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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
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[ ] Definitive Proxy Statement
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SEC 1913 (02-02)
[TRANS-INDUSTRIES, INC. LOGO]
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
June 18, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders of Trans Industries, Inc., to be held on July 21, 2004, at 11:00
a.m. local time, at the Holiday Inn, 1500 Opdyke Road, Auburn Hills, Michigan.
On the following pages, you will find information about the meeting, which is
being held for the following purposes:
1. The election of six directors, three of whom will be elected by the
holders of shares of the Company's Common Stock, par value $0.10
per share, voting separately as a class, and three of whom will be
elected by the holders of shares of the Company's Series B
Convertible Preferred Stock, voting separately as a class for a
one-year term ending at the 2005 annual meeting or until their
successors are duly elected and qualified;
2. To ratify (a) the issuance to Harry E. Figgie, Jr., as trustee
under the Trust Agreement dated July 15, 1976, as amended, (the
"Figgie Trust") of 193,799 shares of Series B Convertible Preferred
Stock and Warrants to purchase in the aggregate up to 145,349
shares of Trans-Industries Common Stock, par value $0.10 per share
pursuant to the Series B Convertible Preferred Stock and Warrant
Purchase Agreement dated March 4, 2004 (the "First Tranche"), and
(b) the applicable voting provisions established by the Company's
Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock of Trans-Industries, Inc. which states
that the approval of the holders of at least a majority of the
outstanding shares of Series B Convertible Preferred Stock, voting
as a separate series, is required for the Company to increase the
maximum number of directors constituting the Board of Directors to
more than six and that the holders of the Series B Convertible
Preferred Stock, again voting as a separate series, have the right
to elect three of the Company's six directors:
3. To approve, for purposes of complying with Nasdaq Marketplace Rule
4350(i)(1)(B), the potential issuance of additional stock to, or
acquisitions by, Mr. Figgie pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement and various
ancillary agreements to the Series B Convertible Preferred Stock
and Warrant Purchase Agreement, (the "Second Tranche") as more
fully described in the accompanying proxy material: and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
At the meeting, management will also review Trans-Industries
operations, discuss the financial statements for the fiscal year ended December
31, 2003, and report on our results of operations for the three month period
ended March 31, 2004, as well as plans for the future. A question and answer
session for stockholders will follow.
Your vote is important to us. If you cannot be with us in person,
please be sure to vote your shares by proxy. This may be accomplished by signing
and dating the enclosed proxy card and returning it in the postage-paid return
envelope. If you send in the proxy card and attend the Annual Meeting, you may
continue to have your shares voted as instructed in the proxy or you may
withdraw your proxy at the Annual Meeting and vote your shares in person.
Sincerely,
Dales S. Coenen
Chairman of the Board
Chief Executive Officer
1
TRANS INDUSTRIES, INC.
2637 SOUTH ADAMS ROAD
ROCHESTER HILLS, MICHIGAN 48309
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
SUMMARY OF PROPOSALS TO BE CONSIDERED BY STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
Trans-Industries, Inc. will be held at the Holiday Inn, 1500 Opdyke Road, Auburn
Hills, Michigan, on July 21, 2004, at 11:00 a.m., for the following purposes:
1. The election of six directors, three of whom will be elected by the
holders of shares of the Company's Common Stock, par value $0.10
per share, voting separately as a class, and three of whom will be
elected by the holders of shares of the Company's Series B
Convertible Preferred Stock, voting separately as a class for a
one-year term ending at the 2005 annual meeting or until their
successors are duly elected and qualified;
2. To ratify (a) the issuance to Harry E. Figgie, Jr., as trustee
under the Trust Agreement dated July 15, 1976, as amended, (the
"Figgie Trust") of 193,799 shares of Series B Convertible Preferred
Stock and Warrants to purchase in the aggregate up to 145,349
shares of Trans-Industries Common Stock, par value $0.10 per share
pursuant to the Series B Convertible Preferred Stock and Warrant
Purchase Agreement dated March 4, 2004 (the "First Tranche"), and
(b) the applicable voting provisions established by the Company's
Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock of Trans-Industries, Inc. which states
that the approval of the holders of at least a majority of the
outstanding shares of Series B Convertible Preferred Stock, voting
as a separate series, is required for the Company to increase the
maximum number of directors constituting the Board of Directors to
more than six and that the holders of the Series B Convertible
Preferred Stock, again voting as a separate series, have the right
to elect three of the Company's six directors:
3. To approve, for purposes of complying with Nasdaq Marketplace Rule
4350(i)(1)(B), the potential issuance of additional stock to, or
acquisitions by, Mr. Figgie pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement and various
ancillary agreements to the Series B Convertible Preferred Stock
and Warrant Purchase Agreement, (the "Second Tranche") as more
fully described in the accompanying proxy material: and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 28, 2004
as the record date for the determination of stockholders of the Company entitled
to notice of and to vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
Robert Anderson
Secretary
Dated: Rochester Hills, Michigan
June 18, 2004
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE URGED TO SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE
ENCLOSED ENVELOPE.
2
TRANS-INDUSTRIES, INC.
2637 S. ADAMS ROAD
ROCHESTER HILLS, MICHIGAN 48309
PROXY STATEMENT
MAILED ON JUNE 18, 2004
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 21, 2004
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Trans-Industries, Inc. (the "Company"), a
Delaware corporation, of proxies for the Annual Meeting of its Stockholders to
be held on July 21, 2004, and any adjournments thereof for the purpose of
considering and acting upon the matters specified in the Notice of Annual
Meeting of its Stockholders accompanying this Proxy Statement.
This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about June18, 2004.
PROXY SOLICITATION
Only stockholders of record as of May 28, 2004 will be entitled to vote
at the Annual Meeting or any adjournments thereof. All proxies in the enclosed
form which are properly executed and returned to the Company will be voted at
the Annual Meeting, and any adjournments thereof, in accordance with any
directions thereon, or, if no directions are made, will be voted FOR approval of
proposals 1, 2 and 3 set forth in the Notice of Annual Meeting. The Company's
Certificate of Incorporation does not provide for cumulative voting rights.
Stockholders who execute proxies may revoke them at any time before they are
voted. The enclosed proxy is revocable by a stockholder at any time prior to the
exercise thereof by submitting a written notice of revocation, a subsequently
executed proxy to the Secretary of the Company or by attending the Annual
Meeting and voting in person. Signing and mailing the proxy will not affect a
stockholder's right to give a later proxy or attend the Annual Meeting and vote
in person. If a stockholder executing a proxy attends the meeting and votes in
person, the proxy will not be used. As of the close of business on May 28, 2004,
the record date, the Company had outstanding 3,139,737 shares of Common Stock,
par value $0.10 per share (the "Common Stock") and 193,799 shares of Series B
Convertible Preferred Stock (the "Series B Convertible Preferred"). Each share
of Series B Convertible Preferred is convertible at the option of the holder
into three shares of Common Stock. Consequently, the Series B Convertible
Preferred is convertible into 581,397 shares of Common Stock. Each share of
Common Stock is entitled to one vote and each share of Series B Convertible
Preferred Stock has the right to vote on an as converted basis with respect to
each matter to be voted on at the Annual Meeting. However, Mr. Figgie has
advised the Company that he will abstain from voting his 581,397 shares of
Common Stock for Proposals II and III. With respect to Proposal I, the holders
of the Common Stock, voting separately as a class are entitled to elect three
Directors to the Board of Directors and the Series B Convertible Preferred Stock
voting separately as a series, are entitled to elect the remaining three
Directors to the Board of Directors.
At the Annual Meeting, in accordance with the Delaware General
Corporation Law and the Company's Certificate of Incorporation, the inspectors
of election appointed by the Board of Directors for the Annual Meeting will
determine the presence of a quorum and will tabulate the results of stockholder
voting. Pursuant to the Company's Amended and Restated By-Laws (the "By-Laws"),
at the Annual Meeting the holders of a majority of the outstanding shares of
Common Stock and Series B Convertible Preferred on an as converted basis
entitled to vote at the Annual Meeting, present in person or by proxy,
constitute a quorum. The shares represented at the Annual Meeting by proxies
which are marked, with respect to the election of Directors, as "withheld" or,
with respect to any other proposal, "abstain," will be counted as shares present
for purposes of determining whether a quorum is present.
Under the rules of the New York Stock Exchange, brokers who hold shares
in street name for beneficial owners have the authority to vote on certain items
when they have not received instructions from such beneficial owners. Under
applicable Delaware law, if a broker returns a proxy and has not voted on a
certain proposal, such broker non-votes will count for purposes of determining
whether a quorum is present.
3
Pursuant to the Company's By-Laws, at the Annual Meeting, subject to
the above-referenced right of the Series B Convertible Preferred Stock holders
to elect three of the six Board members, a plurality of the votes cast is
sufficient to elect a nominee as a Director. In the election of Directors, votes
may be cast in favor or withheld. Votes that are withheld or broker non-votes
will have no effect on the outcome of the election of Directors. Pursuant to the
Company's By-Laws, all other questions and matters brought before the Annual
Meeting will be decided by the vote of the holders of a majority of the
outstanding shares entitled to vote thereon present in person or by proxy at the
Annual Meeting, unless otherwise provided by law or by the Certificate. In
voting on matters other than the election of Directors, votes may be cast in
favor, against or abstained. Abstentions will count as present for purposes of
the proposal on which the abstention is noted and will have the effect of a vote
against the proposal. Broker non-votes are not counted as present and entitled
to vote for purposes of determining whether such a proposal has been approved
and will have no effect on the outcome of such proposal.
The cost of soliciting proxies in the form accompanying this Proxy
Statement will be borne by the Company. In addition to solicitation by mail,
proxies may be solicited by Directors, officers and regular employees of the
Company in person or by mail, telephone, telegraph, facsimile or electronic
mail, following the original solicitation.
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information with respect to Common Stock
owned on April 30, 2004, unless otherwise noted, by each person known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock at such date, the number of shares owned by each such person and the
percentage of the outstanding shares represented thereby. The table also lists
beneficial ownership of Common Stock by each of the Company's Directors, each
nominee for election as a Director, each executive officer named in the summary
compensation table set forth in this Proxy Statement, and all Directors and
executive officers as a group. Unless indicated otherwise, the address of each
director and executive officer is 2637 South Adams Road, Rochester Hills, MI
48309.
