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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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CALCOMP TECHNOLOGY, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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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(4) Date Filed:
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Notes:
CALCOMP TECHNOLOGY, INC.
2411 W. LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92803
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998
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TO THE STOCKHOLDERS OF CALCOMP TECHNOLOGY, INC.:
Please take notice that the Annual Meeting of Stockholders of CalComp
Technology, Inc. (the "Company") will be held at the Orange County Airport
Hilton, located at 18800 MacArthur Blvd., Irvine, California on Thursday, June
11, 1998, at 10:00 a.m. local time, for the following purposes:
1. To elect a Board of eight Directors for the ensuing year;
2. To approve the amendment of the Company's Certificate of Incorporation
to increase the total authorized shares of Common Stock from 60,000,000 to
125,000,000;
3. To approve a proposal to amend the Company's 1996 Stock Option Plan
for Key Employees (the "Plan") to increase the maximum aggregate number of
shares of Company Common Stock available for the grant of stock options
under the Plan from 2,000,000 shares to 4,000,000 shares;
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 27, 1998; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
At the Annual Meeting, the Board of Directors intends to present Arthur E.
Johnson, John C. Batterton, Jeb S. Hurley, Gary P. Mann, Terry F. Powell,
Kenneth R. Ratcliffe, Gerald W. Schaefer and Walter E. Skowronski, as nominees
for election to the Board of Directors.
Only stockholders of record on the books of the Company at the close of
business on April 27, 1998 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. A majority of the outstanding shares must be represented at the
meeting in order to transact business. Consequently, if you are unable to
attend in person, please execute the enclosed proxy and return it in the
enclosed addressed envelope. Your promptness in returning the proxy will
assist in the expeditious and orderly processing of the proxies. If you return
your proxy, you may nevertheless attend the meeting and vote your shares in
person, if you wish.
By Order of the Board of Directors,
CALCOMP TECHNOLOGY, INC.
ARTHUR E. JOHNSON
Chairman of the Board
Anaheim, California
May , 1998
CALCOMP TECHNOLOGY, INC.
2411 W. LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92803
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998
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PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of CalComp
Technology, Inc. (the "Company") for use at the Company's Annual Meeting of
Stockholders to be held at the Orange County Airport Hilton, located at 18800
MacArthur Blvd., Irvine, California on Thursday, June 11, 1998, at 10:00 a.m.
local time, and any and all adjournments or postponements thereof. All shares
represented by each properly executed, unrevoked proxy received in time for
the Annual Meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by the
Company, the proxy holders will vote for the election of the nominees for
election to the Board of Directors listed in the proxy, for approval of an
amendment to the Company's Certificate of Incorporation to increase the
authorized shares of Common Stock from 60,000,000 to 125,000,000, for approval
of the amendment of the Company's 1996 Stock Option Plan for Key Employees
(the "Plan") to increase the maximum aggregate number of shares of Company
Common Stock available for the grant of stock options under the Plan from
2,000,000 shares to 4,000,000 shares, for ratification of the independent
auditors and, as to any other business which may properly come before the
meeting, in accordance with their best judgment. Any stockholder has the power
to revoke his or her proxy at any time before it is voted. A proxy may be
revoked by delivering a written notice of revocation to the Secretary of the
Company, by presenting at the meeting a later-dated proxy executed by the
person who executed the prior proxy, or by attendance at the meeting and
voting in person by the person who executed the prior proxy. This Proxy
Statement and form of Proxy are being mailed to the Company's stockholders on
or about May , 1998.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall
constitute a quorum and that, except as otherwise provided by statute, the
Certificate of Incorporation of the Company or the Bylaws, all other matters
coming before the Annual Meeting shall be decided by the vote of the holders
of a majority of the stock present in person or represented by proxy at the
Annual Meeting and entitled to vote thereat. Votes cast at the Annual Meeting
will be tabulated by the persons appointed by the Company to act as inspectors
of election for the Annual Meeting. The inspectors of election will treat
shares of voting stock represented by a properly signed and returned proxy as
present at the Annual Meeting for purposes of determining a quorum, without
regard to whether the proxy is marked as casting a vote or abstaining.
Likewise, the inspectors of election will treat shares of voting stock
represented by "broker non-votes" (i.e., shares of voting stock held in record
name by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote; (ii) the
broker or nominee does not have discretionary voting power under applicable
rules or the instrument under which it serves in such capacity; or (iii) the
recordholder has indicated on the proxy card or has executed a proxy and
otherwise notified the Company that it does not have Authority to vote such
shares on that matter) as present for purposes of determining a quorum.
Directors will be elected by a favorable vote of a plurality of the shares of
voting stock present and entitled to vote, in person or by proxy, at the
Annual Meeting. Accordingly, abstentions or broker non-votes as to the
election of Directors will not affect the election of the candidates receiving
the plurality of votes. Proposal 2 requires the approval of a majority of the
outstanding shares and therefore abstentions and broker non-votes will have
the same effect as votes against such proposal. Proposals 3 and 4 require the
approval of a majority of the shares of voting stock present and entitled to
vote thereat. Therefore, abstentions as to these proposals will have the same
effect as votes against
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such proposals. Broker non-votes as to these proposals, however, will be
deemed shares not entitled to vote on such proposals, and will not be counted
as votes for or against such proposals, and will not be included in
calculating the number of votes necessary for approval of such proposals.
The cost of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses will include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by
telephone or oral communication with some stockholders by the Company's
regular employees who will not receive additional compensation for the
solicitation. The Company has no plans to hire special employees or paid
solicitors to assist in obtaining proxies.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the [ ] shares of the Company's Common
Stock outstanding at the close of business on April 27, 1998 will be entitled
to notice of and to vote at the meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on April 27,
1998.
3
CERTAIN STOCKHOLDERS
Certain information with respect to (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the current Directors and nominees for election as
Directors, (iii) each of the Executive Officers listed in the compensation
tables herein, and all current Directors and Executive Officers as a group,
including the number of shares of the Company's Common Stock beneficially
owned by each of them as of April 1, 1998, is set forth below:
PERCENT OF
SHARES OF OUTSTANDING
NAME OF INDIVIDUAL COMMON STOCK COMMON STOCK
OR IDENTITY OF GROUP(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
----------------------- ------------------ ------------------
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, MD 20817................... 40,742,957 86.5%
Arthur E. Johnson..................... -- --
John C. Batterton..................... 33,300(3) (4)
Jeb S. Hurley......................... 1,000 (4)
Neil A. Knox(2)....................... -- --
Gary P. Mann.......................... -- --
Terry F. Powell....................... -- --
Kenneth R. Ratcliffe.................. -- --
Gerald W. Schaefer.................... 8,000 (4)
Walter E. Skowronski.................. 2,000 (4)
Gary R. Long(2)....................... 34,000 (4)
James R. Bell......................... 16,600(5) (4)
Andreas Bibl.......................... 500,000(6) 1.1
John J. Millerick..................... 16,600(7) (4)
Winfried Rohloff(2)................... 16,600(8) (4)
All Executive Officers and Directors
as a Group (11 persons).............. 577,500(9) 1.2
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(1) The address for each of the named individuals is c/o CalComp Technology,
Inc., 2411 W. La Palma Avenue, Anaheim, California 92803. Unless
otherwise indicated, the named persons possess sole voting and investment
power with respect to the shares listed (except to the extent such
Authority is shared with spouses under applicable law).
(2) Mr. Knox resigned as Director of the Company effective March 30, 1998.
Mr. Long retired as a Director and as President and Chief Executive
Officer of the Company effective February 28, 1997. Mr. Rohloff resigned
as an Executive Officer of the Company effective December 31, 1997.
(3) Includes an aggregate of 33,300 shares which Mr. Batterton has, or will
have within 60 days after April 1, 1998, the right to acquire upon
exercise of outstanding options.
(4) Less than 1% of the outstanding shares of Common Stock.
(5) Includes an aggregate of 16,600 shares which Mr. Bell has, or will have
within 60 days after April 1, 1998, the right to acquire upon exercise of
outstanding options.
(6) The 500,000 shares beneficially owned by Mr. Bibl were issued in
connection with the Company's acquisition of Topaz Technologies, Inc. and
will be held in escrow until November 1998 to provide a fund for the
satisfaction of any indemnity which may be due the Company in connection
with such acquisition. Mr. Bibl has the power to vote these shares while
they are held in escrow but will not have dispositive power until they
are released from escrow.
(7) Includes an aggregate of 16,600 shares which Mr. Millerick has, or will
have within 60 days after April 1, 1998, the right to acquire upon
exercise of outstanding options.
(8) Includes an aggregate of 16,600 shares which Mr. Rohloff has, or will
have within 60 days after April 1, 1998, the right to acquire upon
exercise of outstanding options.
(9) Includes an aggregate of 66,500 shares which the Executive Officers and
Directors as a Group have, or will have within 60 days after April 1,
1998, the right to acquire upon exercise of outstanding options.
4
THE EXCHANGE
During 1996, the Company (formerly Summagraphics Corporation) entered into a
Plan of Reorganization and Agreement for the Exchange of Stock of CalComp Inc.
("CalComp") for Stock of Summagraphics Corporation, pursuant to which the
Company issued to Lockheed Martin Corporation ("Lockheed Martin") shares of
the Common Stock of the Company representing approximately 90% of the total
outstanding shares of Common Stock of the Company following such issuance, in
exchange for all of the outstanding capital stock of CalComp (the "Exchange").
The closing of the Exchange occurred on July 23, 1996 following approval of
the Exchange by the stockholders of the Company. As a result of the Exchange,
Lockheed Martin acquired control of the Company and CalComp became a wholly-
owned subsidiary of the Company. In connection with the Exchange, the Company
also changed its name from Summagraphics Corporation to CalComp Technology,
Inc. and changed its year end from May 31 to a fifty-two, fifty-three week
fiscal year ending on the last Sunday of December. For financial statement
purposes, the Exchange was treated as an acquisition of Summagraphics by
CalComp, and the disclosures contained herein reflect this same treatment in
that the Company is treated as if it first became a public reporting company
under the Securities Exchange Act of 1934, as amended, on completion of the
Exchange on July 23, 1996 and prior to that date consisted solely of CalComp.
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold office
until the next Annual Meeting of Stockholders when their respective successors
are duly elected and qualified. The Company's Bylaws authorize a Board
consisting of such number of Directors as shall be determined by the Board or
Stockholders, with the number of Directors currently fixed at eight. In
connection with the Exchange, the Company and Lockheed Martin entered into an
agreement pursuant to which Lockheed Martin and the Company agreed, among
other things, that for so long as Lockheed Martin owns at least 50% of the
Common Stock of the Company, at least two-thirds of the members of the Board
of Directors will consist of Lockheed Martin designees and at least two
directors will be "independent" of both Lockheed Martin and the Company. Mr.
