SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential. For Use of the Com-
[X] Definitive proxy statement mission Only (as permitted by
[ ] Definitive additional materials Rule 14a-6(e) (2)
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Name of Registrant as Specified in Its Charter)
N/A
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid 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:
(2) Form, schedule or registration no.:
(3) Filing party:
(4) Dated filed:
Notes:
May 1, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of the
Stockholders of Performance Technologies, Incorporated at Monroe Golf Club, 155
Golf Avenue, Pittsford, New York, on Tuesday, June 4 at 10 a.m. local time.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. The Company's 2001 Annual Report, which is contained in this package,
sets forth important financial information concerning the Company.
A brief report will be made at the meeting of the highlights for the year
2001, and there will be an opportunity for questions of general interest to the
stockholders.
We sincerely hope you will be able to attend the Annual Meeting, but if you
cannot do so, it is important that your shares be represented. Please sign, date
and return the proxy card in the enclosed return envelope, which requires no
postage if mailed in the United States. For some stockholders, information
regarding telephone and Internet voting is included in the proxy card
instructions.
On behalf of the officers and directors, I wish to thank you for your
interest in the Company and your confidence in its future.
Very truly yours,
John M. Slusser
Chairman of the Board
PERFORMANCE TECHNOLOGIES, INCORPORATED
205 Indigo Creek Drive
Rochester, New York 14626
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 4, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of PERFORMANCE TECHNOLOGIES, INCORPORATED (the "Company") will be
held at Monroe Golf Club, 155 Golf Avenue, Pittsford, New York, on Tuesday, June
4, 2002 at 10 a.m., local time, for the following purposes, which are more fully
described in the accompanying Proxy Statement:
1. To elect three nominees to the Board of Directors of the Company for a
three-year term.
2. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending December 31, 2002.
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 5, 2002 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting.
A Proxy Statement and Proxy are enclosed.
WE HOPE YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT ATTEND,
PLEASE SIGN AND DATE THE ENCLOSED PROXY. RETURN THE PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. FOR SOME
STOCKHOLDERS, INFORMATION REGARDING TELEPHONE AND INTERNET VOTING IS INCLUDED IN
THE PROXY CARD INSTRUCTIONS.
BY ORDER OF THE BOARD OF DIRECTORS
Reginald T. Cable, Secretary
Dated at Rochester, New York
May 1, 2002
PERFORMANCE TECHNOLOGIES, INCORPORATED
205 Indigo Creek Drive
Rochester, New York 14626
May 1, 2002
PROXY STATEMENT
GENERAL
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of PERFORMANCE TECHNOLOGIES,
INCORPORATED (the "Company") to be used at the Annual Meeting of Stockholders of
the Company, which will be held on Tuesday, June 4, 2002 (the "Meeting"), and at
any adjournments thereof. This proxy statement and accompanying form of proxy
are first being mailed to stockholders on or about May 1, 2002. The proxy, when
properly executed and received by the Secretary of the Company prior to the
Meeting, will be voted as therein specified unless revoked by filing a written
revocation or a duly executed proxy bearing a later date with the Secretary
prior to the Meeting. A stockholder may also revoke his or her proxy in person
at the Meeting. Unless authority to vote for one or more of the director
nominees is specifically withheld, a signed proxy will be voted FOR the election
of the director nominees named herein and, unless otherwise indicated FOR the
selection of PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending December 31, 2002.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation by use of the mails, directors, officers or regular employees
of the Company, without extra compensation, may solicit proxies personally, by
telephone, by e-mail, telegraph or facsimile transmission. The Company has
requested persons holding stock for others in their names or in the names of
nominees to forward soliciting material to the beneficial owners of such shares
and will, if requested, reimburse such persons for their reasonable expenses in
so doing.
VOTES REQUIRED
Stockholders may vote by mail, telephone or the Internet. Information
regarding telephone and Internet voting is included in some proxy card
instructions. The total outstanding shares of capital stock of the Company as of
April 5, 2002, the record date for the Meeting (the "Record Date"), consisted of
12,239,228 shares of Common Stock, par value $.01 per share (the "Common
Stock"). Only holders of Common Stock of record on the books of the Company at
the close of business on the Record Date are entitled to notice of and to vote
at the Meeting and at any adjournments thereof. Each holder of Common Stock is
entitled to one vote for each share of Common Stock registered in his or her
name. A majority of the outstanding shares of Common Stock, represented in
person or by proxy at the Meeting, will constitute a quorum for the transaction
of all business.
