The Board of Directors and the Audit and Compensation Committees
The Board of Directors is responsible for the general supervision,
management and control of the Company's business. During the fiscal year ended
June 30, 1999 the Board of Directors held 13 meetings. It also acted by
unanimous written consent three times during the same period. Each director
attended at least 75% of the Company's Board of Directors and committee meetings
held during such year. The Board of Directors has an Audit Committee and a
Compensation Committee but does not have a standing Nominating Committee or a
committee performing similar functions.
The Audit Committee confers with KPMG LLP, the Company's auditors,
regarding the scope and results of their audits and any recommendations which
they may have with respect to internal accounting controls and other matters
relating to accounting and auditing. The Audit Committee also considers all
non-audit services performed for the Company by KPMG LLP and the possible effect
that the rendering of such non-audit services may have on their independence.
In addition, the Audit Committee reviews with legal counsel any unregistered
offering or sale of securities made by the
Company. The Audit Committee met once during the fiscal year ended June 30,
1999. During much of that fiscal year, its members were Messrs. Joe F. Brock,
DeVere McGuffin and Larry Reynolds (Messrs. Brock and McGuffin resigned from
the Board in April 1999). The Audit Committee is now composed of Messrs. John
Hockin, Larry Reynolds and Geoffrey Tirman.
The function of the Compensation Committee is to fix officers' salaries,
establish salary policies for non-officer employees and to make recommendations
to the Board of Directors regarding the establishment of remuneration policies
of the Company. The Compensation Committee met once during the fiscal year
ended June 30, 1999 and is composed of the following members: Messrs. Hathaway,
Hockin and Reynolds.
Executive Officers
The names of, and certain information with respect to, the executive officers
of the Company are as follows:
Name of Officer Age Office
--------------------- ------ -----------------------------------
W.T. Nightingale, III 45 President & Chief Executive Officer
James F. Gallagher 56 Vice President
Roger R. Vanderlaan 50 Chief Operations Officer
Laurence Huff 39 Chief Financial Officer
Mr. Nightingale has served in his present position since June 1999. For more
than the previous five years, he served as Vice President of the Company.
Mr. Gallagher was appointed Vice President of the Company in June 1998. Prior
to that, he served as both Vice President, Sales & Marketing of the Company's
Cook Bates Division from March 1998 to June 1998 and as Vice President, Sales
& Marketing of the Company's Super Glue and PRO SEAL Divisions for more than
the previous five years.
Mr. Vanderlaan was appointed Chief Operations Officer of the Company in June
1999. From March 1999 to June 1999, he was Director of Operations of the
Company. For more than the previous five years, he served as Operations
Manager for The Sherwin-Williams Company, Anaheim, California.
Mr. Huff was appointed Chief Financial Officer of the Company in September 1999.
For more than the previous five years, he served as Assistant Corporate
Controller of Stater Bros. Markets, Colton, California.
Executive Compensation
The following table shows, as to the executive officers of the Company,
information concerning compensation paid to them for services to the Company
in all capacities during the fiscal year ended June 30, 1999, as well as the
total compensation paid to such persons for the Company's previous two fiscal
years, provided such persons were executive officers of the Company in such
fiscal years.
Summary Compensation Table
--------------------------
Other All Other
Annual Compensation
Name and Principal PositionYearSalary Bonus Compensation (1)
-------------------------------------- ----- ------------
W.T. Nightingale, III 1999 $134,695 $ 0 (3) $3,630
President and Chief 1998 $130,630 $ 0 (3) $2,724
Executive Officer(2) 1997 $110,240 $ 0 (3) $1,987
James F. Gallagher(4) 1999 $147,517 $ 0 (3) $4,018
Vice President 1998 $129,064 $ 0 (3) $3,787
Roger R. Vanderlaan(5) 1999 $ 37,500 $ 0 (3) $ 385
James T. Munn(6) 1999 $292,244(7) $ 0 (3) $5,317
Former President
and Chief 1998 $261,000 $ 0 (3) $5,762
Executive Officer 1997 $261,000 $ 700 (3) $5,044
Howard J. Bloom(8) 1999 $ 90,899 $ 0 (3) $2,918
Former Vice President 1998 $113,446 $ 0 (3) $4,283
Robert J.
