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FREQUENCY ELECTRONICS, INC.
55 Charles Lindbergh Boulevard
Mitchel Field, New York 11553
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 10, 1995
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 10th day of October 1995, at 10:00 A.M., Eastern
Standard 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, 1995.
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 August 17, 1995 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
September 1, 1995
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
OCTOBER 10, 1995
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 10th day of October 1995, at 10:00 A.M.,
Eastern Standard Time, or any adjournment or adjournments
thereof. The Company will mail this Proxy Statement and the
form of Proxy on or about September 1, 1995. Only stockholders
of record as of the close of business on August 17,1995 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 August 17, 1995, the Company had outstanding 5,027,495
shares of common stock, $1.00 par value ("Common Stock")
(excluding 978,805 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 August 17, 1995,
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 of Amount and Nature of
Beneficial Holder Beneficial Ownership Percent of Class
Richard C. Blum (1)
909 Montgomery Street
San Francisco, CA 94133 651,350 12.96
Fund American Enterprises
Holding, Inc. (2)
The 1820 House, Main
Street Norwich, VT 05055 549,050 10.92
Frequency Electronics, Inc.,
Employee Stock Ownership Plan (3)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 673,216 13.39
Martin B. Bloch (4)(5)
55 Charles Lindbergh Blvd.
Mitchel Field,NY 11553 663,086 12.93
John C. Ho (5)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 93,290 1.84
Abraham Lazar (5)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 23,253 *
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 (6)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 82,000 1.62
Leonard Martire (5)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 27,691 *
Mark Hechler (5)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 62,095 1.23
Marvin Meirs (5)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553 80,745 1.60
All executive officers
and directors as group (13
persons) (5) 1,202,519 22.26
*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) As reported in a Statement of Changes in Beneficial
Ownership on Form 4, dated March 31, 1995 by Fund American
Enterprises Holdings, Inc. ("FAE"). FAE has voting powers over
all shares held by Fund American Enterprises, Inc, its
wholly-owned subsidiary, and is therefore deemed to be the
beneficial owner of all such shares.
(3) Includes 592,486 shares of stock held by the F.E.I. ESOP
Trust for the Company's Employee Stock Ownership Plan, 235,200
of which shares have been allocated to the individual accounts
of employees of the Company (including the Named Officers) and
357,286 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).
(4) 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).
(5) Includes the number of shares which, as at August 17,1995,
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.
Bonus Plan Shares (a) ESOP Shares (b) ISOP Shares
Martin B. Bloch 14,877 1,291 -0-
John C. Ho 9,974 1,291 36,000
Abraham Lazar -0- -0- 21,000
Leonard Martire -0- 1,291 22,400
Mark Hechler 1,804 1,291 34,500
Marvin Meirs 987 1,291 39,500
All Directors and
Officers as a Group
(13 persons) 29,181 10,234 374,202
(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, 1995. 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).
(6) Includes 25,000 shares pursuant to a stock purchase
agreement in connection with the Restricted Stock Plan and
25,000 shares issuable on the full exercise of options granted
to Gen. Franklin on December 6,1993 under the Senior ESOP, as
that term is hereinafter defined.
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 August
17,1995 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
Name Principal Occupation Age Year First
Elected Director
Joseph P. Franklin Chief Executive Officer, 61 1990
(Major General, Chairman of the Board
U.S.A. - Ret) of Directors
Martin B. Bloch(1) President ("on leave"), 59 1961
Chief Scientist and a Director
Joel Girsky President, Jaco Electronics, 56 1986
Inc. and a Director
John C. Ho Vice President,
Research and Development
and a Director 62 1968
Abraham Lazar(2) Director ("on leave") 70 1968
E. John Rosenwald, Jr. Vice Chairman, 65 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. Rosenwald and Mr. Bloch 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 1995. 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, 1995 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 59, 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 61, 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 is 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 56, 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 five years. He has been a director since 1983 of Nastech
Pharmaceuticals Company which manufactures and distributes
certain drugs.
JOHN C. HO, age 62, 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 70, 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 65, 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 Interlocks and Insider Participation in
Compensation Decisions
On November 1, 1992, the Company entered into a consulting
agreement with Franklin, S.A., a Spanish business consulting
company located in Madrid, Spain. General Joseph P. Franklin,
the chairman of the board of directors and chief executive
officer of the Company and a member of the Compensation
Committee, is the chief executive officer of Franklin, S.A.
Under the terms of the consulting agreement, the Company was
obligated to pay Franklin, S.A. $10,000 a month for an
unspecified period as a consulting fee, the cost of rental on
housing for General Franklin at a cost of $2,200 a month and the
cost of an automobile at approximately $450 per month. This
consulting agreement was terminated on Dec 6, 1993 when General
Franklin was elected to his present positions.
