment Agreement. The
Employment Agreement provides that this severance payment is inclusive of any
damages and termination indemnities that may be due under French law or the
Collective Bargaining Agreement. If Mr. Hauser-Kauffmann is dismissed after
March 29, 1998, damages and termination indemnities would be payable under
French law and the Collective Bargaining Agreement, which would take into
account Mr. Hauser-Kauffmann's age and seniority.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation committee of the Board of Directors of the Company (the
"Committee") formulates executive compensation policy for the Company and
determines, subject to Board approval, the compensation of all executive
officers named above. The Committee is comprised of non-employee directors.
BROAD POLICY CONSIDERATIONS. In determination of executive compensation, the
following broad compensation policies were followed:
(1) Executive compensation must be competitive in order to retain and/or
attract key executives critical to the success of the Company.
7
(2) An effective executive compensation plan should be an integrated
program that balances short-term performance with the achievement of long-
term goals and is designed to result in continuously improving shareholder
value.
COMPENSATION PROGRAMS. The short-term components of the Company's executive
compensation program consist of base salaries and bonuses under the Company's
Management Incentive Plan (MIP). The MIP was formulated and established by the
Board in 1994 and continued until 1996 as a complement to base salaries for
officers and executive employees. Beginning in 1997, in order to take into
account the performance of RDI, the officers of the Company will receive a
bonus under an Officer Incentive Compensation Plan which reflects total
Company performance including RDI. The MIP will continue in 1997 for the
remainder of the executive employees.
In 1996, in conjunction with the Initial Public Offering of the Company's
shares, the Board of Directors and the shareholders of the Company,
respectively, approved and adopted the 1996 Stock Compensation Plan as
recommenced by the Board. The Stock Compensation Plan provides the long-term
incentive component of the executive compensation program.
BASE SALARY. In determining 1996 base salaries for United States based
executives, emphasis was placed on a comparison of each individual's salary to
the salaries received by individuals in similar positions in other companies
of comparable size based upon available survey information. The broad policy
consideration to maintain competitive executive compensation was used to
target a base salary within the range of salaries of similar executives at
similar sized companies. Individual performances as well as the Company's
performance compared to financial objectives were also considered.
In regard to the executive in France, the 1996 salary was set by the
employment agreement entered into at the time of the acquisition.
CASH INCENTIVE COMPENSATION. Under the Management Incentive Plan, bonus
opportunities were based on a maximum potential of 50% of the employees base
salary. The bonus target was based on the return on equity for the Company.
The bonus paid in 1996 was approximately 94% of the maximum, or 47% of base
salaries. At the time the Board established the targeted return on equity, the
Company was privately owned.
STOCK INCENTIVE COMPENSATION. The Company's 1996 Stock Compensation Plan was
adopted in October 1996 in conjunction with the Company's Initial Public
Offering. This plan was designed to provide the long term incentive to the
executive employee compensation plan. Since stock option values are dependent
on the long-term growth of the Company's stock price, the Committee believed
that the grant of stock options was the appropriate way in which to add a
long-term incentive element to the Companies executive compensation program.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation of the Chief
Executive Officer reflects the consideration and application of the same
policies and factors described above. Particular consideration was given to
the leadership skills consistently demonstrated by Mr. Atkinson; the
responsibilities imposed on him; and a comparison of his compensation to the
compensation paid to chief executive officers of similarly situated companies.
Mr. Atkinson's base salary was based on competitive data obtained through a
survey of similar sized companies. Mr. Atkinson's bonus was based on targeted
goals for return on equity for the Company.
Members of the Compensation Committee include Messrs. Mossberg, Whitney,
Cooke, and Scolnik.
8
PERFORMANCE GRAPH.