Cavazos, Jr.(9) 1999 $144,137(7) $ 0 (3) $3,500
Former Chief
Financial 1998 $110,794 $ 0 (3) $3,221
Officer 1997 $104,684 $ 0 (3) $2,548
---------------------
(footnotes on following page)
(footnotes from previous page)
(1) No compensation was paid in 1997-1999 pursuant to Long Term Incentive
Plans as that term is defined in the regulations. All Other Compensation
consists of (i) Company contributions to the respective individual's
Qualified Tax-Deferred Savings Plan account and (ii) Company payments of
group life insurance premiums on behalf of the respective individual, as
follows: 1999: Nightingale, Company contribution to TDSP, $2,420; group
life insurance premiums, $1,210; Gallagher, Company contribution to TDSP,
$2,808; group life insurance premiums, $1,210; Vanderlaan, Company contri-
bution to TDSP, $0; group life insurance premiums, $385; Munn, Company
contribution to TDSP, $4,396; group life insurance premiums, $921;
Bloom, Company contribution to TDSP, $1,900; group life insurance
premiums, $1,018; Cavazos, Company contribution to TDSP, $2,579; group
life insurance premiums, $921; 1998: Nightingale, Company contribution
to TDSP, $2,403; group life insurance premiums, $320; Gallagher, Company
contribution to TDSP, $2,373; group life insurance premiums, $1,414; Munn,
Company contribution to TDSP, $4,349; group life insurance premiums,
$1,414; Bloom, Company contribution to TDSP, $2,077; group life insurance
premiums, $2,205; Cavazos, Company contribution to TDSP, $2,033; group
life insurance premiums, $1,188; 1997: Nightingale, Company contribution
to TDSP, $1,637; group life insurance premiums, $350; Munn, Company
contribution to TDSP, $3,499; group life insurance premiums, $1,545;
Cavazos, Company contribution to TDSP, $1,559; group life insurance
premiums, $989.
(2) Mr. Nightingale was promoted from Vice President to President and Chief
Executive Officer in June 1999.
(3) Other Annual Compensation consists of amounts paid for car allowances and,
for one person, for dependents' insurance benefits. In all of these
cases, the amounts totaled less than 10% of the officer's salary for the
year.
(4) Mr. Gallagher was appointed Vice President in June 1998.
(5) Mr. Vanderlaan joined the Company in March 1999 and became Chief Opera-
tions Officer in June 1999.
(6) Mr. Munn left the Company in March 1999.
(7) Includes a Company payment pursuant to a deferred compensation plan.
(8) Mr. Bloom was appointed Vice President in June 1998 and left the Company
in April 1999.
(9) Mr. Cavazos left the Company in March 1999.
Options Granted During Fiscal 1999
The following table summarizes the grants of options to purchase the
Company's Common Stock made to the executive officers of the Company in the
fiscal year ended June 30, 1999.
Percent of
Total Options
Number of Granted to
Options Employees in Exercise Expiration Value at
Name Granted Fiscal Year Price Date Grant Date
--------------- -------- ----------- -------- ---------- ----------
William T.
Nightingale, III 0 0 -- -- --
James F. Gallagher 0 0 -- -- --
Roger R.
Vanderlaan 50,000 67% $1.047 06/28/09 $40,419*
James T. Munn 0 0 -- -- --
Howard J. Bloom 0 0 -- -- --
Robert J. Cavazos, Jr. 0 0 -- -- --
* The stock option was valued using the Black-Scholes option-pricing model with
the following assumptions: volatility rate of 66.54%, risk-free interest
rate of 5.93% and an expected life of 10 years.
Option Exercises and Fiscal 1999 Year-End Values
The following table shows, as to the executive officers of the Company,
information concerning (i) the value (aggregate fair market value less exer-
cise price) realized upon the exercise of stock options by such persons during
the fiscal year ended June 30, 1999 and (ii) the number and value of the stock
options held by those persons at June 30, 1999.
Value of
Number Number Value of Unexer-
Of Unex- Of Unex- Unexer- cised Un-
Shares ercised exercised cised Exer- exercis-
Acquired exercis- Unexer- cisable In- able In-
on Value able cisable the-Money the-Money
Name Exercise Realized Options Options Options Options
------------- --------- -------- -------- --------- ------------- --------
William T.
Nightingale,
III 47,500 $ 54,958 400,000 50,000 $134,000 $20,250
James F.
