FREQUENCY ELECTRONICS, INC.
55 Charles Lindbergh Boulevard
Mitchel Field, New York 11553
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 27, 1996
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Frequency Electronics, Inc. will be held at the offices of the Company, 55
Charles Lindbergh Boulevard, Mitchel Field, New York, on the 27th day of August
1996, at 10:00 A.M., Eastern Daylight Savings Time, for the following purposes:
1. To elect six (6) directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been elected and
shall have qualified;
2. To consider and act upon ratifying the appointment of Coopers &
Lybrand as independent auditors for the fiscal year commencing May 1, 1996.
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The transfer books will not be closed. Only stockholders of record as of
the close of business on July 22, 1996 are entitled to notice of, and to vote
at, the meeting.
By order of the Board of Directors
MARK HECHLER,
Acting Secretary
Mitchel Field, New York
July 29, 1996
If you do not expect to be present at the meeting, please fill in, date
and sign the enclosed Proxy and return same promptly in the enclosed, stamped
envelope.
FREQUENCY ELECTRONICS, INC.
55 Charles Lindbergh Boulevard
Mitchel Field, New York 11553
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 27, 1996
The accompanying Proxy is solicited by and on behalf of the board of
directors of Frequency Electronics, Inc., a Delaware corporation (hereinafter
called the "Company"), for use only at the Annual Meeting of Stockholders to be
held at the office of the Company, 55 Charles Lindbergh Boulevard, Mitchel
Field, New York 11553, on the 27th day of August 1996, at 10:00 A.M., Eastern
Daylight Savings Time, or any adjournment or adjournments thereof. The Company
will mail this Proxy Statement and the form of Proxy on or about July 29, 1996.
Only stockholders of record as of the close of business on July 22, 1996 are
entitled to notice of, and to vote at, the meeting.
The Board may use the services of the Company's directors, officers and
other regular employees to solicit proxies personally or by telephone and may
request brokers, fiduciaries, custodians and nominees to send proxies, proxy
statements and other material to their principals and reimburse them for their
out-of-pocket expenses in so doing. The cost of solicitation of proxies, which
it is estimated will not exceed $75,000, will be borne by the Company. Each
proxy executed and returned by a Stockholder may be revoked at any time
thereafter by filing a later dated proxy or by appearing at the meeting and
voting except as to any matter or matters upon which, prior to such revocation,
a vote shall have been cast pursuant to the authority conferred by such proxy.
Dissenters are not entitled by law to appraisal rights.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On July 22, 1996, the Company had outstanding 4,846,395 shares of
common stock, $1.00 par value ("Common Stock") (excluding 1,159,905 treasury
shares), each of which entitled the holder to one vote. No shares of preferred
stock were outstanding as of such date. A quorum of Stockholders, present in
person or by proxy, is constituted by a majority of the outstanding shares.
The following table sets forth as of July 22, 1996, information concerning the
beneficial ownership of the Company's Common Stock by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) each of the Company's directors and nominees for director, (iii) the
Company's chief executive officer and the Company's four most highly compensated
other executive officers who were serving as executive officers at the end of
the last completed fiscal year, and (iv) all directors and officers of the
Company as a group:
Name and Address Amount and Nature of
of Beneficial Holder Beneficial Ownership Percent of Class
Richard C. Blum (1)
909 Montgomery Street
San Francisco, CA 94133 651,350 13.44
Frequency Electronics, Inc.,
Employee Stock Ownership Plan (2)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 606,256 12.51
Martin B. Bloch (3)(4)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 640,730 13.22
John C. Ho (4)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 106,256 2.19
Abraham Lazar (4)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 21,000 *
E. John Rosenwald, Jr
c/o The Bear Stearns Companies Inc.
245 Park Avenue
New York, NY 10167 7,500 *
Joel Girsky
c/o Jaco Electronics, Inc.
145 Oser Avenue
Hauppauge, NY 11788 -0- *
Joseph P. Franklin (4)(5)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 90,465 1.87
Alfred Vulcan (4)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 69,684 1.44
Mark Hechler (4)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 71,061 1.47
Marvin Meirs (4)(6)
55 Charles Lindbergh Blvd
Mitchel Field, NY 11553 92,211 1.90
All executive officers
and directors as a group (12
persons) (4)(6) 1,215,013 25.07
*designates less than one (1%) percent.
Notes:
(1) Represents 105,300 shares held by BK Capital Partners III and 546,050
shares held by Common Fund as reported by Richard C. Blum & Associates, Inc.
("RCBA") in Statement of Changes in Beneficial Ownership on Form 4, dated
February 8, 1995. All of the foregoing entities are wholly-owned subsidiaries of
RCBA. Mr. Blum has voting and investment powers over all such shares through his
control of RCBA.
(2) Includes 525,526 shares of stock held by the F.E.I. ESOP Trust for
the Company's Employee Stock Ownership Plan, 239,640 of which shares have been
allocated to the individual accounts of employees of the Company (including the
Named Officers) and 285,886 of which shares have not yet been allocated; also
includes 80,730 shares held by the Trust under the Stock Bonus Plan (converted
by amendment to the Employee Stock Ownership Plan as of January 1, 1990).
(3) Includes 100,000 shares issuable on the full exercise of options
granted to Mr. Bloch on March 27, 1991 under the Senior ESOP, as that term is
hereinafter defined. All of these options were, by their terms, exercisable upon
issuance at an exercise price of $5 (see the discussion of the Senior ESOP
included in the Compensation Committee Report, below).