- ------------------------------- ---------------------------- ----------------------------
NAME AND ADDRESS OF SHARES OF COMMON STOCK PERCENTAGE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED OWNED AS OF APRIL 30, 2004
- ------------------------------- ---------------------------- ----------------------------
Dale S. Coenen 579,389 15.0%
- ------------------------------- ---------------------------- ----------------------------
Duncan Miller 495,938 12.8%
- ------------------------------- ---------------------------- ----------------------------
Trans Industries Profit 340,694 8.8%
Sharing Plan
- ------------------------------- ---------------------------- ----------------------------
Ronald C. Lamparter 249,700 6.5%
7204 Sterling Ponds Court
Sterling Heights, MI
48312
- ------------------------------- ---------------------------- ----------------------------
Harry E. Figgie, Jr. 879,675 (1) 22.8% (1)
- ------------------------------- ---------------------------- ----------------------------
Kai Kosanke 14,395 .4%
- ------------------------------- ---------------------------- ----------------------------
Joseph Trimai 3,000 N/A
- ------------------------------- ---------------------------- ----------------------------
All directors and 1,550,858 (2) 40.1% (2)
executive officers as a
group (7 persons)
- ------------------------------- ---------------------------- ----------------------------
(1) Pursuant to the Purchase Agreement, the Harry E. Figgie, Jr. trustee
under the Trust Agreement dated July 15, 1976, as modified and his
Affiliates and successors (the "Investors") received approximately
193,799 shares of Series B Convertible Preferred Stock ("Series B
Stock") and Warrants to purchase up to 145,348 shares of Common Stock
(the "Purchase Agreement"). Each share of Series B Stock is immediately
convertible into three (3) shares of Common Stock. Consequently, the
beneficial ownership figure includes the 193,799 shares of Series B
Convertible Preferred Stock on an as converted basis (193,799 x 3 =
581,397) and the 145,348 subject to the immediately convertible
warranty.
(2) Mr. Figgie resigned from the Board of Directors in June 2003 and
rejoined the Board in the same capacity in March 2004.
4
I. ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected to hold office
until the next annual meeting and until their successors have been elected and
qualified. It is the intention of the persons named in the enclosed form of
proxy to vote for the election, as directors, of the persons named in the table
below. In case any such nominee should become unavailable for any reason, which
the management has no reason to anticipate, the proxy holders reserve the right
to substitute another person of their choice in his place. All persons named in
the table below are now directors of the Company, except for Mr. H. Sean Mathis.
Mr. Coenen, Mr. Figgie, and Mr. Ruben were elected by the stockholders at the
annual meeting in 2003. Mr. Figgie temporarily resigned from the board in June
2003. In March 2004, Mr. Figgie was reinstated as a Company director and Mr.
O'Brien and Mr. Solon were appointed as Company directors in March, 2004. Mr.
Coenen, the Company's CEO, recommended Mr. H. Sean Mathis and Mr. Figgie, a
non-management director recommended Mr. O'Brien as a nominees to serve on the
Company's Board of Directors.
The information concerning the nominees and their security holdings has
been furnished to the Company by the nominees.
PRINCIPAL OCCUPATION AND
NAME OF ORGANIZATION DIRECTOR
NAME AND AGE IN WHICH CARRIED ON SINCE
------------ ------------------- -----
Dale S. Coenen (75)............. Chairman of the Board and 1967
Chief Executive Officer of the
Company
Harry E. Figgie, Jr. (80)....... Private Investor, 2000
Chairman of the Board,
The Clark Reliance Corporation
(Manufacturer of liquid flow
meters and valves)
Robert J. Ruben (80).......... Retired judge: arbitrator 2001
Retired as Secretary
of the Company in June, 2002
James O'Brien (59)............ Managing Director of Catapult 2004
Advisors, LLC.
Richard A. Solon (50)......... President and Chief Operating 2004
Officer of the Company
H. Sean Mathis (57)......... President of Litchfield Asset -
Holdings, an investment advisory
company, and Managing Director of
Miller, Mathis & Co., LLC, a
restructuring investment banking
firm.
5
Each of the nominees has been engaged in the principal occupation set
forth above for more than the past five years except for Mr. O'Brien and Mr.
Solon. Mr. O'Brien prior to being Managing Director for Catapult Advisors, LLC
since January 2003 was the owner of The Wellston Group, a consulting group from
1995 to December 2002; and Chief Operating Officer of Swingster Company, a
manufacturer and distributor of corporate logoed merchandise, from 1994 through
1995. Additionally, Mr. O'Brien serves on the Board of Directors of Young
Innovations, Inc., since of 1998. Young Innovations develops, manufactures, and
markets supplies and equipment used to facilitate the practice of dentistry and
to promote oral health. Mr. Solon, from 2000 to 2004 was president and CEO of
Orion Bus Industries, a manufacturer of transit buses. Prior to his employment
with Orion, Mr. Solon was president of Snorkel International, a manufacturer of
aerial lift equipment.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF THE FOREGOING
NOMINEES FOR MEMBERSHIP TO THE BOARD OF DIRECTORS. A PLURALITY OF THE VOTES
REPRESENTED AT THE MEETING IS REQUIRED TO ELECT A NOMINEE AS A DIRECTOR.
BOARD OF DIRECTORS AND COMMITTEES
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended
December 31, 2003. During that fiscal year no director, except Mr. Miller,
attended fewer than 75% of the aggregate of the total number of meetings of the
Board and the committees on which he served, during the periods that he was a
director.
DIRECTOR INDEPENDENCE
The Board of Directors will review the independence of its members on
an annual basis. No director will be deemed to be independent unless the Board
affirmatively determines that the director in question has no material
relationship with the Company, directly or as an officer, stockholder, member or
partner of an organization that has a material relationship with the Company
which will interfere with that person's exercise of independent judgment. The
Board applies the criteria for independence established by NASDAQ (where the
Company's common stock is listed for trading) and all other applicable laws,
rules and regulations.
In its annual review of director independence, the Board considered all
commercial, banking, consulting, legal, accounting, charitable or other business
relationships any director may have with the Company. As a result of its annual
review, the Board has determined that all of the directors are independent, with
the exception of Messrs. Dale S. Coenen and Richard A. Solon. Dales S. Coenen
and Richard A. Solon are not independent because they are both executive
officers of the Company. In making its independence determination with respect
to Harry E. Figgie, Jr., The Board of Directors considered the transactions that
are the subject of Proposals II and III and concluded that this relationship
with the Company would not impair his independence. Accordingly, the Board of
Directors is comprised of a majority of independent directors as required by the
NASDAQ listing standards.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of directors has four standing committees: (i) an Audit
Committee; (ii) a Compensation Committee, (iii) a Nominating Committee and (iv)
a Management Committee.
The Audit Committee is currently composed of James O'Brien (Chairman),
Harry E. Figgie Jr., and Robert Ruben. The Board of Directors intends to replace
Mr. Figgie with Mr. Mathis as a member of the Audit Committee at the 2004 Annual
Meeting of Stockholders. The Board of Directors has determined that such Audit
Committee will be comprised entirely of independent directors as defined under
the NASDAQ listing standards and Section 10A(m)(3) of the Securities Exchanges
Act of 1934, as amended. The Board of
6
Directors has determined that James O'Brien is the audit committee financial
expert for the Company, as defined by the SEC and he qualifies as a independent
Director. The Board of Directors also certifies that Mr. O'Brien meets the
requirements of a "financially sophisticated audit committee member" under the
NASDAQ listing standards. The Audit Committee is charged with assisting the
Board in its oversight of (i) the qualifications, independence and performance
of the Company's independent accountants and the performance of the Company's
internal auditors and internal audit function; (ii) the integrity of the
Company's financial statements and the Company's financial reporting processes
and systems of internal control; and (iii) the Company's compliance with legal
and regulatory requirements. The Audit Committee provides an avenue of
communications among management, the independent accountants, the internal
auditors and the Board. In carrying out its responsibilities, the audit
committee also meets with the independent auditors in executive session, without
members of management present. Attached to this proxy statement, as Exhibit A,
is the Trans-Industries, Inc. Audit Committee Charter, as amended and restated
and adopted by the Board of Directors on May 19, 2004. The Audit Committee met
four times during the year ended December 31, 2003.
The Compensation Committee is composed of Harry E. Figgie Jr.
(Chairman), Robert Ruben and James O'Brien. The Compensation Committee is
comprised entirely of independent directors, as defined under the NASDAQ listing
standards. The Compensation Committee is charged with assisting the Board in;
(i) developing and periodically reviewing compensation policies for the Company,
including stock options, consistent with and linked to the Company's strategies;
(ii) evaluating the performance of the Company's Chief Executive Officer ("CEO")
and determining his compensation annually; (iii) recommending the compensation
of the Company's other officers to the Board annually; (iv) reviewing
management's recommendations on executive compensation policies and programs;
(v) recommending to the Board the fees of outside directors; and (vi) reviewing
benefit plan administration. The Compensation Committee met once during the year
ended December 31, 2003.
The Nominating And Corporate Governance Committee is composed of Robert
Ruben (Chairman), James O'Brien and Harry E. Figgie Jr. The Nominating and
Corporate Governance Committee is composed entirely of independent directors as
defined under the NASDAQ listing standards. The Nominating and Corporate
Governance Committee is charged with assisting the Board in (i) establishing
criteria for Board membership; (ii) searching for and screening candidates to
fill vacancies on the Board; (iii) recommending an appropriate slate of
candidates for election each year; (iv) evaluating the performance of individual
directors; (v) assessing the overall performance of the Board; (vi) considering
issues regarding the composition and size of the Board; and (vii) monitoring a
process to assess Board effectiveness. In addition, the Nominating and Corporate
Governance Committee evaluates and makes recommendations to the Board of
Directors regarding the development and adoption of corporate governance and
ethical principles applicable to the Company including its Code of Conduct &
Compliance. The Nominating and Corporate Governance Committee has a written
charter which addresses the director nomination process and such related matters
as are required under all applicable securities laws, rules and regulations.
Attached to this proxy statement, as Exhibit B, is the Trans-Industries. Inc.
Nominating Committee charter, as amended and restated and adopted by the Board
of Directors on May 19, 2004. The Nominating Committee met once during the year
ended December 31, 2003.
The Management Committee is composed of Dale S. Coenen, Richard Solon
and Harry E. Figgie, Jr. Mr. Figgie will have the right to appoint two of the
three members of the Management Committee. The Management Committee shall meet
bi-monthly during months the full Board of Directors does not meet. Company
management shall consult with, and report to, the Management Committee as
requested by the Management Committee. Notwithstanding the foregoing, the
ultimate decision making authority for the Company rests with Board of
Directors.