The following graph compares the cumulative total shareholder return on the
Company's common shares, with the cumulative total return of companies on the
Standard & Poor's 500 Stock Index and the total cumulative total return on the
common stock of the Standard & Poor's Auto Parts and Equipment Index.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN*
S&P
Auto Parts
Control S&P 500 & Equip
Devices Index Index
------- ------- ----------
FYE 10/02/96 $100 $100 $100
FYE 12/31/96 $144.44 $108.34 $106.96
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
NOTE: TOTAL RETURNS BASED ON MARKET CAPITALIZATION
9
EMPLOYEE STOCK PURCHASE PLAN
At this Annual Meeting, shareholders will be asked to approve the Control
Devices, Inc. Employee Stock Purchase Plan (the "Plan"). The Plan, and the
right of participants to make purchases thereunder, is intended to meet the
requirements of an "employee stock purchase plan," as defined in Section 423
of the Internal Revenue Code (the "Code"). The following summary of the Plan
is qualified, in its entirety, be reference to the Plan document.
PURPOSE
The purpose of the Plan is to provide employees of Control Devices, Inc. and
designated subsidiaries (collectively, "Participating Companies") an
opportunity to participate in the ownership of the Company. The Plan is
intended to benefit the Company as well as its shareholders and employees. The
Plan gives employees an opportunity to purchase common shares of the Company
at a favorable price through payroll deductions. The Company believes that the
shareholders will benefit correspondingly from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Plan.
ADMINISTRATION
The Plan is administered by a Committee appointed by the Board of Directors.
The members of the Committee will serve at the pleasure of the Board. The
Company intends that the composition of the Committee complies with Code
Section 162.
SHARES AND TERMS
The shares subject to purchase rights granted under the Plan are the
Company's authorized but unissued or reacquired no par value common shares.
The initial number of shares which may be issued under the Plan is 200,000,
subject to adjustment in the event of any increase or decrease in the number
of outstanding common shares resulting from the subdivision or consolidation
of shares, the payment of a stock dividend, any other increase or decrease in
the shares affected without receipt or payment of consideration by the
Company, or the distribution of the shares of a subsidiary to the Company's
shareholders.
ELIGIBILITY
Generally, full-time employees of any Participating Company will be eligible
to participate after completion of one full year of employment. Full-time
employees are employees who complete at least 1,000 hours of active employment
per year, and/or who work more than five months per year. Generally, the
employment relationship will be treated as continuing while the employee is on
a Company approved absence that does not exceed 90 days. Participation will
begin on the first entry date immediately following the date on which the
eligible employee completes an enrollment form and returns it to the
Committee. Entry dates are the first stock trading days of January, April,
July, and October, until the Committee determines otherwise.
Participation in the Plan is completely optional.
OFFERING/PURCHASE PERIODS
The Plan is implemented for consecutive three month offering/purchase
periods, unless otherwise determined by the Board. No offering/purchase period
can exceed 24 months. Each participant will receive a separate purchase right
for each offering/purchase period in which he or she participates. The
purchase right permits the participant to buy common shares at the end of the
offering/purchase period with the payroll deductions accumulated during the
offering/purchase period. The purchase right will be granted on the first day
of the offering/purchase period and will be automatically exercised on the
last day of the offering/purchase period. The Board, at its discretion, may
make changes to the length of offering and/or purchase periods.
10
The purchase price per share under the Plan is a designated percentage of
the fair market value of a Common Share on the date the shares are purchased
under the Plan ("purchase date"). The designated percentage will be 85% unless
otherwise determined by the Board (but in no event will it be less than 85%).
The purchase price may not be lower than the book value of the common shares
(as reported to the Securities and Exchange Commission or to shareholders) as
of the last day of the prior quarter. If the book value exceeds 85% of the
fair market value of the common shares on the purchase date, the purchase
price will be the book value of the shares. However, if the Book Value exceeds
the fair market value on the purchase date, no purchase will be made until the
next purchase date.
The fair market value of the common shares on a given date is the closing
sale price of the common shares as reported on the Nasdaq National Market
System.