(4) Includes the number of shares which, as at July 22, 1996, were
deemed to be beneficially owned by the persons named below, by way of their
respective rights to acquire beneficial ownership of such shares within 60 days
through, (i) the exercise of options; (ii) the automatic termination of a trust,
discretionary account, or similar arrangement; or (iii) by reason of such
person's having sole or shared voting powers over such shares. The following
table sets forth for each person named below the total number of shares which
may be so deemed to be beneficially owned by him and the nature of such
beneficial ownership.
Stock Bonus
Name Plan Shares(a) ESOP Shares(b) ISOP Shares
Martin B. Bloch 14,877 1,757 -0-
John C. Ho 9,974 1,757 38,500
Abraham Lazar -0- -0- 21,000
Alfred Vulcan 1,021 1,663 37,000
Mark Hechler 1,804 1,757 37,000
Marvin Meirs 987 1,757 42,000
All Directors and
Officers as a Group
(12 persons) 29,181 14,427 236,702
(a) Includes all shares allocated under the Company's Stock Bonus Plan ("Bonus
Plan") to the respective accounts of the named persons, ownership of which
shares is fully vested in each such person. No Bonus Plan shares are
distributable to the respective vested owners thereof until after their
termination of employment with the Company. As of January 1, 1990 the Bonus Plan
was amended to an "Employee Stock Ownership Plan" (see the discussion of the
Employee Stock Ownership Plan contained in the Compensation Committee Report,
below, see also footnote (b) to the table).
(b) Includes all shares allocated under the Company's Employee Stock Ownership
Plan ("ESOP") to the respective accounts of the named persons, ownership of
which shares was fully vested in each such person as at April 30, 1996. None of
the ESOP shares are distributable to the respective vested owners thereof until
after their termination of employment with the Company. Upon the allocation of
shares to an employee's ESOP account, such employee has the right to direct the
ESOP trustees in the exercise of the voting rights of such shares (see the
discussion of the ESOP included below in the Compensation Committee Report).
(5) Includes 25,000 shares issuable on the full exercise of options
granted to General Franklin on December 6, 1993 under the Senior ESOP, as that
term is hereinafter defined.
(6) Includes shares granted to the officers of the Company pursuant to
a stock purchase agreement in connection with the Restricted Stock Plan:
Restricted
Name Stock
-------------------------------------
Martin B. Bloch 10,000
Joseph P. Franklin 10,000
John C. Ho 10,000
Alfred Vulcan 10,000
Mark Hechler 10,000
Marvin Meirs 10,000
All Officers as a Group 75,000
(9 persons)
There are no beneficial owners known to the Company who have the right
to acquire further beneficial ownership, except as indicated above.
By action of the Board, pursuant to the By-Laws, only Stockholders of
record at the close of business on July 22, 1996 shall be entitled to notice of,
and to vote at, the meeting.
It is expected that the following business will be considered at the
meeting and action taken thereon.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
It is proposed to elect a Board of six (6) directors ("Director(s)") to
hold office until the next annual meeting of Stockholders and their respective
successors are elected and qualified. Cumulative voting is not permitted. It is
intended that the accompanying form of Proxy will be voted for the re-election
of all six of the present members of the Board, each of whose principal
occupations are set forth in the following table, if no direction to the
contrary is given. In the event that any such nominee is unable or declines to
serve, the Proxy may be voted for the election of another person in his place.
The Board knows of no reason to anticipate that this will occur. The nominees
are as follows:
Nominees for Election as Directors
Year First
Name Principal Occupation Age Elected Director
- ---- -------------------- --- ----------------
Joseph P. Franklin Chief Executive Officer, 62 1990
(Major General, Chairman of the Board
U.S.A. - Ret) of Director
Martin B. Bloch (1) President ("on leave"), 60 1961
Chief Scientist and a
Director
Joel Girsky President, Jaco 57 1986
Electronics,Inc. and a
Director
John C. Ho Vice President, 63 1968
Research and Development
and a Director
Abraham Lazar (2) Director ("on leave" 71 1968
E. John Rosenwald, Jr Vice Chairman, 66 1980
The Bear Stearns
Companies Inc. and
a Director
All directors hold office for a one-year period or until their
successors are elected and qualified.
(1) At this time, Martin Bloch has taken a voluntary leave of absence
as president, and is attending board meetings and acting solely in an advisory
capacity. He is not participating in any board decisions or board actions (by
vote, written consent or otherwise) and is voluntarily abstaining from
participation (except when called upon for information) from any board
discussion of corporate policy or board action. Martin Bloch has been elected
President of FEI Communications, Inc., a subsidiary of Registrant, which is
engaged in the manufacture and sale of time and frequency control products for
commercial and non-U.S. defense and space.
(2) Also at this time, Abraham Lazar is voluntarily abstaining from any
further attendance at or participation in board meetings or other board
activities.
The foregoing restrictions on Messrs. Bloch's and Lazar's board
participation will abide until the final disposition of the Indictment as to
each of them respectively whereby, depending on the result, they will
respectively either resign from or resume their original board positions. See
Item 3 - Legal Proceedings in the Company's Annual Report on Form 10-K.
Certain Information as to Committees and Meetings of the Board of Directors
During the past fiscal year, four meetings of the Board were held. Each
incumbent Director attended all meetings of the Board except for Mr. Girsky who
attended three meetings and Mr. Lazar who is voluntarily abstaining from
attendance.