Gallagher 0 0 250,000 0 $ 18,750 --
Roger R.
Vanderlaan 0 0 0 0 -- --
James T. Munn 500,000 $297,000 0 0 -- --
Howard J. Bloom 0 0 0 0 -- --
Robert J.
Cavazos, Jr. 65,000 $ 41,665 0 0 -- --
Directors' Compensation
Non-employee directors of the Company are paid $500 per month for their
services as directors, plus actual expenses for living and travel to and from
the meetings. During the fiscal year ended June 30, 1999, no payments were made
to the directors with respect to special assignments.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Carl Hathaway, John Hockin
and Larry Reynolds. All of such persons are non-employee directors.
In October 1994, the Company loaned to John Hockin, a director of the
Company, $309,187.50 to enable Dr. Hockin to exercise a nonqualified stock
option. The note was a full recourse note, had a four-year term, bore interest
at 7.89% per year, and was secured by the 485,000 shares of Pacer Common Stock
purchased pursuant thereto. In 1998, the Board extended the term of the note
for six months. Dr. Hockin paid portions of this note in August 1997, January
1999 and February 1999 and paid the remaining balance in full in April 1999.
Larry Reynolds, a director of the Company, and the law firm of Reynolds
& Jensen, LLP, of which Mr. Reynolds is a partner, have performed legal services
in the past for the Company. The Company believes that the terms and costs of
such legal services provided by Mr. Reynolds were at least as fair to the
Company as could have been obtained from unaffiliated law firms. The Company
expects such services to continue in the future.
REPORT OF COMPENSATION COMMITTEE
Introduction
The Compensation Committee (the "Committee") of the Board of Directors
of the Company is comprised of Messrs. Hathaway, Hockin and Reynolds, all non-
employee Directors of the Company. It is responsible for reviewing and recom-
mending for approval by the Company's Board of Directors the cash and equity
compensation for the Company's Chief Executive Officer and other executives.
Cash compensation is comprised of salary and bonus, and equity compensation
has been comprised of stock options. The Committee generally meets once per
year at or shortly prior to the meeting of the Board during the first quarter
of the fiscal year. This report is for the fiscal year July 1, 1998 through
June 30, 1999; accordingly, the Committee met on August 7, 1998 and formulated
recommendations to the Board of Directors, which acted thereon at its regular
meeting on August 7, 1998.
Compensation Philosophy
The level of compensation to executives of the Company is related to both
corporate and individual performance. Corporate performance is judged based
upon both the results for the immediately preceding fiscal year and, very
importantly, on the Company's performance over the longer term. Individual
performance is measured based upon particular responsibilities of each function,
performance to specific goals, and general management skills.
Compensation Program
The Company has a comprehensive compensation program which consists of
task compensation, both fixed and variable, and, if the situation warrants,
equity based compensation. The principal components of the program, which are
intended to attract, retain, motivate and reward executives who are expected
to manage both the short-term and long-term successes of the Company,
are:
1. Salary: The Committee meets at least once annually to review and approve
each executive's salary for each annual period of employment ending with
the anniversary date of employment. If, because of this scheduling,
adjustments are warranted, it is possible that increases may be effective
retroactively or prospectively. The base salary component of compensation
is intended to reward an executive for normal levels of performance, as
opposed to the bonus component which is intended to compensate for per-
formance exceeding expected levels. When reviewing base salaries, the
Committee considers the following factors: individual performance,
corporate performance, levels of responsibility and prior experience.
The Committee also reviews published information regarding the compen-
sation of executives at companies comparable to the Company to determine
that the Company's compensation is both competitive and reasonable, but
does not attempt to set compensation within any particular range or level
by comparison with the compensation reviewed. Also considered in the
evaluation is the potential that a competitor of the Company may attempt
to lure a key executive employee away from the Company. Lastly, the
CEO's recommendation is also considered because of the "team" approach to
management utilized by the Company.
2. Bonus: Based upon the quality of corporate performance over time,
corporate performance over the immediately preceding year, as well as
the qualitative performance of each individual executive, the Committee
recommends to the Board the amount of cash bonus (if any) to be paid to
him or her. The recommendation of the CEO is also considered in deter-
mining the amount of any bonus recommended to be paid to any individual
executive because of the team approach utilized by management of the
Company.