Pursuant to the provisions of the Delaware General Corporation Law,
directors shall be elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the Meeting
and entitled to vote at the Meeting. Because directors are elected by a
plurality of the votes cast, withholding authority to vote with respect to one
or more nominees will have no effect on the outcome of the election, although
such shares would be counted as present for purposes of determining the
existence of a quorum. Similarly, any broker non-votes (which occur when shares
held by brokers or nominees for beneficial owners are voted on some matters but
not on others in the absence of instructions from the beneficial owner) are not
considered to be votes cast and therefore would have no effect on the outcome of
the election of directors, although they would be counted for quorum purposes.
The affirmative vote of a majority of the votes cast is required to ratify
the selection of PricewaterhouseCoopers LLP as independent public accountants
for the Company for the fiscal year ending December 31, 2002. Abstentions and
any broker non-votes are not considered to be votes cast and therefore would
have no effect on the outcome of this proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, with notes thereto, sets forth as of April 5, 2002
certain information regarding the Common Stock held by (i) the persons known to
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director of the Company, as well as the newly nominated individual (iii)
each executive officer of the Company, and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated immediately
beneath the beneficial owner's name, the address of each beneficial owner listed
in the table below is Performance Technologies, Inc., 205 Indigo Creek Drive,
Rochester, New York 14626.
Shares Beneficially Owned
Name of Beneficial Amount and Nature
Owner of Beneficial Ownership Percent of Class(1)
Putnam Investments 1,237,315(2) 10.1%
One Post Office Square,
Boston, MA 02109
FMR Corp. 1,214,250(3) 9.9%
82 Devonshire Street,
Boston, MA 02109
Reginald T. Cable 814,561(4) 6.6%
150 Metcalfe Street
Ottawa, Canada
FleetBoston Financial Corporation 787,725(5) 6.4%
One Federal Street,
Boston, MA 02110
Lord, Abbett & Co. 716,954(6) 5.9%
767 Fifth Avenue,
New York, NY 10153
Charles E. Maginness 645,360(7) 5.3%
John M. Slusser 471,511(8) 3.8%
Bernard Kozel 437,923(9) 3.6%
Donald L. Turrell 308,811(10) 2.5%
William E. Mahuson 245,500(11) 2.0%
Dorrance W. Lamb 140,412(12) 1.1%
John J. Grana 115,113(13) *
John J. Peters 95,799(14) *
John E. Mooney 50,295(15) *
Paul L. Smith 15,000(16) *
Stuart B. Meisenzahl 13,250(17) *
Arlen Vanderwel 0(18) *
All Directors and Officers
as a Group (12 persons) 2,538,974(19) 19.6%
-------------------------
* Less than 1%.
(1) Percentage based upon 12,239,228 shares of Common Stock outstanding as of
April 5, 2002.
(2) The following information is derived from a Schedule 13G dated March 8,
2002 filed by Putnam Investments on behalf of itself, Marsh & McLennan
Companies, Inc. (its parent holding company), Putnam Investment
Management, LLC (a wholly-owned subsidiary of Putnam Investments and
investment adviser to the Putnam family of mutual funds) and The Putnam
Advisory Company, LLC (a wholly-owned subsidiary of Putnam Investments
and investment adviser to Putnam's institutional clients). Both Putnam
Investment Management, LLC and The Putnam Advisory Company, LLC have
dispositive power over the shares as investment managers. However, each
of the mutual fund's trustees has voting power over the shares held by
each fund, and The Putnam Advisory, LLC has shared voting power over the
shares held by institutional clients. Putnam Investments and The Putnam
Advisory Company, LLC have shared voting power with respect to 500,800 of
such shares. Putnam Investments and The Putnam Advisory Company, LLC have
shared dispositive power with respect to 810,315 shares. Putnam
Investments and Putnam Investment Management, LLC have shared dispositive
power with respect to 427,000 shares.
(3) The following information is derived from a Schedule 13G dated February
14, 2002 filed by FMR Corp. Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp, is the beneficial owner of 1,214,250
shares as a result of acting as investment advisor to various investment
companies. The ownership of one investment company, FA Value Strategies
Fund, amounted to 1,214,250 shares. Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the funds each has sole power to
dispose of the 1,214,250 shares owned by the Funds. Neither FMR Corp. nor
Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote
or direct the voting of the shares owned directly by the Fidelity Funds,
which power resides with the Funds' Boards of Trustees. Fidelity carries
out the voting of the shares under written guidelines established by the
Funds' Boards of Trustees.
(4) Includes (a) 37,083 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 26,416 shares of Common Stock owned by
Mr. Cable; (c) 6,006 shares held in trust by American Stock Transfer &
Trust Co. as Trustee and Exchange Agent for the benefit of Mr. Cable: and
(d) 745,056 shares held in trust by American Stock Transfer & Trust Co.
as Trustee and Exchange Agent for 3414850 Canada Inc., of which (i) Mr.