In December 1983, the Board appointed an Audit Committee which
presently consists of three Directors, Messrs. Rosenwald, Girsky, and Franklin.
The function of the Audit Committee is to insure the integrity and credibility
of the Company's financial information system and the published reports flowing
out of that system. The Audit Committee held one meeting during the last fiscal
year.
The Compensation Committee, which presently consists of three
Directors, Messrs. Rosenwald, Girsky and Franklin met one time in 1996. The
committee determines cash remuneration arrangements for the highest paid
executives and oversees the Company's stock option, bonus and other incentive
compensation plans. The report of the Compensation Committee appears on page 9
of this proxy statement.
During fiscal 1994, a Stock Option Committee was formed which consolidated
all of the separate committees that previously administered the various plans.
The Stock Option Committee is designed to consist of at least a majority of
outside directors. Presently the members are Messrs. Rosenwald, Girsky and
Franklin.
Compliance with Section 16(a) of the Exchange Act
Any person who is an officer, director, or the beneficial owner,
directly or indirectly, of more than 10% of the outstanding common stock of the
Company is required under Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") to file certain reports with the Securities and
Exchange Commission (the "Commission") disclosing his or her holdings or
transactions in any securities of the Company. For purposes of this discussion,
all such persons required to file such reports will be referred to as "Reporting
Persons". Every Reporting Person must file an initial statement of his or her
beneficial ownership of the Company's securities on the Commission's Form 3
within ten days after he or she becomes a Reporting Person. Thereafter (with
certain limited exceptions), all changes in a Reporting Person's beneficial
ownership of the Company's securities must be reported on the Commission's Form
4 on or before the 10th day after the end of the month in which such change
occurred. The Company knows of no person who was a Reporting Person during the
fiscal year ended April 30, 1996 or during the current fiscal year, who has
failed to file any reports required to be filed on Forms 3 or 4 with respect to
his or her holdings or transactions in the Company's securities since the
Company became publicly-held in 1982.
BUSINESS EXPERIENCE OF DIRECTORS
MARTIN B. BLOCH, age 60, has been a Director of the Company and of its
predecessor since 1961. He recently resigned as Chairman of the board of
directors and chief executive officer and is currently its president and chief
scientist. He has taken a voluntary leave of absence as president and neither
performs any of the functions of, nor holds any of the responsibilities or
powers of that office. Martin Bloch has been elected President of FEI
Communications, Inc., a subsidiary of Registrant, which is engaged in the
manufacture and sale of time and frequency control products for commercial and
non-U.S. defense and space. Previously, he served as chief electronics engineer
of the Electronics Division of Bulova Watch Company. He is a director of Numax
Electronics Incorporated.
JOSEPH P. FRANKLIN, age 62, has served as a Director of the Company
since March 1990. In December 1993, he was elected Chairman of the Board of
Directors and Chief Executive Officer. He has been the chief executive officer
of Franklin S.A., since August 1987, a Spanish business consulting company
located in Madrid, Spain, specializing in joint ventures, and was a director of
several prominent Spanish companies. General Franklin was a Major General in the
United States Army until he retired in July 1987.
JOEL GIRSKY, age 57, has served as a Director of the Company since
October 1986. He is the President and a director of Jaco Electronics, Inc.,
which is in the business of distributing electronics components and has served
in such a capacity for over six years. He has been a director since 1983 of
Nastech Pharmaceuticals Company which manufactures and distributes certain
drugs.
JOHN C. HO, age 63, has been employed by the Company and its
predecessor since 1961, and has served as a Vice President since 1963 and as a
Director since 1968. Prior to joining the Company, Mr. Ho held various
engineering positions with International Telephone and Telegraph Company and
Bulova Watch Company.
ABRAHAM LAZAR, age 71, was employed by the Company and its predecessor
from 1965 to 1986, serving as Executive Vice President from 1966 to 1986, and
from 1987 to 1989. He has been a Director since 1968. He was employed as a
consultant from 1986 to 1987. Mr. Lazar retired in 1990 and has been retained as
a consultant. At this time, Mr. Lazar is voluntarily abstaining from any further
attendance at or participation in board meetings or other board activities.
E. JOHN ROSENWALD, JR., age 66, has served as a Director of the Company
since October 1980. He was a partner in the investment banking firm of Bear,
Stearns & Co. for more than five years, was a Member of the Office of the
President, The Bear Stearns Companies Inc., from 1985 to 1988 and has been Vice
Chairman of the Bear Stearns Companies Inc. since May 1988. He is a director of
The Bear Stearns Companies Inc., and Hasbro, Inc.
No Director or executive officer or any associate of a Director or
executive officer is an adverse party in litigation with the Company or any of
its subsidiaries or has a material interest adverse to the Company or any of its
subsidiaries.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Overall Policy
The members of the Compensation Committee include Messrs. E. John
Rosenwald, Jr., Joel Girsky, and Joseph P. Franklin. The Committee reviews and,
with any changes it believes appropriate, approves the Company's executive
compensation.
The general goals of the Compensation Committee are to: (i) attract,
motivate, and retain effective and highly qualified executives; (ii) strengthen
the common interests of management and shareholders through executive stock
ownership; (iii) promote the Company's long and short term strategic goals and
human resource strategies; (iv) recognize and award individual contributions to
the Company's performance, and; (v) reflect compensation practices of comparable
companies.