NOMINATION OF DIRECTORS
As indicated previously, the holders of a majority of the Series B
Convertible Preferred Stock voting as a separate series, shall be entitled to
elect three of the six members of the Company's Board of Directors. With respect
to the three remaining members of the Board of Directors who will be elected by
the holders of the Company's Common Stock voting as a separate class, such
directors will be nominated by the Board of Directors or by stockholders in
accordance with the Bylaws of the Company. As a matter of course, the Nominating
and Corporate Governance Committee reviews the qualifications of various persons
to determine
7
whether they might make good candidates for consideration for membership on the
Board of Directors. The Nominating and Corporate Governance Committee will
review all proposed nominees for the Board of Directors, including those
proposed by stockholders, in accordance with its mandate contained in its
charter. This will include a review of the person's judgment, experience,
independence, understanding of the Company's business or other related
industries and such other factors as the Nominating and Corporate Governance
Committee determines are relevant in light of the needs of the Board of
Directors and the Company. The Nominating and Corporate Governance Committee
will select qualified candidates and review its recommendations with the Board
of Directors, which will decide whether to invite the candidate to be a nominee
for election to the Board of Directors.
The Nominating and Corporate Governance Committee does not rely on a
fixed set of qualifications for director nominees. The Committee's primary
mandate with respect to director nominees is to create a Board with a broad
range of skills and attributes that is aligned with the Company's needs. The
minimum qualifications for director nominees is that they (i) be able to
dedicate the time and resources sufficient for the diligent performance of the
duties required by a member of the Board of Directors, (ii) not hold positions
that conflict with their responsibilities to the Company, and (iii) comply with
any other minimum qualifications for either individual directors or the Board as
a whole mandated by applicable laws and regulations.
The Nominating and Corporate Governance Committee's process for
evaluating nominees for director, including nominees recommended by
stockholders, is to consider an individual's skills, character professional
ethics, judgment, leadership experience, business experience, knowledge of
issues facing publicly traded companies, and other relevant criteria as they may
contribute to the Company's success. This evaluation is performed in light of
the Committee's views as to what skill set and other characteristics would most
complement those of the current directors. Ultimately, the Nominating and
Corporate Governance Committee will select prospective Board members who it
believes will be effective, in conjunction with the other members of the Board,
in collectively serving the long-term interests of the Company's stockholders.
If the Nominating and Corporate Governance Committee receives a nominee
recommendation from a stockholder or group of stockholders that has beneficially
owned more than 5% of the Company's voting common stock for at least one year as
of the date of the recommendation, the name of the candidate, the name(s) of the
stockholder(s) who recommended the candidate and whether the Nominating and
Corporate Governance Committee chose to nominate the candidate will be provided,
if the consent of both the stockholder and the candidate has been received.
For a stockholder to submit a candidate for consideration by the
Nominating and Corporate Governance Committee for nomination for election as a
director at the 2005 Annual Meeting, a stockholder must notify the Company's
secretary no later than January 15, 2005. Notices should be sent to: Secretary,
2637 South Adams Road, Rochester Hills, MI 48309. The notice must contain, at a
minimum, the following:
o the name, age, business address and residence address of the
proposed nominee;
o the principal occupation or employment of the proposed
nominee;
o the number of shares of the Company which are beneficially
owned by such candidate;
o a description of all arrangements or understandings between
the stockholder(s) making such nomination and each candidate
and any other person or persons (naming such person or
persons) pursuant to which nominations are to be made by the
stockholder;
o detailed biographical data and qualifications and information
regarding any relationships between the candidate and the
Company within the past three years;
o any other information relating to the proposed nominee that
would be required to be disclosed in a proxy statement or
other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder;
6
o any other information the stockholder believes is relevant
concerning the proposed nominee;
o a written consent of the proposed nominee(s) to being named as
a nominee and to serve as a director if elected;
o whether the proposed nominee is going to be nominated at the
annual meeting of stockholders or is only being provided for
consideration by the Nominating and Corporate Governance
Committee;
o the name and record address of the stockholder who is
submitting the notice;
o the class or series and number of shares of voting stock of
the Company which are owned of record or beneficially by the
stockholder who is submitting the notice and the date such
shares were acquired by the stockholder and if such person is
not a stockholder of record or if such shares are owned by an
entity, reasonable evidence of such person's ownership of such
shares or such person's authority to act on behalf of such
entity; and
o if the stockholder who is submitting the notice intends to
nominate the proposed nominee at the annual meeting of
stockholders, a representation that the stockholder intends to
appear in person or by proxy at the annual meeting to nominate
the proposed nominee named in the notice.
COMMUNICATIONS WITH THE BOARD
In order to provide the Company's stockholders and other interested
parties a direct and open line of communication to the Board of Directors, we
have adopted the following procedures for communications with the Board.
Stockholders of the Company [and other interested persons] may
communicate with the chairman of the Nominating Committee, Audit Committee or
Compensation Committee or with the independent directors as a group by sending
such communication by regular mail or overnight delivery service to: the
Corporate Secretary, Trans-Industries, Inc., 2637 South Adams Road, Rochester
Hills, MI 48309. The mail should specify which of the foregoing is the intended
recipient.
All communications received in accordance with these procedures will be
reviewed initially by Dale S. Coenen, Richard A. Solon, or Kai Kosanke who will
relay all such communications to the appropriate director or directors unless he
determines that such communication:
o Does not relate to the business or affairs of the Company or
the functioning or constitution of the Board of Directors or
any of its committees; or
o Relates to routine or insignificant matters that do not
warrant the attention of the Board of Directors.
ATTENDANCE BY MEMBERS OF THE BOARD OF DIRECTORS AT THE ANNUAL MEETING OF
STOCKHOLDERS
The Company encourages each member of the Board of Directors to attend
each annual meeting of stockholders. All of the Company's current directors who
were members of the Board at last year's annual meeting of stockholders held on
May 21, 2003 were in attendance.
9
CODE OF CONDUCT & COMPLIANCE
The Sarbanes-Oxley Act and related rules adopted by the SEC require
publicly traded companies to disclose whether they have adopted a code of ethics
that applies to a company's principal executive officer, principal financial
officer and principal accounting officer or controller, or persons performing
similar functions. The rules also define what constitutes a code of ethics. The
Company recently has adopted such a code of ethics. The Company will provide to
any person without charge, upon request, a copy of its Code of Conduct &
Compliance. To receive a copy of the Company's Code of Conduct & Compliance,
requests should be sent to:
Trans-Industries, Inc.
Attn: Chief Financial Officer
2637 South Adams Road
Rochester Hills, MI. 48309
10
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
for services in all capacities to the Company and its subsidiaries for the years
ended December 31, 2003, 2002 and 2001 of those persons who were, at December
31, 2003, (i) the Chief Executive Officer and (ii) the next four most highly
compensated executive officers of the Company and its subsidiaries (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION COMPENSATION
POSITION YEAR ($) (3) ($) (1) (3) ($) (3) ($)(2)(3)
-------- ---- ------- ----------- ------------ --------------
Dale S. Coenen 2003 $325,676 $ -0- $25,000 $ -0-
Chairman of the Board 2002 320,718 -0- 25,000 -0-
and President of 2001 325,727 -0- 25,000 -0-
Trans-Industries, Inc.
O.K. Dealey, Jr. 2003 202,384 121,000 25,000 3,000
President of 2002 185,718 -0- 25,000 2,750
Transmatic, Inc. 2001 175,718 -0- 25,000 2,533
Kai Kosanke 2003 152,403 -0- -0- 2,256
Vice President of 2002 140,718 -0- -0- 2,111
Trans Industries, Inc. 2001 126,825 -0- -0- 1,800
Jack Stratford 2003 130,250 25,714 -0- -0-
Sr. Vice President of 2002 129,288 27,440 -0- -0-
Transmatic, Inc. 2001 157,613 -0- -0- -0-
Joseph Trimai 2003 123,846 48,167 -0- 1,806
Sr. Vice President of 2002 110,718 44,000 -0- 1,661
Transmatic, Inc. 2001 103,057 40,000 -0- 1,561
(1) The bonuses reported in the table are indicated for the year earned,
not necessarily the year paid.
(2) "All Other Compensation" consists of discretionary contributions to the
Company's Defined Contribution Plan and Company matching contributions
to the 401(K) Plan.
(3) The incremental cost to the Company and its subsidiaries of providing
incidental personal benefits to executive officers of the Company did
not, for the 2003 fiscal year, exceed the lesser of $50,000 or 10% of
the total of annual salary and bonus for any individual named in the
Summary Compensation Table.
RELATED PARTY TRANSACTIONS
The Company does not know of any transactions other than those
discussed elsewhere in this proxy statement in which the amount involved exceeds
$60,000 and in which any director, officer, or any security holder who is known
to the Company to own of record or beneficially more than five percent of the
Company's voting securities, or any immediate family member of any such persons
had a material interest.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has a Compensation Committee of the Board of Directors,
consisting of Harry E. Figgie Jr., Robert Ruben, and Jim O'Brien. Harry E.
Figgie, Jr. has engaged, or has the potential to engage, in the transactions
with the Company described elsewhere in this proxy statement. See the disclosure
under proposals II and III that follows.
11
COMPENSATION OF DIRECTORS
The Board of Directors has approved an annual compensation for its
members of $25,000. For the year ended December 31, 2003 Dale S. Coenen, Robert
J. Ruben, and Harry E. Figgie, Jr. received $25,000, $25,000 and $12,500,
respectively for their Board and Committee Service.
PROFIT SHARING PLAN
A Defined Contribution Plan was adopted by the Company in 1977, and is
nondiscriminatory, port-able, cliff-type vesting, and completely Company
financed for all full time employees of Trans-Industries, Inc. and its
subsidiaries with one year or more of service who are not part of a collective
bargaining unit. Contributions are established annually by action of the Board
of Directors based on profits, cash flow, and other pertinent factors. For 2003,
there was no contribution made to the Plan. Distribution of accounts is made
upon termination of employment. Due to the variable circumstances surrounding
the Company's decision to contribute to the Plan in any given year, the Company
has determined that it is not feasible to project estimated annual benefits
payable upon retirement at normal retirement age for each of the "Named
Officers."
Incorporated into the Defined Contribution Plan is a 401(K) feature,
whereby the Company matches the employee's deferrals at a rate of 25 percent.
