UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under SS.240.14a-12
CYBEROPTICS CORPORATION
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(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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2) Aggregate number of securities to which transaction applies: N/A
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
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was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
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CYBEROPTICS CORPORATION
5900 Golden Hills Drive
Minneapolis, MN 55416
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 8, 2003
To the Shareholders of
CYBEROPTICS CORPORATION:
The Annual Meeting of Shareholders of CyberOptics Corporation (the
"Company") will be held on Friday, May 16, 2003, at the Marquette Hotel, 710
Marquette Avenue, Minneapolis, Minnesota at 3:00 p.m. for the following
purposes:
1) To elect seven directors;
2) To approve amendments to the CyberOptics Corporation
1992 Employee Stock Purchase Plan increasing the
number of shares of common stock reserved for
issuance thereunder by 100,000 shares and extending
the term thereof to the completion of the purchase
period which ends on the first business day occurring
on or after July 31, 2012; and
3) To consider such other matters as may properly come
before the meeting or any adjournments thereof.
Only holders of record of Common Stock at the close of business on
April 1, 2003, will be entitled to receive notice of and to vote at the meeting.
Shareholders who do not expect to attend the meeting in person are urged to fill
in, date, sign and promptly return the proxy in the enclosed envelope, or, for
registered shareholders, promptly return your proxy online at
HTTP://WWW.EPROXY.COM/CYBE, as described more completely on the enclosed proxy
card. If you later desire to revoke your proxy, you may do so at any time before
it is exercised.
By Order of the Board of Directors
Thomas Martin
SECRETARY
Minneapolis, Minnesota
April 8, 2003
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IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
In order that there may be a proper representation at the meeting,
you are urged, whether you own one share or many,
to promptly complete, sign and mail your proxy,
or to return it electronically at the website set up for this purpose.
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CYBEROPTICS CORPORATION
5900 Golden Hills Drive
Minneapolis, MN 55416
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON MAY 16, 2003
The accompanying proxy is solicited on behalf of the Board of Directors
of CyberOptics Corporation (the "Company") for use at the Annual Meeting of
Shareholders to be held Friday, May 16, 2003, at 3:00 p.m. at the Marquette
Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402, and at any
adjournments thereof. The cost of solicitation, including the cost of preparing
and mailing the Notice of Annual Meeting of Shareholders and this Proxy
Statement, will be paid by the Company. Representatives of the Company may,
without cost to the Company, solicit proxies for the management of the Company
by means of mail, telephone or personal calls.
The only matters the Board of Directors knows will be presented are
those stated in Proposals 1 and 2 of this Proxy Statement. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF PROPOSALS 1 AND 2.
Should any other matter properly come before the meeting, it is intended that
the persons named in the enclosed proxy will have authority to vote such proxy
in accordance with their judgment on such matter.
VOTING RIGHTS AND PROCEDURES
Shares of the Company's common stock, no par value (the "Common
Stock"), represented by proxies in the form solicited will be voted in the
manner directed by a shareholder. If no direction is made, the proxy will be
voted for the election of the nominees for director named in this Proxy
Statement, for the amendments to the Employee Stock Purchase Plan, and in the
discretion of the proxies with respect to any other matters properly brought
before the meeting. Shares voted as a "withhold vote for" one or more directors
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting and as unvoted, although
present and entitled to vote, for purposes of the election of the directors with
respect to which the shareholder has abstained. If a broker submits a proxy that
indicates the broker does not have discretionary authority to vote certain
shares, those shares will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the meeting, but
will not be considered as present and entitled to vote with respect to the
matters voted on at the meeting.
Proxies may be revoked at any time before being exercised by delivery
to the Secretary of the Company of a written notice of termination of the
proxies' authority or a duly executed proxy bearing a later date. Only holders
of record of Common Stock at the close of business on April 1, 2003, will be
entitled to receive notice of and to vote at the meeting. On April 1, 2003, the
Company had 8,190,416 shares of Common Stock outstanding. Each outstanding share
is entitled to one vote on all matters presented at the meeting.
A copy of the Company's Annual Report to Shareholders for the year
ended December 31, 2002, is being furnished to each shareholder with this Proxy
Statement. This Proxy Statement and a form of proxy are being mailed to
shareholders on or about April 8, 2003.
2
PROPOSAL I-ELECTION OF DIRECTORS
NOMINEES
Seven persons have been nominated for election at the Annual Meeting:
Steven K. Case, Alex B. Cimochowski, Kathleen P. Iverson, Erwin A. Kelen, Irene
M. Qualters, Steven M. Quist and Michael M. Selzer, Jr. Each nominee has served
as a director of the Company for more than one year. The following information
is furnished with respect to each nominee as of March 31, 2003:
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE FOR PAST FIVE YEARS SINCE
-------------------------- -------------------------------------------------------------------------- -----------------
Steven K. Case Chairman of the Company since September 1995 and Chairman and Chief January 1984
Age 54 Executive Officer of Avanti Optics Corporation from May 2000 until
February 2003; President of the Company from 1984 until February 1998;
adjunct Professor of Electrical Engineering at the University of
Minnesota since 1978 and member of University Industry Advisory Board.