To achieve the foregoing goals, the Compensation Committee has
structured a comprehensive compensation program aimed at: (i) compensating
executive officers on an annual basis with a cash salary at a level sufficient
to retain and motivate them and to recognize and award individual merit; (ii)
linking a portion of executive compensation to long-term appreciation of the
Company's stock price by encouraging executive ownership of the Company's stock
through awards of shares of the Company's stock and grants of options to
purchase Company stock, and; (iii) providing incentives to achieve corporate
performance goals by rewarding contributions to the Company's performance
through cash bonuses keyed to operating profit levels. These policies are
implemented through a reward system which includes base salary and long and
short term incentive compensation opportunities consisting of the following:
Base Salaries
The Committee annually reviews the base salaries of the CEO and all
other executive officers of the Company. The Compensation Committee believes
that the Company's executive officers, including those shown in the Summary
Compensation Table on page 14 (the "Named Officers") have been largely
responsible for the Company's past successes, for developing and implementing
the Company's program of consolidating and restructuring operations to achieve
significant cost reductions and production and engineering improvements, and for
achieving and maintaining the Company's position at the forefront of technical
innovation in the area of the Company's operations. A base salary for each
executive is determined on the basis of such factors as: levels of
responsibility; experience and expertise; evaluations of individual performance;
contributions to the overall performance of the Company; time and experience
with the Company; internal compensation equity; external pay practices for
comparable companies, and; existing base salary relative to position value.
In determining a base salary for Mr. Bloch, the Compensation Committee
took into account base salaries for senior officers at companies of comparable
size and complexity, both public and private, as well as its assessment of Mr.
Bloch's individual performance, and his contribution to the Company's past
growth and accomplishments as well as contributions which it is anticipated will
be made by Mr. Bloch in the future. In reviewing Mr. Bloch's compensation for
fiscal 1995 and fiscal 1996, the Committee took into account the proposed
current and anticipated future changes in government spending policies for
defense and military applications, which have always constituted the bulk of the
Company's business, and Mr. Bloch's leadership and contributions to the
Company's responses to such changes. These include the Company's restructuring
and redirection towards a more efficient and diversified application of its
technologies and operations. In this regard, the Committee recognized Mr.
Bloch's untiring efforts in developing new, non-military technology
applications, markets and marketing programs which the Committee believes will
help to position the Company to compete more effectively in commercial as well
as military markets. The Committee noted that in fiscal 1996 revenues had
increased and an operating profit had been realized for the first time in four
years, after charges to earnings of over $1 million for inventory and bad debts
reserves and incentive compensation accruals. Continuing investment in research
and development for commercial products under Mr. Bloch's leadership was
highlighted as the principle reason for the marked improvement in the past
year's results. It should be noted that the base salary for Mr. Bloch was
determined at a time when he was the chief executive officer and whose
resignation as such in December 1993 was wholly unanticipated. However, the
members of the Compensation Committee did not believe that this change in his
managerial status would reduce the value of his overall contribution to the
Company because the consequent reallocation of his time would result in at least
comparable value to the Company.
Upon the election of General Franklin to the position of Chairman of
the Board of Directors and Chief Executive Officer the factors noted above were
also taken into consideration in awarding his base salary. Based on General
Franklin's special qualifications, the responsibilities involved and the
compensation of comparable positions in the industry and the region, the
non-employee members of the Compensation Committee awarded a base salary of
$250,000.
Effective August 1, 1994, General Franklin and Mr. Bloch voluntarily
reduced their base salaries to $225,000 and $292,000, respectively. Effective
August 1, 1995, General Franklin and Mr. Bloch voluntarily reduced their base
salaries to $202,500 and $263,500, respectively, and the salaries of all other
officers were reduced by 10%.
The non-employee members of the Committee took note of these salary
reductions in approving the awards of incentive bonuses to the senior officers
of the Company based on the Company's fiscal 1996 performance and the incentive
compensation plans described below.
Short Term Incentives
The Company maintains two short term incentive bonus plans, the Income
Pool Incentive Compensation Plan ("IPICP") and the Presidential Incentive Plan
("PIP"). They are designed to create incentives for superior performance and to
allow the Company's executive officers to share in the success of the Company by
rewarding the contributions of individual officers. The availability of funds
for distribution under these plans is dependent upon the performance of the
Company as a whole. Focused on short term or annual business results, they
enable the Company to award designated executives with annual cash bonuses based
on their contributions to the profits of their particular divisions of the
Company.
The Income Pool Incentive Compensation Plan
The IPICP authorizes the establishment of an income pool based upon the
"Operating Profits" of the Company. Operating Profits are defined as follows:
net sales minus cost of sales and selling and administrative expenses in
accordance with Generally Accepted Accounting Principles consistently applied.
The amount of income pool available for distribution under the IPICP is
calculated in accordance with the following formula: the amount of Operating
Profit divided by 1,000,000, squared, and multiplied by $20,000 (provided
however that the income pool may not exceed 12% of Operating Profits). Persons
eligible to receive cash awards under the IPICP include the Executive Committee,
excluding the CEO, and any other employee who is recommended by such Executive
Committee and approved by the CEO. All of the Company's executive officers
including all of the Named Officers comprise the Executive Committee. For any
fiscal year when there are funds available for distribution under this plan,
General Franklin determines the amount to be awarded to each of the members of
the Executive Committee. The members of such committee may recommend to General
Franklin, for his approval, designated individuals, who are not members of such
committee, to share in such distribution. Under the terms of the plan, the
entire income pool is not required to be distributed each year and any
undistributed portions of such pool are not carried forward to future periods.