3. Stock Options: Given the Company's limited resources and commitment to
the bottom line, the Company believes it cannot rely solely on cash
compensation to compete for and to provide incentives to its employees.
From time to time, pursuant to a stock option plan, stock options are
used by the Company to provide long term incentives to its executives.
The giving of stock options is not automatic but is based on much the
same evaluation as that utilized for bonuses with a recommendation being
made to the Board relative thereto. When a stock option is granted, the
number of shares given may or may not, depending on the Board's deter-
mination, immediately vest or vest on a prorated basis over a period of
years. The number of stock options for any particular executive, if
granted, is determined by an assessment principally of the significance
of the function performed by the executive and also of the executive's
individual past, current and expected future contribution to the success
of the Company.
4. CEO Compensation: The Committee determined the CEO's compensation for the
fiscal year ended June 30, 1999 using the foregoing principles. The
Committee noted that in the fiscal year ended June 30, 1998, the Company
increased its net sales by 24% and its net income by 27% over the
previous fiscal year. The Committee also took note of the grant to Mr.
Munn of a ten-year incentive stock option to purchase 1,000,000 shares
of the Company's Common Stock which it had authorized in March 1995.
This option was scheduled to vest as to 100,000 shares annually from 1995
until 2004. The Committee considered both Mr. Munn's potential upside
resulting from this option and his salary level, and arrived at what it
considered to be an appropriate compensation package for the fiscal year
ended June 30, 1999. Mr. Munn left the Company in March 1999.
COMPENSATION COMMITTEE
Carl Hathaway
John G. Hockin, II
Larry K. Reynolds
STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth the Company's total shareholder return as
compared to the S&P 500 (R) Index and the S&P(R) Chemicals Index over a five-
year period, beginning June 30, 1994, and ending June 30, 1999. The total
shareholder return assumes $100 invested at the beginning of the period in the
Company's common stock, the S&P 500 and the S&P Chemicals Index. It also
assumes reinvestment of all dividends.
Effective in November 1994, the Company and James T. Munn, the former
President and CEO, entered into a two-year employment agreement. Mr. Munn
received a salary of $261,000 per annum during the term of said Agreement. He
also received a ten-year incentive stock option to purchase 1,000,000 shares
of the Company's Common Stock at $1.00 per share. Mr. Munn left the Company
in March 1999. At that time, 400,000 shares of said option had vested and were
then
exercisable and the remaining 600,000 shares were canceled. The 400,000
shares then expired 30 days after Mr. Munn's departure without having been
exercised.
In October 1994, the Company loaned to John Hockin, a director of the
Company, $309,187.50 to enable Dr. Hockin to exercise a nonqualified stock
option. The note was a full recourse note, had a four-year term, bore interest
at 7.89% per year, and was secured by the 485,000 shares of Pacer Common Stock
purchased pursuant thereto. In 1998, the Board extended the term of the note
for six months. Dr. Hockin paid portions of this note in August 1997, January
1999 and February 1999 and paid the remaining balance in full in April 1999.
Larry Reynolds, a director of the Company, and the law firm of Reynolds
& Jensen, LLP, of which Mr. Reynolds is a partner, have performed legal services
in the past for the Company. The Company believes that the terms and costs of
such legal services provided by Mr. Reynolds were at least as fair to the
Company as could have been obtained from unaffiliated law firms. The Company
expects such services to continue in the future.
AUDITORS
KPMG LLP served as the Company's auditors for the fiscal year ended June
30, 1999. No decision has been made regarding auditors for the fiscal year
ending June 30, 2000. The Company expects that representatives of KPMG LLP will
be present at the Meeting and will be afforded an opportunity to make a
statement if they desire to do so. The Company also expects a representative
of KPMG LLP to be available at that time to respond to appropriate questions
addressed to the officer presiding at the Meeting.
Directors and executive officers are required to comply with section 16(a)
of the Securities Exchange Act of 1934, which requires generally that such
persons file (i) a report on Form 3 disclosing their ownership interest in the
Company's Common Stock within 10 days of assuming their position and (ii)
reports on Form 4 on or before the tenth day of the month following any month in
which they engage in any transaction in the Company's Common Stock. Joe F.