Kathleen P. Iverson President and Chief Executive Officer of the Company since January 2003; May 1998
Age 47 President and Chief Operating Officer of the Company from January 2002
until January 2003; Vice President/General Manager, Complete Point
Solutions, of Rosemount, Inc., a subsidiary of Emerson Electric Co.,
from December 2000 to January 2002; Vice President/General Manager,
Worldwide Temperature, of Rosemount, Inc. from January 1996 to
December 2000.
Steven M. Quist General Manager at the Company's Portland, Oregon facility since January June 1991
Age 57 2003. Chief Executive Officer from March 2000 until December 2002;
President of the Company from February 1998 until January 2002; President
of Rosemount Inc., a subsidiary of Emerson Electric Co., and an employee
of Rosemount, Inc. from 1970 until joining the Company; Director of
Rimage Corporation and Data I/O Corporation.
Alex B. Cimochowski + President and owner of Four Peaks Technologies, Inc., a printing company, May 1984
Age 63 since November 1996; independent business consultant from September 1995
to November 1996; Chief Executive Officer of Delphax Systems from
November 1988 to September 1995.
Erwin A. Kelen * President of Kelen Ventures since 1990; President of Datamyte Corporation, February 1995
Age 67 a subsidiary of Allen Bradley Co., from 1984 until 1990; Director of
Printronix, Inc., Insignia Systems, Inc. and Computer Network
Technologies, Inc.
Irene M. Qualters + Vice President, Research Information Services, Merck & Company, Inc. June 1999
Age 53 since 1999; President of Cray Research, a subsidiary of Silicon Graphics,
Inc., and Senior Vice President of Silicon Graphics, Inc. from 1997 to
1998; Vice President of Silicon Graphics, Inc. from 1996 to 1997; Senior
Vice President of Cray Research from 1995 until its acquisition by
Silicon Graphics, Inc. in 1996.
Michael M. Selzer, Jr. *+ President, Chief Executive Officer and Director of Urologix, Inc., a June 1999
Age 50 medical device manufacturer, since January 1999; Vice President and
General Manager-Neurostimulation Business of Medtronic, Inc., a medical
device manufacturer, from 1994 until December 1998. Director of
MedAmicus, Inc.
+ Member of Audit Committee
* Member of Compensation Committee
3
All nominees elected at the Annual Meeting will serve until the next
annual meeting or until their earlier death, resignation, removal or
disqualification. The persons named in the accompanying proxy intend to vote the
proxies held by them in favor of the nominees named above as directors, unless
otherwise directed. Should any nominee for director become unavailable for any
reason, the proxies will be voted in accordance with the best judgment of the
persons named therein. The Board of Directors has no reason to believe that any
candidate will be unavailable.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMMON STOCK
REPRESENTED AT THE MEETING IS REQUIRED FOR THE ELECTION OF EACH DIRECTOR. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE.
COMPENSATION OF DIRECTORS
Directors who are not also employees receive directors' fees of $1,000
per meeting attended, and $500 per meeting held by conference call. Until 1999,
directors who were not also employees also received an option to purchase 18,000
shares vesting over a period of four years upon their initial election to the
Board of Directors, or upon shareholder approval of the Stock Option Plan for
Nonemployee Directors in 1993 and 1997, if they were directors on the dates of
approval. Mr. Cimochowski and Mr. Quist each received options in 1993 and 1997,
Mr. Kelen received options in 1995 and 1997, and Ms. Iverson received options in
1998 under this arrangement.
In 1999, the Stock Option Plan for Nonemployee Directors was amended to
provide for the grant to each nonemployee director of an option to purchase
4,500 shares, which are exercisable from the date of grant, at each annual
meeting at which the director is elected or reelected, commencing with the
annual meeting at which previous options are fully vested. Ms. Qualters and Mr.
Selzer each received an option to purchase 4,500 shares under the amended plan
in each of 1999, 2000, 2001 and 2002. Mr. Cimochowski and Mr. Kelen each
received an option to purchase 4,500 shares under the amended plan in 2002.
COMMITTEES/MEETINGS
Except for its Compensation Committee and Audit Committee, the Company
does not have any standing committees, including any nominating committee, of
the Board of Directors. The Audit Committee, which consists of Ms. Qualters, Mr.
Cimochowski and Mr. Selzer, assists the Board of Directors in monitoring the
financial statements of the Company and the Company's internal controls and
retains, approves the compensation for and oversees the work of the Company's
independent accountants in connection with their audit of the Company's
financial statements. The Compensation Committee, which consists of Mr. Kelen
and Mr. Selzer, administers the Company's stock benefit plans and determines
compensation policy and levels for the Company's executive officers. During the
fiscal year ended December 31, 2002, the Board of Directors of the Company met
six times and acted four times by writing in lieu of meeting, the Compensation
Committee met four times and acted once by action in lieu of meeting, and the
Audit Committee met six times and acted three times through its designated
chair. Every nominee for director attended at least 75 percent of the aggregate
of the total number of meetings of the Board and the total number of meetings of
the Board Committees for which such nominee was a member.