LIMITATIONS
No purchase right will be granted to any person who immediately thereafter
would own, directly or indirectly, shares possessing 5% or more of the total
combined voting power or value of all classes of shares of the Company or any
of its subsidiaries. Furthermore, no participant will be granted purchase
rights under this Plan if such grant would result in the participant's rights
to purchase shares under all employee stock purchase plans of the Company and
its subsidiaries accruing at a rate which exceeds $25,000 worth of shares in
any calendar year.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
Participants will pay for their shares in a manner, and at such time as the
Committee determines. Generally, the participant will make after-tax payroll
deductions during the offering/purchase period. The deductions may not exceed
10% of a participant's compensation. The participant's payroll deductions will
be used to purchase as many shares (including fractional) as possible with the
amount of payroll deductions credited to the participant's account during the
offering/purchase period. A participant may increase or decrease his or her
deductions during an offering/purchase period to become effective on the
subsequent entry date. To change the rate of payroll deductions, a participant
must file a new enrollment form with the Committee authorizing the change,
subject to such timing limitations as the Committee determines. A
participant's enrollment form will remain in effect for successive
offering/purchase periods until changed or terminated.
A participant may discontinue participation in the Plan, and elect to
receive all of his or her accumulated payroll deductions on the next purchase
date. The participant's purchase right will automatically terminate and the
participant must file another enrollment form to resume participation.
The Code generally limits the value of shares a participant can purchase in
any calendar year to $25,000. Thus, the Company may decrease a participant's
payroll deductions to 0% in order to comply with the Code if at any time
during a calendar year, the aggregate of all payroll deductions used to
purchase common shares in all prior purchase periods plus all payroll
deductions accumulated in the following purchase period equals $22,500 (90% of
$25,000). The Company may provide either (i) that payroll deductions will
recommence at the same rate on the next entry date, or (ii) that the
participant will be required to file a new enrollment form.
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that, with
certain exceptions, no amendment or termination may adversely affect
outstanding purchase rights. However, an outstanding right may be terminated
as of the end of an offering/purchase period. The Board may not modify or
amend the Plan if that amendment, in the Board's judgment, constitutes a
change which would require shareholder approval under applicable law.
11
REORGANIZATIONS
In the event of a dissolution or liquidation of the Company, or a merger or
consolidation to which the Company is a constituent corporation, the Plan will
terminate unless the plan of merger, consolidation or reorganization provides
otherwise. All amounts that have been withheld but not yet applied to purchase
common shares under the Plan will be refunded to participants, without
interest. The Plan in no event restricts the Company's right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of certain federal income tax
consequences of the Plan. This summary does not discuss the tax consequences
of a participant's death or the income tax laws of any city, state or foreign
country in which the participant may reside. This description does not purport
to be complete.
Grants under the Plan will permit the Plan to qualify under Code Section
423. In the case of a qualifying grant, no taxable income results to the
employee at the time of the grant of the purchase right or upon its exercise.
If the employee does dispose of the purchased shares within two years of the
date of the purchase right grant, or within one year of the date the shares
are transferred to him or her, and the purchase price was equal to 100% of the
fair market value of the common shares at the date of the grant, any profit or
loss recognized upon subsequent disposition will be long-term capital gain or
loss. If the shares are held for the prescribed period and the purchase price
was less than 100% of the fair market value of the common shares at the date
of the grant, the lesser of (i) the excess of the fair market value of the
shares at the time of disposition over the purchase price or (ii) the excess
of the fair market value of the shares at the time the purchase right was
granted over the purchase price will be treated as ordinary income, with any
remaining profit treated as long-term capital gain. Any loss will be a long-
term capital loss. In either case, there will be no tax effect upon the
Company. If the shares are disposed of before the end of the prescribed
holding period (a "disqualifying disposition"), the employee must report as
ordinary income, and the Company may deduct from its taxable income, the
excess of the fair market value of the common shares on the date of exercise
over the purchase price. The balance of any gain or loss will be a short-term
capital gain or loss to the employee. Upon a disqualifying disposition, it is
possible for an employee to have both ordinary income and capital loss.