Neil A. Knox, one of the two "independent" Directors, resigned from the Board
effective as of March 30, 1998. The Company is currently considering
candidates to replace Mr. Knox. In addition, in connection with the Company's
Joint Development Agreement ("JDA") with Eastman Kodak Company ("Kodak"),
Lockheed Martin agreed with Kodak to vote its shares for the election of a
Kodak-designated director, in this election, Mr. Hurley.
Of the eight nominees for election to the Board of Directors, all are
currently serving as Directors of the Company and, except for Messrs. Johnson
and Hurley, were elected to their present terms of office at the 1997 Annual
Meeting. Mr. Johnson was appointed by the Board in August 1997 to fill a
vacancy created by the resignation of Peter B. Teets. Mr. Hurley was appointed
by the Board in April, 1998 pursuant to Lockheed Martin's agreement with
Kodak. Unless instructed to the contrary, the shares represented by the
proxies will be voted in favor of the election of the nominees named below as
Directors. Although it is anticipated that each nominee will be able to serve
as a Director, should any nominee become unavailable to serve, the proxies
will be voted for such other person or persons as may be designated by the
Company's Board of Directors. The nominees receiving the highest number of
votes, up to the number of Directors to be elected, will be elected as
Directors. The number of shares of Common Stock owned by Lockheed Martin is
sufficient to assure that if Lockheed Martin votes in favor of the nominees,
they will be elected.
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The following table sets forth information for each of the nominees.
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
Arthur E. Johnson............ 51 Chairman of the Board of Directors 1997
John C. Batterton............ 50 Director, Chief Executive Officer 1997
and President
Gary P. Mann................. 52 Director 1996
Terry F. Powell.............. 52 Director 1996
Gerald W. Schaefer........... 51 Director 1996
Walter E. Skowronski......... 49 Director 1997
Jeb S. Hurley................ 39 Director 1998
Kenneth R. Ratcliffe......... 51 Director 1996
Arthur E. Johnson has been Chairman of the Board of Directors of the Company
since August 1997. He is President and Chief Operating Officer of the
Information and Services Sector of Lockheed Martin Corporation. He also served
as President of Lockheed Martin's Systems Integration Group from January 1997
to August 1997, and President, Lockheed Martin's Federal Systems from January
1996 to January 1997. He previously served as Vice President, Federal Systems
Group of Loral Corporation from 1994 to 1996 and as President and Chief
Operating Officer of IBM Federal Systems Division from 1992 to 1994.
John C. Batterton has been a Director, and President and Chief Executive
Officer, of the Company since April 1, 1997. Mr. Batterton previously served
as General Manager and Vice President, Operations--Business Imaging Systems
Division of Kodak from September 1994 until March 1997. From 1992 to September
1994, he served as Product Line General Manager, Imaging and Data Processing
Products, Office Imaging--Business Imaging Systems Division of Kodak. Prior to
1992, Mr. Batterton held various other management positions with Kodak.
Jeb S. Hurley has been Vice President & General Manager--Commercial Imaging
Business, Kodak Professional Division of Eastman Kodak Company and has also
served on the Board of Directors for the Image Bank, a Kodak subsidiary, since
June 1996. From January 1996 to June 1996, Mr. Hurley served as Vice
President--Digital Systems, Kodak Professional Division. From June 1994 to
January 1996, he served as Vice President & General Manager--Printing Systems
Business, of Digital Equipment Corporation. Prior to that, Mr. Hurley was
Director--Product Management & Planning of Okidata Corporation from September
1992 to June 1994.
Gary P. Mann has served as President, Integrated Business Solutions,
Lockheed Martin Corporation since January 1998. From February 1996 to January
1998, he served as President, Commercial Systems Group, Information & Services
Sector, Lockheed Martin Corporation. From March 1995 to January 1996, Mr. Mann
served as Vice President, Business Development, Information & Technology
Services Sector, Lockheed Martin Corporation. Mr. Mann has also served as Vice
President and General Manager, Martin Marietta Information Systems Company,
from 1993 to March 1995. From 1991 to 1993, Mr. Mann served as President,
Martin Marietta Technical Services.
Terry F. Powell has served as Vice President, Human Resources, Lockheed
Martin Corporation, since March 1998. Mr. Powell previously served as Vice
President, Human Resources, Information & Services Sector, Lockheed Martin
Corporation, since March 1995. Mr. Powell has also served as Vice President,
Human Resources, Lockheed Aeronautical Systems Company, from 1987 to 1995.
Gerald W. Schaefer has served as Vice President, Finance, Information &
Services Sector, Lockheed Martin Corporation, since March 1995. Mr. Schaefer
also served as Vice President, Finance, Space Group, Martin Marietta
Corporation from 1993 to 1995. From 1989 to 1993, Mr. Schaefer served as
Manager, Finance, Aerospace Operations Division, GE Aerospace.
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Walter E. Skowronski has served as Vice President and Treasurer of Lockheed
Martin Corporation since March 1995. Mr. Skowronski also served as Vice
President and Treasurer of Lockheed Corporation from 1992 to 1995. From 1990
to 1992, Mr. Skowronski served as Staff Vice President-Investor Relations.
Kenneth R. Ratcliffe has served as a Principal of Rohner Associates, a
management consulting firm, since July 1996. Mr. Ratcliffe has also served as
President and Chief Operating Officer, PC Connection, Inc., from 1994 to 1995.
From 1987 to 1993, Mr. Ratcliffe served as Vice President, Finance and
Operations, Apple Computer.
The Board of Directors held nine meetings during the fiscal year ended
December 28, 1997. Each incumbent Director attended at least 75% of the total
number of meetings of the Board of Directors and of Board of Director
committees on which that Director served which were held during the period for
which he was a Director. Directors, other than employees or officers of the
Company or Lockheed Martin, receive $10,000 annually for service on the Board
of Directors, $1,000 per Board meeting attended and $500 per committee meeting
attended. Directors are reimbursed for expenses incurred in connection with
attendance at Board and committee meetings. Directors who are officers or
employees of the Company or Lockheed Martin are not compensated separately for
service on the Board of Directors.
The Board of Directors has standing Compensation, Stock Option and Audit
Committees, but does not have a Nominating Committee. The Stock Option
Committee is a subcommittee of the Compensation Committee.
The Compensation Committee is responsible for reviewing the structure,
performance and compensation of management, as well as annually nominating a
slate of officers. The Compensation Committee is comprised of Messrs. Mann,
Powell and Ratcliffe. The Compensation Committee held nine meetings during the
fiscal year ended December 28, 1997.
The Stock Option Committee is responsible for administering the Company's
Stock Option Plans. The Stock Option Committee is comprised of Messrs. Powell
and Ratcliffe. The Stock Option Committee held four meetings during the fiscal
year ended December 28, 1997.
The Audit Committee is responsible for reviewing the results and scope of
the audit and other services provided by the Company's independent auditors.
The Audit Committee is comprised of Messrs. Ratcliffe and Schaefer. The Audit
Committee held one meeting during the fiscal year ended December 28, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Directors, Executive Officers and greater-than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 28, 1997 all
Section 16(a) filing requirements applicable to its Directors, Executive
Officers and greater-than ten percent beneficial owners were satisfied, except
that Mr. Bibl inadvertently failed to file (i) a Form 3 reporting his
appointment as an executive officer during fiscal 1997 and (ii) a Form 5 at
year-end reporting the non-filing of the Form 3. Mr. Bibl filed a Form 3 when
this oversight was discovered.
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PROPOSAL 2
APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE TOTAL AUTHORIZED SHARES OF COMMON STOCK
GENERAL
On April 7, 1998, the Board of Directors of the Company adopted, subject to
stockholder approval, an amendment to the Company's Fourth Amended and
Restated Certificate of Incorporation (the "Certificate") to increase the
total authorized shares of Common Stock of the Company from 60,000,000 to
125,000,000. Such increase in the number of authorized shares of Common Stock
of the Company would be effected by restating the first sentence of the first
paragraph of current Article 4 of the Certificate to read as follows:
"The total number of shares of stock which the Corporation shall have
Authority to issue is One Hundred Thirty Million (130,000,000), of
which One Hundred Twenty-Five Million (125,000,000) shares of the par
value of One Cent ($.01) per share, amounting in the aggregate to One
Million Two Hundred Fifty Thousand Dollars ($1,250,000), shall be
Common Stock, and Five Million (5,000,000) shares of the par value of
One Cent ($.01) per share, amounting in the aggregate to Fifty Thousand
Dollars ($50,000), shall be Preferred Stock."
The additional shares of Common Stock for which authorization is sought herein
would be part of the existing class of Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. Holders of Common Stock have no preemptive or other
subscription rights.
As of March 31, 1998, 47,094,950 shares of Common Stock were issued and
outstanding; 2,096,550 shares were reserved for issuance pursuant to
outstanding grants under the Company's stock option plans; 437,300 were
reserved and available for issuance under the Company's stock option plans;
and 8,052,500 shares were reserved for issuance pursuant to the exercise of
outstanding warrants. Therefore, of the 60,000,000 shares currently authorized
by the Certificate, approximately 2,318,700 shares are presently available for
general corporate purposes.
PURPOSES AND EFFECTS OF THE AUTHORIZED SHARES AMENDMENT
The increase in authorized shares of Common Stock is recommended by the
Board of Directors in order to provide a sufficient reserve of such shares for
the present and future needs and growth of the Company. Such additional
authorized shares would be available for issuance at the discretion of the
Board of Directors without further stockholder approval (subject to certain
provisions of state law) to take advantage of future opportunities for equity
financing, to improve the Company's capital structure, in connection with
possible acquisitions, in connection with the Company's stock option plans, in
connection with stock dividends or stock splits, and for other corporate
purposes.
The Board of Directors does not intend to issue any Common Stock or
securities convertible into Common Stock except on terms that the Board deems
to be in the best interests of the Company and its stockholders. The Company's
management has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
to be authorized by the proposed amendment to the Certificate.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an antitakeover effect (for example, by diluting
the stock of a person seeking to effect a change in the composition of the
Board of Directors or contemplating a tender offer or other transaction for a
combination of the Company with another company), this proposal to amend the
Certificate is not in response to any effort of which the Company is aware to
accumulate the Company's stock or obtain control of the Company, nor is it
part of a plan by management to recommend a series of similar amendments to
the Board of Directors and stockholders.
8
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
to the Certificate of Incorporation to increase the total authorized shares of
Common Stock of the Company from 60,000,000 shares to 125,000,000 shares. Such
approval will require the affirmative vote of a majority of the voting power
of all outstanding shares of the Company's Common Stock. The Board of
Directors recommends a vote "FOR" the proposal.
