SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-12
CHICAGO RIVET & MACHINE CO.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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CHICAGO RIVET & MACHINE CO.
P.O. BOX 3061
901 FRONTENAC ROAD
NAPERVILLE, ILLINOIS 60566
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 2003
To the Shareholders of
CHICAGO RIVET & MACHINE CO.
Notice is hereby given that the Annual Meeting of Shareholders of CHICAGO
RIVET & MACHINE CO., an Illinois corporation (the "Company"), will be held at
the Company's principal offices, 901 Frontenac Road, Naperville, Illinois, on
Tuesday, May 13, 2003 at 10:00 A.M., Chicago time, for the following purposes:
1. To elect a Board of seven directors, to serve until the next Annual
Meeting of Shareholders and until their successors are elected and shall
qualify; and
2. To consider and act upon such other matters as may properly come
before the meeting.
Shareholders of record at the close of business on March 17, 2003 will be
entitled to notice of and to vote at this Annual Meeting and at any adjournments
or postponements thereof.
A copy of the Annual Report of the Company for the year ended December 31,
2002, which contains Financial Statements, is enclosed.
You are requested to sign, date and return the accompanying proxy card in
the enclosed envelope, whether or not you expect to attend the meeting in
person.
Your cooperation is respectfully solicited and appreciated.
By order of the Board of Directors
KIMBERLY A. KIRHOFER, Secretary
Naperville, Illinois
March 26, 2003
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, WE REQUEST THAT YOU EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY.
CHICAGO RIVET & MACHINE CO.
P.O. BOX 3061
901 FRONTENAC ROAD
NAPERVILLE, ILLINOIS 60566
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 2003
This Proxy Statement is furnished to the holders of common stock, $1.00 par
value per share ("Common Stock"), of Chicago Rivet & Machine Co., an Illinois
corporation (the "Company"). Proxies are being solicited on behalf of the Board
of Directors of the Company to be used at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Tuesday, May 13, 2003 at the Company's
principal offices, 901 Frontenac Road, Naperville, Illinois, at 10:00 A.M.,
Chicago time, and at any adjournments or postponements thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders (the
"Notice"). The Company's Annual Report to Shareholders for the year ended
December 31, 2002, including financial statements, this Proxy Statement, the
Notice and the attached form of proxy are first being mailed to shareholders on
or about March 26, 2003.
Each shareholder of record at the close of business on March 17, 2003, the
record date stated in the Notice, is entitled to vote at the meeting and at any
adjournments or postponements thereof. On the record date, there were
outstanding 966,132 shares of Common Stock, each entitled to one vote. No other
shares of the Company of any other class were outstanding.
Any shareholder giving a proxy has the power to revoke it at any time prior
to the exercise thereof by executing and delivering to the Secretary of the
Company at the above address a subsequent proxy or a written notice of
revocation of the proxy, or by attending the Annual Meeting and voting in
person. In the absence of any contrary written direction in the proxy, each
proxy will be voted for the election of the nominees for director named in this
proxy statement and in the proxy, and, in the best judgment of the persons named
in the proxy as representatives, upon any other matters which may properly come
before the Annual Meeting.
Proxies will be solicited by mail and may also be solicited by personal
interview, telephone, telecopy and telegram. Solicitation will be made on a
part-time basis by directors and officers of the Company and by other managerial
employees, who will receive no compensation therefor other
1
than their regular salary. The Company will arrange for brokerage houses,
nominees and other custodians holding Common Stock of record to forward proxy
soliciting material to the beneficial owners of such shares, and will reimburse
such record owners for the reasonable out-of-pocket expenses incurred by them.
The cost of the solicitation of proxies will be borne by the Company.
The Board of Directors of the Company does not intend to bring any matters
before the Annual Meeting except those indicated in the Notice and does not know
of any matter which anyone else may properly present for action at the Annual
Meeting. If any other matters properly come before the Annual Meeting, however,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Annual Meeting, will be authorized to vote or otherwise act
thereon in accordance with their judgment on such matters.
2
PRINCIPAL SHAREHOLDERS
The persons listed in the table below are known by the Company to be
beneficial owners of more than five percent of the Company's outstanding Common
Stock.