EXECUTIVE OFFICERS
In December 2002, Mr. Quist retired as the Company's Chief Executive
Officer, and Ms. Iverson was named as his replacement. The current executive
officers include Ms. Iverson, Dr. Case and Scott G. Larson, 42, who started as
Controller with the Company in October 1995, was promoted to Director of
Financial Reporting in February 2000, and was promoted to Vice
President--Finance and Chief Financial Officer in August 2000. Mr. Larson was
Controller of Medisys, Inc., a publicly traded medical device company, from 1991
until joining the Company.
PROPOSAL II--APPROVAL OF THE AMENDMENT TO THE
COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN
As of March 21, 2003, the Company's Board of Directors adopted, subject
to shareholder approval, an amendment (i) to increase the number of shares of
Common Stock available for issuance under the CyberOptics Corporation 1992
Employee Stock Purchase Plan (the "Purchase Plan") by 100,000 shares and (ii) to
extend the term of the Purchase Plan to the completion of the purchase period
which ends on the first business day occurring on
4
or after July 31, 2012. As of March 31, 2003, there were 171,849 shares
remaining that could be issued under the Purchase Plan.
The Purchase Plan provides an attractive means for employees to
accumulate ownership in the Company as well as to assist the Company in
attracting highly skilled and qualified individuals. Therefore, the Board of
Directors believes that it is desirable to amend the Purchase Plan to continue
its utility by increasing the number of shares of Common Stock authorized for
issuance thereunder and to extend its term.
The Purchase Plan was initially approved by the Company's shareholders
in 1992 and is administered by the Compensation Committee of the Board of
Directors (the "Compensation Committee"). The Purchase Plan reserves shares of
the Company's Common Stock for sale to participating employees at the lower of
85% of the fair market value of the Company's Common Stock on the first business
day, or the last business day, of the applicable purchase period. Under the
terms of the Purchase Plan, purchase periods begin on the first business day of
August of each year and end on the last business day of July of the following
year.
Participating employees may direct the Company to make payroll
deductions of between 1% and 10% of their compensation during a purchase period
that will be applied to the purchase of shares under the Purchase Plan and may
withdraw from the Purchase Plan at any time (although no employee may enroll
again after a withdrawal until commencement of the next purchase period). No
participant may purchase more than 10,000 shares or shares having a market value
exceeding $25,000 under the Purchase Plan during any purchase period. If total
purchases during a purchase period would result in the sale of more than 100,000
shares under the Purchase Plan, each participant is allocated a pro rata portion
of the 100,000 shares that may be sold in the purchase period.
Any employee of the Company or any of its subsidiaries (other than
employees who have been employed by the Company or any of its subsidiaries fewer
than six months or whose customary employment by the Company or any of its
subsidiaries is less than 20 hours per week or six months per calendar year) is
eligible to participate in the Purchase Plan, provided that no employee who
holds more than 5% percent of the outstanding Common Stock may participate. As
of March 31, 2003, approximately 150 employees were eligible to participate in
the Purchase Plan.
Upon a participant's termination of employment with the Company for any
reason other than approved retirement or death, participation in the Purchase
Plan will cease and the balance of the participant's share purchase account will
be paid, in cash, to the participant within 30 days. Upon the death or approved
retirement of a participant, no further contributions will be made to the
participant's share purchase account and the balance in the account will either
be used to purchase shares of Common Stock at the end of the current purchase
period or be paid in cash if requested, provided that in the case of approved
retirement, no purchase of Common Stock shall be allowed if the last day of the
purchase period in which such retirement occurs is more than 3 months following
the date of such retirement.
The Purchase Plan may be amended by the Board of Directors at any time,
except that the Board of Directors cannot, without shareholder approval, adopt
any amendment that (i) would cause Rule 16b-3 under the Exchange Act to become
unavailable with respect to the Purchase Plan, (ii) requires shareholder
approval under any rules or regulations of the National Association of
Securities Dealers, Inc. or any securities exchange applicable to the Company,
or (iii) permits the issuance of Common Stock before payment in full.
The Board of Directors adopted the amendments to the Purchase Plan in
order to allow the Company to continue to provide a convenient and advantageous
way for its employees to make systematic purchases of Common Stock and therefore
to develop a stronger incentive to work for the continued success of the
Company. The amendments to the Purchase Plan are being submitted to the
shareholders for approval in order to comply with the requirements of the
Internal Revenue Code of 1986, as amended.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMMON STOCK
REPRESENTED AT THE MEETING IS REQUIRED FOR APPROVAL OF THE AMENDMENTS TO THE
PURCHASE PLAN DESCRIBED ABOVE. THE BOARD RECOMMENDS A VOTE FOR AMENDING THE
PURCHASE PLAN AS DESCRIBED ABOVE.