Cable is a 70% shareholder and (ii) a trust for the benefit of Mr. Cable
is a 30% shareholder. Excludes 52,917 shares of Common Stock issuable
upon exercise of options not yet vested.
(5) The following information is derived from a Schedule 13G dated February
14, 2002 filed by FleetBoston Financial Corporation. Fleet National Bank
and Fleet Investment Advisors, Inc. are the listed subsidiaries which
acquired the security being reported on by the parent holding company.
FleetBoston Financial Corporation has sole dispositive power over 787,725
shares and sole power to vote or to direct the voting of 500,425 shares
of common stock.
(6) The following information is derived from a Schedule 13G dated January
16, 2002 filed by Lord, Abbett & Co. Lord, Abbett & Co. has sole
dispositive power and sole power to vote or to direct the voting of
716,954 shares of common stock.
(7) Includes (a) 37,000 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 103,247 shares of Common Stock
owned of record by Mr. Maginness' wife. Mr. Maginness disclaims
beneficial ownership of the shares owned by his wife.
(8) Includes (a) 21,250 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 15,000 shares of Common Stock
owned of record by Mr. Slusser as custodian for his minor children living
in his household.
(9) Includes (a) 21,250 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 39,000 shares of Common Stock owned of
record by The Jayme E. Fund Trust U/A, Benjamin J. Fund Trust U/A and
Ariel D. Fund Trust U/A over which Mr. Kozel has voting and investment
powers; (c) 186,279 shares of Common Stock owned of record by the Kozel
Family, LLC, over which Mr. Kozel has voting and investment power; and
(d) 189,144 shares of Common Stock owned of record by The Kozel Holding
Company, LLC, over which Mr. Kozel has voting and investment power.
(10) Includes (a) 215,960 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 87,876 shares owned jointly by Mr.
Turrell and his wife; and (c) 4,975 shares of Common Stock owned of
record by Mr. Turrell's wife as custodian for their child. Mr. Turrell
disclaims beneficial ownership of the shares owned by his wife as
custodian for their child. Excludes 70,290 shares of Common Stock
issuable upon exercise of options not yet vested.
(11) Includes 81,000 shares of Common Stock issuable upon exercise of options
currently exercisable.
(12) Includes 108,117 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 48,688 shares of Common Stock issuable
upon exercise of options not yet vested.
(13) Includes (a) 114,553 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 150 shares of Common Stock owned
of record by Mr. Grana's wife as custodian for their child living in
their household. Excludes 40,447 shares of Common Stock issuable upon
exercise of options not yet vested.
(14) Includes 95,237 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 43,063 shares of Common Stock issuable
upon exercise of stock options not yet vested.
(15) Includes (a) 21,250 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 29,045 shares of Common Stock
owned of record by Mr. Mooney's wife. Mr. Mooney disclaims beneficial
ownership of the shares owned by his wife.
(16) Includes 14,500 shares of Common Stock issuable upon exercise of options
currently exercisable.
(17) Includes 10,000 shares of Common Stock issuable upon exercise of options
currently exercisable.
(18) Excludes 6,700 shares of Common Stock issuable upon exercise of options
not yet vested.
(19) Includes 740,117 shares of Common Stock issuable upon exercise of stock
options currently exercisable. Excludes 209,188 shares of Common Stock
issuable upon exercise of stock options not yet vested.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The Company currently
has eight directors, three in two classes and two in one class. Terms are
staggered so that one class is elected each year. Only one class of directors is
elected at each Annual Meeting of Stockholders. Each director so elected serves
for a three-year term and until his or her successor is elected and qualified,
subject to such director's earlier death, resignation or removal.
The Board of Directors recommends the election of the three nominees named
below, all of whom are currently directors of the Company. Unless authority to
vote for one or more of the nominees is specifically withheld according to the
instructions, proxies in the enclosed form will be voted FOR the election of
each of the three nominees named below. The Board of Directors does not
contemplate that any of the nominees will be unable to serve as a director, but
if that contingency should occur prior to the voting of the proxies, the persons
named in the enclosed proxy reserve the right to vote for such substitute
nominee or nominees as they, in their discretion, shall determine.
Information about the Directors
The following table sets forth certain information with respect to each
director of the Company who is being proposed for re-election at the Meeting for
a three-year term expiring in 2005 and the nominee for director of the Company
who is being proposed for a three-year term expiring in 2005.
PROPOSED FOR ELECTION AS DIRECTORS AT THE 2002 ANNUAL MEETING
FOR A THREE-YEAR TERM EXPIRING IN 2005
Director
Name and Background Since
Bernard Kozel, age 80, has served as a director of the Company
since 1983. He is the former Chairman of the Board of J. Kozel & 1983
Son, a Rochester, New York-based structural steel company. He is
President of K.G. Capital Corporation.