<Table>
<Caption>
NUMBER OF SHARES PERCENT
BENEFICIALLY OWNED AS OF
NAME AND ADDRESS OF FEBRUARY 17, 2003 CLASS(1)
- ---------------- --------------------- --------
John A. Morrissey and Walter W. Morrissey
One Oakbrook Terrace, Suite 802
Oakbrook Terrace, Illinois 60181...................... 174,572(2) 18.1%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401........................ 73,100(2) 7.6%
</Table>
- ---------------
(1) The percent of class figures in this table and throughout this proxy
statement are based upon the number of the outstanding shares of the Company
as of February 17, 2003 (966,132).
(2) The nature of the beneficial ownership of these shares is discussed in the
following paragraphs.
John A. Morrissey and Walter W. Morrissey may be deemed to constitute a
group within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, and each may be deemed therefore to be the beneficial owner of
the shares beneficially owned by the other. As of February 17, 2003, John A.
Morrissey beneficially owned 90,452 shares (9.4%) with sole voting and
investment power. As of February 17, 2003, Walter W. Morrissey beneficially
owned 84,120 shares (8.7%) with sole voting and investment power. The group
consisting of John A. Morrissey and Walter W. Morrissey may be deemed to be a
beneficial owner of a total of 174,572 shares (18.1%).
Dimensional Fund Advisors, Inc. ("Dimensional"), filed a Schedule 13G with
the Securities Exchange Commission on February 3, 2003 in which it stated that
it beneficially owned 73,100 shares of Common Stock as of December 31, 2002, all
of which shares are owned by four investment companies registered under the
Investment Company Act of 1940 for which Dimensional serves as investment
manager. In its Schedule 13G, Dimensional disclaimed beneficial ownership of all
such shares.
3
ELECTION OF DIRECTORS
A Board of seven directors is to be elected at the Annual Meeting, to serve
until the next Annual Meeting and until their successors shall have been elected
and shall qualify. The shares represented by proxies received by the Board of
Directors will be voted, in the absence of any contrary direction therein, for
the election of the nominees hereinafter listed and described. The Board of
Directors believes that the persons named will be available, but, if any nominee
is unable or unwilling to serve as director, the proxies will be voted for
another individual to be selected by the Board of Directors.
A majority of the outstanding Common Stock shares of the Company will
constitute a quorum at the Annual Meeting. Election as a director requires a
plurality of the votes cast at the Annual Meeting, so the seven nominees who
receive the largest number of votes cast will be elected as directors. An
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote at the Annual Meeting is required for approval of any proposal
submitted to shareholders (except for election of directors). Abstentions,
withheld votes and broker non-votes are counted for purposes of determining the
presence or absence of a quorum. Abstentions are counted as votes against a
proposal, whereas broker non-votes are not counted for purposes of determining
whether a proposal has been approved. For any nominee, withheld votes will have
no effect on the election of that nominee.
In the election of directors, voting rights are cumulative, which means
that each shareholder is entitled to as many votes as are equal to the number of
his shares multiplied by the number of directors to be elected (seven). Each
shareholder may cast all of such votes for one nominee or may distribute them
among two or more nominees in his discretion. In the absence of any contrary
written direction in the proxy, the proxy will confer discretionary authority on
the persons named therein as representatives to cumulate votes selectively among
the nominees in the manner just described.
4
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the Board of
Directors, the Board of Directors' nominees for director and each executive
officer of the Company named in the Summary Compensation Table (the "Named
Executives"), including their ages, principal occupations and beneficial
ownership of common shares of the Company, and information regarding the
beneficial ownership of such shares by all directors and executive officers of
the Company as a group:
<Table>
<Caption>
NUMBER OF
SHARES
SERVED AS BENEFICIALLY PERCENT
A DIRECTOR OWNED AS OF OF
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 17, 2003 CLASS
---- --- -------------------- ---------- ----------------- -------
John A. Morrissey....... 67 Chairman of the Board & 1968 90,452 9.4%(1)
Chief Executive Officer of
the Company; President and
Director, Algonquin State
Bank
Walter W. Morrissey..... 60 Attorney at Law 1972 84,120 8.7%(2)
John C. Osterman........ 51 President, Chief Operating 1988 4,000 0.4%(3)
Officer & Treasurer of the
Company
William T. Divane, Chairman of the Board and
Jr.................... 60 Chief Executive Officer of 1999 2,000 0.2%(4)
Divane Bros. Electric Co.