5
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT OF THE BOARD OF DIRECTORS
The Company's executive compensation policies are recommended and
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee is currently composed of two independent, outside
directors.
The principal objective of the Company's compensation policy is to
increase shareholder value by providing an incentive to officers and employees
to maximize the Company's performance. Although the Compensation Committee
normally reviews and resets base salary, annual incentive compensation and
long-term equity incentives annually, because the Company's performance had
declined significantly as a result of the depressed conditions in the
electronics industry, and because Mr. Quist had announced plans to retire
mid-year, the Compensation Committee did not increase salaries of its executives
from 2001 to 2002. In fact, executive management accepted a 10% reduction in
salaries to help reduce expenses in mid-2001 and agreed to continue the 10%
salary reduction through November 2002. Other non-executive employees received a
5% salary reduction, but full salaries for other employees were reinstated
before executives' salaries in July 2002.
As a result, the base salary of Mr. Quist, as Chief Executive Officer
of the Company, declined by 10% from 2001 to 2002. Further, in anticipation of
his retirement and to further reduce expense, Mr. Quist accepted a 50% reduction
in pay commencing in July 2002. Ms. Iverson, who started with the Company in
January 2002 and became Chief Executive Officer in January 2003, negotiated her
employment terms after the salary reduction had been implemented. The terms upon
which the Company retained Ms. Iverson, including her $225,000 salary, a $38,500
hiring bonus and a $ 30,000 guaranteed bonus, reflect in part the desire to
defer cash expense.
Although the Company established an executive bonus program in early
2002 which would pay bonuses based on a matrix that was dependent on increases
in revenue and in net income before income taxes, because revenue and net income
declined, no bonuses based on performance were paid. Further, although some
portion (30% for Mr. Quist) of executive bonuses was based on a sliding scale
directly related to the percentage by which the year's revenue exceeded budget,
revenue targets were not achieved in 2002 and no bonuses were paid (except the
guaranteed bonus for Ms Iverson mentioned above).
Although stock options have historically been used as long-term
incentives, the Company used stock options during 2002 primarily as a retention
mechanism for employees, including executives. In February 2002, the Company
granted stock options to substantially all of its employees in recognition of
the continuation of the salary reductions that they had accepted, but that they
had expected would be lifted in early 2002. The size of these grants ranged from
options to purchase 100 shares for non-technical employees to options to
purchase 1500 shares for employees such as Mr. Quist. Ms. Iverson received, as a
condition to her employment, options to purchase 50,000 shares, and as a
condition to her promotion to chief executive officer, options to purchase an
additional 35,000 shares. Further, the Company granted to Dr. Case and Mr.
Larson, its Chairman and its Chief Financial Officer, additional options to
purchase 75,000 shares and 25,000 shares, respectively, in May 2002 (immediately
after the annual meeting) as incentives and to retain them during a period of
increased responsibility and decreased pay and to replace options that had
expired.
The Compensation Committee believes that the compensation program for
executive officers during the year 2002 achieved the principal objectives for
which it was designed.
Erwin A. Kelen
Michael M. Selzer, Jr.
6
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for
the last three fiscal years awarded to or earned by Mr. Quist, the Chief
Executive Officer of the Company during the year ended December 31, 2002, and
the executive officers of the Company who received cash compensation from the
Company during the year ended December 31, 2002 exceeding $100,000.
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- -------------------------- -------
RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS(#) PAYOUTS SATION(1)
-------------------- ------ -------- ---------- ------------ --------- ---------- ------- ----------
Kathleen P. Iverson 2002 $212,019 $68,500(3) - - 85,000 - $3,037
Chief Operating
Officer,
President &
Director (2)
Steven M. Quist 2002 164,539 - - - 1,500 - 8,618
Chief Executive 2001 212,011 - - - 13,500 - 15,224
Officer & Director 2000 214,134 143,225 - - - - 4,922
William J. Farmer 2002 141,300 - - - 21,200 - 4,318
Senior Vice 2001 145,282 - - - 3,200 - 4,506
President
2000 134,189 68,800 - - 22,500 - 6,837
Scott G. Larson 2002 119,000 - - - 26,000 - 3,632
Vice President-
Finance & Chief
Financial Officer 2001 117,838 - - - 3,000 - 5,268
2000 94,366 26,886 - - 10,000 - 2,865
---------------------
(1) Includes Company contributions for such officers to a 401K plan, and
for some officers, travel bonus reimbursements, tax preparation
reimbursements and Company contributions of commuting expenses.
(2) Ms. Iverson began her employment with the Company in January 2002.
(3) Includes $38,500 hiring bonus and $30,000 guaranteed 2002 bonus paid in
2003.