PROPOSAL 3
APPROVAL OF AMENDMENT TO CALCOMP TECHNOLOGY, INC.
1996 STOCK OPTION PLAN FOR KEY EMPLOYEES
GENERAL
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the CalComp Technology, Inc. 1996 Stock Option Plan for Key
Employees (the "Plan") which would increase the maximum aggregate number of
shares of Company Common Stock available for the grant of stock options under
the Plan from 2,000,000 shares to 4,000,000 shares.
The following is a brief summary of the material features of the Plan and is
qualified in its entirety by express reference to the Plan, a copy of which
will be sent without charge prior to the Annual Meeting to any stockholder
requesting it from the Secretary of the Company.
The Plan provides for grants of stock options ("Options") and stock
appreciation rights ("Rights") to key salaried employees of the Company. At
March 31, 1998, there were approximately 700 employees eligible to participate
in the Plan. The Plan is administered by a committee (the "Stock Option
Committee") designated by the Board of Directors. The composition of the Stock
Option Committee is intended to comply with the disinterested administration
provisions of Section 162(m) of the Internal Revenue Code and the regulations
promulgated thereunder.
The Board may amend or discontinue the Plan at any time subject to certain
restrictions set forth in the Plan. However, in light of applicable securities
and tax laws, the Company anticipates that any amendment that would materially
increase the benefits under the Plan, materially increase the number of
securities that may be issued under the Plan or materially modify the
eligibility requirements will be submitted to the stockholders for their
approval. No amendment or discontinuance may adversely affect any previously
granted Option or Right without the consent of the recipient thereof.
A total of 2,000,000 Options and 2,000,000 Rights are currently authorized
to be issued under the Plan. If the proposed amendment is approved by the
stockholders, the total number of Options authorized to be issued under the
Plan will be increased to 4,000,000. No more than ten percent of the Options
and Rights available under the Plan may be granted to a single participant.
Proportionate adjustments will be made to the number of shares of Common Stock
subject to the Plan in the event of any recapitalization, stock dividend,
stock split, combination of shares or other change in the Common Stock. Shares
of Common Stock subject to Options or Rights that are cancelled, terminated or
forfeited are again available for issuance under the Plan.
At March 31, 1998, Options to purchase 1,549,700 shares of the Company's
Common Stock were outstanding under the Plan with exercise prices ranging from
$1.75 to $4.9375 per share, 197,800 of which were exercisable. As of the same
date, Options to purchase 13,000 shares had been exercised, and 437,300
Options remained available for grant. The expiration dates for outstanding
Options granted under the Plan range from August 7, 2006 to March 16, 2008. In
addition, options to purchase 346,850 shares of the Company's Common Stock
were outstanding under prior stock option plans of the Company terminated on
or prior to the Exchange. All of these options were exercisable at March 31,
1998 at prices ranging from $2.75 to $9.00 per share. The
9
expiration dates for these options range from June 30, 1998 to September 28,
2005. The Company has also granted a consultant 200,000 options, exercisable
at $2.625 per share, 100,000 of which were exercisable as of March 31, 1998.
These options expire December 31, 2001.
The Stock Option Committee administers the Plan and has authority to select
the participants that will be granted Options and Rights, to determine,
subject to the authority of the Board of Directors to terminate the plan or
accelerate vesting of Options and Rights, the nature, extent, timing, exercise
price and duration of Options and Rights, to prescribe all other terms and
conditions consistent with the Plan, to interpret the Plan, to establish any
rules or regulations relating to the Plan that it determines to be
appropriate, to delegate its authority as appropriate, and to make any other
determination that it believes necessary or advisable for the proper
administration of the Plan.
The Stock Option Committee may grant non-qualified stock options or
incentive stock options to purchase shares of Common Stock. The Stock Option
Committee determines the number and exercise price of the options, provided
that the option exercise price may not be less than the fair market value of
the Common Stock on the date of grant. The term of an Option is also
determined by the Stock Option Committee, provided that the term of an Option
may not exceed 10 years. No Option may be exercised within one year following
the date of grant, subject to acceleration upon a change in control or
amendment by the Board of Directors. The Plan provides that each grant of
Options is to be divided into three approximately equal installments which
will vest on the first, second and third anniversaries of the date of grant.
The option exercise price may be paid in cash, or, if authorized by the
Stock Option Committee, in shares of Common Stock, in a combination of cash
and shares of Common Stock, through a reduction in the number of shares of
Common Stock subject to Options or in the amount payable pursuant to a Right,
or by delivery of a promissory note.
The terms and conditions of the Plan governing the issuance of Rights are
generally the same as apply to issuances of Options, except that a Right
represents the right to receive upon exercise a cash payment equal to the
excess of the fair market value of a share of Common Stock on the date of
exercise over the fair market value of a share of Common Stock set on the date
of the grant. The term of Rights is set by the Stock Option Committee, but may
not exceed ten years.
If a participant dies or becomes disabled, all unvested Options and Rights
are automatically vested, and may be exercised at any time within three years
(or their remaining term if less). If a participant's employment is terminated
due to a layoff, or early or normal retirement, all unvested Options and
Rights outstanding 18 months or more vest as though the participant had
remained in the employ of the Company (and, along with other vested options
and rights, may be exercised during the remaining term), and all other
unvested Options and Rights are forfeited. In all other cases of a
participant's resignation or termination of employment, all non-vested Options
and Rights are forfeited (and any vested Options and Rights must be exercised
within six months).
In the event of a "Change of Control," the vesting date of all outstanding
Options and Rights will be accelerated. For purposes of the Plan, a "Change of
Control" means one of the following events:
(i) a tender offer or exchange offer is consummated for the ownership of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding voting securities entitled to vote
in the election of directors;
(ii) The Company is merged, combined, consolidated, recapitalized or
otherwise reorganized with one or more other entities that are not
subsidiaries and, as a result, less than 75% of the outstanding voting
securities of the surviving or resulting corporation are thereafter owned
in the aggregate by the stockholders of the Company (directly or
indirectly), determined on the basis of record ownership as of the date of
determination of holders entitled to vote on the action( or in the absence
of a vote, the day immediately prior to the event);
10
(iii) Any person (as this term is used in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended, but excluding any
person described in and satisfying the conditions of Rule 13d-1(b)(1)
thereunder), becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities entitled to vote in the election of directors;
(iv) At any time within any period of two years after a tender offer,
merger, combination, consolidation, recapitalization, or other
reorganization or a contested election, or any combination of these events,
the "Incumbent Directors" cease to constitute at least a majority of the
authorized number of members of the Board. "Incumbent Directors" means the
persons who were members of the Board immediately before the first of these
events and the persons who were elected or nominated as their successors or
pursuant to increases in the size of the Board by a vote of at least three-
fourths of the Board members who were then Board members (or successors or
additional members so elected or nominated); or
(v) The stockholders approve a plan of liquidation and dissolution or the
sale or transfer of substantially all of the business and/or assets of the
Company as an entity that is not a subsidiary of the Company.
Options and Rights are not transferable except (a) by will, or (b) by the
laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations and does not
purport to be complete. Reference should be made to the applicable provisions
of the Code. There also may be state and local and foreign income tax
consequences applicable to transactions involving Options or Rights. In
addition, the following description does not address specific tax consequences
applicable to an individual participant who receives an Option and does not
address special rules that may be applicable to directors and officers.
Under existing federal income tax provisions, a participant who receives
stock options will not normally realize any income, nor will the Company
normally receive any deduction for federal income tax purposes, in the year
such option is granted.
When a non-qualified stock option granted pursuant to the Plan is exercised,
the employee will realize ordinary income measured by the difference between
the aggregate purchase price of the Common Stock as to which the option is
exercised and the aggregate fair market value of the Common Stock on the
exercise date, and the Company will be entitled to a deduction in the year the
option is exercised equal to the amount the employee is required to treat as
ordinary income, subject to the limitations imposed by Section 162(b) of the
Code.
An employee generally will not recognize any income upon the exercise of an
incentive stock option, but the excess of the fair market value of the shares
at the time of exercise over the option price will be an item of adjustment,
which may, depending on particular factors relating to the employee, subject
the employee to the alternative minimum tax imposed by Section 55 of the Code.
An employee will recognize capital gain or loss in the amount of the
difference between the exercise price and the sale price on the sale or
exchange of stock acquired pursuant to the exercise of an incentive stock
option, provided the employee does not dispose of such stock within two years
from the date of grant and one year from the date of exercise of the incentive
stock option (the "required holding periods"). An employee disposing of such
shares before the expiration of the required holding periods will recognize
ordinary income equal to the lesser of (i) the difference between the option
price and the fair market value of the stock on the date of exercise, or (ii)
the total amount of gain realized. The remaining gain or loss is treated as
short term or long term gain or loss depending on how long the shares are
held. The Company will not be entitled to a federal income tax deduction in
connection with the exercise of an incentive stock option, except where the
employee disposes of the shares of Common Stock received upon exercise before
the expiration of the required holding periods.
11
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement therefor. If the option is a non-qualified
option, the income recognized on exercise is added to the basis. If the option
is an incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of incentive stock option and
have not been held for the applicable holding period. This gain will be added
to the basis of the shares received in replacement of the previously owned
shares.
In general, stock appreciation rights are taxed and deductible in
substantially the same manner as nonqualified stock options. Accordingly, a
participant will not recognize income upon the grant of a Right. Upon exercise
of the Right the holder will recognize ordinary compensation income equal to
the excess of the fair market value of the Company Common Stock on the date
the Right is exercised over the exercise price for such Right. The Company
will be entitled to a deduction at the time the holder recognizes income in an
amount equal to the amount of income recognized by the holder.
If, upon a change in control of the Company, the exercisability or vesting
of an Option granted under the Plan is accelerated, any excess on the date of
the change in control of the fair market value of the shares or cash issued
over the purchase price of such shares, if any, may be characterized as
Parachute Payments (within the meaning of Section 280G of the Code) if the sum
of such amounts and any other such contingent payments received by the
employee exceeds an amount equal to three times the "Base Amount" for such
employee. The Base Amount generally is the average of the annual compensation
of such employee for the five years preceding such change in ownership or
control. An Excess Parachute Payment, with respect to any employee, is the
excess of the Parachute Payments to such person, in the aggregate, over and
above such person's Base Amount. If the amounts received by an employee upon a
change in control are characterized as Parachute Payments, such employee will
be subject to a 20% excise tax on the Excess Parachute Payment, and the
Company will be denied any deduction with respect to such Excess Parachute
Payment.