The Company's contributions to the 401(K) plan amounted to $45,000 for 2003.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation programs are intended to provide its
executive officers with a mix of salary, benefits and incentive compensation
arrangements that are: (i) consistent with the interests of stockholders, (ii)
competitive with the arrangements provided by other companies in the industry,
(iii) commensurate with each executive's performance, experience and
responsibilities, and (iv) sufficient to attract and retain highly qualified
executives. In making its recommendations concerning adjustments to salaries and
awards under the other compensation plans, the Compensation Committee considers
the financial condition and performance of the Company during the prior year and
the Company's success in achieving financial, operational and other strategic
objectives. The Compensation Committee also makes an assessment of the
contributions of the individual executive officer to the Company's performance
and to the achievement of its objectives, as well as the success of the
executive in achieving objectives which may have been set for such individual.
In assessing individual performance, the Compensation Committee also seeks to
recognize individual contributions during periods when the Company experienced
adverse business or financial conditions.
Each component of an executive's compensation package is intended to
assist in attaining one or more of the objectives outlined above. The Company
attempts to provide its executives with base salaries and benefits that are
competitive with those of comparable companies and commensurate with the
performance, experience and responsibilities of each executive. Through salary
adjustments and bonuses, the Company also seeks to provide its executives with
incentives to improve the Company's financial and operational performance by
providing a method for rewarding individual performance. Finally, the Company's
Employees' Stock Option Plan has been used to provide executive officers with an
opportunity to acquire a proprietary interest in the Company, thereby providing
these individuals with increased incentive to promote the long-term interests of
the Company's stockholders.
While the Compensation Committee seeks to assure that the Company's
compensation programs further the objectives described above and considers the
various factors outlined above in making compensation decisions, it does not
take a highly formalized or objective approach to determining compensation.
Instead, the Compensation Committee gives consideration to these various factors
in subjectively evaluating the compensation of each individual executive.
12
In 1993, Congress adopted Section 162(m) of the Internal Revenue Code.
The Compensation Committee's policy with respect to Section 162(m) is to make
every reasonable effort to ensure that compensation is deductible to the extent
permitted, while simultaneously providing our executives with appropriate
rewards for their performance. Section 162(m) generally limits the ability of
public companies to deduct compensation in excess of $1,000,000 paid to certain
executive officers. We do not believe that the Section 162(m) limitations will
impact the Company because the current level of compensation for each of its
executive officers is well below the $1.0 million salary limitation.
2003 COMPENSATION DECISIONS
Base Salary and Benefits. The base salaries and benefits provided to
executive officers for 2003 were established by the Compensation Committee in
accordance with the compensation philosophy discussed above. The Compensation
Committee made no individual salary adjustments in 2003 with respect to the base
salaries of Mr. Coenen and Mr. Stratford. Mr. Dealey's salary for 2003 was
$205,000 after receiving an increase of $20,000 per year in 2003. Mr. Kosanke's
base salary for 2003 was $152,500 after receiving an increase of $12,500 per
year in 2003. Mr. Trimai's base salary for 2003 was $122,500 after receiving an
increase of $12,500 per year in 2003.
Bonuses. During 2003, the executive officers of the Company
participated in individual bonus arrangements tied to various measures of the
Company's performance. Under these arrangements, neither Mr. Coenen nor Mr.
Kosanke received a cash bonus for 2003.
Stock Options. During 2003, the Company did not award any stock options
to employees of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's compensation is determined on the basis
of the Compensation Committee's subjective assessment of the Chief Executive
Officer's performance, measured by the Company's financial condition, results of
operations and success in achieving strategic objectives. The Compensation
Committee also considers the responsibilities associated with the Chief
Executive Officer's position and the level of compensation provided to Chief
Executive Officers of other companies in the industry.
The Compensation Committee reviews Mr. Coenen's salary on an annual
basis. Mr. Coenen's base salary for 2003 was $320,000, which was unchanged from
that in 2002. During 2003, Mr. Coenen also participated in an individual bonus
arrangement tied to the Company's pre-tax profits, but he did not earn a bonus
under this arrangement. Mr. Coenen is the beneficial owner of approximately
18.5% of the Company's Common Stock. Mr. Coenen did not receive options to
purchase shares of Common Stock in 2003.
THE 2003 COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Duncan Miller (Chairman)
------------------
Harry E. Figgie Jr.
-------------------
Robert Ruben
------------------
13
SHAREOWNER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total stockholder return on the
Company's Common Stock to the cumulative total return of a broad index of the
NASDAQ Market and an index of non-financial stocks for the period December 31,
1998 through December 31, 2003.
FIVE YEAR CUMULATIVE TOTAL RETURN
TRANS-INDUSTRIES, INC., NASDAQ MARKET INDEX (US COMPANIES)
AND NASDAQ NON-FINANCIAL STOCKS INDEX
[LINE GRAPH]
---------------------------- --------- --------- --------- ------- ------- --------
Ending 12/31 1998 1999 2000 2001 2002 2003
---------------------------- --------- --------- --------- ------- ------- --------
NASDAQ Index 100 185 112 89 61 92
---------------------------- --------- --------- --------- ------- ------- --------
Non-Financial Index 100 196 114 88 57 88
---------------------------- --------- --------- --------- ------- ------- --------
Trans-Industries, Inc. 100 64 19 11 46 32
---------------------------- --------- --------- --------- ------- ------- --------
ASSUMES $100 INVESTED ON DECEMBER 31, 1998.
TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
14
AUDIT COMMITTEE MATTERS
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the 2003 fiscal year.
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. The Audit Committee's activities are
governed by a written charter adopted by the Board of Directors.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal controls.
The independent auditors audit the annual financial statements prepared by
management and express an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States.
The Audit Committee monitors these processes.
In this context, the Audit Committee met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's financial statements were prepared in accordance
with accounting principles generally accepted in the United States, and the
Audit Committee reviewed and discussed the audited financial statements with
management and the independent auditors, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of
specific judgments and the clarity of disclosures in the financial statements.
The Audit Committee also discussed with the independent auditors such other
matters as are required to be discussed with the Audit Committee under generally
accepted auditing standards.
In addition, the independent auditors provided the Audit Committee with
the written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions With Audit Committees) related to the
auditors' independence. The Audit Committee discussed with the independent
auditors the auditors' independence from the Company and its management and
considered the compatibility of non-audit services with the auditors'
independence.
The Audit Committee discussed with the Company's financial management
and independent auditors the overall scope and plans for the audit. The Audit
Committee also met with the independent auditors, with and without management
present, to discuss the results of the examinations, their evaluation of the
Company's internal controls and the overall quality of the Company's financial
reporting. In addition, the Audit Committee considered other areas of its
oversight relating to the financial reporting process that it determined
appropriate.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors
approved, that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 filed with the
Securities and Exchange Commission.
AUDIT COMMITTEE
James O'Brien (Chairman)
--------------
Robert J. Ruben
--------------
Harry E Figgie Jr.
--------------
15
INDEPENDENT PUBLIC ACCOUNTANTS
On May 18, 2004, The Audit Committee was advised by its independent
auditors, Grant Thornton LLP, that they have declined to stand for reelection as
the Company's independent auditors. The Audit Committee has not yet appointed an
independent auditor to replace Grant Thornton for our fiscal year ended December
31,2004.
Grant Thornton's reports on our consolidated financial statements for
each the years ended December 31, 2003 and 2002 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles except that the 2003 Audit Report expressed
substantial doubt about the Company's ability to continue as a going concern.
During the years ended December 31, 2003 and 2002 and through the
effective date of cessation of the client-auditor relationship between the
Company and Grant Thornton, there were no disagreements with Grant Thornton on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to Grant
Thornton's satisfaction, would have caused it to make reference to the subject
matter of the disagreements in connection with its report on our consolidated
financial statements for such years.
The Company had to request additional time for the filing of its most
recent Securities Exchange Act reports filed with the SEC because it lacked the
resources necessary to address the financial reporting related to significant
and complex business transactions. The Company intends to evaluate its resources
and make appropriate changes to provide sufficient resources and additional time
to prepare its periodic reports. Grant Thornton advised the Company that this is
a reportable condition.
On May 28, 2004, we filed a Form 8-K with the SEC reporting these
events. Attached as an exhibit to that form 8-K was a letter from Grant Thornton
indicating that we had provided Grant Thornton with a copy of the foregoing
disclosures, and stating that it found no basis for disagreements with such
statements.
Grant Thornton LLP, Southfield, Michigan has acted as the Company's
independent certified public accountants since 1994. A representative of Grant
Thornton LLP is expected to be present at the meeting and will have an
opportunity to make a statement if he so desires. He will also be available to
respond to appropriate questions.
All auditing and permissible non-audit services provided by the
Company's independent auditor are pre-approved by the Audit Committee in
accordance with the Audit Committee charter which is attached as Appendix A to
this proxy statement. The following table sets forth the aggregate fees billed
to the Company for the fiscal year ended December 31, 2002 and 2003 by Grant
Thornton LLP:
2003 2002
---- ----
Audit Fees ................. $ 77,030 $ 75,120
Audit Related Fees ......... 17,600 9,975
Tax Fees ................... 32,300 27,500
All Other Fees ............. 1,942 13,963
-------- --------
$128,872 $117,558
======== ========
The amounts shown above include out-of-pocket expenses incurred by Grant
Thornton in connection with the provision of such services. The amount shown for
"Audit Fees" includes fees relating to quarterly reviews of unaudited financial
statements, and the amounts shown for "Audit Related Fees" includes fees
relating to audits of medical and deferred compensation plans. The Audit
Committee of the Board of Directors considered whether Grant Thornton's
provision of the services generating "All Other Fees" is compatible with
maintaining Grant Thornton's independence.
16
II. RATIFICATION OF THE FIGGIE TRANSACTION
On February 25, 2004, the Board of Directors, acting in the best
interest of the Company, authorized the Company to issue up to $3,000,000 of
Series B Convertible Preferred Stock, par value $0.10 per share (the "Series B
Stock"), and Series B-1 Convertible Preferred Stock, par value $0.10 per share
(the "Series B-1 Stock"), and warrants ("Warrants) to purchase shares of the
Company's Common Stock, par value $0.10 per share (the "Common Stock"), to the
Harry E. Figgie, Jr. Trust created under a declaration of trust dated July 15,
1976 (the "Investor") pursuant to a Series B Convertible Preferred Stock and
Warrant Purchase Agreement (the "Purchase Agreement").
On March 4, 2004, the Company and the Investor consummated the first
tranche (the "First Tranche") under the Purchase Agreement and the Company
issued and sold to the Investor 193,799 shares of Series B Stock and a Warrant
to purchase 145,348.84 shares of Common Stock (the "Warrant Shares") for an
aggregate purchase price of $1,500,000. Each of the Warrant Shares has an
initial exercise price, subject to certain anti-dilution protections, of $3.00
per share. Each share of Series B Stock is convertible initially, subject to
certain anti-dilution protections, into three fully paid and non-assessable
shares of Common Stock. The Company used the proceeds of the Figgie Transaction
for working-capital and other corporate purposes, including the payment of
accounts payable and indebtedness to certain commercial lenders.