Charles E. Maginness, age 69, served as Chairman of the Board from
1986 to June 2001 and served as Chief Executive Officer of the 1983
Company from 1995 to 1997. From 1984 through 1986, he held the
position of President and from 1984 through 1995 was also Chief
Financial Officer. From 1970 to 1983, Mr. Maginness was employed by
Kayex Corporation where he held several positions, including
President and Chief Executive Officer, and President of its Hamco
Division.
Arlen Vanderwel, age 48, was appointed to the Board of Directors in
October 2001 and is currently Vice President of Technology at Sun October
Microsystems where for the past three years he has been responsible 2001
for the strategic technology directions of Sun's Network Equipment
Provider group in Menlo Park, California. He was formerly with
Nortel Networks where he held various management positions,
including Chief Engineer, Public Networks and Vice President,
Platform Technology. Mr. Vanderwel has 27 years of
telecommunications industry experience.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 1
The following table sets forth certain information with respect to each
director of the Company whose term in office does not expire at the Meeting.
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE 2002 ANNUAL MEETING
Director
Name and Background Since
John M. Slusser, age 49, a founder of the Company, has served as
Chairman of the Board since June 2001 and has served as a director 1981
since the Company's inception in 1981. From 1981 through 1995, he
held various positions, including President and Chief Executive
Officer. From 1995 until 2000, he served as Chairman of the Board
of InformationView Solutions Corporation and to 1999 as that
company's Chief Executive Officer. Since 2000, he has served as
President of Radio Daze LLC.
Stuart B. Meisenzahl, age 60, has served as a director of the
Company since 2001. He is a former partner in the law firm of 2001
Harter, Secrest & Emery LLP, general counsel to the Company. He was
affiliated with the firm for 36 years, retiring in December 1999,
and he practiced principally in the areas of federal securities law
and biotechnology licensing. Following his retirement, Mr.
Meisenzahl has acted as a business consultant to a number of
biotechnology companies and is Acting General Counsel to Vaccinex,
Inc., a biotechnology company in Rochester, New York. In addition,
he has served as director or trustee for a number of charitable
organizations in Rochester, New York.
Director
Name and Background Since
John E. Mooney, age 57, has served as a director of the Company
since 1984. He is Chairman and Chief Executive Officer of Essex 1984
Partners, Inc., a property development and management company in
Rochester, New York.
Paul L. Smith, age 66, has served as a director of the Company
since 1993. He is an independent business and financial consultant. 1993
From 1983 to 1993, he served as Senior Vice President and Chief
Financial Officer of Eastman Kodak Company. He also serves on the
Board of Directors of Constellation Brands, Inc. and Home
Properties of New York, Inc.
Donald L. Turrell, age 54, has served as Chief Executive Officer of
the Company since June 1997, and President and Chief Operating 1995
Officer since April 1995. From 1985 to 1990, he held the position
of Vice President of Sales and Marketing and from 1990 to 1993, he
held the position of Vice President and General Manager of the
Workstation Products business unit. From 1993 to 1995, he held the
position of President of the Company's Performance Computer
business unit. From 1977 to 1984, Mr. Turrell held various
positions with Rochester Instrument Systems, including Sales
Manager, Product Marketing Manager, Vice President of Sales and
Vice President of Marketing.
Committees of the Board of Directors
The Board has a Compensation Committee to evaluate executive compensation.
Messrs. Kozel, Mooney and Smith comprise the Compensation Committee.
Additionally, the Board has a Stock Option Committee to determine option grants
pursuant to the Company's 2001 Stock Option Plan. For purposes of complying with
Securities Exchange Act Rule 16b-3, the Company has at least two non-employee
directors administer the 2001 Stock Option Plan. Messrs. Kozel, Slusser and
Smith currently comprise the Stock Option Committee. The Board also has an Audit
Committee for the purposes of reviewing the Company's financial reporting
procedures. Messrs. Kozel, Mooney and Smith comprise the Audit Committee. The
Board also has a Nominating Committee to identify potential new directors and to
designate officers of the Company. Messrs. Maginness, Turrell and Slusser
comprise the Nominating Committee. The Nominating Committee considers and
establishes procedures regarding recommendations for nomination to the Board of
Directors submitted by stockholders. Such recommendations should be sent to the
Company, to the attention of the Secretary.
The Compensation Committee, Stock Option Committee, Audit Committee, and
Nominating Committee met three, two, two, and three times, respectively, in
2001. The Company's Board of Directors held eight meetings in 2001. All of the
directors attended at least 75 percent of the Board of Directors' meetings and
committee meetings that required their attendance.