The purpose of the Plan is to increase stockholder value and to advance the
interests of the Company by furnishing equity incentives designed to attract,
retain and motivate key employees and to strengthen the mutuality of interest
between such employees and the Company stockholders. It is expected that the
Options currently available under the Plan will be insufficient to meet the
Company's needs through the 1999 Annual Meeting.
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
to the Plan. Such approval will require the affirmative vote of a majority of
the voting power of all outstanding shares of the Company's Common Stock
present or represented and entitled to vote at the Annual Meeting. The Board
of Directors recommends a vote "FOR" the proposal.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent certified
public accountants, to audit the financial statements of the Company for the
fiscal year ending December 27, 1998, and recommends that stockholders vote
"FOR" ratification of such appointment. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
Ernst & Young LLP audited the Company's financial statements for the fiscal
year ending December 28, 1997. Its representatives are expected to be present
at the meeting with the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
12
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
John C. Batterton....... 50 President and Chief Executive Officer
John J. Millerick....... 50 Senior Vice President and Chief Financial Officer
James R. Bell........... 56 Senior Vice President, Input Technologies Division
Andreas Bibl............ 48 Senior Vice President, Development and President of Topaz
Technologies, Inc.
For additional information with respect to Mr. Batterton, who is also a
nominee as a Director of the Company, see "Election of Directors."
John J. Millerick has been Senior Vice President and Chief Financial Officer
of the Company since August 1996. He also served as Treasurer of the Company
from August 1996 until January 1997 and as interim President and Chief
Executive Officer of the Company from March 1, 1997 to April 1, 1997. Mr.
Millerick previously served as Vice President-Finance for Digital Equipment
Corporation's Personal Computer Business Unit from December 1994 until August
1995. Before joining Digital, Mr. Millerick served 12 years at Wang
Laboratories in several management positions, leaving as Vice President-
Corporate Controller and Acting Chief Financial Officer.
James R. Bell has been Senior Vice President of the Company's Input
Technologies Division (formerly Digitizer Division) since the beginning of
1994. Mr. Bell returned to the Company after serving for nearly two years as
Vice President of Business Development for Lockheed Commercial Electronics Co.
Mr. Bell first joined the Company in 1983 and was named Vice President of
Operations of the Company's former display products division (Hudson, New
Hampshire) in 1988.
Andreas Bibl has been Senior Vice President, Development of the Company
since July 22, 1997. Mr. Bibl has also served as President of Topaz
Technologies, Inc. since 1994. He co-founded, and was the Chairman, Chief
Executive Officer and Chief Technical Officer of Raster Graphics, Inc. from
1987 to 1994.
13
SUMMARY COMPENSATION TABLE
The following sets forth certain summary compensation information concerning
the named Executive Officers for each of the Company's last three fiscal
years:
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ---------------------
AWARDS
---------------------
NUMBER OF NUMBER OF
SECURITIES SECURITIES
OTHER ANNUAL UNDERLYING UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION COMPANY LOCKHEED COMPENSATION
POSITION(1) YEAR SALARY BONUS (2)(3)(4) OPTIONS(5) OPTIONS(6) (7)
------------------ ------ -------- ------- ------------ ---------- ---------- ------------
John C. Batterton....... 1997 $186,550 -- $743,361 150,000 -- --
Chief Executive Officer 1996 -- -- -- -- -- --
and President 1995 -- -- -- -- -- --
Gary R. Long............ 1997 56,888 -- -- -- -- $428,229
Chief Executive Officer 1996 250,016 -- 24,900 100,000 7,000 12,463
and President 1995 265,208 103,000 -- -- 7,000 12,988
James R. Bell........... 1997 173,381 -- 96,227 20,000 -- 9,631
Senior Vice President, 1996 160,061 -- 59,867 50,000 3,000 7,774
Input Technologies 1995 164,519 55,800 36,048 -- 2,700 8,497
Division
Andreas Bibl............ 1997 213,462 -- 1,350 -- -- --
Senior Vice President, 1996 -- -- -- -- -- --
Development, President 1995 -- -- -- -- -- --
Topaz Technologies, Inc
John J. Millerick....... 1997 231,990 -- 149,460 25,000 -- --
Senior Vice President 1996 69,246 25,000 75,000 50,000 -- --
and Chief Financial 1995 -- -- -- -- -- --
Officer
Winfried Rohloff........ 1997 261,522 88,718 376,842 15,000 -- --
Senior Vice President, 1996 207,727 88,718 43,061 50,000 2,700 --
World Wide Sales, 1995 204,426 72,553 -- -- 3,500 --
Marketing & Service
- --------
(1) Mr. Batterton became an Executive Officer effective April 1, 1997. Mr.
Long retired as an Executive Officer and Director of the Company
effective February 28, 1997. Mr. Bibl became an Executive Officer
effective July 22, 1997.
(2) During 1997, certain Executive Officers of the Company received personal
benefits from the Company. The cost of the personal benefits furnished to
each named Executive Officer, with the exceptions of Messrs. Batterton,
Bell, Millerick and Rohloff, did not exceed the lesser of $50,000 or 10%
of the total annual salary and bonus of that Executive Officer as
reported in the above table. The amount reported for Mr. Batterton for
1997 includes $334,947 for tax reimbursement and $394,604 for relocation
expenses. The amount reported for Mr. Bell for 1997 includes $95,782 for
Lockheed Martin stock option exercises. The amount reported for Mr.
Millerick for 1997 includes $66,773 for tax reimbursement and $79,762 for
relocation expenses. The amount reported for Mr. Rohloff for 1997
includes $58,773 for tax reimbursement, $88,110 for relocation expenses,
$116,375 for Lockheed Martin stock option exercises, and $113,584 for
financial services and benefits. All payments of perquisites and other
personal benefits to the named Executive Officers, including relocation
expenses, were made in accordance with the Company's policies and
procedures.
14
(3) During 1996, certain Executive Officers of the Company received personal
benefits from the Company. The cost of the personal benefits furnished to
each named Executive Officer with the exceptions of Messrs. Bell,
Millerick and Rohloff did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus of that Executive Officer as reported in
the above table. The amount reported for Mr. Bell for 1996 includes
$38,820 for a car lease buyout payment and $21,047 for tax
reimbursements, financial services, airline club memberships, and health
club dues. The amount reported for Mr. Millerick for 1996 includes
$30,922 for tax reimbursement and $44,527 for relocation expenses. The
amount reported for Mr. Rohloff for 1996 includes payments of $20,526 for
relocation expenses, $15,510 for tax reimbursements, and $7,025 for Cost
of Living Adjustment. All payments of perquisites and other personal
benefits to the named Executive Officers, including relocation expenses,
were made in accordance with the Company's policies and procedures.
(4) The amount reported for Mr. Bell for 1995 includes payments of $16,500
for a country club membership and $10,904 for tax reimbursements, health
club dues and car telephone expenses.
(5) The referenced options were granted under the Company's 1996 Stock Option
Plan for Key Employees and relate to Common Stock of the Company.
(6) The referenced options for 1996 and 1995 were granted under the Lockheed
Martin Corporation Amended Omnibus Securities Award Plan and relate to
shares of common stock of Lockheed Martin.
(7) Amounts include Lockheed Martin's (for 1995, 1996 and 1997) matching
contributions under the Lockheed Salaried Employees Savings Plan Plus
(401K Plan) for Mr. Long of $4,727, $12,463 and $-0- and for Mr. Bell of
$8,497, $7,774 and $9,631, respectively, and Lockheed Martin's (for 1995
and 1996) contributions to the Lockheed non-qualified supplemental plan
for Messrs. Long and Bell of $8,201 and $1,983, respectively. For Mr.
Long, the amount for 1997 also includes $24,040 for unused vacation at
the time of his retirement and $404,189 as a lump-sum payment under the
Sanders Supplemental Executive Retirement Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information concerning individual grants of
stock options during the fiscal year ended December 28, 1997 to each of the
named Executive Officers by the Company:
INDIVIDUAL GRANTS BY THE COMPANY
--------------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL EXERCISE AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS OR BASE OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO PRICE FOR OPTION TERM(4)
GRANTED EMPLOYEES IN ($/SHARE) EXPIRATION ----------------------------
NAME (1)(2) FISCAL YEAR (3) DATE 5% 10%
---- ---------- ------------ --------- ---------- ------------- --------------
John C. Batterton....... 100,000 17.6% $2.4375 4/1/07 $153,293 $388,475
50,000 8.8% 2.3750 7/22/07 74,524 188,858
Gary R. Long............ -- -- -- -- -- --
James R. Bell........... 20,000 3.5% 3.125 8/1/07 39,306 99,609
Andreas Bibl............ -- -- -- -- -- --
John J. Millerick....... 25,000 4.4% 3.125 8/1/07 49,132 124,511
Winfried Rohloff........ 15,000 2.6% 3.125 8/1/07 29,479 74,707
- --------
(1) No SARS were granted in 1997.
(2) The options were granted under the CalComp Technology, Inc. 1996 Stock
Option Plan for Key Employees for a term of 10 years, subject to earlier
termination in certain events related to termination of employment, and
become exercisable 33% per year beginning one year from the date of
grant. Options awarded in 1997 expire six months following termination of
employment except in instances of death, disability, layoff or
retirement. In the event of death, all outstanding options vest
immediately and will expire at the end of their remaining term or three
years following death, whichever is earlier. In instances of disability,
all outstanding
15
options vest immediately and expire on the normal expiration date, ten
years following the date of grant. In instances of layoff or early or
normal retirement, the terms of all outstanding options that have been
outstanding for 18 months or more, or which have already vested, will be
unaffected by such layoff or retirement. Options outstanding less than 18
months which have not vested will be forfeited. In the event of a change in
control of the Company, the options would vest to the extent not already
vested.
(3) All options were granted at fair market value (the last sales price for
the Company's Common Stock on the trading day previous to the date of
grant as reported by NASDAQ).
(4) The dollar amounts set forth in these columns are the result of
calculations at the 5% and 10% rates set by the Securities and Exchange
Commission, and, therefore, are not intended to forecast possible future
appreciation, if any, of the Company's Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following sets forth certain information concerning each exercise of
stock options during the fiscal year ended December 28, 1997 by each of the
named Executive Officers and the aggregated fiscal year-end value of the
unexercised options of each such Executive Officer:
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE AT FISCAL YEAR-END FISCAL YEAR-END($)(2)
ON REALIZED ------------------------- -------------------------
NAME(1) EXERCISE ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------- -------- -------- ----------- ------------- ----------- -------------
John C. Batterton....... -- $ -- -- 150,000 $ -- $162,750
Gary R. Long--Company... -- -- -- -- $ -- $ --
--Lockheed Martin...... -- -- 3,500 10,500 $112,420 $234,045
James R. Bell--Company.. -- -- 16,600 53,400 $ 20,750 $ 44,250
--Lockheed Martin...... 1,793 95,782 5,254.5 4,750 $160,503 $108,335
Andreas Bibl............ -- -- -- -- $ -- $ --
John J. Millerick....... -- -- 16,600 58,400 $ 20,750 $ 44,875
Winfried Rohloff--
Company................ -- -- 16,600 48,400 $ 20,750 $ 43,125
--Lockheed Martin...... 3,500 116,375 1,750 4,450 $ 56,210 $103,123
- --------
(1) The first line next to each Executive Officer's name indicates options to
acquire shares of the Company's Common Stock. The second line, where
applicable, indicates options to acquire shares of Common Stock of
Lockheed Martin.