The applicable voting provisions established by the Company's
Certificate of Designation, Preferences and Rights of Series B Convertible
Preferred Stock of Trans-Industries, Inc. also state that the approval of the
holders of at least a majority of the outstanding shares of Series B Convertible
Preferred Stock, voting as a separate series, is required for the Company to
increase the maximum number of directors constituting the Board of Directors to
more than six and that the holders of the Series B Convertible Preferred Stock,
again voting as a separate series, have the right to elect three of the
Company's six directors. Therefore, the Company's Board of Directors currently
cannot be expanded to include more than six members without the approval of the
Investors and the Investors have the right to elect three of the Company's six
directors.
The Investor has an option (the "Option") under the Purchase Agreement
to purchase between $500,000 and $1,500,000 of shares of Series B-1 Stock and a
Warrant to purchase 25% of the number of shares of Common Stock initially
issuable upon conversion of all of such Series B-1 Stock purchased by the
Investor under the Option. Each share of Series B-1 Preferred Stock is
convertible initially, subject to certain anti-dilution protections, into three
shares of Common Stock.
Simultaneously with the consummation of the First Tranche, the
Investor, the Company and certain other stockholders of the Company also entered
into a number of ancillary agreements which granted the Investor certain rights,
including the right of the Series B holders to elect, as a class, three of the
Company's six directors. A summary of each of these ancillary agreements is
provided in Proposal III below.
Due to a stagnant economy and significant losses, the Company has been
forced to borrow heavily against its assets. In December 2003, the Company's
primary lender refused to extend the existing forbearance agreement. Upon
learning of the Investors' possible interest, the lender was willing to
negotiate the terms of a forbearance agreement contingent on the capital
contribution by the Investor. The Company faced with liquidity concerns and due
to the pressure from the financial institution to expedite the documentation of
the forbearance agreement, was compelled to act quickly and entered into the
Purchase Agreement and issued the securities underlying the First Tranche.
NASD Rule 4350(i)(1)(B) requires the Company to seek stockholder
approval prior to the issuance of certain designated securities when the
issuance or potential issuance will result in a change of control of the
Company. The Company determined that stockholder approval was not required under
the NASD rule. It considered the following factors among others in making this
determination. Immediately following the First Tranche, the Investors' equity
stake in the Company comprised approximately 23% of the outstanding Common
Stock. The NASD has taken the interpretive position that an acquisition of
20-30% would not be found to represent a change of control if a larger
offsetting ownership and/or voting position remains outstanding following the
transaction. In the instant case, the voting power exercised by the remaining
members of the Board of Directors exceeds the voting power held by the
investors. Therefore, the Company
17
concluded that no change of control had occurred as defined by the NASD and
consequently, stockholder approval was not required for the First Tranch of this
transaction. While stockholder approval for the First Tranche is not required,
the Company has decided to seek stockholder ratification of the First Tranche.
Ratification of Proposal II requires the affirmative vote of a majority
of the votes cast. A proxy card marked "Abstain" with respect to the proposal
will not be voted, accordingly abstentions and broker non-votes will have no
effect on the ratification of this proposal. MR. FIGGIE HAS ADVISED THE COMPANY
THAT HE WILL ABSTAIN FROM VOTING THE SECURITIES ACQUIRED IN THE FIRST TRANCHE
FOR PURPOSES OF THE RATIFICATION OF PROPOSAL II.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE ISSUANCE
OF THE SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANT PURSUANT TO THE
SERIES B CONVERTIBLE PREFERRED STOCK WARRANT PURCHASE AGREEMENT
INCLUDING THE APPLICABLE VOTING PROVISION GIVING THE INVESTORS
THE RIGHT TO ELECT THREE OF THE COMPANY'S SIX DIRECTORS.
III. APPROVAL PURSUANT TO NASDAQ MARKETPLACE RULE 4350(i) OF THE SECOND
TRANCHE OR THE APPLICABLE PROVISIONS OF THE VARIOUS ANCILLARY
AGREEMENTS RELATED TO THE FIGGIE TRANSACTION
As indicated above, the Company determined that stockholder approval
was not required under the NASD listing standards for the issuance of the Series
B Stock and Warrants to purchase the Company's Common Stock in the
above-referenced transaction and for the provisions giving the Investors' the
right to elect three of the Company's six directors. However, in addition to the
Purchase Agreement, as described in Proposal II above, the Board of Directors
believes that certain provisions contained in the ancillary agreements, executed
in connection with the Purchase Agreement, could possibly result in such a
change of control of the Company. Certain provisions of the Investors Rights
Agreement, the Right of First Refusal, the Voting Agreement and the Investors'
Option, which are discussed in greater detail below, provide for potential
additional equity acquisitions by the Investors. The Share Purchase Agreement
will also provide for additional acquisitions of the Company's Common Stock by
an entity affiliated with the Investors. These acquisitions would increase the
Investors' percentage ownership above the 30% threshold and may be deemed to
constitute a change of control as defined by Nasdaq. Cognizant of this issue,
the Company negotiated conditions in each of these Agreements that provide that
the Investors may not acquire additional equity until the Company receives
stockholder approval for these contemplated provisions. To the extent the Option
and the provisions of the various agreements described below result in the
issuance of additional securities to Harry E. Figgie, Jr. trustee under the
Trust Agreement dated July 15, 1976(the Investors'), as modified, the Company
believes such a change in control may occur and consequently is requesting
stockholder approval of the requisite provisions of these ancillary documents.
As more fully described below, shareholder approval is sought for: (1)
the Investors Option under the Purchase Agreement by which the Investors may
purchase additional shares of Series B-1 stock; (the "Option") (2) the Investor
Rights Agreement between the Company and the Investors (the "Investor Rights
Agreement"); (3) the Right of First Refusal Agreement by and among the Company,
the Investors, Dale Coenen and Duncan Miller (the "ROFR Agreement"); (4) the
Share Purchase Agreement between Clark-Reliance and Mr. Duncan Miller, as
amended (the "Share Purchase Agreement"); and (5) the Voting Agreement between
the Company, Investors and Messrs. Dale Coenen and Duncan Miller.
18
THE INVESTORS OPTION UNDER THE PURCHASE AGREEMENT
On March 4, 2004 the Company entered into the Series B Convertible
Preferred Stock and Warrant Purchase Agreement with the Investors. Pursuant to
certain provisions under that agreement, the Investors may exercise their rights
under the Option, to purchase (1) between $500,000 to $1,500,000 in shares of
Series B-1 Stock at $9.00 per share and (2) an additional number of Warrants
exercisable for Common Stock at $3.00 a share. Each share of Series B-1 Stock
acquired pursuant to the exercise of the Option will be immediately convertible
into three (3) fully paid, non-assessable shares of Common Stock. The Warrants
to be purchased upon the exercise of the Option shall entitle the Trust to
purchase that number of shares of Common Stock equal to the product of (x) 25%
and (y) the number of shares of Common Stock initially issuable upon conversion
of the shares of Series B-1 Convertible Preferred Stock purchased upon the
exercise of the Option. For example, if 100,000 shares of Series B-1 Convertible
Preferred Stock are purchased upon the exercise of the Option, and assuming that
each such share is initially convertible into three (3) shares of Common Stock,
then the Warrants would entitle the Trust to purchase 75,000 shares of Common
Stock (100,000 x 3 x 25% = 75,000).
The terms of the Series B-1 Convertible Preferred Stock, shall be
identical to the terms of the Series B Convertible Preferred stock, except that
the purchase price per share of the Series B-1 Preferred Stock shall be $9.00
per share, the dividend rate shall be $.45 per share and the liquidation
preference shall be $9.00 per share. In addition, the Series B-1 Convertible
Preferred Stock and the Series B Convertible Preferred Stock will share pari
passu in an liquidation proceeds pro rata based on the amount owed.
THE INVESTOR RIGHTS AGREEMENT
On March 4, 2004 the Company also entered into the Investors Rights
Agreement with the Investors. Pursuant to the Investor Rights Agreement, the
Company shall, prior to any issuance of any shares of capital stock of the
Company or a security convertible into any shares of capital stock of the
Company, offer to the Investor by written notice the right, for a period of 30
days, to purchase all of such securities for cash at an amount equal to the
price or other consideration for which such securities are to be issued. Under
the terms of this Agreement the Company is prohibited from undertaking any of
the following corporate actions without the approval of a majority of the Series
B stockholders: (1) create or authorize the creation of any additional class of
stock unless the same ranks junior to the Series B Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Company; (2) increase the authorized amount of Series B Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Series B Preferred Stock as to the
distribution of assets on the liquidation; dissolution or winding up of the
Company, or create or authorize any obligation or security convertible into
shares of Series B Preferred Stock or into shares of any other class or series
of stock unless the same ranks junior to the Series B Preferred Stock as to
distribution of assets on the liquidation, dissolution or winding up of the
Company; (3) consent to any liquidation, dissolution or winding up of the
Company; (4) consolidating or merging with or into another entity; (5) the sale,
lease, abandonment, transfer or other disposition of all or substantially all of
the Company's assets; (6) amending the Company's Certificate of Incorporation to
the detriment the Series B Preferred stockholder; (7) purchasing or setting
aside any sums for the purchase of any shares of stock other than the Series B
Preferred Stock (except for certain limited circumstances); and (8) approving
any annual budget for the Company that is more than a 10% deviation from the
preceding year's approved budget.
Without the consent of the majority of the holder of the then
outstanding shares of Series B Preferred Stock the Company will not: (a)
terminate, or appoint a new Chief Executive Officer, Chief Operating Officer or
Chief Financial Officer, provided, however, that the Investors agree that Dale
Coenen shall remain Chief Executive Officer for three years from the date of the
Investors Rights Agreement, subject to his earlier death, disability,
resignation or removal for cause by a majority of the Board of Directors of the
Company; or (b) increase the maximum number of directors constituting the Board
of Directors to a number in excess of six. The Investors will also have the
right to appoint two of the three members of the Company's newly constituted
Management Committee which shall meet bi-monthly during the months the full
Board of Directors does not meet. The Company's management will consult with,
and report to, the Management Committee, however, the ultimate decision making
authority for the Company rests with the Board of Directors.