Compensation of Directors
Members of the Board of Directors who are not employees of the Company
received $1,000 for each meeting attended. Each Board member also receives
$10,000 per year if he attends at least 75 percent of the scheduled meetings. In
addition, each committee member receives $400 for each meeting attended if the
meeting is not scheduled on the same day as a Board of Directors meeting. The
Company's 2001 Stock Option Plan currently provides that on the day of the
Company's Annual Meeting of Stockholders, each individual elected, reelected or
continuing, as an Outside Participating Director will automatically receive a
non-statutory option for 10,000 shares of Common Stock. The exercise price for
these options will be the fair market value of the Company's Common Stock on the
date of the option grant. Options vest on the first anniversary of the grant
date and expire five years from the date of grant. From time to time, the
Company may grant additional options to directors. At the 2001 Stockholders
Meeting, Messrs. Kozel, Maginness, Meisenzahl, Mooney, Slusser and Smith each
received a non-qualified option to purchase 10,000 shares at an exercise price
of $14.250 per share. Mr. Vanderwel received a non-qualified option to purchase
6,700 shares at an exercise price of $8.00 upon his appointment to the Board on
October 1, 2001.
EXECUTIVE OFFICERS
The Company is currently served by five executive officers, who are elected
annually by the Board of Directors and serve until their successors are elected
and qualify.
Executive
Officer
Name and Background Since
John J. Grana, age 46, has served as Vice President, Engineering
since 1994. From 1997 to 2000, he held the position of Vice 2000
President and General Manager of the Controller Products Group.
From 1994 to 1997, he held the position of Vice President of
Software Engineering. From 1990 to 1994, he held the position of
Technical Director of the Workstation Products business unit, and
from 1986 to 1990, he served in various engineering positions.
Prior to joining the Company, he held various engineering positions
with Computer Consoles, Inc. (now a division of Nortel Networks).
Mr. Grana holds a BS degree in Computer Science from Rochester
Institute of Technology.
Dorrance W. Lamb, age 54, has served as Chief Financial Officer of
the Company since April 1995 and as Vice President of Finance since 1995
August 1992. Prior to joining the Company, he was Senior Vice
President for Finance and Administration at Infodata Systems, Inc.
based in Fairfax, Virginia. Mr. Lamb is a certified public
accountant and holds a BS degree in Accounting from Benjamin
Franklin University.
William E. Mahuson, age 51, has served as Vice President since
1987. From 1987 to 1990, he served as Vice President, Engineering 1987
and from 1992 to 1995 he served as General Manager of the UconX
business unit of the Company. Prior to joining the Company, he held
various technical and technical management positions with Computer
Consoles, Inc. (now a division of Nortel Networks) and the Xerox
Corporation. Mr. Mahuson holds a BS degree in Electrical
Engineering from Rensselaer Polytechnic Institute.
John J. Peters, age 43, has served as Vice President, Engineering
since 1994. From 1997 to 2000, he held the position of Vice 2000
President of Development, Network Switching Products. From 1994 to
1997, he held the position of Vice President of Hardware
Engineering. From 1990 to 1994, he served as Technical Director of
the Hardware Products business unit, and from 1986 to 1990, he
served in various engineering positions. Prior to joining the
Company, he held various engineering positions with Computer
Consoles, Inc. (now a division of Nortel Networks). Mr. Peters
holds a BS degree in Engineering from the Rochester Institute of
Technology.
Donald L. Turrell, age 54, has served as Chief Executive Officer of
the Company since 1997. Further information about Mr. Turrell is 1985
set forth under "DIRECTORS WHOSE TERMS DO NOT EXPIRE AT THE 2002
ANNUAL MEETING" above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of a registered class of the
Company's equity securities to file certain reports regarding ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors, and 10% stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% stockholders were complied with.
Report of the Compensation Committee with Respect to Executive Compensation
General
The Compensation Committee, in conjunction with the Stock Option Committee
of the Board of Directors, administers the Company's executive compensation
program. The Compensation Committee is comprised of three outside directors,
Paul L. Smith, Chairman, John E. Mooney and Bernard Kozel. The Compensation
Committee considers internal and external information in determining executive
officer compensation, including data provided by Watson Wyatt & Company.
The Company's executive pay program is designed to attract and retain
executives who will contribute to the Company's long-term success, to reward
executives for achieving short and long-term strategic Company goals, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions and Company
performance.
The three key components of the Company's executive compensation are base
salary, short-term incentives (cash bonus) and long-term incentives (stock
options).
Base Salary. Annually, the Compensation Committee reviews with the Chief
Executive Officer and approves, with any modifications it deems appropriate, a
salary plan for all of the Company's executives, none of whom have a written
employment agreement with the Company. The salary plan is developed under the
ultimate direction of the Chief Executive Officer based on performance judgments
as to the past and expected future contributions of each executive.