(2) Market value of underlying securities at exercise date or year-end, as
the case may be, minus the exercise or base price of "in-the-money"
options.
16
PENSION PLAN
The Executive Officers of the Company named in the Summary Compensation
Table set forth above, with the exception of Mr. Rohloff, participate in the
Lockheed Martin Pension Plan (the "Lockheed Martin Plan") sponsored by the
Company's majority shareholder, Lockheed Martin Corporation ("Lockheed
Martin"), which plan covers all of the Company's Executive Officers and
substantially all of the salaried employees of the Company on a contributory
basis. Set forth below is a pension table, which shows the estimated annual
benefits payable upon retirement for specified earnings and years of service
under the Lockheed Martin Plan. The following information does not apply to
Mr. Rohloff who is covered under a pension plan sponsored by the German
government.
FIVE YEAR AVERAGE 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 40 YEARS OF
COMPENSATION(1)(2) SERVICE SERVICE SERVICE SERVICE SERVICE
------------------ ----------- ----------- ----------- ----------- -----------
$100,000................ $ 21,915 $ 29,220 $ 36,525 $ 43,830 $ 58,440
150,000................ 33,165 44,220 55,275 66,330 88,440
200,000................ 44,415 59,220 74,025 88,830 118,440
300,000................ 66,915 89,220 111,525 133,830 178,440
400,000................ 89,415 119,220 149,025 178,830 238,440
500,000................ 111,915 149,220 186,525 223,830 298,440
- --------
(1) Benefits payable under the Lockheed Martin Plan may be limited by Section
401(a)(17) and 415 of the Internal Revenue Code. The maximum earnings
which may be considered to compute a benefit in accordance with Section
401(a)(17) of the Code is $160,000. The maximum annual amount payable
under the Lockheed Martin Plan as of December 31, 1997 in accordance with
Section 415(b) was $125,000 at age 65 for someone born before January 1,
1938.
(2) Amounts listed in the foregoing table are not subject to any deduction for
Social Security benefits or other offsets and are computed as single life
annuities.
Mr. Bell participated in the Sanders Pension Plan, which covered him on a
contributory basis, during the first six months of 1997. Effective July 1,
1997, the Sanders Pension Plan merged into the Lockheed Martin Plan. If Mr.
Bell terminates his employment prior to June 30, 2002, he will receive his
pension calculated in accordance with the formula used in the Lockheed Martin
Plan, or if the pension benefit would be greater, in accordance with the
formula under the Sanders Plan, whichever is applicable. The pension benefits
to be received under the Sanders Pension Plan do not in any situation
materially exceed the benefits to be received under the Lockheed Martin Plan
as provided in the table above.
As of December 28, 1997, the estimated annual benefits, payable upon
retirement at age 65 for the individuals named in the compensation table,
based on the continued employment at current compensation, are as follows:
Mr. Batterton $53,835; Mr. Bell $48,034; Mr. Bibl $49,484 and Mr. Millerick
$52,627. These amounts (as do the amounts shown in the table) include benefits
payable under the supplemental plans discussed below. The years of credited
service as of December 28, 1997, for Messrs. Batterton, Bell, Bibl and
Millerick were 15.02 years, 19.52 years, 16.62 years and 16.02 years,
respectively. The calculation of retirement benefits under the Lockheed Martin
Plan is determined by a formula which takes into account the participant's
years of credited service and average compensation for the highest three
consecutive years of the last ten years of employment with the Company
preceding retirement. (The formula for calculating pension benefits under the
Sanders Plan is similar except that average compensation is based on the
highest five consecutive years of the last ten years of employment.)
Average compensation includes the employee's normal rate of pay (without
overtime) and bonuses earned under the Company's Management Incentive
Compensation Plan and lump sum payments in lieu of salary increase. Normal
retirement age is 65, however, benefits are payable as early as age 55 at a
reduced amount or without reduction at age 60. Certain employees who retire
between age 60 and 62 are eligible for supplemental payments ending at age 62.
If an employee's age and years of credited service equal or exceed 85, a
participant can retire as early as age 55 without actuarial reduction.
17
The Lockheed Martin Plan provides that in the event of a change in control
of Lockheed Martin (as defined in the plan document), (i) the Lockheed Martin
Plan may not be terminated and the benefits payable thereunder may not be
adversely modified for a period of two years following such change in control;
(ii) the Lockheed Martin Plan may not be merged or consolidated with an
underfunded plan during the five-year period following such change in control;
and (iii) if the Lockheed Martin Plan is terminated within the five-year
period following such change in control, any surplus assets remaining after
satisfaction of all plan liabilities, taxes and other rightful claims of the
U.S. government shall be transferred to a trust and applied solely to the
payment of certain employee benefits otherwise payable to employees and
retirees (e.g., retiree medical benefits), and the trust shall remain in
existence at least until the expiration of that five-year term. In addition,
during the five-year period following a change in control, the Lockheed Martin
Plan may not invest in securities issued by Lockheed Martin or any affiliate
of Lockheed Martin, any entity in which 10 percent or more of the equity
interests are held in the aggregate by officers, directors or affiliates of
Lockheed Martin, or by 5 percent stockholders of Lockheed Martin.
Certain salaried employees of the Company also participate in non-qualified
supplemental retirement plans. These supplemental plans pay benefits in excess
of Internal Revenue Code limits on qualified plan benefits or in some
instances in accordance with a grand-fathered or special pension formula. The
supplemental plans generally pay benefits at the same time and in the same
form as benefits are paid under the Lockheed Martin Retirement Program,
although lump sum payments are available under some supplemental plans. The
plans providing supplemental benefits to the Lockheed Martin Plan provide that
any participant receiving annuity benefits under such plans at the time of a
change in control of Lockheed Martin, as defined, will receive, in lieu of the
continuation of such annuity payments, the actuarial equivalent of such
benefits in a lump sum payable within thirty calendar days following the
change in control.
Defined Contribution Plans
Lockheed Martin also sponsors a number of different defined contribution
plans which cover virtually all employees of the Company. During 1997, the
Lockheed Martin Salaried Savings Plan ("Salaried Savings Plan") covered the
named executive officers.
The Salaried Savings Plan permits eligible employees to make regular savings
contributions on a pre-tax or after-tax basis. For the fiscal year ending
December 31, 1997, participants could contribute up to 17 percent of their
current base salary (maximum of 16 percent on a pre-tax basis) subject to the
limitations imposed by the Internal Revenue Code. Participants in the Salaried
Savings Plan may direct the investment of employee contributions among eleven
different investment options, including unitized funds invested in Lockheed
Martin's common stock. All contributions to the Salaried Savings Plan are 100
percent vested.
In addition, Lockheed Martin made a matching contribution to the
participant's account equal to 50 percent of up to the first 8 percent of
compensation contributed by the participant. Lockheed Martin matching
contributions are invested in the ESOP Stock Fund, which is in part funded by
an employee stock ownership feature of the plan. Matching contributions are
100 percent vested.
Because of the limitations on annual contributions to the Salaried Savings
Plan contained in the Internal Revenue Code, certain employees are not allowed
to elect to contribute the maximum 17 percent of compensation otherwise
permitted by the Salaried Savings Plan. A supplemental savings plan
("Supplemental Plan") has been established for certain Salaried Savings Plan
participants affected by these limits. Additional matching contributions that
become payable under a Termination Benefits Agreement are also payable through
this plan. Earnings credited to a Supplemental Plan account mirror the
participant's investment elections under the Salaried Savings Plan, including
investments in Lockheed Martin's common stock, except that investments in the
Supplemental Plan reflect only bookkeeping entries rather than actual
purchases of the underlying instruments. The Supplemental Plan provides for
payment following termination of employment in a lump sum or up to twenty
annual installments. All amounts accumulated and unpaid under the Supplemental
Plan must be paid in a lump sum within fifteen calendar days following a
change in control, as defined in the plan document.
18
Full distribution under the Salaried Savings Plan is generally made upon the
termination, layoff, retirement, disability or death of the participant.
The Company entered into an agreement with Gary Long on November 8, 1995
under the provisions of the Sanders Supplemental Executive Retirement Plan
("SERP"). Pursuant to this agreement, Mr. Long continued in the employ of
CalComp through February 28, 1997 at which time he was eligible for certain
SERP benefits, including: (i) one year of salary continuation plus the average
of the three prior years' incentive compensation with all benefits and
perquisites to which he was entitled as President of the Company continuing;
(ii) payment of a consulting fee equal to 35% of his base salary at retirement
for a one-year period following salary continuation; and (iii) a one-time
relocation benefit payable within one year of retirement. Mr. Long elected to
be paid items (i) and (ii) under the SERP in a lump sum of $404,189, which was
paid on February 28, 1997. Additionally, when Mr. Long reached age 65 on May
18, 1997, he became entitled to certain retirement benefits, including Company
retiree life insurance coverage (beginning at $1 million in May, 1997 and
decreasing in equal annual increments to $250,000 beginning in May 2002 and
continuing at $250,000 until his death), dental coverage and retiree medical
plan benefits.
EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements with each of Messrs.
Batterton, Millerick and Bibl. Pursuant to these agreements, Mr. Batterton
receives a base salary of $250,000, Mr. Millerick a base salary of $230,000
and Mr. Bibl a base salary of $200,000. Each is also eligible thereunder for
performance bonuses and other standard employee benefits. Mr. Millerick's
agreement further provides that if he is involuntarily terminated (other than
for cause) by the Company prior to August 12, 1998, he will receive a lump sum
severance payment equal to 140% of his annualized base salary, a continuation
of benefits for one year and payment of out-placement services of up to 10% of
his base salary. The employment agreements of Messrs. Batterton and Millerick
also provide for relocation payments for temporary lodging, meal allowance,
travel, sale of home and associated income taxes, where applicable. Mr.
Batterton's agreement covers such expenses incurred during the first 18 months
following employment up to a maximum of $100,000, while Mr. Millerick's
agreement covers such expenses incurred during the first 30 months following
employment up to a maximum of $450,000. Mr. Batterton has also entered into a
separate relocation agreement with the Company providing for a relocation
payment of $540,443, which is to be repaid if he voluntarily leaves the
employment of the Company within two years of the payment of the benefit,
other than in the event of a "Change of Control" of the Company (as defined
below).