John R. Madden.......... 65 Chairman of the Board of 1980 200 0.02%(5)
Directors of the First
National Bank of LaGrange
Edward L. Chott......... 67 Chairman of the Board & 2000 -- --(6)
Chief Executive Officer of
The Broaster Co.
Nirendu Dhar............ 61 General Manager of H & L 2001 -- --(7)
Tool Company, Inc.
Michael J. Bourg........ 40 Controller of the Company -- 200 0.02%(8)
Donald P. Long.......... 51 Vice President-Sales of -- 50 --
the Company
All directors and
executive officers as
a group............... -- 181,022 18.7%
</Table>
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(1) Mr. John A. Morrissey has been Chairman of the Board of the Company since
1979 and Chief Executive Officer since 1981. He has been President and a
director of Algonquin State Bank for more than five years, and is also a
director of The First National Bank of LaGrange and is President and a
director of The First Algonquin Company (a bank holding company).
5
He is a brother of Director Walter W. Morrissey. All of the shares listed
above as beneficially owned by Mr. John A. Morrissey are beneficially owned
by him with sole voting and investment power. The foregoing amount does not
include shares directly owned by Walter W. Morrissey in his individual
capacity. See "Principal Shareholders."
(2) Mr. Walter W. Morrissey has been a partner in the law firm of Morrissey &
Robinson for more than five years. Mr. Walter W. Morrissey is a director of
The First Algonquin Company and a director of Algonquin State Bank. He is a
brother of Director John A. Morrissey. All of the shares listed above as
beneficially owned by Mr. Walter W. Morrissey are beneficially owned by him
with sole voting and investment power. The foregoing amount does not include
shares directly owned by John A. Morrissey in his individual capacity. See
"Principal Shareholders." The law firm of Morrissey & Robinson was retained
by the Company to perform certain legal services in 2001 and 2002 and has
been retained by the Company during the current year to perform additional
legal services.
(3) Mr. Osterman has been President, Chief Operating Officer and Treasurer of
the Company since September, 1987. Of the shares listed above as
beneficially owned by Mr. Osterman, 600 (0.06%) are beneficially owned by
him with sole voting and investment power, 2,800 (0.29%) are beneficially
owned by him in joint tenancy with his wife, with shared voting and
investment power, and 600 (0.06%) are beneficially owned by his wife. Mr.
Osterman expressly disclaims beneficial ownership with respect to the 600
shares owned by his wife.
(4) Mr. Divane is Chairman of the Board of Directors and Chief Executive Officer
of Divane Bros. Electric Co. (an electrical contractor). Prior to that he
was President and Chairman of the Board of Directors of Divane Bros.
Electric Co. for more than five years. All of the shares listed as
beneficially owned by him are owned with sole voting and investment power.
(5) Mr. Madden has been Chairman of the Board of Directors of The First National
Bank of LaGrange for more than five years. In addition, he is Chairman of
the Board of Directors of F.N.B.C. of LaGrange, Inc. (a bank holding
company), Chairman of the Board of Directors of The First Algonquin Company,
Chairman of the Board of Directors of the State Bank of Illinois, formerly
known as West Chicago State Bank, Chairman of the Board of Heritage Bank of
Schaumburg and Chairman of the Board of Schaumburg Bancshares, Inc. (a bank
holding company). All of the shares listed as beneficially owned by him are
owned with sole voting and investment power.
(6) Mr. Chott has been Chairman of the Board and Chief Executive Officer of The
Broaster Co. (a restaurant equipment manufacturer and food distributor) for
more than five years.
(7) Mr. Dhar has been employed as General Manager of the Company's subsidiary, H
& L Tool Company, Inc., since 1996. Mr. Dhar was employed as Plant Manager
and Chief Engineer of H & L Tool Company, Inc. prior to the Company's
acquisition of H & L Tool Company, Inc. for more than five years.
6
(8) All of the shares listed as held by Mr. Bourg are beneficially owned by him
in joint tenancy with his wife, with shared voting and investment power.
ADDITIONAL INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during
2002.