Annual Short-term Incentive Awards. The short-term incentive award program
is intended to be variable and is directly related to the Company's financial
performance. The parameters of the short-term incentive program for the
Company's employees, including executive officers, are generally established at
the beginning of each year. Amounts contributed to this program are based upon
the Company's profitability.
Long-term Incentive Awards. Stock options are granted to executive officers
and employees under the Performance Technologies, Incorporated 2001 Stock Option
Plan administered by the Stock Option Committee. The Compensation Committee, in
conjunction with the Stock Option Committee, believes that stock options are a
means of aligning the long-range interests of all employees, including
executives, with those of the Company's stockholders by providing them with the
opportunity to acquire an equity stake in the Company. The size of the stock
option award is based primarily on the individual's responsibilities and
position with the Company, as well as on the individual's performance. Stock
options are granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and options generally vest in three
to five years. This approach is designed to encourage the creation of
stockholder value over the long term since no benefit is realized from a stock
option grant unless the price of the Company's Common Stock rises.
Executive Officer Compensation
Due to the dramatic changes in economic climate in 2001, the Compensation
Committee again recommended that the Company retain the services of Watson Wyatt
& Company to perform a comparative analysis of the compensation of its executive
officers. Watson Wyatt & Company compared the total compensation of the
Company's executives to a peer group of companies with similar products and
target markets. The analysis indicated that the total compensation levels for
executive officers is generally appropriate in the years that short term
incentive bonuses are earned and stock options are granted. However, the
analysis continued to indicate that the base salary compensation levels of
executives could be adjusted upward to become more comparable. The Company
continues to address the deficiencies outlined in the Watson Wyatt & Company
analysis and made upward salary adjustments in 1999, 2000 and 2001 toward this
objective.
The Company met the profitability measurement established in the Company's
2001 annual short-term incentive plan resulting in a cash incentive bonus being
earned by the executives and employees for 2001.
Stock options granted for 2001 were issued to executive officers in
December 2000.
President and Chief Executive Officer
Mr. Turrell's base salary, short-term incentive and long-term incentive
awards are determined by the Compensation Committee based upon the same factors
as those employed by the Compensation Committee for executive officers
generally. Mr. Turrell's base salary for 2001 was $180,000, which was lower than
reported in the peer companies in the Watson Wyatt & Company analysis. Mr.
Turrell earned a short-term incentive bonus, related to the Company's
profitability measure, in the amount of $35,000 for 2001 and was granted stock
options for 35,000 shares in December 2000 as part of his 2001 compensation
plan.
Compensation Committee
Paul L. Smith, Chairman
John E. Mooney
Bernard Kozel
Compensation Committee Interlocks and Insider Participation
The Chief Executive Officer of the Company, Donald L. Turrell, consults
with the Compensation Committee and makes recommendations. He participates in
discussions with the Compensation Committee but does not vote or otherwise
participate in the Compensation Committee's determinations.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation for services rendered to the Company in all capacities for the
fiscal years ended December 31, 2001, 2000, and 1999, paid by the Company to
those persons who were, during the fiscal year ended December 31, 2001 (i) the
Chief Executive Officer of the Company and (ii) the other executive officers of
the Company who earned over $100,000 during the fiscal year ended December 31,
2001 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
Name and Long Term All Other
Principal Position Annual Compensation Compensation Compensation(2)
------------------ ------------------- ------------ -------------
Securities
Underlying
Year Salary Bonus Options(#)(1)
---- ------ ----- -----------
Donald L. Turrell, 2001 $180,381 $ 35,000 $12,680
Chief Executive Officer 2000 $174,519 60,000 $15,434
and President 1999 $164,423 $183,544 33,750 $15,256
Dorrance W. Lamb, 2001 $150,885 $ 28,000 $ 6,359
Vice President - Finance 2000 $139,615 40,000 $11,314
Chief Financial Officer 1999 $129,423 $157,324 26,250 $ 8,174
William E. Mahuson, 2001 $120,193 $ 20,000 $ 5,175
Vice President 2000 $113,808 $ 9,004
1999 $108,846 $144,214 7,500 $ 6,219
John J. Grana 2001 $125,770 $ 22,000 $ 1,910
Vice President 2000 $115,615 35,000 $ 4,413
(Officer since 5/2000) 1999 $105,692 $144,214 13,500 $ 2,929
John J. Peters 2001 $124,192 $ 22,000 $ 4,856
Vice President 2000 $106,808 30,000 $ 7,215
(Officer since 5/2000) 1999 $101,731 $ 78,662 10,500 $ 4,461
------------------
(1) All option shares have been adjusted for the Company's three-for-two stock
split effected in September 1999. Stock options granted for 2001 were
issued to executive officers in December 2000, while options granted for
2000 were issued to executive officers in February 2000.