The recipients of cash bonuses under the IPICP, and the amount of such bonuses,
are approved by General Franklin, based upon an evaluation of the performance,
level of responsibility and leadership of the individual executive in relation
to the Company's operating results. For the fiscal year ended April 30, 1996,
the Company has accrued approximately $75,000 to be distributed under the terms
of the IPICP. During the fiscal years ended April 30, 1995 and 1994, there were
no operating profits and, as a consequence, no funds were available for awards
under this plan during those years.
The Presidential Incentive Plan
The PIP is designed to provide the president with incentive
compensation by way of annual cash payments based upon the Company's earnings
before income taxes. Funds are made available to the PIP based upon the
following formula: consolidated pre-tax profits divided by 1,000,000, squared,
and multiplied by $5,000. For the year ended April 30, 1996, the Company has
accrued approximately $50,000 to be used as awards under this plan. For the
years ended April 30, 1995 and 1994, the Company had no earnings before taxes
and thereforeno awards were made under this plan.
Long Term Incentives
As part of its comprehensive compensation program, the Company stresses
long-term incentives through awards of shares of its common stock under the
Employee Stock Ownership Plan, described below, and through the grant of options
to purchase common stock through various Incentive Stock Option Plans, also
described below. Grants and awards are aimed at attracting new personnel,
recognizing and rewarding current executive officers for special individual
accomplishments, and retaining high-performing officers and key employees by
linking financial benefit to the performance of the Company (as reflected in the
market price of the Company's common stock) and to continued employment with the
Company. The number of shares granted to executive officers under the Company's
ESOP is determined on a pro-rata basis, as described below. Grants of stock
options are generally determined on an individual-by-individual basis. The
factors considered are the individual's performance rating, the number of stock
options previously granted to the individual and the Company's financial and
operational performance.
The Employee Stock Ownership Plan and Trust
The Employee Stock Ownership Plan ("ESOP") is maintained by the Company
for all of its employees including its executive officers. The ultimate value of
any awards of stock made under this plan is dependent upon the market value of
the Company's common stock at such time as the shares are distributed to the
recipients. The Compensation Committee believes that awards of stock under this
plan provide employees with a long-term focus since distribution of the stock is
not made until after termination of employment and is forfeitable until certain
lapse of time and continued employment criteria are met. The ESOP was
established as of January 1, 1990 through the amendment of the Company's
previously existing Stock Bonus Plan and was funded at inception with 714,000
shares of the Company's common stock (the "ESOP Shares") to be allocated
annually to the employees of the Company over a period of ten years. Allocations
are made under the ESOP to each employee's account in proportion to the
percentage which such person's annual base salary bears to the aggregate annual
compensation of all members during the fiscal year for which the allocation was
made, provided however that not more than $48,000 in annual salary is counted
towards any employee's percentage participation. The Company's executives
therefore cannot benefit under this plan to any extent greater than any other
employee of the Company who earns an annual salary of $48,000 or more.
An employee's right to receive shares allocated to his account is 20%
vested after completion of three years of employment with yearly increases in
the percentage vested until after seven years of employment, at which time an
employee's right to receive 100% of the shares allocated to his or her account
is vested. Determination of the vesting period is made in accordance with the
employee's years of employment with the Company and not from the time of any
particular allocation of shares to his account. Accordingly, the right to
receive all shares allocated to an employee at any time after he or she has been
employed by the Company for seven or more years, is fully vested at the time of
such allocation. As of April 30,1996, each of the Named Officers, with the
exception of General Franklin, have more then seven years of service and
therefore have the vested right to receive 100% of the shares allocated to their
respective accounts.
All ESOP Shares, whether or not allocated to an employee's account, are
held in trust by the trustees who administer the ESOP until distribution to the
respective employee. ESOP Shares are distributed only after termination of
employment with the Company. Voting of allocated shares is by the ESOP trustees
at the direction of the employees in proportion to the number of shares
allocated in their respective accounts.
As of April 30, 1996, one thousand seven hundred fifty-seven (1757)
shares were allocated to the account of each of the Named Officers (with the
exception of General Franklin who has 465 shares allocated to his account). The
dollar value of such shares, as at the date of allocation, is included in the
Summary Compensation Table. Awards under this plan are not tied to any
performance criteria other than those relating to percentage of aggregate annual
compensation of all members, lapse of time, and continued employment with the
Company.
The Incentive Stock Option Plans
Grants of stock options are an integral part of the Company's long-term
incentive compensation program. The Compensation Committee believes that
ownership of options to purchase the Company's stock helps executives view the
Company and its operations and achievements from the perspective of a
stockholder with an equity stake in the business. All options granted to the
Company's executives have exercise prices equal to the fair market value of the
Company's common stock on the date of grant. The value to an executive of such
options is, therefore, tied to the future market value of the Company's stock
since he or she will benefit from such options only when the market price of the
stock increases above the exercise price of the option. Moreover any benefit to
an option holder is limited to the extent that all stockholders benefit from
such increase in the market value of the stock. In addition options become
exercisable only after one year from grant and then only in 25% cumulative
increments annually. The Compensation Committee believes that this staggered
approach to exercisability provides an incentive to executives to increase
shareholder value over the long term since the full benefit of the options
cannot be realized unless stock price appreciationoccurs over a number of years.