LONG-TERM INCENTIVE PLAN AWARDS/EMPLOYMENT AGREEMENTS
Other than its Restated Stock Option Plan and the 1998 Stock Incentive
Plan, the Company does not maintain any long-term incentive plans. It does not
have any employment agreements with any of the executive officers named in the
Summary Compensation Table, except for a retirement agreement with Mr. Quist and
a separation agreement with Mr. Farmer. In accordance with his retirement
agreement, Mr. Quist served from July 2002 through December 2002 at an annual
salary rate of $110,000. Mr. Quist also signed a consulting agreement under
which he agreed to provide management consulting for up to twelve days during
2003 for fees of $2,000 per day. Although he originally intended to retire on
December 31, 2002, in order to assist with management transitions at the
Company's Portland, Oregon operations, Mr. Quist also agreed to serve on a
part-time basis as manager of CyberOptics SemiConductor through December 31,
2003 at an annual salary of $80,000. As part of his retirement agreement, the
Company accelerated the vesting for options held by Mr. Quist so that they were
fully vested on December 31, 2002, and extended the deadline for exercising his
options to December 31, 2004. Mr. Quist and his spouse also receive certain
health insurance benefits under his retirement agreement. Under his separation
agreement, Mr. Farmer continues as an employee through July 10, 2003, at full
salary but he resigned as an officer and his duties were reduced as of September
30, 2002. The Company also accelerated the vesting of options held by Mr. Farmer
so that they were fully vested on January 10, 2003, and extended the deadline
for exercising his options to September 30, 2004.
7
STOCK OPTIONS
The Company maintains a Restated Stock Option Plan, a 1998 Stock
Incentive Plan and a Stock Option Plan for Nonemployee Directors. The Company
may grant stock options to executive officers and other employees and
consultants of the Company under the Restated Stock Option Plan and the 1998
Stock Incentive Plan. The following table sets forth information with respect to
options granted to the executive officers listed in the Summary Compensation
Table in 2002:
OPTION GRANTS IN 2002
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ----------------------------------
NAME (#) 2002 ($/SH) DATE 5% ($) 10% ($)
-------------------- ------------ ------------------ ---------- ------------- ---------------- -------------
Ms. Iverson 50,000(2) 12.24% $11.87 2/15/2012 $373,249 $945,886
35,000(2) 8.56% 4.30 9/13/2009 61,269 142,782
Mr. Quist 1,500(3) 0.46% 11.87 12/31/2004 2,681 5,613
Mr. Farmer 1,200(3) 0.37% 11.87 9/30/2004 1,946 4,049
20,000(2) 4.89% 11.71 9/30/2004 28,773 59,494
Mr. Larson 1,000(3) 0.24% 11.87 2/15/2007 3,279 7,247
25,000(2) 6.12% 11.71 5/17/2009 119,179 277,737
------------------
(1) Represents the realizable value from the date of grant until
termination, without discounting to present value, assuming
appreciation in the market value of the Common Stock from the market
price on the date of grant at the rates indicated. Actual gains, if
any, on stock option exercises are dependent on the future performance
of the Common Stock, and overall stock market conditions. The amounts
reflected in this table may not necessarily be achieved.
(2) Options vest 25% per year commencing one year after grant and expire
five, seven or ten years after the grant.
(3) Options vest 50% on December 31, 2002 and 50% on December 31, 2003.
EQUITY COMPANSATION PLAN INFORMATION
The following table sets forth information with respect to options
exercised during 2002 and held by the executive officers listed in the Summary
Compensation Table as of December 31, 2002:
AGGREGATED OPTION EXERCISES IN 2002 AND OPTION VALUES AS OF DECEMBER 31, 2002
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME ON EXERCISE REALIZED DECEMBER 31, 2002(1) DECEMBER 31, 2002(2)
------------------- ------------ --------------- ------------------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ------------ --------------- ------------------- ---------------- ------------- ---------------
Ms. Iverson 13,500 85,000 - $16,100
Mr. Quist(3) 188,935 - - -
Mr. Farmer 19,175 33,350 - -
Mr. Larson 10,000 33,500 - -
-------------------
(1) All of such options are exercisable at a price equal to the fair market
value of the Common Stock as reported on the Nasdaq National Market
("Nasdaq") on the date of grant.
(2) Represents the difference between the closing price of the Common Stock as
reported on Nasdaq on December 31, 2002, and the exercise price of the
options.
(3) In accordance with his retirement agreement, all of Mr. Quist's options
became fully exercisable on December 31, 2002.
8
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information with respect to securities
authorized for issuance under the Company's equity compensation plans:
(c)
(a) (b) NUMBER OF SECURITIES
NUMBER OF SECURITIES WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
TO BE ISSUED UPON EXERCISE PRICE OF FUTURE ISSUANCE UNDER
EXERCISE OF OUTSTANDING QUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS (EXCLUDING THOSE
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS EREFLECTED IN COLUMN (a))
---------------------------------- -------------------- ----------------- -------------------------
EQUITY COMPENSATION PLANS APPROVED
BY SECURITY HOLDERS
Restated Stock Option Plan 440,300 $10.67 40,753
1998 Stock Incentive Plan 793,176 14.81 290,502(1)
Stock Option Plan for 157,500 10.90 63,300
Nonemployee Directors
Employee Stock Purchase Plan - - 171,849(2)
EQUITY COMPENSATION PLANS NOT
APPROVED BY SECURITY HOLDERS
Options issued to executives 220,435 12.21 -
and certain other employees
upon initial employment (3)
TOTAL 1,611,411 $12.94 566,404
------------------
(1) In addition to options, shares may be issued in restricted stock awards,
performance awards and other stock-based awards.