(2) Includes payments for life insurance, car allowances and car expenses, and
401(k) allowance.
Employment Agreements
The Company does not have employment agreements with any of its executive
officers.
Stock Option Grants And Exercises
There were no stock options granted to the Named Executives during the
fiscal year ended December 31, 2001 pursuant to the Performance Technologies,
Incorporated 2001 Stock Option Plan or the Company's original Stock Option Plan
which expired on December 31, 2001.
The following table sets forth information with respect to the exercise of
stock options by the Named Executives, if any, during the year ended December
31, 2001, and it also sets forth information with respect to status of
unexercised stock options as of December 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
FY-End (#) FY-End ($) (1)
---------- --------------
Shares Acquired Value
Name on Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- ---------------- --------------- ----------- ------------- ----------- -------------
Donald L. Turrell 178,989 72,261 $1,200,936 $ 147,882
Dorrance W. Lamb 83,390 48,415 $ 511,312 $ 93,802
William E. Mahuson 77,250 3,750 $ 585,026 $ 15,889
John J. Grana 5,000 $ 42,960 101,214 33,786 $ 663,505 $ 28,600
John J. Peters 85,044 28,256 $ 543,960 $ 22,244
(1) Represents the difference between the fair market value of the Common Stock
as of December 31, 2001 and the exercise price of the option. Options that
are not in-the-money have been excluded from the computation.
(2) Represents the difference between the fair market value of the Common Stock
underlying the options as of the exercise date and the exercise price of
the options.
Report of the Audit Committee to Stockholders
The Audit Committee of the Board of Directors is comprised of three members
of the Company's Board of Directors, each of whom is independent pursuant to the
Nasdaq National Market's listing standards. Among other things, the Audit
Committee recommends to the Board that the Company's audited financial
statements be included in the Annual Report on Form 10-K and recommends the
selection of the independent auditors to audit the Company's books and records.
The Audit Committee has:
o reviewed and discussed the Company's audited financial statements for 2001
with management and with PricewaterhouseCoopers LLP, the Company's
independent auditors;
o reviewed and discussed management's selection, application and disclosure
of critical accounting policies;
o reviewed and discussed the adequacy of the Company's internal controls and
accounting and financial personnel;
o discussed with PricewaterhouseCoopers LLP the matters required to be
discussed by SAS 61 (Codification for Statements on Auditing Standards);
o discussed the process used by management in formulating accounting
estimates and the basis for the auditors' conclusions regarding the
reasonableness of those estimates; and
o received and discussed the written disclosures and the letter from the
independent auditors required by Independence Standards Board Statement No.
1 (Independent Discussions with Audit Committees).
Based on such review and discussions with management and the independent
auditors, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for 2001 for filing with the SEC.
Auditors' Fees
Audit Fees: For professional services rendered by them for the audit of the
Company's annual financial statements for 2001 and reviews of the financial
statements included in its Quarterly Reports on Form 10-Q for 2001,
PricewaterhouseCoopers LLP billed the Company fees in the aggregate amount of
$52,000.
Financial Information Systems Design and Implementation Fees:
PricewaterhouseCoopers LLP billed the Company no fees for professional services
rendered by them for 2001 in connection with financial information systems
design and implementation.
All Other Fees: For professional services other than those described above
rendered by them for 2001, PricewaterhouseCoopers LLP billed the Company fees in
the aggregate amount of $44,000.
The Audit Committee has considered whether the provision for audit and tax
services described above under "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" is compatible with maintaining the
independence of PricewaterhouseCoopers LLP and has concluded that
PricewaterhouseCoopers LLP meets the independence standards.
Audit Committee
John E. Mooney, Chairman
Paul L. Smith
Bernard Kozel
Report of the Stock Option Committee to Stockholders
General
The Stock Option Committee of the Board of Directors administers the
Company's stock option program. The Stock Option Committee is comprised of three
outside directors, John M. Slusser, Chairman, Paul L. Smith and Bernard Kozel.
The Stock Option Committee considers internal and external information in
determining overall guidelines for stock option grants, including data provided
by Watson Wyatt & Company.
Stock options are granted to executive officers and employees under the
2001 Performance Technologies, Incorporated Stock Option Plan administered by
the Stock Option Committee. The Stock Option Committee believes that stock
options are a means of aligning the long-range interests of all employees,
including executives, with those of the Company's stockholders by providing them
with the opportunity to acquire an equity stake in the Company. The size of the
stock option award is based primarily on the individual's responsibilities and
position with the Company, as well as on the individual's performance. Stock
options are granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and options generally vest in three
to five years. This approach is designed to encourage the creation of
stockholder value over the long term since no benefit is realized from a stock
option grant unless the price of the Company's Common Stock rises.