The Company has entered into Change of Control Agreements with Messrs.
Batterton, Millerick and Bell. Benefits under these agreements are payable if,
within 18 months of a "Change of Control," (1) the officer is involuntarily
terminated by the Company or any successor owner (except for terminations for
cause), (2) the officer is removed from the position held immediately prior to
the change and the effect is a material reduction of status, responsibilities
or duties or the officer's base salary at the time of change of control is
reduced and the officer terminates his employment within sixty (60) days after
his status or pay is reduced.
These agreements provide for a lump sum payment to each officer of one and
one-half years' annual salary for the period immediately prior to the Change
of Control, plus an amount equal to one year's bonus award at the officer's
target level, less all statutory deductions. In addition, the agreements
provide for lump sum payment for any vacation earned but not taken prior to
termination of employment, outplacement assistance at a cost to the Company
not to exceed $20,000 and up to 18 months' continuation of the officer's then
current medical/dental coverage. In addition, the Company will pay for
medical/dental coverage for the officer and his dependents for the first 12
months following the employment termination date or, if earlier, until the
officer is eligible for coverage under a health plan of another employer. Mr.
Bell would also receive an additional payment of $52,600 to compensate him for
a resulting anticipated loss of pension earnings.
"Change of Control" of the Company is defined as the occurrence of any
event, as a result of which, Lockheed Martin, one or more subsidiaries of
Lockheed Martin, or a combination thereof ceases to own or control (directly
or indirectly) more than 50% of the voting securities of the Company.
19
The Company has also entered into a Termination Agreement with Mr.
Batterton. This Agreement provides that if Mr. Batterton is involuntarily
terminated (other than for cause) by the Company prior to April 1, 2000, he
will receive a lump sum severance payment equal to the greater of his
annualized base salary at the time of termination or $250,000. Mr. Bibl's
employment agreement provides that if his employment is terminated by the
Company without cause prior to October 31, 1999, Mr. Bibl will receive his
base salary for a period of one year following the date of termination, as
well as a pro rata share of any bonus accrued to the date of termination.
Pursuant to the terms of a Termination Agreement between the Company and Mr.
Rohloff, Mr. Rohloff received a severance payment of DM 1,090,535 (or
approximately $615,000) in connection with the termination of his employment
by the Company on December 31, 1997.
DIRECTORS COMPENSATION
Directors, other than employees or officers of the Company or Lockheed
Martin, receive $10,000 annually for service on the Board of Directors, $1,000
per Board meeting attended and $500 per committee meeting attended. Directors
are reimbursed for expenses incurred in connection with attendance at Board
and committee meetings. Directors who are officers or employees of the Company
or Lockheed Martin are not compensated separately for service on the Board of
Directors.
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee which follows shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference.
During the year ended December 28, 1997, the Committee reviewed numerous
salary surveys made available by Lockheed Martin, the Company's majority
shareholder, together with surveys obtained separately by the Committee in
connection with reviewing the specific components and amounts of the
compensation packages of the president and chief executive officer and the
Company's executive officers. The Committee's review took into
consideration available information regarding compensation packages offered
by comparable commercial companies prior to making the Committee's
recommendations to the Board of Directors for compensation to be applicable
to the president and chief executive officer and to the other executive
officers in 1997.
The Committee's recommendations reflected the Company's philosophy of
linking compensation with enhancement of stockholder value through a
structure for executive compensation which includes (i) a cash compensation
package consisting of competitive base salary levels and incentive
opportunities linked to corresponding levels of individual and company
performance and (ii) stock option incentives which require increases in the
Company's stock price in order for executives to realize value and, thus,
tie them to the Company's long-term stock performance. The Committee also
took into consideration the difficult challenges faced by management in
implementing the Company's strategy to end-of-life certain of its product
lines and develop new technology. In that regard, additional stock option
awards were made to the president and chief executive officer and the
executive officers of the Company in order to continue to retain and
motivate them to improve the Company's stock market performance. These
awards were made at the fair market value of the Company's Common Stock at
the date of the grant.
In addition to addressing current compensation levels and granting of
additional stock options, the Committee also studied the Company's
management incentive compensation plan ("MICP") and made significant
revisions to the prior MICP program which had reflected a philosophy of
management by objectives and emphasized individual and overall corporate
performance against targeted individual performance results and business
results.
In recognition of the Committee's belief that the prior MICP programs
failed to measure both the performance of the Company's separate business
units and individual performance in certain targeted results
20
areas, the Committee recommended to the Board, and the Board approved, a
revised MICP program to incorporate a new formula (called the Management
Performance Commitment Matrix--"MPCM") which measures individual
performance with emphasis on contributions to the Company's business units
and to the Company's overall performance in light of the Company's ultimate
goal of enhancing shareholder value.
The Committee reviews with the Board in detail all aspects of
compensation for the Company's executive officers.
Compensation Committee
Terry F. Powell, Chairman
Gary P. Mann
Kenneth R. Ratcliffe
April 24, 1998
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company during
the last fiscal year consisted of Messrs. Powell, Knox, Mann and Ratcliffe,
each of whom was a non-employee Director of the Company. Mr. Knox resigned as
a member of the Compensation Committee effective March 30, 1998.
21
COMPANY STOCK PRICE PERFORMANCE
The following chart shows a comparison of the cumulative total return of the
Company's Common Stock, the CRSP Total Return Index for The Nasdaq Stock
Market (U.S. Index) ("Nasdaq Index") and the CRSP Total Return Industry Index
for Nasdaq Computer Manufacturing ("Computer Index") for the period commencing
on July 23, 1996 and ending on December 28, 1997. The historical stock
performance shown on the chart is not intended to and may not be indicative of
future stock performance(1).
COMPARISON OF CUMULATIVE TOTAL RETURN FROM JULY 23, 1996 THROUGH DECEMBER 28,
1997
[GRAPH APPEARS HERE]
-----------------------------------------------------------
July 23, 1996 December 29, 1996 December 28, 1997
- --------------------------------------------------------------------------------------------
CalComp Technology, Inc. $ 100 $ 121 $ 147
- --------------------------------------------------------------------------------------------
Computer Index $ 100 $ 145 $ 173
- --------------------------------------------------------------------------------------------
Nasdaq Index $ 100 $ 123 $ 151
- --------------------------------------------------------------------------------------------
- --------
(1) Assumes that $100 was invested on July 23, 1996 in the Company's Common
Stock at $2.375 per share, the closing price for the Company's Common
Stock on that date, and at the closing price for each Index on that date,
and that all dividends were reinvested. No cash dividends have been
declared on the Company's Common Stock.
22
CERTAIN TRANSACTIONS
General. Because of Lockheed Martin's beneficial ownership of in excess of
85% of the outstanding shares of the Company's Common Stock, Lockheed Martin
is able to elect all of the members of the Company's Board of Directors and
exercise a controlling influence over the business and affairs of the Company,
including any determinations with respect to mergers or other business
combinations involving the Company, the acquisition or disposition of assets
by the Company, the incurrence of indebtedness by the Company, the issuance of
any additional Common Stock or other equity securities, and the payment of any
dividends with respect to the Common Stock. In addition, Lockheed Martin, by
virtue of its controlling ownership, has the power to approve matters
submitted to a vote of the Company's stockholders (or by written consent in
lieu of a meeting) without the consent of the Company's other stockholders;
has the power to prevent a change in control of the Company; and could seek to
cause the Company to pay dividends, enter into business or financial
transactions with Lockheed Martin, sell assets, or take other actions that
might be favorable to Lockheed Martin.
The Company currently has a Board of Directors consisting of eight members.
Five members of the Board are officers, directors or employees of Lockheed
Martin. Two members of the Board, Messrs. Ratcliffe and Hurley, are neither
directors or officers nor employees of Lockheed Martin, nor officers or
employees of the Company. Mr. Hurley was appointed by the Board in April 1998
pursuant to an agreement between Lockheed Martin and Kodak entered into in
connection with the Company's Joint Development Agreement with Kodak ("JDA").
One member of the Board, Mr. Batterton, is the President and Chief Executive
Officer of the Company. Lockheed Martin has agreed with the Company to use its
good faith efforts to continue to cause at least two of the members of
CalComp's Board of Directors to be independent of Lockheed Martin and the
Company. Subject to this agreement, Lockheed Martin has the ability to change
the size and composition of the Company's Board of Directors and committees of
the Board.
Revolving Credit Agreement. In connection with the Exchange, the Company and
Lockheed Martin entered into a revolving credit agreement (the "Revolving
Credit Agreement") pursuant to which Lockheed Martin agreed to provide, from
time to time, financing for repayment of specified indebtedness and general
corporate purposes, including, without limitation, financing the working
capital needs of the Company and its subsidiaries. The Revolving Credit
Agreement had a term of two years from the date of its execution, but could be
terminated (or could have the maximum borrowing limit reduced) after the first
anniversary of the July 23, 1996 effective date of the Revolving Credit
Agreement, at the Company's or Lockheed Martin's option, upon at least 120
days' prior written notice of termination, which notice could be given not
more than 120 days prior to the first anniversary. The Company and Lockheed
Martin have amended the Revolving Credit Agreement to increase the aggregate
amount of borrowings available to the Company under the existing credit line
from $33 million to $73 million, to extend the maturity date to January 31,
1999, to eliminate the requirement for compliance with certain financial ratio
covenants, to eliminate the right of Lockheed Martin to cancel the agreement
upon 120 days prior written notice, and to remove the security interest of
Lockheed Martin in the assets of the Company. As of December 28, 1997, the
Company had borrowed an aggregate of $59.5 million under the line and expects
to continue to use the additional funds available under the increased line to
meet working capital, investment and restructuring requirements. There is no
required prepayment or scheduled reduction of availability of loans under the
Amended Revolving Credit Agreement.
On June 24, 1997, the Company completed the sale of its 27.9 acre
headquarters facility to Lincoln Property Company, Inc. of Dallas Texas, and
D.L.J. Real Estate Capital Partners for $21.5 million, less associated costs
to sell. Proceeds from the sale of the property were used to reduce
outstanding borrowings under the Amended Revolving Credit Agreement.
Loans outstanding under the Amended Revolving Credit Agreement bear
interest, at the Company's option, either at (i) a rate per annum equal to the
higher of the Federal Funds rate plus 0.5% or the rate publicly announced from
time to time by Morgan Guaranty Trust Company of New York in New York as its
"prime" rate or (ii) LIBOR plus 2.0%. In addition, the Company is required to
pay Lockheed Martin a commitment fee
23
equal to 0.45% per annum on the amount of the available but unused commitment
under the Amended Revolving Credit Agreement. During 1997, the Company paid
Lockheed Martin an aggregate of $4,017,000 in interest and loan fees to
Lockheed Martin.