NEW PLAN BENEFITS
Since participation in the Plan is completely voluntary, and participants
may deduct various amounts of their compensation to purchase shares under the
Plan, it is impossible to determine the number of shares that will be or would
have been purchased under the Plan.
VOTE REQUIRED FOR APPROVAL OF THE PLAN
The affirmative vote of a majority of the common shares represented and
voting at the Annual Meeting is necessary to approve the Plan. The Board
believes that adoption of the Plan is in the best interests of the Company and
its shareholders.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
independent public accountants to examine the financial statements of the
Company and its subsidiaries for the current fiscal year ending December 31,
1997. Although there is no requirement that such appointment be submitted to a
vote of the shareholders, the Board of Directors feels that the shareholders
should be afforded the opportunity to ratify the appointment. If the
shareholders do not ratify the appointment, the Board of Directors , in its
discretion and without further vote of the shareholders, will select another
firm to serve as independent public accountants for the current fiscal year.
Arthur Andersen LLP has served as independent public accountants for the
Company since 1994 when the Company was formed and is considered by the Board
of Directors to be well qualified. The Board of Directors
12
thereby recommends a vote FOR ratification of the appointment of Arthur
Andersen LLP, and if the enclosed proxy is duly executed and received in time
for the meeting and if no contrary specification is made as provided therein,
it is the intention of the persons named therein to vote the shares
represented thereby for ratification of such appointment.
A representative of Arthur Andersen is expected to be present at the
shareholder meeting to respond to appropriate questions.
SHAREHOLDER PROPOSALS
November 18, 1997 is the date by which shareholder proposals intended to be
presented at the 1998 annual meeting must be received by the Company to be
considered for inclusion in the proxy materials relating to that meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other business to be
transacted at the Annual Meeting of shareholders, but if any other matters do
come before the meeting it is the intention of the persons named in the
accompanying proxy will vote according to their discretion.
By Order of the Board of Directors.
-------------------------------------
Jeffrey G. Wood
Secretary
13
DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONTROL DEVICES, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 1997
P The undersigned shareholder of CONTROL DEVICES, INC. hereby acknowledges
R receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement,
O dated March 10, 1997, and hereby appoints Bruce D. Atkinson and Ralph R.
X Whitney, Jr., and each of them, proxies and attorneys-in-fact, with full
Y power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1997 Annual Meeting of Shareholders of
CONTROL DEVICES, INC., to be held on April 25, 1997 at 9:30 a.m. (EST),
local time, at Embassy Suites Hotel, 1050 Westbrook Street, Portland, Maine,
and at any adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL. WITH RESPECT TO ANY OTHER MATTERS WHICH MAY ARISE,
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PERSON(S) NAMED ABOVE.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
___________
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
___________
[X] PLEASE MARK
VOTES AS IN Account number & shares will be automatically printed here
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1, AND
"FOR" ITEMS 2 AND 3.
1. Election of Directors
NOMINEES: Ralph R. Whitney, Jr., Bruce D. Atkinson,
Charles M. Brennan, III, John D. Cooke,
James O. Fullerknecht, Jr., Alan O. Mossberg,
John M. Ramey and Glenn Scolnik
FOR WITHHELD
[_] [_]
[_]______________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
Name & Address will
Print out here.
Signature:________________________Date:___________
FOR AGAINST ABSTAIN
2. Ratify the Control Devices, Inc. [_] [_] [_]
Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
3. Ratify the appointment of Arthur [_] [_] [_]
Andersen LLP as independent public
accountants.
MARK HERE MARK HERE
FOR ADDRESS [_] IF YOU PLAN [_]
CHANGED AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS OR OTHER
FIDUCIARIES SHOULD GIVE FULL TITLE AS SUCH. IF SIGNING FOR A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY A DULY AUTHORIZED OFFICER.
Signature:________________________Date:___________