Under the terms of the ISOPs, eligible employees could be granted
options to purchase shares of the Company's common stock. Under the terms of
each of the ISOPs, all options granted thereunder are mandated to have a term of
ten years and an exercise price equal to the market price of the Company's
common stock on the date of grant, and to be exercisable, commencing one year
from the date of grant, at a cumulative rate of: 25% of the total shares subject
to the option in the second year; 50% of the total shares subject to the option
in the third year; 75% of the total shares subject to the option in the fourth
year, and; the remainder of the total shares subject to option in the fifth
year.
The President (or, in his absence, the Chairman of the Board of
Directors) and the Stock Option Committee each have full authority to determine
awards of stock options to individuals. The President, Chairman, and members of
the Committee will recuse themselves from considering and approving awards where
they are personally involved. In the case where the President or Chairman have
made awards, the Stock Option Committee will be informed each time awards are
made.
The Senior Executive Stock Option Plan
The Company established a Senior Executive Stock Option Plan in 1987
("Senior ESOP") for the President or Chairman of the Board of Directors of the
Company or of any subsidiary of the Company which produces gross sales for two
consecutive fiscal years in excess of $30,000,000. The Senior ESOP provides that
eligible employees may be granted options to purchase shares of the Common Stock
of the Company, exercisable after one year of continuous employment from date of
grant. The option price must be at least fair market value on the date of grant
of the option. The Stock Option Committee administers the Senior ESOP and has
the discretion to determine which eligible employees shall be granted stock
options and the number of shares subject to such options. During fiscal 1994,
General Franklin was granted 25,000 options under this plan. Previously, only
Mr. Bloch had received grants of options under this plan.
The Restricted Stock Plan
The Company maintains a Restricted Stock Plan which it established in
1989 (the "Restricted Stock Plan") for key employees (including all officers and
directors who are employees). The Restricted Stock Plan provides that eligible
employees ("Participants") may enter into restricted stock purchase agreements
to purchase shares of the Common Stock of the Company, subject to various
forfeiture restrictions ("Restricted Stock"). A total of 250,000 shares of
Common Stock were made available for purchase under the Restricted Stock Plan.
The Compensation Committee has the authority to determine (i) those who may
purchase Restricted Stock, (ii) the time or times at which Restricted Stock may
be purchased, (iii) the number of shares of Restricted Stock which may be
purchased, (iv) the duration of the restrictions on the Restricted Stock, (v)
the manner and type of restrictions to be imposed on the Restricted Stock, and
(vi) the purchase price to be paid for the Restricted Stock (which purchase
price may not be less than the $1 per share par value of the Common Stock on the
date the Restricted Stock is purchased), and (vii) the method of payment of the
purchase price. During fiscal 1996, the Stock Option Committee authorized the
grant of an aggregate of 75,000 shares of Restricted Stock to the nine Company
Officers at an option price of $6.00 per share. The Stock Option Committee did
not authorize any persons to purchase any shares under this plan during fiscal
1995. During fiscal 1994 the Stock Option Committee authorized the grant of
25,000 shares to General Franklin.
Supplemental Separation Benefits
During 1996, the Company agreed to provide supplemental separation
benefits to certain executive officers. Under the agreement, in the event of a
change in control or ownership of part or all of the Company which gives rise to
discharge of any officer without cause and such officer is not offered the
opportunity to be hired by the new or successor management or company within 30
days at no less than the base salary earned before discharge then such officer
will receive supplemental severance pay equal to one month's base salary for
each year of service at the Company up to a maximum of 15 months.
E. John Rosenwald, Jr.
Joel Girsky
Joseph P. Franklin
Members of the Compensation Committee
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid or accrued during each of the Company's last three fiscal
years to all of the Company's Chief Executive Officers and each of the Company's
four other most highly compensated executive officers (collectively, the "Named
Executive Officers") based on salary and bonus earned in 1996.
Long Term
Compensation Awards
-------------------
$Value of
Restricted
Name and Principle Annual Compensation Stock
Position Year Salary Bonus Awards(6) Options
---- ------ ----- ---------- -------
Martin B. Bloch, 1996 $309,621 $38,000 $2,971 10,000 (9)
President, 1995 327,559 -0- 1,836 -0-
Chief Scientist (1) 1994 383,892 -0- 1,661 -0-
Joseph P. Franklin 1996 220,236 27,500 2,964 10,000 (9)
Chairman of the Board, 1995 240,935 -0- -0- -0-
C.E.O. (2) 1994 103,845 -0- -0- 50,000 (7)
John C. Ho, 1996 129,700 22,500 2,971 10,000 (9)
Vice President, 1995 121,289 -0- 1,836 -0-
Research and 1994 123,978 -0- 1,661 10,000 (8)
Development (3)
Alfred Vulcan, 1996 127,466 22,500 2,971 10,000 (9)
Vice President, 1995 124,070 -0- 1,836 -0-
Systems Engineering (4) 1994 126,088 -0- 1,661 10,000 (8)
Mark Hechler, 1996 122,208 22,500 2,971 10,000 (9)
Vice President, 1995 125,329 -0- 1,836 -0-
Manufacturing (5) 1994 143,335 -0- 1,661 10,000 (8)
Notes:
(1) For the fiscal years ended April 30, 1996, 1995 and 1994, the
salary shown for Mr. Bloch (which reflects amounts paid as chief executive
officer for the period May 1, 1993 to December 6, 1993 and as chief scientist
from December 6, 1993 to April 30, 1996) includes aggregates of $26,683, $13,808
and $37,642, respectively, for: (i) automobile allowance; (ii) insurance
premiums to provide term life insurance benefits (available to all employees);
(iii) the cost of medical insurance (available to all employees); and (iv) the
costs of medical reimbursements available to officers. Effective August 1, 1994
Mr. Bloch's base salary of $325,000 was reduced to $292,500 and on August 1,
1995, to $263,250.