(2) Shares are issued based on employees' elections to participate in the
plan.
(3) Represent options received by executives and certain other employees upon
their initial employment by the Company granted on the same terms as those
options granted under equity compensation plans approved by security
holders. None of these options qualify as incentive stock options.
9
CERTAIN TRANSACTIONS
AVANTI OPTICS CORPORATION. On August 7, 2000, the Company entered into
an organization agreement with Avanti Optics Corporation ("Avanti"), a newly
formed entity for which Dr. Steven K. Case, the Chairman of the Company, served
as Chairman and Chief Executive Officer, and for which Erwin A. Kelen, a
director of the Company, served as a director. Avanti was formed to pursue the
development of products for the photonics markets. Dr. Case and his family
members acquired 13,500,000 shares, or approximately 65% of the outstanding
shares, of Avanti for $1,350,000 cash. The Company acquired 3,833,250 shares, or
approximately 12% of the outstanding shares, of Avanti for approximately
$190,000 cash, the right to hire certain Company employees, title to equipment
the Company had used in photonics research, a potential business agreement with
a telecommunications company for a photonics inspection system, and a license to
use certain intellectual property the Company had developed for the electronics
markets. The Company also agreed to partially fund development of a photonics
inspection system that Avanti was pursuing in return for rights to the
technology that was developed. The Company provided Avanti with a total of
$224,516 of funding under this arrangement in 2000, but terminated funding when
the development effort was terminated.
Between August 2000 and April 2002, Avanti completed a venture capital
financing in which it sold preferred stock and completed several smaller sales
of common stock, raising $3,400,000 to finance operations. The Company
determined not to invest in these financings because it obtained no commercial
advantage through the financings and because it had determined to focus its
development efforts on its core business.
In early 2002, Avanti again approached the Company for additional
equity financing, which the Company refused. Nevertheless, after considerable
negotiation, on April 30, 2002, the Company loaned an additional $1.5 million to
Avanti under a convertible promissory note that was secured by all of Avanti's
intellectual property and accompanied by warrants and exclusive rights to
manufacture and distribute manual and semi-automated equipment that Avanti was
developing. The note bore interest at 3% above the prime rate of interest and
was repayable on April 30, 2003, or upon an earlier event of default. The loan
and any accrued interest was to automatically convert to the type of equity
shares Avanti issued at the closing of the next qualifying equity financing
occurring on or before the maturity date of the loan at 80% of the price in that
equity round, and if there was a change of control prior to conversion, the
Company was entitled to receive twice the principal and interest then
outstanding on the loan. In consideration of the loan, the Company also received
a five-year warrant to purchase the number of shares of Avanti equity securities
as was equal to $450,000 (30% warrant coverage) divided by the price per share
in the next equity financing of Avanti. The exercise price of the warrant was
equal to the price in such next equity financing. The loan was made in part to
acquire the exclusive rights to manufacture and distribute manual and
semi-automated equipment for the assembly of surface mountable optical
components that were then under development by Avanti. The Board of the Company,
with Dr. Case and Mr. Kelen not participating, concluded that there was
substantial potential for these manual and semi-automated assembly machines and
that the transaction was on as good, or better, terms as could be obtained from
other companies in Avanti's industry.
Although Avanti met its development objectives, primarily because of
the dramatic disintegration of markets and financing for photonics equipment
companies and equipment manufacturers, Avanti was unable to locate additional
financing. By December 31, 2002, it had virtually depleted its funds,
significantly curtailed operations and notified the Company that it was unlikely
to be able to repay its obligations under the loan. In February 2003, Avanti
completely ceased business operations. By settlement agreement dated February
14, 2003, the Company foreclosed on the intellectual property assets of Avanti,
and accepted certain capital equipment and cash as partial payment for the
interest accrued under its loan. Three of Avanti's employees, including Dr.
Case, became full-time employees of the Company.
10
SHAREHOLDER RETURN
The graph set forth below compares the cumulative total shareholder
return on the common stock of the Company from January 1, 1998 through December
31, 2002 with the cumulative total return on a broad market index (the Nasdaq
NMS Index) and a peer group index (the Nasdaq Computer and Data Processing
Index). In each case, the cumulative return is calculated assuming an investment
of $100 on January 1, 1998, and reinvestment of all dividends.