The Amended Revolving Credit Agreement imposes certain negative and
affirmative covenants on the Company which limit the Company's ability to
incur indebtedness, to pay dividends, or to undertake certain corporate
actions (mergers, consolidations, etc.) without the prior approval of Lockheed
Martin. The Amended Revolving Credit Agreement also sets forth certain events
of default. The events of default include, without limitation: (i) failure to
pay interest or principal when due, (ii) material breach of any representation
or warranty, (iii) failure to perform certain covenants, (iv) failure to pay
other indebtedness when due or breach of any other term contained in other
agreements or instruments relating to other indebtedness, (v) commencement of
bankruptcy or reorganization proceedings, (vi) an event of default under the
Cash Management Facility (described below) or (vii) the occurrence of certain
events the result of which could reasonably be expected to have a Material
Adverse Effect. In the case of an Event of Default, Lockheed Martin may, by
notice in writing to the Company, terminate the Amended Revolving Credit
Agreement and demand payment of amounts owing thereunder.
Pursuant to the Amended Revolving Credit Agreement, Lockheed Martin has the
right to set off, appropriate and apply against any and all cash transferred
from the Company to Lockheed Martin in accordance with the Cash Management
Agreement (as defined below) and any and all credits, indebtedness or claims
at any time held or owing by Lockheed Martin to or for the credit or account
of the Company.
Cash Management Agreement. In connection with the Exchange, the Company and
Lockheed Martin entered into a cash management agreement (the "Cash Management
Agreement") pursuant to which Lockheed Martin provides cash advances to the
Company. The term of the Cash Management Agreement, as amended, extends from
the date of its execution through January 31, 1999. In accordance with the
terms of the Cash Management Agreement, excess cash balances of the Company
will first be deemed to be a repayment of outstanding principal indebtedness
under the Amended Revolving Credit Agreement, with any excess being applied
against advances or held as an investment by Lockheed Martin on an overnight
basis. The aggregate principal amounts of cash invested with Lockheed Martin
will bear interest at a rate per annum equal to the Federal Funds Rate as in
effect from time to time. Cash shortfalls, up to $2 million, will be funded by
Lockheed Martin on an overnight basis, and will bear interest at a rate per
annum equal to the Federal Funds Rate as in effect from time to time. Pursuant
to the terms of the Cash Management Agreement, Lockheed Martin will have the
right to set off, appropriate and apply against any and all cash transferred
from the Company to Lockheed Martin under the Cash Management Agreement and
any and all credits, indebtedness or claims at any time held or owing by
Lockheed Martin to or for the credit or account of the Company.
Intercompany Services Agreement. In connection with the Exchange, the
Company and Lockheed Martin also entered into an intercompany services
agreement (the "Services Agreement") with respect to the services to be
provided by Lockheed Martin. The Services Agreement provides that Lockheed
Martin will furnish to the Company a package of services in exchange for a
services fee, which will be determined by Lockheed Martin recognizing to the
extent practicable, (i) Lockheed Martin's percentage ownership of the Company,
(ii) the Company's requirements for certain services for which CalComp Inc. or
the Company was previously charged by Lockheed Martin or other third parties
and (iii) costs of obtaining services from third parties that previously were
provided to CalComp Inc. by Lockheed Martin. The Services Agreement will
expire two years after the date of its execution, but may be terminated by
Lockheed Martin, at its option, upon not less than 90 days' prior written
notice to the Company, provided that Lockheed Martin no longer owns Common
Stock representing more than 50% of all of the issued and outstanding Common
Stock of the Company. The Company may terminate the Services Agreement by
providing not less than 90 days prior written notice to Lockheed Martin at any
time that Lockheed Martin owns less than 25% of all of the issued and
outstanding Common Stock of the Company. Consistent with past practices, the
method used to determine amounts to be charged the Company will be in
accordance with the requirements of Cost Accounting Standard 9904.403 ("CAS
403") "Allocation of Home Office Expenses to Segments." CAS 403 establishes
the formulas and criteria for the allocation of home office
24
expenses to organizational segments and is promulgated by the Cost Accounting
Standards Board and used by contractors to the United States Government.
Lockheed Martin's allocations are reviewed for compliance with the promulgated
standards by the Department of Defense. In fiscal 1997, Lockheed Martin billed
the Company approximately $2.9 million under the Services Agreement.
The services provided by Lockheed Martin under the Services Agreement
include certain tax services; corporate control and audit services; insurance
planning and advice; health, safety and environmental management services;
human resources and employee relations services; legal services; employee
benefit plans administration and services; and treasury services.
The Company has agreed to indemnify Lockheed Martin, except in certain
limited circumstances, against liabilities that Lockheed Martin may incur that
are caused by or arise in connection with the Company's failure to fulfill its
obligations under the Services Agreement.
In addition to the service agreement fees, the Company has entered into
various support agreements with Lockheed Martin to provide, among other
things, that Lockheed Martin undertake to provide certain services for and at
the request of the Company including, but not limited to, administration of
the pension and savings plan, legal and other general administrative services
and group medical, liability and workers' compensation insurance. Expenses are
allocated to the Company based on actual amounts incurred on behalf of the
Company plus estimated overhead related to such amounts. Amounts billed to the
Company were $4,223,000 in 1997. Such amounts are allocated to various cost
elements in the financial statements based on relevant factors which include
headcount and square footage.
Corporate Agreement. The Company and Lockheed Martin also entered into a
corporate agreement (the "Corporate Agreement") in connection with the
Exchange. Under the terms of the Corporate Agreement, the Company has agreed
that, for so long as Lockheed Martin continues to own 50 percent or more of
the Common Stock of the Company, the Company will propose, at each election of
directors (including elections to fill vacancies) a slate of directors or
individual directors such that at least 66 percent of the Board of Directors
of the Company is comprised of persons designated by Lockheed Martin. The
Corporate Agreement also obligates Lockheed Martin and the Company to use
their good faith efforts to cause at least two individual directors of the
Company to be independent of both the Company and Lockheed Martin within the
meaning of the rules of the New York Stock Exchange regarding who may serve on
the audit committee of a company listed on such exchange. Subject to these
agreements, Lockheed Martin will be able to elect 100% of the directors for so
long as Lockheed Martin owns more than 50 percent of the combined voting power
of the Company.
In addition, the Corporate Agreement provides that for so long as Lockheed
Martin maintains ownership of 50 percent or more of the Common Stock, the
Company may not take any action or enter into any commitment or agreement
which may reasonably be anticipated to result, with or without notice and with
or without lapse of time, or otherwise, in a contravention or event of default
by Lockheed Martin of (i) any provision of applicable law or regulation,
including, but not limited to, provisions pertaining to ERISA, (ii) any
provision of Lockheed Martin's Charter or Bylaws, (iii) any credit agreement
or other material instrument binding upon any Lockheed Martin entity, or (iv)
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over any Lockheed Martin entity. Additionally, for so long as
Lockheed Martin continues to own 50 percent or more of the Common Stock of the
Company, the Company may not take any action reasonably expected to result in
a material increase in liabilities required to be included in its consolidated
financial statements, nor may it materially increase its obligations under any
employee benefit plan, without the prior written consent of Lockheed Martin.
The Corporate Agreement also provides that nothing contained in the Corporate
Agreement is intended to limit or restrict in any way the ability of Lockheed
Martin to control or limit any action or proposed action of the Company,
including but not limited to, the incurrence by the Company of indebtedness,
based upon Lockheed Martin's internal policies or other factors.
Registration Rights Agreement. In connection with the Exchange, the Company
also entered into a registration rights agreement (the "Registration Rights
Agreement") with Lockheed Martin. Under the
25
Registration Rights Agreement, until Lockheed Martin or its assignees can sell
all of the registrable securities then owned in a single market transaction
pursuant to Rule 144(k) under the Securities Act of 1933, as amended (the
"Securities Act"), in the case of any proposed registration of shares of
capital stock or other securities of the Company, Lockheed Martin or its
assignees shall have the right, subject to certain limitations contained
therein, to elect to include in such registration statement all or a part of
their registrable securities (a "Piggyback Registration").
Under the Registration Rights Agreement, at any time after the date of the
Registration Rights Agreement and from time to time thereafter, Lockheed
Martin (or an assignee owning in the aggregate at least 25% of the Common
Stock issued to Lockheed Martin as of the date of the execution of the
Registration Rights Agreement) may cause the Company to use its best efforts
to file a registration statement to register under the Securities Act for sale
to the public all or a portion of the registrable securities of Lockheed
Martin or its assignees, and thereafter use its best efforts to file any and
all amendments as may be necessary to cause the registration statement to be
declared effective. The Company will have no obligation, however, to register
any securities under the Registration Rights Agreement unless the reasonably
anticipated aggregate offering price to the public of such securities, as
stated by Lockheed Martin or its assignees in their written registration
request, equals or exceeds $15 million. In addition, the Company will have no
obligation to file more than three registration statements on a form other
than Form S-3 and in no event will it be required to file more than four
registration statements in total. The costs and expenses (other than
underwriting discounts, commissions and similar payments) of all registrations
will be borne by the Company.
The Registration Rights Agreement contains indemnification and contribution
provisions (i) by Lockheed Martin and its assignees for the benefit of the
Company and related persons, (ii) by the Company for the benefit of Lockheed
Martin and the other persons entitled to effect registrations of Common Stock
pursuant to its terms and (iii) related persons.
Tax Sharing Agreement. The Company and Lockheed Martin also entered into a
tax sharing agreement (the "Tax Sharing Agreement"), effective the date of the
Exchange. Pursuant to the Tax Sharing Agreement, the Company and Lockheed
Martin will make payments between them such that, with respect to any period,
the amount of taxes to be paid by the Company or any refund payable to the
Company will be determined as though the Company were to file separate
federal, state and local income tax returns (including any amounts determined
to be due as a result of a redetermination of the tax liability of Lockheed
Martin arising from an audit or otherwise) as the common parent of an
affiliated group of corporations filing a consolidated return rather than a
consolidated subsidiary of Lockheed Martin. Under the Tax Sharing Agreement,
for so long as the Company remains part of the Lockheed Martin combined
consolidated group for federal income tax purposes, the Company will be
entitled to the benefit of any tax attribute attributable to the Company that
could be used by the Company if it were not part of the Lockheed Martin
combined consolidated group. At such time as the Company ceases to be included
in the Lockheed Martin combined consolidated group for federal income tax
purposes, the Company shall no longer be entitled to the benefit of any tax
attribute created while part of the Lockheed Martin combined consolidated
group that would otherwise have been attributable to the Company.