Annually, the Stock Option Committee reviews specific option requests along
with option grant guidelines submitted by the Chief Executive Officer, and
approves, with any modifications it deems appropriate, stock option grants
requested for several categories of employees throughout the company.
The Stock Option Committee in cooperation with the Executive Compensation
Committee approves stock option grants for the executive officers, key employees
and the Chief Executive Officer. Stock Option requests for executive officers
are developed under the direction of the Chief Executive Officer, based on
criteria that evaluate past and expected future contributions of each executive.
In 2001, the Stock Option Committee referenced a year 2000 report from
Watson Wyatt & Company to review the status of the Company's option grant level
for a variety of employee groups. The Watson Wyatt & Company report analyzed the
Company's Option program with respect to option program trends in the high
technology industry and the impact of such programs on attracting, retaining and
motivating necessary skilled personnel.
Stock Option Committee
John M. Slusser, Chairman
Paul L. Smith
Bernard Kozel
Stock Performance Graph
The following graph compares the cumulative total return on the
Company's Common Stock at the end of each calendar year since December 31, 1996
to the NASDAQ Stock Market (U.S.) Index, and the NASDAQ Computer Manufacturer
Index. The stock performance shown in the graph below is not intended to
forecast or necessarily be indicative of future performance.
(The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T.)
Performance NASDAQ NASDAQ
Technologies, Stock Computer
Incorporated Market Manufacturer
12/31/96 100 100 100
12/31/97 225 122 121
12/31/98 204 173 263
12/31/99 405 321 558
12/31/00 317 193 314
12/31/01 310 153 217
CERTAIN TRANSACTIONS
The Company leased its facility at 315 Science Parkway from Vortex
Enterprises, LLC ("Vortex"), a New York limited liability company of which Mr.
Maginness and Mr. Slusser, directors of the Company, are equal members. Vortex
(formerly C & J Enterprises) acquired the property and constructed the facility
with the proceeds of an industrial development revenue bond with the County of
Monroe Industrial Development Agency ("COMIDA") in September 1990. Pursuant to
the terms of the facility lease, the Company was obligated to pay annual rental
of $270,000 plus annual increases based on the Consumer Price Index, together
with real property taxes and assessments, expenses and other charges associated
with the facility. The lease on this facility expired in April 2002.
Arlen Vanderwel, a director of the Company and a nominee for election to
the Board of Directors of the Company at the 2002 Annual Meeting of
Stockholders, is an employee of Sun Microsystems, Inc., serving as that
company's Vice President of Technology since 1999. During the past fiscal year,
Sun Microsystems was a customer of the Company from which the Company received
payments for goods or services in excess of five percent of the Company's
consolidated gross revenues for that fiscal year.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as the independent public
accountants of the Company for the fiscal year ended December 31, 2001 and the
Board of Directors has again selected PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2002. This selection will be presented to the stockholders for their approval at
the Meeting. The Board of Directors recommends a vote in favor of the proposal
to approve and ratify this selection and (unless otherwise directed therein) it
is intended that the shares represented by the enclosed properly executed proxy
will be voted FOR such proposal. If the stockholders do not ratify this
selection, the Board of Directors may reconsider its choice.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Meeting. The representative will be given an opportunity to make a statement
if he so desires and will be available to respond to appropriate questions
concerning the audit of the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's proxy
statement to be issued in connection with the 2003 Annual Meeting of
Stockholders, such proposal must be delivered to the Company no later than
December 31, 2002. If the proposal is in compliance with all of the requirements
of Rule 14a-8 under the Securities Exchange Act, the Company will include the
stockholder proposal in its proxy statement and place it on the form of proxy
issued for the 2003 Annual Meeting of Stockholders. Stockholder proposals that
are not submitted for inclusion in the Company's proxy materials pursuant to
Rule 14a-8 under the Securities Exchange Act may be brought before the 2003
Annual Meeting of Stockholders only if written notice of the proposal is
delivered to the Company's Secretary no earlier than March 6, 2003 and no later
than April 5, 2003, and if the stockholder complies with all of the other
provisions of Article II, Section 12 of the Company's By-laws. All such notices
should be delivered to Reginald T. Cable, Secretary of Performance Technologies,
Inc., 205 Indigo Creek Drive, Rochester, New York 14626.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter other than those specifically referred to in this Proxy
Statement. If any other matters properly come before the Meeting, it is intended
that the holders of the proxies will act in respect thereto in accordance with
their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Reginald T. Cable, Secretary
Dated at Rochester, New York
May 1, 2002