The Board of Directors has appointed an Audit Committee, which presently
consists of Directors Edward L. Chott, William T. Divane, Jr., and John R.
Madden, each of whom is an "independent director" under the rules of the
American Stock Exchange, the Exchange on which the Company's stock is traded.
The Audit Committee met six times during 2002. The duties of the Audit Committee
include recommendation of the independent auditor to be selected by the Board of
Directors, review of the arrangements and scope of the independent auditor's
examination, review of internal accounting procedures and controls, and review
of the independence of the auditor in regard to the Company and its management.
The Board of Directors has adopted a written charter for the Audit Committee.
The Board of Directors has also appointed a Compensation Committee, which
presently consists of Directors William T. Divane, Jr., John R. Madden and
Walter W. Morrissey. The duties of the Compensation Committee include
considering and recommending to the Board of Directors the compensation and
benefits of all officers of the Company and the development of general policies
relating to compensation and benefits of employees of the Company. The
Compensation Committee met three times during 2002.
The Board of Directors has also appointed an Executive Committee, which
presently consists of Directors John R. Madden, John A. Morrissey, Walter W.
Morrissey and John C. Osterman. Under the by-laws of the Company and the
resolution of the Board of Directors appointing the Executive Committee, the
Executive Committee has all of the authority of the Board of Directors in the
management of the Company, except as otherwise required by law. The Executive
Committee met eleven times during 2002.
The Company does not have a Nominating Committee.
Directors of the Company who are also officers receive no compensation for
their services as directors or as members of any committee of the Board of
Directors, apart from their regular compensation for services as such officers.
Each director who is not an officer of the Company receives a director's fee of
$9,000 per year and a $1,250 fee for attendance at each meeting of the Board of
Directors. Each member of the Audit Committee receives a $350 fee for attendance
at each meeting of the Audit Committee. Each member of the Executive Committee
who is not an officer of the Company receives an additional fee of $10,000 per
year and a $350 fee for attendance at each meeting of the Executive Committee.
7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors, executive officers and persons who own more than 10% of the
Company's Common Stock file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Such persons are also required to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on the Company's review of copies of such forms, the Company is not aware
that any of its directors, executive officers or 10% shareholders failed to
comply with the filing requirements of Section 16(a) during the period
commencing January 1, 2002 and ending December 31, 2002.
8
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes individual compensation
information regarding compensation paid by the Company with respect to the
fiscal years ended December 31, 2002, 2001, and 2000 to all executive officers
of the Company whose salary and bonus exceed $100,000.
The Company does not provide stock options, stock appreciation rights or
other long-term incentive plan awards to its executive officers.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
------------------------- ---- ------ ----- ---------------
John A. Morrissey -- Chairman and........ 2002 $216,577 $ 75,000
Chief Executive Officer 2001 $210,000 $ 55,000 --
2000 $206,264 $ 55,000 --
John C. Osterman -- President, Chief..... 2002 $197,613 $ 55,000 $8,651
Operating Officer and Treasurer 2001 $191,625 $ 35,000 $5,898
2000 $188,203 $ 35,000 $7,253
Nirendu Dhar -- General Manager,......... 2002 $176,076 $135,000 $7,255
H & L Tool Company, Inc. 2001 $159,390 $110,000 $4,501
2000 $153,112 $110,000 $5,979
Donald P. Long -- Vice
President -- Sales..................... 2002 $127,000 $ 3,500 $5,747
2001 $127,000 $ 4,000 $4,419
2000 $127,000 $ 8,000 $5,610
Michael J. Bourg -- Controller........... 2002 $ 98,750 $ 6,000 $4,439
2001 $ 92,750 $ 5,000 $3,211
2000 $ 86,000 $ 7,500 $3,826
</Table>
- ---------------
(1) Includes premium on term life insurance and Company contributions to the
Employees' Trust. Premiums paid for Mr. Osterman's policy were $1,656,
$1,656, and $1,533 for 2002, 2001, and 2000, respectively, premiums paid for
Mr. Dhar's policy were $260, $259, and $259 for 2002, 2001, and 2000,
respectively, premiums paid for Mr. Long's policy were $1,102, $1,102, and
$1,067, for 2002, 2001, and 2000, respectively, and premiums paid for Mr.