19
THE RIGHT OF FIRST REFUSAL AGREEMENT
Under the terms of the Right of First Refusal Agreement, between the
Company, Dale Coenen and Duncan Miller (individually, a "Stockholder" and
collectively, the "Stockholders") and the Investors, the Stockholders agree to
provide the Company and the Investors with notice prior to transferring or
otherwise disposing of any shares of capital stock of the Company except in
certain limited circumstances. A Stockholder will have no right to Transfer all
or any part of its shares of capital stock of the Company unless such
Stockholder shall give a notice to each Investor and the Company setting forth
(a) the number and type of the securities proposed to be transferred, (b) the
identity of the proposed transferee, (c) the price at which and the terms
(including payment terms) upon which the securities are proposed to be
transferred and a summary of all the material terms of the proposed sale. The
giving of this notice shall constitute an offer by the selling Stockholder to
the Investors and the Company to sell the securities to such party or parties in
accordance with the terms and conditions of the Right of First Refusal
Agreement.
When the transfer notice is given the Investors shall have the right
and option, but not the obligation, to purchase all or any portion of the
offered securities. The Company shall have the right and option, but not the
obligation, to purchase in the aggregate all, but not fewer than all, of the
offered securities which the Investors shall not have elected to purchase, at
the price and upon the terms (including payment terms) set forth in the notice.
If the Company's option and the Investors' option are not exercised with respect
to all of the offered securities, than the selling Stockholder shall be entitled
for a limited period to transfer the offered securities, but only to the
proposed transferee identified in the original notice, and only at the notice
price and payment terms.
Mr. Coenen has agreed that he will not transfer, or attempt to
transfer, any Securities under the terms of this Agreement until the earlier of
(1) August 31, 2004, and (ii) the date on which the Company receives Shareholder
Approval (and then only, in compliance with the terms and conditions of the
Investors Rights Agreement.
THE VOTING AGREEMENT
Pursuant to the terms of the Voting Agreement between the Company, Dale
Coenen, Duncan Miller (the "Stockholders") and the Investors, Messrs. Coenen and
Miller have agreed to vote all of their beneficially owned securities to ensure
that the size of the Board of Directors shall be set and remain at six members.
Each Stockholder will also vote all the securities it holds with respect to the
three directors that the Certificate of Incorporation provides shall be elected
by the holders of Series B Convertible Preferred Stock voting as a single class,
in favor of three designees, (the "Figgie Directors") who initially shall be
Harry E. Figgie, Jr., James O'Brien and Richard Solon. In the event of a vacancy
on the Board with respect to any of the Figgie Directors, each Stockholder
agrees to vote all of their Securities to fill such vacancy as described above.
Each Stockholder will also take any and all action in its capacity as a
stockholder and/or Director of the Company to cause the designees of the
Investors to be elected as the Company's Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer.
Finally, each Stockholder will vote all Securities that it holds (or to
which it has voting power) to approve the transactions contemplated by the
Series B Convertible Preferred Stock and Warrant Purchase Agreement and the
provisions of the various ancillary documents described above, as required by
certain National Association of Securities Dealers, Inc. ("NASD") rules
providing for qualitative listing requirements applicable to securities traded
on the Nasdaq National Market and Nasdaq SmallCap Market and any other approval,
authorization or waiver that may be required by any state or other institution,
persons or agencies, including without limitation, the Securities and Exchange
Commission.
On all other matters other than those described above on which the
Stockholders have a vote at any regular or special meeting of the stockholders
of the Company. The Stockholders shall vote their stock for or against such
matter in the same proportion as all of the stockholders of the Company, other
than the Investors, have voted for or against such matter.
20
THE SHARE PURCHASE AGREEMENT
Pursuant to the Share Purchase Agreement, Clark-Reliance has agreed to
purchase Mr. Duncan Miller's entire right, title and interest in each share of
Common Stock beneficially owned by him in the Company for $2.50 a share. Harry
E. Figgie, Jr., is the Chairman of the Board of Directors and majority
stockholder of Clark-Reliance Corporation, a Delaware corporation.
THE REGISTRATION RIGHTS AGREEMENT
On March 4, 2004 the Company entered into the Registration Rights
Agreement with the Investors. While the Company is not required by the terms of
this agreement to seek shareholder approval of any provisions we are including
the following disclosure because of the related party nature of the transaction
and to advise you as to the material terms of this agreement. Pursuant to the
terms of the Registration Rights Agreement, the Company agrees that if it at any
time and from time to time it shall determine to effect the registration f any
of its Common Stock (whether in connection with the offering by the Company or
others) then, in each such case, the Company will promptly give written notice
of the proposed registration to the Investors and use all reasonable efforts to
include among the Common Stock which it then registers all shares specified by
the Investors in a written request or requests received by the Company.
The obligations of the Company are subject to certain qualifications
including the following: (a) the Company shall not be obligated to effect any
registration on Form S-1 prior to the first anniversary of the date of the
Registration Rights Agreement; (b) the Company shall not be obligated to effect
any registration on Form S-1 unless Form S-3 is not available for such
registration; and (c) the Company shall not be obligated to effect more than
three registrations; the Company shall not be obligated to effect any
registration 90 days after the effective date of any registration statement
pertaining to any securities of the Company.
In the event of a registration for an underwritten offering, the
managing underwriter shall be selected by the Company subject to the approval of
the Investors, which approval may not be unreasonably withheld. If, in the case
of an underwritten registration, the managing underwriters advise the Company
that in their opinion the number of shares requested to be included in such
offering exceeds the number of shares which can be sold therein without
adversely affecting the marketability of the offering, the Company will include
in such registration statement the number of shares requested to be included
which in the opinion of the underwriters can be sold without adversely affecting
the marketability of the offering.
APPROVAL OF PROPOSAL III REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE VOTES CAST. A PROXY CARD MARKED "ABSTAIN" WITH THE RESPECT TO THE PROPOSAL
WILL NOT BE VOTED, ACCORDINGLY ABSTENTIONS AND BROKER NON-VOTES WILL HAVE NO
EFFECT ON THE APPROVAL OF THIS PROPOSAL. AS INDICATED ABOVE, MR. FIGGIE HAS
ADVISED THE COMPANY THAT HE WILL ABSTAIN FROM VOTING THE SECURITIES ACQUIRED IN
THE FIRST TRANCHE FOR THE PURPOSES OF THE APPROVAL III.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE OPTION,
AND THE FOREGOING PROVISIONS OF THE INVESTOR RIGHTS AGREEMENT, RIGHT OF
FIRST REFUSAL AGREEMENT, VOTING AGREEMENT AND SHARE PURCHASE
AGREEMENT.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors and persons who own 10% or more of a registered
class of our equity securities, to file
21
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC.
Executive officers, directors and 10% or greater stockholders are required by
SEC regulations to furnish us with copies of all Forms 3, 4 and 5.
Based solely on our review of the copies of such forms we have received
, we believe that all of our executive officers and directors complied with the
filing requirements applicable to them.
STOCKHOLDER PROPOSALS
Any proposals by stockholders of the Company intended to be included in
the Company's proxy statement and form of proxy relating to the Company's next
annual meeting of stockholders must be in writing and received by the Company at
its office at 2637 S. Adams Rd., Rochester Hills, Michigan 48309 no later than
December 16, 2004.
GENERAL
Our Board of Directors does not know of any matters other than the
foregoing which will be presented for consideration at the meeting. However, if
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote thereon in accordance with their
best judgment.
The entire cost of soliciting management proxies will be borne by the
Company. Proxies will be solicited by mail and may be solicited personally by
directors, officers or regular employees of the Company, who will not be
compensated for their services.
The Company will provide any stockholder of record at the close of
business on May 28, 2004, without charge, upon written request to its Secretary
at 2637 S. Adams Rd., Rochester Hills, Michigan 48309, a copy of the Company's
Annual Report and Form 10-K for the fiscal year ended December 31, 2003. In
order to assure a quorum, whether or not you plan to attend the meeting, you are
urged to forward your proxy without delay. If you do attend the meeting and
vote, your proxy will not be used. A prompt response will aid management in
preparing for the Annual Meeting and, accordingly, will be greatly appreciated.
By Order of the Board of Directors,
Robert Anderson
Secretary
June 18, 2004
22
EXHIBIT A
TRANS-INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee (the "Committee") of Trans-Industries, Inc. (the
"Company) is appointed by the Board of Directors (the "Board") of the Company.
The primary functions of the Committee are to:
o Assist the Board in fulfilling its oversight of the integrity of
the Company's financial statements, the Company's compliance with
legal and regulatory requirements, the independent auditor's
qualifications and independence, and the performance of the
Company's internal audit function and independent auditor; and
o Prepare the report of the Committee required to be included in the
Company's proxy statement for the Annual Meeting of Stockholders.
MEMBERSHIP
General.
The Committee shall consist of no less than three directors, including
a Chair, as determined by the Board. Committee members shall be appointed by the
Board each year at the Board meeting following the Annual Meeting of
Stockholders and at other times when necessary to fill vacancies. Each committee
member shall serve for a period of one year or until such time as a member's
successor has been duly appointed. Committee members will serve at the pleasure
of the Board.
Independence and Qualifications.
Each member of the Committee shall meet the independence and experience
requirements as set forth by the Nasdaq Stock Market, Inc. ("NASDAQ"), Section
10A(m)(3) of the Securities Exchange Act of 1934 and the Securities and Exchange
Commission, and any other applicable laws, rules and regulations, as amended
from time to time. Each member of the Committee shall be financially literate,
which shall include the ability to read and understand fundamental financial
statements such as the Company's balance sheet, income statement, and cash flow
statement, as determined by the Board in its business judgment. At least one
member of the audit committee shall have past employment experience in finance
or accounting, requisite professional certification in accounting or other
comparable experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer or
other senior officer with financial oversight RESPONSIBILITIES. The Committee
shall also determine whether one or more of its members meets the criteria of an
"Audit Committee Financial Expert" as defined by the Securities and Exchange
Commission and make all required proxy statement disclosures relating thereto.
If a Committee member simultaneously serves on the audit committee of more than
three public companies (including the Company), the Board must determine that
such simultaneous service would not impair the ability of such member to
effectively
23
serve on the Committee. The Company will be required to disclose any
such determination in its annual proxy statement.