In determining the amount of tax sharing payments, Lockheed Martin will
prepare a pro forma consolidated return for the Company that reflects the same
positions and elections used by Lockheed Martin in preparing the returns for
the Lockheed Martin consolidated group. Lockheed Martin will continue to have
all the rights of a common parent of a consolidated group, will be the sole
and exclusive agent for the Company in any and all matters relating to the
income tax liability of the Company, will have sole and exclusive
responsibility for the preparation and filing of consolidated federal and
consolidated or combined state income tax returns (or amended returns), and
will have the power, in its sole discretion, to contest or compromise any
asserted tax adjustment or deficiency and to file, litigate or compromise any
claim or refund on behalf of the Company. Interest required to be paid by or
to the Company with respect to any federal income tax pursuant to the Tax
Sharing Agreement shall be computed at the rate and in the manner provided in
the Internal Revenue Code of 1986 for interest on underpayments and
overpayments, respectively, of federal income tax for the relevant period. Any
interest
26
required to be paid by or to the Company with respect to any state or local
income tax or franchise tax return shall be computed at the rate and in the
manner as provided under the applicable state or local statute for interest on
underpayments and overpayments, respectively, of such tax for the relevant
period.
Under the Tax Sharing Agreement, the Company will reimburse Lockheed Martin
for any outside legal and accounting expenses incurred by Lockheed Martin in
the course of the conduct of any audit or contest regarding the Lockheed
Martin consolidated group, and for any other expenses incurred by Lockheed
Martin in the course of any litigation relating thereto, to the extent such
costs are reasonably attributable to an issue relating to the Company or its
subsidiaries; provided, however, that prior to incurring any such expenses,
Lockheed Martin shall consult with the Company and shall consider the
Company's views with regard to the retention of outside professional
assistance.
The Company believes that the amounts payable by, or charged to, the Company
under the terms of the forgoing agreements with Lockheed Martin, taken
collectively, are reasonable in the circumstances and are substantially at
market rates.
Joint Development Agreement with Kodak. In connection with the Company's
Joint Development Agreement with Kodak, Lockheed Martin entered into a
separate shareholder agreement with Kodak pursuant to which Lockheed Martin
has agreed to vote its shares to elect a Kodak-designated director, currently
Mr. Hurley, during the term of the JDA. The JDA has a term of five years and
provides for the contribution by Kodak to a joint development project (the
"Project") of up to $36,000,000, with $20,000,000 having been advanced upon
the signing of the JDA and up to an additional $16,000,000 to be funded
incrementally over the term upon the achievement of certain milestones and the
occurrence of certain events. The JDA also provides for royalties to be paid
by Kodak to the Company in respect of licenses granted thereunder by the
Company to Kodak which allow Kodak under certain circumstances to exploit the
inkjet technology developed pursuant to the Project. The JDA provides that
Kodak will also provide technical personnel to work on the project, but that
except as otherwise contemplated by the JDA, the Company will fund all other
development and manufacturing expenses relating to the Project. If, during the
term of the JDA, the Company desires to sell any of the CrystalJet assets
related to the assets acquired by the Company from Topaz Technologies, Inc.
(the "Topaz Assets"), the Company will be required to offer Kodak a right of
first refusal to purchase such Topaz Assets. The JDA also includes OEM
Agreements between the parties providing for the sale of future developed
products by the Company to Kodak and the mutual purchase of certain inks and
related media products developed in connection with the Project. Pursuant to
the JDA, the Company issued to Kodak a warrant (the "Warrant") to purchase
8,000,000 shares (the "Warrant Shares") of the Company's Common Stock (or
approximately 15% of the Company's outstanding shares after giving effect to
the issuance of the Warrant Shares) at an exercise price of $3.88 per share.
The Warrant has a term of seven years and will become exercisable as to
4,000,000 of the Warrant Shares on March 29, 1999, and as to the remaining
4,000,000 Warrant Shares on March 29, 2000 (each a "Vesting Date"); provided,
however, that in the event the JDA is terminated prior to a Vesting Date, the
Warrant will terminate as to any unvested Warrant Shares. The Warrant contains
standard adjustment provisions and piggyback registration rights covering the
Warrant Shares. During the 24-month period after the issuance of the Warrant
(and so long as the JDA has not been terminated), upon the issuance by the
Company of additional shares of Common Stock, the number of Warrant Shares
will be proportionately increased so that the number of Warrant Shares will
continue to represent 15% of the issued and outstanding shares of the
Company's Common Stock; provided, further, that the exercise price of any
additional Warrant Shares will be the same as the price of the additional
shares of Common Stock issued by the Company. No adjustments will be required
with respect to 1) shares of Common Stock issued to any employee, consultant,
advisor, officer or director of the Company pursuant to a Board-approved plan;
or 2) shares issued in connection with certain merger, exchange or acquisition
of assets transactions. The Warrant also provides Kodak with a right of first
refusal with respect to proposed issuances of the Company's capital stock
during the 24-month period after the date of issuance of the Warrant.
Vendor and Customer Relationships. Effective May 15, 1996, the Company
transferred its ownership interest in AGT Holdings, Inc., the parent of Access
Graphics, Inc. ("Access Graphics") a computer products
27
distributor, to Lockheed Martin. On November 17, 1997, the assets of Access
Graphics, along with the assets of several other Lockheed Martin companies,
were transferred to LMT Sub, Inc. (LMT Sub), a wholly-owned subsidiary of
Lockheed Martin. Subsequently, the stock of LMT Sub was exchanged for the
Series A Preferred Stock of Lockheed Martin held by the General Electric
Company. The Company has sold, and continues to sell, computer graphics
equipment to Access Graphics for resale. Sales to Access Graphics amounted to
$6,401,000 in 1997. It is expected that the customer relationship with Access
Graphics will continue. In addition, the Company sold products to Lockheed
Martin Skunk Works ($298,000), Lockheed Martin Engineering and Sciences
($183,000), Sandia Corporation ($130,000) and Formtek ($123,000) and to other
various Lockheed Martin affiliated companies ($310,000). The Company believes
that such sales were consummated at prices and terms consistent with similar
transactions with unrelated third parties. The Company also purchased certain
components from Lockheed Martin Commercial Electronics (Commercial
Electronics), a former affiliate of Lockheed Martin Corporation. Purchases
amounted to $4,273,000, $10,0959,000 and $10,503,000 for 1997, 1996 and 1995,
respectively. The Company believes these purchases were consummated at prices
and terms consistent with similar transactions with unrelated third parties.
Commercial Electronics was sold to Benchmark Electronics on February 28, 1998
and is, therefore, no longer an affiliate of Lockheed Martin.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 1999 Annual
Meeting of Stockholders and presentation in the Company's Proxy Statement with
respect to such meeting should arrange for such proposal to be delivered to
the Company at its principal place of business no later than January [ ],
1999 in order to be considered for inclusion in the Company's Proxy Statement
relating to that meeting. Matters pertaining to such proposals, including the
number and length thereof, eligibility of persons entitled to have such
proposals included and other aspects are regulated by the Securities Exchange
Act of 1934, Rules and Regulations of the Securities and Exchange Commission
and other laws and regulations to which interested persons should refer.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal years ended December 28, 1997, December 29, 1996 and December 31, 1995
accompanies this Proxy Statement. THE COMPANY WILL SEND A STOCKHOLDER UPON
REQUEST, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT ON FORM 10-K (WITHOUT
EXHIBITS) FOR THE YEAR ENDED DECEMBER 28, 1997, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO, WHICH THE COMPANY HAS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE REQUEST MUST BE DIRECTED TO THE ATTENTION OF WILLIAM
F. PORTER, JR., SECRETARY, AT THE ADDRESS OF THE COMPANY SET FORTH ON THE
FIRST PAGE OF THIS PROXY STATEMENT.
28
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matter is presented properly for action at the Annual
Meeting or at any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best
judgment and in the discretion of the proxy holders.
By Order of the Board of Directors,
CALCOMP TECHNOLOGY, INC.
ARTHUR E. JOHNSON
Chairman of the Board
Anaheim, California
May , 1998
29
SKU# (322-PS-98)
PROXY
CALCOMP TECHNOLOGY, INC.
2411 W. La Palma Avenue
Anaheim, CA 92803
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints John C.
Batterton, John J. Millerick and William F. Porter, Jr., and each of them
individually, the attorney, agent and proxy of the undersigned, with full power
of substitution, to vote all stock of CALCOMP TECHNOLOGY, INC., which the
undersigned is entitled to represent and vote at the 1998 Annual Meeting of
Stockholders of the Company to be held at the Orange County Airport Hilton,
located at 18800 MacArthur Blvd., Irvine, California on June 11, 1998, at 10:00
a.m., and at any and all adjournments or postponements thereof, as fully as if
the undersigned were present and voting at the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, 3 AND 4.
[X] Please mark votes
as in this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1, 2, 3 AND 4. The shares represented by this Proxy will
be voted as directed by the stockholder. Where no direction is given, such
shares will be voted "FOR" the election of the Directors named herein; "FOR"
amendment of the certificate of incorporation; "FOR" amendment of the Stock
Option Plan; and "FOR" ratification of Ernst & Young LLP as independent
auditors.
1. Election of Directors:
Nominee: Arthur E. Johnson, John C. Batterton, Jeb S. Hurley, Gary P. Mann,
Terry F. Powell, Kenneth R. Ratcliffe, Gerald W. Schaefer and Walter E.
Skowronski
[_] FOR [_] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[_] _______________________
INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided above.
2. Approval of an amendment to the Company's FOR AGAINST ABSTAIN
Certificate of Incorporation to increase the [_] [_] [_]
authorized shares of Common Stock from 60,000,000
to 125,000,000
3. Approval of an amendment to the Company's 1996 FOR AGAINST ABSTAIN
Stock Option Plan for Key Employees to increase [_] [_] [_]
the maximum number of shares of Common Stock
issuable pursuant thereto from 2,000,000 shares
to 4,000,000 shares.
4. Ratification of Ernst & Young LLP as FOR AGAINST ABSTAIN
Independent Auditors. [_] [_] [_]
Please sign your name exactly as it appears hereon. Executors, administrators,
guardians, officers of corporations and others signing in a fiduciary capacity
should state their full titles.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelop. If your address is incorrectly shown, please print changes. Whether or
not you plan to attend the meeting, you are urged to sign and return this proxy,
which may be revoked at any time prior to its use.
IMPORTANT - PLEASE SIGN AND DATE AND RETURN PROMPTLY.
Signature _________________________________ Date: ________________________
Signature _________________________________ Date: ________________________