Bourg's policy were $769, $769, and $680, for 2002, 2001 and 2000,
respectively. The amounts allocated to Mr. Osterman under the Employees'
Trust for 2002, 2001, and 2000 were $6,995, $4,242, and $5,720,
respectively, the amounts allocated to Mr. Dhar under the Employees' Trust
for 2002, 2001, and 2000 were $6,995, $4,242, and $5,720, respectively, the
9
amounts allocated to Mr. Long under the Employees' Trust for 2002, 2001, and
2000 were $4,645, $3,317,and $4,543, respectively, and the amounts allocated
to Mr. Bourg under the Employees' Trust for 2002, 2001 and 2000 were $3,670,
$2,442, and $3,146, respectively.
PROFIT SHARING PLAN
The Chicago Rivet & Machine Co. Profit Sharing Trust (the "Employees'
Trust") is a part of the Chicago Rivet & Machine Co. Profit Sharing Plan (the
"Plan") established by the Company for the benefit of its officers and
employees. Participants eligible to share in Company contributions include all
employees of the Company who have completed one year of service with the
Company.
The Company makes contributions to the Employees' Trust pursuant to a
formula based on the Company's annual earnings. The Company may also contribute
such other amounts out of current or retained earnings as may be determined by
the Board of Directors. The Company's contributions are allocated among eligible
participants in proportion to their respective compensation.
Each participant has a balance in the Employees' Trust consisting of his
share of Company contributions, amounts forfeited by other participants and
trust fund earnings. Each participant's balance vests over a five-year period,
beginning after his third year of employment. Full vesting also occurs,
regardless of length of employment, when a participating employee reaches normal
retirement age, dies or becomes permanently and totally disabled.
The Plan also contains a 401(k) feature pursuant to which participants may
elect to have a portion (up to 20%) of their compensation (but not to exceed the
maximum permitted by law) contributed to the Employees' Trust in lieu of
receiving it in cash. Each eligible employee, for this purpose, becomes a
participant on the first day of the calendar quarter following completion of 60
days of employment. These contributions are always fully vested and
nonforfeitable.
Company contributions received by the Employees' Trust are held and
invested by the Trustee, subject to direction as to asset allocation by the
administrative committee for the Employees' Trust. 401(k) contributions made to
the Employees' Trust are invested in accordance with participants' investment
directions among certain investment funds established by the administrative
committee and sponsored by the Trustee.
Distribution of a participant's vested balance is made on termination of
employment, or later, if the participant so requests, subject to certain
limitations. Generally, distribution is made in a lump sum. Participants may
request a loan from the Plan of an amount that does not exceed the lesser of 50%
of the participant's 401(k) contributions or $50,000.
10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Director Walter W. Morrissey, who serves on the Company's Compensation
Committee, is a partner in the law firm of Morrissey & Robinson, which was
retained by the Company to perform legal services in 2001 and 2002 and has been
retained by the Company during the current year to perform additional legal
services. Walter W. Morrissey is also a brother of Chief Executive Officer and
Chairman of the Board of Directors John A. Morrissey.
In the last completed fiscal year, Chief Executive Officer and Chairman of
the Board of Directors John A. Morrissey has served as an officer and a director
of The First Algonquin Company. Director John R. Madden, who serves on the
Company's Compensation Committee, is an executive officer of The First Algonquin
Company. Director Walter W. Morrissey is also a director of The First Algonquin
Company.
REPORT OF COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION OBJECTIVES
Chicago Rivet is a leader in the fastener industry, manufacturing rivets,
standard and specialty cold-formed fasteners, screw machine products and
automated assembly equipment, primarily for the automotive industry. The
industry is characterized by intense competition for customers, market share and
executive talent. The objective of the Executive Compensation Program of the
Company (the "Program") is to align compensation with business objectives and
performance to enable the Company to attract, retain, and reward key executives
whose contributions are critical to ensuring the long-term success of the
Company and increasing profitability, thereby enhancing shareholder value. The
Compensation Committee consists of three members of the Board of Directors who
are not eligible to participate in the Program. The duties of the Compensation
Committee include considering and recommending to the Board of Directors the
compensation and benefits of all officers of the Company and developing general
policies relating to compensation and benefits of the employees of the Company.