Brock, a director, filed one Form 4 late with respect to transactions that
occurred in the fiscal year ended June 30, 1999. The late Form 4 reflected one
transaction in the Company's Common Stock. Mr. Brock resigned from the Board
in April 1999. Jonathan Merriman became a director in the fiscal year
ended June 30, 1999 and filed his Form 3 late. James T. Munn, a director,
filed one Form 4 late with respect to transactions that occurred in the fiscal
year ended June 30, 1999. The late Form 4 reflected five transactions in the
Company's Common Stock. Mr. Munn resigned from the Board in June 1999.
Geoffrey Tirman became a director in the fiscal year ended June 30, 1999 and
filed his Form 3 late. Mr. Tirman also filed two Form 4s late with respect to
transactions that occurred in the fiscal year ended June 30, 1999. The late
Form 4s reflected two transactions in the Company's Common Stock. Roger
Vanderlaan became an officer in the fiscal year ended June 30, 1999 and
filed his Form 3 late.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
THE 2000 ANNUAL SHAREHOLDERS' MEETING
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's Annual Meeting to be held in
2000 must be received by the Company no later than May 27, 2000 in order that
they may be included in the Proxy Statement and form of proxy relating to that
meeting. It is recommended that shareholders submitting proposals direct them
to the Secretary of the Company and utilize certified mail-return receipt
requested in order to provide proof of timely delivery. No such proposals were
received with respect to the Annual Meeting scheduled for November 9, 1999.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE
FURNISHED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST to the
Office of the President, Pacer Technology, 9420 Santa Anita Avenue, Rancho
Cucamonga, California 91730.
OTHER MATTERS
The cost of soliciting proxies will be borne by the Company.
Solicitations are expected to be primarily by mail, but may also be made by
telephone, telegraph or personal contact by officers, directors or employees
of the Company without additional compensation. The Company will also request
persons, firms and corporations holding shares which are beneficially owned
by others to send proxy materials to, and obtain proxies from, the beneficial
owners and will reimburse such holders for their reasonable expenses.
The Board of Directors of the Company knows of no business, matters or
proposals which will be presented for consideration at the Meeting other than
as discussed above. However, if any other business, matters or proposals
should come before the Meeting, it is the intention of the persons named as
proxy holders in the enclosed form of proxy to vote the proxies as shall be
designated by the management of the Company. If the number of proxies
necessary to adopt either of the matters discussed above is not obtained by the
time of the Meeting, it is the intention of the proxy holders, unless
instructed otherwise, to postpone or adjourn the Meeting as to such matter to
a later time or times.
By Order of the Board of Directors:
W.T. Nightingale, III
President & CEO
Rancho Cucamonga, California
October 4, 1999
P THIS PROXY IS SOLICITED ON BEHALF OF
R THE BOARD OF DIRECTORS OF PACER TECHNOLOGY
O
X 1999 Annual Meeting of Shareholders
Y
The undersigned shareholder of Pacer Technology, a California corpor-
ation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated October 4, 1999, and
Annual Report to Shareholders for the fiscal year ended June 30, 1999, and
hereby appoints John G. Hockin, II and Larry K. Reynolds, and each of them
acting singly, proxies and attorneys-in-fact with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Shareholders of the Company to be held on
Tuesday, November 16, 1999, at 9:00 a.m., California time, at the DoubleTree
Hotel, Ontario, 222 North Vineyard Avenue, Ontario, California, and at any
adjournment or adjournments thereof, and to vote all Common Shares to which
the undersigned would be entitled, if then and there personally present, on
the matters set forth on the reverse side. Any one of such attorneys-in-fact
or substitutes as shall be present and shall act at said meeting or any
adjournment(s) thereof shall have and may exercise all powers of said
attorneys-in-fact hereunder.
SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[X] Please mark votes
as in this example.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSAL 1, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
1. ELECTION OF DIRECTORS
Nominees: Carl E. Hathaway, John G. Hockin, II, D. Jonathan Merriman,
W.T. Nightingale, III, Larry K. Reynolds, Geoffrey Tirman
FOR WITHHOLD
[ ] [ ]
[ ]_________________________________________
For all nominees except as noted above
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(This Proxy should be marked, dated, signed by the shareholder
(s) exactly as his name appears hereon and returned promptly
in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
Signature:____________ Date __________
Signature:____________ Date __________
MARK HERE FOR
ADDRESS CHANGE AND
NOTE AT [ ] LEFT
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