(2) Represents General Franklin's salary as chief executive officer for
the period from December 6, 1993 through April 30, 1996. Effective August 1,
1994, General Franklin's base salary of $250,000 was reduced to $225,000 and, on
August 1, 1995, to $202,500. For the fiscal years ended April 30, 1996 and 1995,
the salary shown for General Franklin includes an aggregate of $11,245 and
$9,204, respectively, for: (i) automobile allowance; (ii) insurance premiums to
provide term life insurance benefits (available to all employees); and (iii) the
costs of medical reimbursements available to officers.
(3) For the fiscal years ended April 30, 1996, 1995 and 1994, the
salary shown for Mr. Ho includes aggregates of $17,973, $7,068 and $8,700,
respectively, for: (i) automobile allowance; (ii) insurance premiums to provide
term life insurance benefits (available to all employees); (iii) the cost of
medical insurance (available to all employees); and (iv) the costs of medical
reimbursements available to officers.
(4) For the fiscal years ended April 30, 1996, 1995 and 1994, the
salary shown for Mr. Vulcan includes aggregates of $20,037, $9,849 and $13,559,
respectively, for: (i) automobile allowance; (ii) insurance premiums to provide
term life insurance benefits (available to all employees); (iii) the cost of
medical insurance (available to all employees); and (iv) the costs of medical
reimbursements available to officers.
(5) For the fiscal years ended April 30, 1996, 1995 and 1994, the
salary shown for Mr. Hechler includes aggregates of $15,096, $11,108 and
$25,307, respectively, for: (i) automobile allowance; (ii) insurance premiums to
provide term life insurance benefits (available to all employees); (iii) the
cost of medical insurance (available to all employees); and (iv) the costs of
medical reimbursements available to officers.
(6) Represents the dollar value, as at the date of allocation, of
shares of common stock of the Company allocated under the Company's Employee
Stock Ownership Plan ("ESOP") as at December 31, 1995, 1994, and 1993 (the
"Grant Dates"), respectively. Awards made under the ESOP are not
performance-based, but are awarded to all employees of the Company in proportion
to the percentage which their annual salary bears to the aggregate annual
salaries of all eligible employees of the Company, provided however that not
more than $48,000 in annual salary is counted towards any employee's percentage
participation. Distribution of shares allocated to an employee's account is not
made until after termination of employment. Four hundred sixty-six (466), three
hundred ninety-seven (397) and three hundred and two (302) shares of the
Company's common stock were allocated to the ESOP accounts of each of the Named
Officers (except General Franklin) as at December 31, 1995, 1994 and 1993,
respectively. In General Franklin's case, four hundred sixty-five (465) shares
were allocated to his ESOP account only at December 31, 1995. The market price
of the Company's common stock as at each of the foregoing Grant Dates was $6 3/8
at December 31, 1995, $4 5/8 at December 31, 1994 and $5 1/2 at December 31,
1993 (see the discussion under the caption "The Employee Stock Ownership Plan
and Trust" included in the Compensation Committee Report, above).
(7) Represents options to purchase 25,000 shares of the common stock of
the Company, granted to General Franklin on December 6, 1993, under the Senior
Executive Stock Option Plan ("SESOP") for a term of 10 years at an exercise
price of $5 5/8 and 25,000 shares pursuant to a stock purchase agreement under
the Restricted Stock Plan at a purchase price of $1 per share (for a more
detailed discussion of the terms and provisions of the SESOP and Restricted
Stock Plan, reference is made to the discussions included in the Compensation
Committee Report, above).
(8) Represents options to purchase shares of Common Stock granted to
each individual under incentive stock option plans with an exercise price equal
to the then current market price of the Company's common stock.
(9) Represents shares pursuant to a Stock Purchase Agreement dated
October 10, 1995 under the Restricted Stock Plan at a purchase price of $6.00
per share. (Refer to the Restricted Stock Plan discussion included in the
Compensation Committee Report above.)
Stock Options
The following table sets forth the total number of unexercised options
held by each of the Named Officers as at April 30, 1996. All of such Options
have exercise prices which were higher than the fair market value of the Common
Stock on April 30, 1995. During 1996, shares were awarded to the Named Officers
under the terms of the Restricted Stock Plan. Also, Joseph P. Franklin exercised
his option to acquire 25,000 shares of Stock at $1.00 per share under the terms
of the Restricted Stock Plan. No other options were granted to or exercised by
Named Officers during 1996.