RESPONSIBILITIES AND DUTIES
The Committee shall perform the following responsibilities and duties:
Responsibilities with Respect to Retention and Independence of
Independent Auditor:
o Be solely responsible to appoint and, where appropriate, terminate,
the Company's independent auditor. The Committee shall be directly
responsible for the compensation and oversight of the work of the
independent auditor (including resolution of disagreements between
management and the independent auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report
or related work. The independent auditor shall report directly to
the Committee.
o Pre-approve all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the
Company by its independent auditor.
o Inquire as to the independence of the independent auditor. As part
of this responsibility, the Committee will ensure that the
independent auditor submits on an annual basis to the Committee a
formal written statement delineating all relationships with and
professional services rendered to the Company as required by
Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. The Committee is responsible for
actively engaging in a dialogue with the independent auditor with
respect to any disclosed relationships or services that may impact
the objectivity and independence of the independent auditor and for
recommending that the Board take appropriate action in response to
the independent auditor's report to satisfy itself of the
independent auditor's independence.
o In connection with Committee's evaluation of the auditor's
independence, the Committee is also to review and evaluate the
performance of the lead partner of the audit engagement team and
further to establish policies and procedures to ensure the
rotation, if applicable, of the audit partners on the audit
engagement team, in accordance with Securities and Exchange
Commission rules or other applicable laws or regulations.
o Obtain and review, at least annually, a report by the independent
auditor describing: (a) the firm's internal quality-control
procedures; and (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with any such issues. The Committee shall present its
conclusions with respect to the independent auditor to the Board.
o Establish and review clear hiring policies for employees or former
employees of its independent auditor, and ensure that neither the
Company's CEO, chief financial officer, controller, nor any person
serving in an equivalent position with the Company was employed by
the independent auditor and participated in any capacity in the
audit of the Company during the one year period preceding the date
of the initiation of the audit.
Responsibilities with Respect to the Internal Audit Function:
o Determine the scope of the Company's internal audit program.
o Review the results of any internal audits which may be conducted,
including the adequacy of the Company's internal controls and any
significant findings and recommendations reported by the internal
auditors (together with management's response).
o Review with the independent auditor and management, including the
internal auditors (as appropriate), the responsibilities,
structure, staffing and budget of the Company's internal
24
audit function, if any, as well as the activities, organizational
structure, and qualifications of the internal auditors. The
Committee is to review the appointment or replacement of the senior
internal auditing executive, if any.
Responsibilities Related to Financial Statement and Disclosure Matters:
o Review, discuss and evaluate the following with management and the
independent auditor, at least annually:
(a) Major issues regarding accounting principles and financial
statement presentations, including any significant changes
in the Company's selection or application of accounting
principles, any major issues as to the adequacy of the
Company's internal controls and any special steps adopted
in light of material control deficiencies;
(b) Any analysis prepared by management and/or the independent
auditor setting forth significant financial reporting
issues and judgments made in connection with the
preparation of the financial statements, including
analysis of the effects of alternative Generally Accepted
Accounting Principle ("GAAP") methods on the financial
statements; and
(c) The effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the Company's
financial statements.
o Review the nature and scope of the planned arrangements and scope
of the annual audit, and the results of the audit findings with the
independent auditor, including those matters required to be
discussed by Statement on Accounting Standards No. 61 relating to
the conduct of the audit, as well as any audit problems or
difficulties encountered in the scope of the audit work and
management's response, including (a) any restrictions on the scope
of activities or access to requested information, and (b) any
significant disagreements with management.
o Discuss with the independent auditor any significant findings and
recommendations made by the independent auditor together with
management's response.
o Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and control
such exposures, including the Company's risk assessment and risk
management policies.
o Discuss with management and the independent auditor the Company's
annual financial statements and related notes, including the
Company's disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and recommend to
the Board whether the financial statements should be included in
the Company's Annual Report on Form 10-K.
o Discuss with management and the independent auditor the Company's
quarterly financial statements, including the Company's disclosures
under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the results of the independent
auditor's review of the quarterly financial statements, before the
filing of the Company's Quarterly Report on Form 10-Q.
o Review and discuss with management and, if appropriate, the
independent auditor the Company's earnings press releases, as well
as financial information and earnings guidance provided to analysts
and rating agencies (including the use of "proforma" or "adjusted"
"non-GAAP financial information" contained in any such release or
guidance). Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types
of presentations to be made). The Chair of the Committee may
represent the entire Committee for these purposes where it is
impractical for the entire Committee to meet.
o Review and discuss prior to the filing of the document containing
the audit opinion, reports from the independent auditor on:
(a) All critical accounting policies and practices used;
(b) All alternative treatments of financial information
within GAAP that have been discussed with
management, ramifications of the use of such
alternative
25
disclosures and treatments, and the treatment preferred by the
independent auditor; and
(c) Other material written communications between the
independent auditor and management including, but not
limited to, any management letter, or schedule of unadjusted
differences.
o Review disclosures regarding internal controls and other matters
made to the Committee by the Company's CEO and CFO during their
certification process for the Form 10-K and Form 10-Q.
o Prepare the report of the Audit Committee in accordance with
regulations of the Securities and Exchange Commission, to be set
forth in the proxy statement for the Company's Annual Meeting of
Stockholders.
Responsibilities Related to Compliance Oversight:
o Retain independent counsel, accountants or other advisors, as it
determines necessary to carry out its duties and conduct or
authorize investigations into any matters within the scope of the
Committee's responsibilities. The Company shall provide appropriate
funding, as determined by the Committee, in its capacity as a
committee of the Board, for payment of compensation to the
independent auditor engaged for the purpose of rendering or issuing
an audit report or related work or performing other audit, review
or attest services for the Company, the compensation of any
independent advisors employed by the Committee and the Committee's
ordinary administrative expenses that are necessary and appropriate
to carry out its duties.
o Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding accounting
or auditing matters.
o Obtain from the independent auditor assurance that, if the
independent auditor detects or becomes aware of any illegal
act, the Committee is adequately informed, and that a report
is provided to the Committee if the independent auditor
reaches specific conclusions with respect to such illegal
acts.
o Discuss with management, including the General Counsel, legal
compliance and litigation matters that may have a material
impact on or raise material issues concerning the Company's
financial statements or accounting policies.
o Conduct or authorize such additional reviews, assessments or
investigations as may be delegated to it by the Board, or on
its own motion, as the Committee may deem necessary or
appropriate to perform any of the foregoing functions.
o Review and approve all related-party transactions, as defined
in Item 404 of Regulation S-K, for potential conflict of
interest situations.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent auditor.
ADMINISTRATION
26
Meetings and Reports.
The Committee will hold meetings, in person, by telephone or by other
recognized legal means of communication, at such times and with such frequency
as it deems necessary to carry out its duties and responsibilities under this
Charter. Special meetings of the Committee may be called by the Chairman of the
Board or the CEO of the Company or by the Chairman of the Committee, with notice
of any such special meeting to be given in accordance with the Company's Bylaws.
A majority of the members of the Committee shall constitute a quorum for the
transaction of business by the Committee. At the discretion of the Committee,
other members of the Board and any officer or employee of the Company may be
invited to attend and participate in meetings of the Committee. The Committee
also may act by unanimous written consent in accordance with the terms of the
Company's Bylaws and applicable law. If approved by the Board, the Committee may
delegate any of its responsibilities under this Charter to a subcommittee
composed solely of members of the Committee.
Minutes of each Committee and records of all other Committee actions
shall be prepared by a secretary of the meeting designated by the Committee, and
shall be retained with the permanent records of the Company.
A report on each meeting of the Committee and on each action of the
Committee taken by unanimous written consent shall be provided to the Board by
the Chairman of the Committee (or, in the Chairman's absence, by another member
of the Committee) at the next regularly scheduled meeting of the Board or as
otherwise requested by the Board.
The Committee shall also review and reassess this Charter on an annual
basis, and ensure that the Charter is included as an appendix to the Company's
proxy statement at least once every three years.
Performance Evaluation of Committee.
The performance of the Committee shall be reviewed and evaluated
annually by the Board based on review criteria and procedures developed by the
Nominating and Corporate Governance Committee.
BOARD OF DIRECTORS APPROVAL
This Charter was approved and adopted by the Board on May 19, 2004.
27
EXHIBIT B
TRANS-INDUSTRIES, INC.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
(AS ADOPTED ON MAY 19, 2004)
The Board of Directors (the "Board") of Trans-Industries, Inc. (the
"Company") has constituted and established a Nominating and Corporate Governance
Committee (the "Committee") with authority, responsibility and specific duties
as described in this Nominating and Corporate Governance Committee Charter.
PURPOSE
The purpose of the Nominating and Corporate Governance Committee is to:
o Identify individuals qualified to become Board members;
o Recommend to the Board the persons to be nominated by the Board for
election as directors at the annual meeting of stockholders;
o Develop and recommend to the Board a set of corporate governance
principles applicable to the Company; and
o Oversee the evaluation of the Board and management.
MEMBERSHIP
The Committee shall consist of three directors who are independent of
management and free from any relationship that, in the opinion of the Board, and
as evidenced by its appointment of such Committee members, would interfere with
the exercise of independent judgment as Committee members. Each Committee member
shall meet the definition of "independent" within the meaning of the Nasdaq
listing standards, and any other applicable laws, rules and regulations, as
amended from time to time.
The Board shall appoint one member of the Committee to serve as the
Chairman of the Committee. In the event the Board fails to appoint a Chair of
the Committee, the Nominating and Corporate Governance Committee shall elect a
Chair by majority vote. The Board may fill vacancies on the Committee from time
to time, and the Board may remove a Committee member from membership on the
Committee at any time with or without cause.
PRINCIPAL FUNCTIONS
The Committee has two basic responsibilities: (1) to assist the Board
in identifying individuals qualified to become board members and to recommend
that the Board select the director nominees to be elected at the annual meeting
of stockholders or to be appointed to fill a vacancy or to otherwise increase
the size of the Board; and (2) to assist the Board in developing and
implementing the Company's corporate governance policies and guidelines. In
carrying out its responsibilities, the Committee will:
28
o Identify, review, evaluate and recommend individual candidates to
the Board to become Board members and shall consider management and
stockholder recommendations for director candidates. In
recommending candidates for nomination, the Committee shall
consider such factors as it deems appropriate and shall not
recommend candidates for nomination who do not meet the following
minimum qualifications:
o A desire to represent the best interests of the stockholders;
o An express commitment to the mission and success of the
Company as well as an ability to work compatibly with the
Board and senior management;
o The highest ethical standards, values and integrity;
o Experience and knowledge that the Committee deems relevant to
the Company;
o The ability and willingness to commit and devote the necessary
time and energy to the diligent performance of his or her
duties, including preparing for, attending and participating
in Board meetings and one or more standing committees of the
Board; and
o Basic knowledge of corporate governance matters and the role
of boards of public companies.
o Establish policies and procedures with regard to the consideration
of stockholder recommended director candidates and the process by
which the Committee identifies and evaluates all director
candidates.
o Evaluate whether an incumbent director should be nominated for
reelection to the Board upon expiration of such director's term.