The responsibilities of the Compensation Committee include the following: review
the compensation of the Chairman, President and other highly paid officers of
the Company; develop general policies relating to compensation and benefits for
other employees of the Company; and review the operation of the discretionary
bonus plan. The Compensation Committee met three times during 2002.
EXECUTIVE COMPENSATION PRINCIPLES
The elements of total compensation for Company executives are base salary
and cash bonuses. The following principles guided compensation decisions for key
executives of the Company: compensation opportunity is related to performance;
compensation decisions are
11
designed to achieve financial objectives, build shareholder value and reward
individual and corporate performance; compensation is competitive and equitable;
and the proportion of total pay that is at risk against individual and Company
performance objectives increases with the more senior positions. The
Compensation Committee also considers the experience, length of service and
consistent performance of each individual executive when setting compensation
levels. The competitors of the Company for executive talent are not necessarily
the same companies that are selected to compare shareholder returns (see Stock
Performance Graph, page 13) because the Company requires executives with skills
from diverse backgrounds.
CEO COMPENSATION
John A. Morrissey has been Chairman of the Board of the Company since 1979
and Chief Executive Officer ("CEO") since 1981. The 2002 base salary and cash
bonus for the CEO were determined in accordance with the performance goals
referred to above. The Company's net income in 2002 was $2.60 million compared
to $1.79 million in 2001. The factors considered in fixing the annual salary and
cash bonus for performance year 2002 of the CEO were: his leadership, his vision
for the future of the Company, his dedication and focus on the short-term and
long-term interests of the Company and its stockholders, his professionalism,
integrity and competence, the Company's financial results and the achievement of
internal and external goals of the Company.
COMPENSATION DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation in excess of $1 million paid to the companies' CEO or any of the
four other most highly compensated executive officers. Certain performance-based
compensation, however, is exempt from the deduction limit. Given the amount of
compensation paid the CEO and the four other most highly compensated executive
officers, the limits on deductibility of Section 162(m) of the Code on the
Company's tax return are not applicable to the Company.
The Compensation Committee believes that the described executive
compensation policy serves the interests of the shareholders and the Company.
Committee Members:
William T. Divane, Jr.
John R. Madden
Walter W. Morrissey
12
STOCK PERFORMANCE GRAPH
The graph set forth below shows the cumulative total shareholder return(1)
(i.e., price change plus reinvestment of dividends) of the Company's Common
Stock during the five-year period ended December 31, 2002, as compared to the
Total Return Index for the American Stock Exchange (US) and the Dow Jones US
Auto Parts Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG CHICAGO RIVET & MACHINE CO., THE TOTAL RETURN INDEX FOR
THE AMERICAN STOCK EXCHANGE (US), AND THE DOW JONES US AUTO PARTS INDEX
[PERFORMANCE GRAPH]
<Table>
<Caption>
Cumulative Total Return
- --------------------------------------------------------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
- --------------------------------------------------------------------------------------------------------------
Chicago Rivet & Machine Co. 100 93 89 69 96 100
- --------------------------------------------------------------------------------------------------------------
Total Return Index for the American Stock Exchange (US) 100 107 142 131 122 100
- --------------------------------------------------------------------------------------------------------------
Dow Jones US Auto Parts Index 100 99 101 74 97 87
- --------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) Cumulative total shareholder return assumes reinvestment of dividends. The
above graph assumes $100 was invested on December 31, 1997, in Chicago Rivet
& Machine Co., in the Total Return Index for the American Stock Exchange
(US), and the Dow Jones US Auto Parts Index (formerly titled "Dow Jones Auto
Parts Index"). The values shown in the graph above are as of the end of each
period indicated.
13
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of three
directors who are independent directors as defined by the rules of the American
Stock Exchange. The Audit Committee operates under a charter approved by the
Board of Directors.
Management is responsible for the Company's financial statements and the
financial reporting process and has represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles. The independent accountants are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and for issuing a report thereon. The Audit Committee is responsible for
oversight of these processes. The Audit Committee has reviewed and discussed the
financial statements with members of management and with the independent
accountants.
Further, the Audit Committee has discussed with the independent accountants
the matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees," as amended. The Audit Committee has
discussed the independent accountants' independence, including the matters in
the written disclosures provided to the Audit Committee as required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," with both management and with the independent accountants.