NUMBER OF UNEXERCISED OPTIONS
OUTSTANDING AT APRIL 30, 1996
NUMBER OF OPTIONS
NAME EXERCISABLE UNEXERCISABLE TOTAL
---- ----------- ------------- -----
Martin B. Bloch 110,000 110,000
Joseph P. Franklin 35,000 35,000
John C. Ho 48,500 5,000 53,500
Mark Hechler 47,000 5,000 52,000
Alfred Vulcan 47,000 5,000 52,000
Long-Term Incentive Plans
The Company does not maintain any compensation plans for its executive
officers or directors or for any of its other employees which provide
compensation intended to serve as incentive for performance to occur over a
period longer than one fiscal year other than the restricted stock and stock
option plans discussed in the Compensation Committee Report, above. Awards under
these plans are shown in the Summary Compensation Table, above.
Pension Benefits
The Company has no defined benefit or actuarial retirement plans in
effect. It has entered into certain Executive Incentive Compensation Agreements
with key employees (including some officers) providing for the payment of
benefits upon retirement or death or upon the termination of employment not for
cause. The Company has purchased whole life insurance (of which it is the sole
beneficiary) on the lives of the participants to fund this liability. The annual
premium paid during fiscal 1996 approximated the increase in cash surrender
value of such insurance policies. The annual benefit provided under the program
in fiscal 1996 upon retirement at age 65 or death is as follows: Martin B. Bloch
- - $100,000, John C. Ho - $50,000, Mark Hechler - $50,000 and Alfred Vulcan -
$50,000. The benefit described above is payable for ten years or the life of the
participant, whichever is longer. Two years after retirement or early
retirement, the participants can elect to receive the benefit, less benefits
received during the two-year period, in a lump sum under certain conditions.
Upon voluntary termination of employment, the participant would be entitled to a
lump sum payment, the amount of which would be based upon the value of the
dividend accumulation for the year in which termination occurs, or upon
discharge not for cause, the participant would be entitled to a lump sum
payment, the amount of which would be based upon the value of the dividend
accumulation for the year in which termination occurs plus one-half of the cash
surrender value at the end of such year. In conjunction with the program, the
participants are required to make certain covenants with the Company relating
to, among other things, nondisclosure of confidential information,
noncompetition with the Company and the providing of consulting services
subsequent to retirement.
Performance Graph
The following graph compares the cumulative total shareholder return on
the common stock of the Company with the cumulative total return of the
companies listed in the Standards & Poors' 500 Stock Index (the "S&P Index") and
an industry peer group index (the "Peer Group Index"). The graph assumes that
$100 was invested on May 1, 1991 in each of the common stock of the Company, the
stock of the companies comprising the S&P Index and the stocks of the companies
comprising the Peer Group Index, including the reinvestment of dividends through
April 30, 1996. The Peer Group Index consists of Alpha Industries, Inc., Anaren
Microwave, Inc., ARX Inc., Ball Corp., Burr-Brown Corp., California Microwave,
Datum Inc., EDO Corp., Genrad Inc., Kollmorgen Corp., Odetics, Inc., Scientific
Atlanta, Inc., and Trimble Navigation, Inc.
Cumulative Total Shareholder Return for
Five-Year Period Ended April 30, 1996
(Performance Graph- See Appendix)
Employment Contracts and Change-In-Arrangements
None of the Named Officers are employed by the Company pursuant to
employment agreements. As described in the Compensation Committee Report on page
13, the Company has provided supplemental separation benefits for certain
executive officers, including the Named Officers, in the event of a change in
control or ownership of part or all of the Company. Such benefits will be
provided only if an officer is discharged without cause and is not offered the
opportunity to be hired by the new or successor management or company within 30
days at no less than the base salary earned before discharge. The Company does
not have any other material compensatory plans or arrangements with its
employees with respect to any resignation, retirement or other termination of
such persons employed with the Company resulting from, or in any way connected
with, a change-in-control of the Company.
Vote Required
In order for Proposal No. 1 respecting the election of six (6)
directors to be adopted, the holders of at least a plurality of the shares
represented at the Annual Meeting, must vote for such adoption in person or by
proxy.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed the firm of Coopers & Lybrand L.L.P., as
independent auditors for the fiscal year commencing May 1, 1996. Stockholders
are requested to signify their approval or disapproval of the appointment.
It is anticipated that a representative of Coopers & Lybrand L.L.P.,
the principal auditors of the Company for the current year, will be present at
the meeting. Such representative will be given the opportunity to make a
statement and will be available to respond to appropriate questions.
Vote Required
An affirmation vote by the holders of a majority of the Company's
shares present or represented by proxy at the Annual Meeting is required for the
ratification of Coopers & Lybrand L.L.P. as the Company's independent auditors
for the 1997 fiscal year.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the
Board intends to present and knows that others will present at the meeting are
hereinabove set forth. If any other matter or matters are properly brought
before the meeting or any adjournments thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their judgment.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next annual
meeting of Stockholders of the Company must be received by the Company for
inclusion in its Proxy Statement and form of Proxy relating to that meeting by
May 1, 1997.
ANNUAL REPORT
A copy of the Company's combined Annual Report and Form 10-K, including
the financial statements and the financial statement schedule thereto, for the
fiscal year ended April 30, 1996 is being mailed to Stockholders concurrently
with the mailing of this Proxy Statement. For a charge of $50, the Company
agrees to provide a copy of the exhibits to the Form 10-K to any Stockholders
who request such a copy.
By Order of the Board of Directors,
MARK HECHLER,
Acting Secretary
Dated: July 29, 1996
APPENDIX
Performance Graph is Graphical Material and is NOT
electronically filed with this submission. A paper copy
of the graph is filed with Form SE.