The Committee shall use the same factors established for new
director candidates to make its evaluation and also shall take into
account the incumbent director's past performance and contribution
to the Board and its committees.
o Review annually the Board's committee structure and recommend to
the Board for its approval directors to serve on each of the
Board's committees. The Committee also shall recommend additional
directors to serve as committee members when necessary to fill
vacancies. The Committee shall consult with the Chief Executive
Officer or acting Chairman of the Board on all such
recommendations.
o Shall develop and recommend to the Board for its approval Corporate
Governance Guidelines for the Company. Thereafter, the Committee
shall periodically review and assess the adequacy of the Company's
Corporate Governance Guidelines and recommend changes to the Board
as necessary.
o Shall develop and recommend to the Board for its approval a Code of
Conduct & Compliance applicable to the Company's directors,
officers and employees, as well as a Financial Code of Ethics
applicable to the Company's Chief Executive Officer, Chief
Financial Officer, Chief Accounting Officer and other persons
performing similar functions.
o Shall review matters brought to its attention relating to the
integrity of management, including conflicts of interest, and shall
oversee adherence to the Company's Code of Conduct & Compliance. In
connection with these reviews, the Committee will meet, as
appropriate, with the Company's outside counsel and other Company
officers and employees.
o Establish procedures to ensure prompt notification of Nasdaq after
an executive officer becomes aware of any material non-compliance
by the Company with any Nasdaq listing standard.
o Shall develop and recommend to the Board for its approval an annual
self-evaluation process for the entire Board and each of its
committees. The Committee shall coordinate and oversee the process
of such annual Board and committee evaluations.
29
o Shall be responsible for coordinating and overseeing the process
for the evaluation of the company's senior executives by the Board
of Directors.
o Present an annual report to the Board on succession planning and
management development for "senior management," including the CEO.
This succession planning includes development of policies and
procedures for succession in the event of retirement or emergency;
o Shall make recommendations regarding director orientation programs
and shall consider continuing education opportunities for directors
to the extent appropriate.
o Delegate, where appropriate in the discretion of the Committee, any
of its responsibilities to a subcommittee.
o Retain and authorize search firms, consultants, legal, accounting
or other advisors, without seeking approval from the Board, as it
deems necessary, to assist in fulfilling its responsibilities and
discharging its duties.
o Report its activities to the Board at its next regularly scheduled
meeting following a Committee meeting or written action,
accompanied by any recommendations to the Board approved by the
Committee.
o Review the disclosure regarding the Nominating and Corporate
Governance Committee's director nominating function and procedures
required to be disclosed in the Company's proxy statement and
ensure that any material changes to the procedures by which
stockholders may recommend nominees to the Board are disclosed in
the next periodic report filed with the SEC;
o Periodically review and assess its own performance and the adequacy
of this Charter and recommend any appropriate changes to the Board.
o Such other duties and responsibilities as may be assigned to the
Committee, from time to time, by the Board and/or the Chairman of
the Board.
ADMINISTRATION
Meetings and Reports.
The Committee will hold meetings, in person, by telephone or by other
recognized legal means of communication, at such times and with such frequency
as it deems necessary to carry out its duties and responsibilities under this
Charter. Special meetings of the Committee may be called by the Chairman of the
Board or the CEO of the Company or by the Chairman of the Committee, with notice
of any such special meeting to be given in accordance with the Company's Bylaws.
A majority of the members of the Committee shall constitute a quorum for the
transaction of business by the Committee. At the discretion of the Committee,
other members of the Board and any officer or employee of the Company may be
invited to attend and participate in meetings of the Committee. The Committee
also may act by unanimous written consent in accordance with the terms of the
Company's Bylaws and applicable law. If approved by the Board, the Committee may
delegate any of its responsibilities under this Charter to a subcommittee
composed solely of members of the Committee.
Minutes of each Committee and records of all other Committee actions
shall be prepared by a secretary of the meeting designated by the Committee, and
shall be retained with the permanent records of the Company.
30
A report on each meeting of the Committee and on each action of the
Committee taken by unanimous written consent shall be provided to the Board by
the Chairman of the Committee (or, in the Chairman's absence, by another member
of the Committee) at the next regularly scheduled meeting of the Board or as
otherwise requested by the Board, accompanied by any recommendations to the
Board approved by the Committee.
The Committee shall also review and reassess its performance as well as
this Charter on an annual basis and recommend any appropriate changes to the
Board.
Performance Evaluation of Committee.
The performance of the Committee shall be reviewed and evaluated
annually by the Board based on review criteria and procedures developed by the
Nominating and Corporate Governance Committee.
BOARD OF DIRECTORS APPROVAL
This Charter was approved and adopted by the Board on May 19, 2004.
31
TRANS-INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, JULY 21, 2004
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a shareholder of Trans-Industries, Inc. hereby appoints
Dale S. Coenen and Kai Kosanke and each of them, as Proxies, with full power of
substitution, to represent the undersigned and to vote, as designated below, all
the shares of Common Stock of TRANS-INDUSTRIES, INC., held of record by the
undersigned on May 28, 2004, at the Annual Meeting of Stockholders to be held at
the Holiday Inn, 1500 Opdyke Road, Auburn Hills, Michigan on July 21, 2004, or
at any and all postponements and adjournments thereof, with all the powers which
the undersigned would possess if personally present, upon the matters set forth
herein.
The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Meeting.:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of three directors to hold office for a term of one year.
Please cast your vote for or against each of the following nominees:
NOMINEE FOR AGAINST NOMINEE FOR AGAINST
------- --- ------- ------- --- -------
Dale S. Coenen |_| |_| Robert J. Ruben |_| |_|
H. Sean Mathis |_| |_|
Vote FOR |_| Vote WITHHELD |_|
all nominees from all nominees
(except as marked)
(INSTRUCTIONS: To withhold authority to vote for any indicated nominee, write
the nominee's name(s) on the space provided below.)
- -------------------------------------------------------------------------------
2. To ratify (a) the issuance to Harry E. Figgie, Jr., as trustee under
the Trust Agreement dated July 15, 1976, as amended, (the "Figgie Trust")
of 193,799 shares of Series B Convertible Preferred Stock and Warrants to
purchase in the aggregate up to 145,349 shares of Trans-Industries Common
Stock, par value $0.10 per share pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement dated March 4, 2004 (the
"First Tranche"), and (b) the applicable voting provisions established by
the Company's Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock of Trans-Industries, Inc. which
states that the approval of the holders of at least a majority of the
outstanding shares of Series B Convertible Preferred Stock, voting as a
separate series, is required for the Company to increase the maximum
number of directors constituting the Board of Directors to more than six
and that the holders of the Series B Convertible Preferred Stock, again
voting as a separate series, have the right to elect three of the
Company's six directors;
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve, for purposes of complying with Nasdaq Marketplace
Rule 4350(i)(1)(B), the potential issuance of additional stock to, or
acquisitions by, Mr. Figgie pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement and various ancillary
agreements to the Series B Convertible Preferred Stock and Warrant
Purchase Agreement, (the "Second Tranche") as more fully described in the
accompanying proxy material.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any and all
postponements or adjournments thereof. This proxy when properly executed
will be voted in the manner directed herein by the undersigned
stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,2
and 3.
- ------------------------------- ----------------------------- Date -------------, 2004
Signature of Stockholder Signature of Stockholder
Please sign your name exactly as it appears hereon. 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 full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[TRANS-INDUSTRIES, INC. LOGO]
SERIES B CONVERTIBLE PREFERRED STOCK PROXY CARD
TRANS-INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, JULY 21, 2004
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a shareholder of Trans-Industries, Inc. hereby appoints
Dale S. Coenen and Kai Kosanke and each of them, as Proxies, with full power of
substitution, to represent the undersigned and to vote, as designated below, all
the shares of Series B Convertible Preferred Stock of TRANS-INDUSTRIES, INC.,
held of record by the undersigned on May 28, 2004, at the Annual Meeting of
Stockholders to be held at the Holiday Inn, 1500 Opdyke Road, Auburn Hills,
Michigan on July 21, 2004, or at any and all postponements and adjournments
thereof, with all the powers which the undersigned would possess if personally
present, upon the matters set forth herein.
The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Meeting.:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1 Election of three directors to hold office for a term of one year.
Please cast your vote for or against each of the following nominees:
NOMINEE FOR AGAINST NOMINEE FOR AGAINST
------- --- ------- ------- --- -------
Harry E. Figgie Jr. |_| |_| James O'Brien |_| |_|
Richard A. Solon |_| |_|
Vote FOR |_| Vote WITHHELD |_|
all nominees from all nominees
(except as marked)
(INSTRUCTIONS: To withhold authority to vote for any indicated nominee, write
the nominee's name(s) on the space provided below.)
- -------------------------------------------------------------------------------
2. To ratify (a) the issuance to Harry E. Figgie, Jr., as trustee under
the Trust Agreement dated July 15, 1976, as amended, (the "Figgie Trust")
of 193,799 shares of Series B Convertible Preferred Stock and Warrants to
purchase in the aggregate up to 145,349 shares of Trans-Industries Common
Stock, par value $0.10 per share pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement dated March 4, 2004 (the
"First Tranche"), and (b) the applicable voting provisions established by
the Company's Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock of Trans-Industries, Inc. which
states that the approval of the holders of at least a majority of the
outstanding shares of Series B Convertible Preferred Stock, voting as a
separate series, is required for the Company to increase the maximum
number of directors constituting the Board of Directors to more than six
and that the holders of the Series B Convertible Preferred Stock, again
voting as a separate series, have the right to elect three of the
Company's six directors;
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve, for purposes of complying with Nasdaq Marketplace
Rule 4350(i)(1)(B), the potential issuance of additional stock to, or
acquisitions by, Mr. Figgie pursuant to the Series B Convertible
Preferred Stock and Warrant Purchase Agreement and various ancillary
agreements to the Series B Convertible Preferred Stock and Warrant
Purchase Agreement, (the "Second Tranche") as more fully described in the
accompanying proxy material.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any and all
postponements or adjournments thereof. This proxy when properly executed
will be voted in the manner directed herein by the undersigned
stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,2
and 3.
- ------------------------------- ------------------------------ Date -------------, 2004
Signature of Stockholder Signature of Stockholder
Please sign your name exactly as it appears hereon. 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 full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[TRANS-INDUSTRIES, INC. LOGO]