Based upon the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for 2002,
which will be filed with the Securities and Exchange Commission. The Audit
Committee has also recommended, and the Board of Directors has approved the
engagement of PricewaterhouseCoopers LLP as independent accountants for 2003.
Edward L. Chott William T. Divane, Jr. John R. Madden
February 26, 2003
14
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as the Company's independent
certified public accountants for 2002. The Board of Directors has again
designated that firm as the Company's independent certified public accountants
for 2003. A representative of that firm is expected to be present at the
Company's 2003 Annual Meeting of Shareholders with the opportunity to make a
statement, if so desired, and to be available to respond to appropriate
questions.
AUDIT FEES
For fiscal year ended December 31, 2002, the aggregate fees for
professional services rendered by PricewaterhouseCoopers LLP in connection with
the annual audit of the Company's financial statements and reviews of the
financial statements included in the Company's quarterly reports were $146,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for financial information systems design and
implementation in 2002 were $29,000, relating to the implementation of new data
processing systems.
ALL OTHER FEES
The aggregate fees for all other professional services rendered by
PricewaterhouseCoopers LLP in 2002 were approximately $8,000, relating to an
audit of the Company's profit sharing plan.
The Audit Committee has considered whether the provision of the non-audit
services described above is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Shareholder proposals for inclusion in proxy materials for the Company's
2004 Annual Meeting pursuant to Rule 14a-8 under the Exchange Act must be
received by the Company at the Company's principal executive offices by November
28, 2003. In order for shareholder proposals made outside of Rule 14a-8 under
the Exchange Act to be considered timely within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposals must be received by the Company at the
Company's principal executive offices by December 28, 2003. The Company's
by-laws require that proposals of shareholders made outside of Rule 14a-8 under
the Exchange Act must be submitted in accordance with the requirements of the
by-laws, not later than December 28, 2003 and not earlier than November 28,
2003. However, if the annual meeting is called for a date not
15
within 30 days before or after such anniversary date, such proposals must be
received by the Company not later than the close of business on the 10th day
following the date notice of the annual meeting was mailed or a public
announcement of the annual meeting was made, whichever first occurs. To be in
proper written form, a shareholder nomination must set forth the information
prescribed in the Company's by-laws.
OTHER MATTERS
It is not presently expected that any matters other than the election of
directors will be brought before the meeting. If, however, other matters do come
before the meeting, it is the intention of the persons named as representatives
in the accompanying proxy to vote in accordance with their judgment on such
matters.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2002, FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY
SHAREHOLDER OF RECORD OR BENEFICIAL OWNER OF COMMON SHARES OF THE COMPANY UPON
WRITTEN REQUEST TO THE SECRETARY, CHICAGO RIVET & MACHINE CO., P.O. BOX 3061,
901 FRONTENAC ROAD, NAPERVILLE, ILLINOIS 60566.
By order of the Board of Directors
KIMBERLY A. KIRHOFER, Secretary
Naperville, Illinois
March 26, 2003
16
PROXY
REMINDER
CHICAGO RIVET & MACHINE CO.
P.O. BOX 3061, 901 Frontenac Road, Naperville, Illinois 60566
----------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints John A. Morrissey, Walter W.
Morrissey and John R. Madden, and each of them, as the proxies and
representatives of the undersigned, with full power of substitution, to vote all
common shares of Chicago Rivet & Machine Co. which the undersigned would be
entitled to vote, with all powers which the undersigned would have if personally
present, at the Annual Meeting of Shareholders to be held on May 13, 2003, and
at any adjournments or postponements thereof, as designated below.
<Table>
1. Election of the following seven directors: John A. COMMENTS: (change of address)
Morrissey, Walter W. Morrissey, John C. Osterman, William T.
Divane, Jr., John R. Madden, Edward L. Chott and Nirendu ---------------------------------------
Dhar.
---------------------------------------
Except with respect to any nominee for whom authority to
vote is withheld, a vote FOR ALL NOMINEES includes ---------------------------------------
discretionary authority (i) to cumulate votes selectively
among the nominees, and (ii) to vote for a substituted ---------------------------------------
nominee if any of the nominees listed becomes unable or
unwilling to serve. (If you have written in the above
space, please mark the corresponding
2. In their discretion, upon such other matters as may box on the reverse side of this card.)
properly come before the meeting.