[PLOT POINTS CHART]
Quarter Computer and Data
Date Nasdaq US Processing CyberOptics
---------- ---------- ----------- -----------
1/01/1998 100.000000 100 100
3/31/1998 117.036858 162.3670452 118.6787104
6/30/1998 120.253495 179.8463526 63.18322674
9/30/1998 108.499248 168.7316384 44.50451638
12/31/1998 140.989773 219.2297375 61.53491132
3/31/1999 158.091462 264.4155699 57.14379904
6/30/1999 172.765809 275.0099383 70.87756313
9/30/1999 177.012652 286.3829939 70.60064614
12/31/1999 261.483604 482.2831435 120.8742665
3/31/2000 293.743383 476.3714558 186.5365596
6/30/2000 255.450636 388.7237955 304.938353
9/29/2000 235.087043 359.5611643 120.7424013
12/29/2000 157.416870 221.9714101 111.6766664
3/30/2001 117.482430 161.9299763 69.22924771
6/29/2001 138.458470 210.8436603 80.43779258
9/28/2001 96.076739 128.959664 58.02070284
12/31/2001 318.235472 178.7411296 87.36071735
3/28/2002 293.640957 164.927297 85.51460407
6/28/2002 233.376682 131.0790764 63.22937957
9/30/2002 180.635924 101.4565371 11.47227533
12/31/2002 219.408960 123.2339218 31.39711215
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors and officers,
and any beneficial owner of more than 10% of a class of equity securities of the
Company, are required to report their ownership of the Company's equity
securities and any changes in such ownership to the Securities and Exchange
Commission (the "Commission") and the securities exchange on which the equity
securities are registered. Specific due dates for these reports have been
established by the Commission, and the Company is required to disclose in this
Proxy Statement any delinquent filing of such reports and any failure to file
such reports during the fiscal year ended December 31, 2002. Except for Ms.
Iverson, who filed a late form 4 reporting an option grant, and based upon
information provided by officers and directors, all other officers, directors
and 10% shareholders otherwise filed all reports on a timely basis in the 2002
fiscal year.
11
SHARES OUTSTANDING
The following table sets forth information pertaining to the ownership
of the Company's Common Stock by each person known by the Company to
beneficially own 5% or more of the Company's Common Stock, by each director, by
each officer named in the Summary Compensation Table, and by all officers and
directors as a group as of March 4, 2003:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
---------------------------------- ----------------------- --------
Third Avenue Management LLC
767 Third Avenue
New York, New York 10017-2023(2) 1,586,750 19.3%
Leroy C. Kopp and
Kopp Investment Advisors, Inc. and
Kopp Holding Company
7701 France Avenue South, Ste 500 1,476,926 17.9%
Edina, MN 55435(3)
Steven K. Case
5900 Golden Hills Drive
Minneapolis, MN 55416(4) 570,000 6.8%
Alex B. Cimochowski 44,056*
William J. Farmer 83,527 1.0%
Kathleen P. Iverson 28,605*
Erwin A. Kelen 106,500 1.3%
Irene M. Qualters 18,000*
Steven M. Quist 223,368 2.7%
Michael M. Selzer, Jr. 18,450*
Scott Larson 14,363 *
All executive officers and
directors as a group (9 persons) 1,105,869 12.5%
------------------------
*Less than 1%
(1) Includes 184,500 shares for Dr. Case, 40,500 shares for Mr.
Cimochowski, 52,525 shares for Mr. Farmer, 26,000 shares for Ms.
Iverson, 85,500 shares for Mr. Kelen, 18,000 shares for Ms. Qualters,
188,935 shares for Mr. Quist, 18,000 shares for Mr. Selzer, 11,500
shares for Mr. Larson, and 625,460 shares for all officers and
directors as a group, purchasable upon exercise of options exercisable
within 60 days of March 4, 2003.
(2) Based on Schedule 13G/A filed January 30, 2003. Includes 1,233,550
shares over which the holder has sole voting power.
(3) Based on Schedule 13G filed February 4, 2003. Includes 89,000 held by
Leroy Kopp or family foundations or trusts he controls, 478,700 shares
over which Kopp Investment Advisers, Inc. ("KIA") has sole voting
power, 292,200 shares over which KIA has sole power of disposition and
1,095,725 shares over which KIA has shared power of disposition.
(4) Based on Schedule 13G/A filed February 12, 2003. Includes 184,500
shares issuable upon exercise of exercisable options.
12
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Company's Board of Directors is composed of
the following nonemployee directors: Alex B. Cimochowski (Chair), Irene M.
Qualters and Michael M. Selzer, Jr. All of the members of the Audit Committee
are independent for purposes of the Nasdaq listing requirements. The Audit
Committee operates under a written charter adopted by the Board of Directors.
The Audit Committee approves the retention of the Company's independent
accountants. The independent accountants report directly to the Audit Committee,
in compliance with the requirements of the Sarbanes-Oxley Act of 2002.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent accountants are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and to issue a report on the Company's financial statements. The Audit
Committee's responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees).
The Company's independent accountants also provided to the Audit
Committee the written disclosure required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants the accounting firm's
independence. The Committee also considered whether non-audit services provided
by the independent accountants during the last fiscal year were compatible with
maintaining the independent accountants' independence.
Based upon the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representation
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002 filed with the
Securities and Exchange Commission.
Members of the Audit Committee
Michael M. Selzer, Jr.
Irene M. Qualters
Alex B. Cimochowski
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company has selected PricewaterhouseCoopers LLP as its independent
accountants for its fiscal year ending December 31, 2003. Representatives of
PricewaterhouseCoopers LLP, which has served as the Company's independent
accountants since July 1994, are expected to be present at the Annual Meeting,
will have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders.
AUDIT FEES
Audit fees billed or expected to be billed to the Company by
PricewaterhouseCoopers LLP for the audit of the Company's financial statements
for the fiscal year ended December 31, 2002 and for reviews of the Company's
financial statements included in the Company's quarterly reports on Form 10-Q
for the last fiscal year totaled approximately $124,000.
13
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not provide services to the Company
during the last fiscal year for the design and implementation of financial
information systems and the Company paid no fees for such services.
ALL OTHER FEES
Fees billed or expected to be billed to the Company by
PricewaterhouseCoopers LLP for all other non-audit services, consisting of
tax-related services and services related to meeting statutory requirements in
foreign jurisdictions, totaled approximately $343,000.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of
PricewaterhouseCoopers LLP and has approved a specific amount of nonaudit
services, consisting solely of tax-related and foreign statutory services, for
the 2003 fiscal year.
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE NEXT ANNUAL MEETING
Any shareholder wishing to include a proposal in the Company's proxy
solicitation materials for its next annual meeting of shareholders must submit
such proposal for consideration in writing to the Secretary of the Company at
its principal executive offices, 5900 Golden Hills Drive, Minneapolis, MN 55416,
no later than December 10, 2003.
Pursuant to the Company's Bylaws, in order for business to be properly
brought before the next annual meeting by a shareholder, or in order for a
nominee for director to be considered at such annual meeting, the shareholder
must give written notice of such shareholder's intent to bring a matter before
the annual meeting, or nominate the director, no later than December 10, 2003.
Each such notice must set forth certain information with respect to the
shareholder who intends to bring such matter before the meeting and the business
desired to be conducted, as set forth in greater detail in the Company's Bylaws.
Management will use discretionary authority to vote against any
shareholder proposal, or director nominee not made by management, presented at
the next annual meeting if: (i) such proposal or nominee has been properly
omitted from the Company's proxy materials under federal securities laws; (ii)
notice of such proposal or nominee was not submitted to the Secretary of the
Company at the address listed above by December 10, 2003; or (iii) the proponent
has not solicited proxies in compliance with federal securities laws from the
holders of at least the percentage of the Company's voting shares required to
carry the proposal or elect the nominee.
GENERAL
The Board of Directors of the Company does not know of any matters
other than those described in this Proxy Statement that will be acted upon at
the Annual Meeting. In the event that any other matters properly come before the
meeting calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment.
BY ORDER OF THE BOARD OF
DIRECTORS
Thomas Martin
SECRETARY
Dated: April 8, 2003
CYBEROPTICS(R)
MAKING LIGHT WORK
CYBEROPTICS CORPORATION
2003 ANNUAL SHAREHOLDERS MEETING
MAY 16, 2003
--------------------------------------------------------------------------------
CYBEROPTICS(R) PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Kathleen P. Iverson and Scott G. Larson, and
each of them, with power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual meeting of Shareholders of
CyberOptics Corporation, to be held on May 16, 2003, and any adjournments
thereof, as specified below on the matters referred to, and, in the discretion,
upon any other matters which may be brought before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY BY
MAIL OR ELECTRONICALLY AS DESCRIBED ON THE REVERSE SIDE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
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|COMPANY # |
|CONTROL # |
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THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
* Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 11:00 a.m. (CT) on May 15, 2003.
* You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the last 4
digits of the U.S. Social Security Number or Tax Identification Number for
this account. If you do not have a U.S. SSN or TIN please enter 4 zeros.
* Follow the simple instructions the voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/cybe/ - QUICK *** EASY *** IMMEDIATE
* Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on May 15, 2003.
* You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the last 4
digits of the U.S. Social Security Number or Tax Identification Number for
this account to obtain your records and create an electronic ballot. If you
do not have a U.S. SSN or TIN please leave blank.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to CyberOptics Corporation, c/o Shareowner
Services(SM), P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
\ PLEASE DETACH HERE /
1. Election of 01 Steven K. Case 04 Kathleen P. Iverson 07 Michael M. Selzer, Jr. [ ] Vote FOR [ ] WITHHOLD
directors: 02 Steven M. Quist 05 Erwin A. Kelen all nominees AUTHORITY
03 Alex B. Cimochowski 06 Irene M. Qualters (except as to vote for
marked) all nominee
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR A SPECIFIC NOMINEE, WRITE | |
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) | |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
2. To approve amendments to the 1992 Employee Stock Purchase Plan. [ ] For [ ] Against [ ] Abstain
3. To vote with discretionary authority on any other matter that may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE DIRECTORS NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Address Change? Mark Box [ ] Indicate changes below: Date ___________________________________
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Signature(s) in Box
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation please sign in full
corporate name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.