You are encouraged to specify your choices by marking the appropriate box ON THE REVERSE SIDE. If no SEE REVERSE
direction is made, this proxy will be voted FOR ALL NOMINEES. SIDE
- -----------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</Table>
[X] Please mark your
votes as in this
example.
<Table>
This proxy when properly executed will be voted as directed below. If no direction is made, this proxy will be voted
FOR ALL NOMINEES.
- -----------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR such nominees.
- -----------------------------------------------------------------------------------------------------------------------
FOR ALL NOMINEES WITHHELD as to
(except as marked below) ALL NOMINEES
1. Election of [ ] [ ]
Directors
(See Reverse) 2. In their discretion, the Proxies are authorized
to vote upon such other business as may properly
come before the meeting.
To withhold authority to vote for any individual nominee,
write that nominee's name on the line below. Change of Address/
Comments on [ ]
- -------------------------------------------- Reverse Side
- -----------------------------------------------------------------------------------------------------------------------
The signer hereby revokes all proxies
heretofore given by the signer to vote
at said meeting or any adjournments or
postponements thereof.
NOTE: Please sign exactly as name
appears hereon and be sure to date the
proxy. If shares are held in the name of
more than one person, all holders must
sign. Executors, administrators,
trustees, guardians and corporate
officers must give full title as such.
Please sign, date and mail this proxy in
the enclosed return envelope as promptly
as possible.
-------------------------------------------------
SIGNATURE
2003
-------------------------------------------------
SIGNATURE IF HELD JOINTLY DATE
- -----------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</Table>
P CHICAGO RIVET & MACHINE CO.
R P.O. BOX 3061, 901 FRONTENAC ROAD, NAPERVILLE, ILLINOIS 60566
O ----------------------------------------------
X PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned hereby constitutes and appoints John A. Morrissey, Walter W. Morrissey and John R. Madden, and each of them,
as the proxies and representatives of the undersigned, with full power of substitution, to vote all common shares of Chicago
Rivet & Machine Co. which the undersigned would be entitled to vote, with all powers which the undersigned would have if
personally present, at the Annual Meeting of Shareholders to be held on May 13, 2003, and at any adjournments or postponements
thereof, as designated below.
1. Election of the following seven directors: John A.Morrissey, COMMENTS: (change of address)
Walter W. Morrissey, John C. Osterman, William T. Divane, Jr., _____________________________
John R. Madden, Edward L. Chott and Nirendu Dhar. _____________________________
_____________________________
Except with respect to any nominee for whom authority to vote is with- _____________________________
held, a vote FOR ALL NOMINEES includes discretionary authority (i) to _____________________________
cumulate votes selectively among the nominees, and (ii) to vote for a (If you have written in the
substituted nominee if any of the nominees listed becomes unable above space, please mark the
or unwilling to serve. corresponding box on the
reverse side of this card.)
2. In their discretion, upon such other matters as may properly come
before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOX ON THE REVERSE SIDE. IF NO SEE REVERSE
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES. SIDE
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
PLEASE MARK YOUR 6040
[X] VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BELOW. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES.
------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH NOMINEES.
------------------------------------------------------------------------------------------------------------------
FOR ALL NOMINEES WITHHELD AS TO
(EXCEPT AS MARKED BELOW) ALL NOMINEES
1. Election of 2.In their discretion, the Proxies are
Directors [ ] [ ] authorized to vote upon such other
(See Reverse) business as may properly come before
the meeting.
To withhold authority to vote for any individual nominee, write
that nominee's name on the line below. Change of Address/
Comments on [ ]
________________________________________________________________ Reverse Side
------------------------------------------------------------------------------------------------------------------
The signer hereby revokes all proxies heretofore given
by the signer to vote at said meeting or any adjournments
or postponements thereof.
NOTE: Please sign exactly as name appears hereon and be
sure to date the proxy. If shares are held in the name of
more than one person, all holders must sign. Executors,
administrators, trustees, guardians and corporate
officers must give full title as such.
PLEASE SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
---------------------------------------------------------
SIGNATURE
2003
---------------------------------------------------------
SIGNATURE IF HELD JOINTLY DATE
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\