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 current 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 chief executive
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 1994 and fiscal
1995, 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. While the Committee was cognizant
of the recent decline in the Company's results of operations ,
it took into consideration the special circumstances which have
contributed to such decline. These circumstances include, among
other things, a charge against operations of $5,400,000 incurred
in connection with the consolidation of the Company's east and
west coast operations, investments in manufacturing and
technological improvements instituted and developed by the
Company under Mr. Bloch's leadership, a write down of
$4,400,000 to more accurately reflect the net realizable value
of inventory, and continued significant investments in research
and development focused on the development of commercial
products. While the foregoing have had a negative impact on the
Company's results for the past several years, the Committee
believes that the underlying changes which they represent should
have a positive effect on future results of operations. 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.
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, Gen. Franklin determines the amount to be awarded to each
of the members of the Executive Committee. The members of such
committee may recommend to Gen. 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 Gen.
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. During the fiscal
years ended April 30, 1993, 1994 and 1995, there were no
operating profits. Consequently no funds were available for
awards under this plan.
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 years ended April 30, 1995,1994
and 1993, the Company had no earnings before taxes and therefore
no 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 30,1995,
each of the Named Officers, with the exception of Gen. 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, 1995, twelve hundred ninety one (1291) shares
were allocated to the account of each of the Named Officers
(with the exception of Gen. Franklin who had no 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 appreciation
occurs 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, Gen. 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. The Stock Option Committee did not
authorize any persons to purchase any shares under this plan
during fiscal 1993 or fiscal 1995. During fiscal 1994 the Stock
Option Committee authorized the grant of 25,000 shares to Gen.
Franklin.
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 1995.
Long Term
Compensation Awards
$Value of
Name and Principle Restricted
Position Annual Compensation Stock
Year Salary Bonus Awards (5) Options
Martin B. Bloch,
President,
Chief Scientist (1) 1995 $327,559 $-0- $ 1,836 -0-
1994 383,892 -0- 1,661 -0-
1993 367,733 -0- 936 -0-
Joseph P. Franklin
Chairman of the Board,
C.E.O. (8) 1995 240,935 -0- -0- -0-
1994 103,845 -0- -0- 50,000 (6)
1993 -0- -0- -0- -0-
Leonard Martire,
Vice President,
Space Systems and Business
Development (2) 1995 129,211 -0- 1,836 -0-
1994 145,939 -0- 1,661 10,000 (7)
1993 152,913 -0- 936 -0-
Mark Hechler,
Vice President,
Manufacturing (3) 1995 125,329 -0- 1,836 -0-
1994 143,335 -0- 1,661 10,000 (7)
1993 141,145 -0- 936 -0-
Marvin Meirs,
Vice President,
Engineering (4) 1995 126,386 -0- 1,836 -0-
1994 130,843 -0- 1,661 10,000 (7)
1993 133,833 -0- 936 -0-
Notes:
(1) For the fiscal years ended April 30, 1993, 1994 and 1995,
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, 1995) includes aggregates of $10,953, $37,642 and $13,808,
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) and 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.
(2) For the fiscal years ended April 30, 1993, 1994 and 1995,
the salary shown for Mr. Martire includes aggregates of $14,831,
$8,700 and $9,196, 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.
(3) For the fiscal years ended April 30, 1993, 1994 and 1995,
the salary shown for Mr. Hechler includes aggregates of
$13,364, $25,307 and $11,108, 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, 1993, 1994 and 1995,
the salary shown for Mr. Meirs includes aggregates of $7,321,
$13,661 and $11,319, 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) 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, 1992, 1993, and 1994 (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. Two hundred
fourteen (214), three hundred and two (302) and three hundred
ninety seven (397) 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, 1992, 1993 and
1994, respectively. The market price of the Company's common
stock as at each of the foregoing Grant Dates was $4 3/8 at
December 31,1992, $5 1/2 at December 31, 1993 and $4 5/8 at
December 31,1994 (see the discussion under the captioned "The
Employee Stock Ownership Plan and Trust" included in the
Compensation Committee Report, above).
(6) Represents options to purchase 25,000 shares of the common
stock of the Company, granted to Gen. Franklin on December 6,
1993, under the Senior Executive Stock Option Plan ("SESOP") for
a term of 10 years at an exercise price of $5.625 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).
(7) 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.
(8) Represents Gen. Franklin's salary as chief executive
officer for the period from December 6, 1993 through April 30,
1995. Effective August 1,1994 Gen. Franklin's base salary of
$250,000 was reduced to $225,000. For the fiscal year ended
April 30,1995, the salary shown for Gen. Franklin includes an
aggregate of $9,204 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.
Stock Options
The following table sets forth the total number of unexercised
options held by each of the Named Officers as at April 30, 1995.
All of such Options have exercise prices which were higher than
the fair market value of the Common Stock on April 30, 1994. No
options were granted or exercised to/by Named Officers during
1995
NUMBER OF UNEXERCISED OPTIONS OUTSTANDING AT APRIL 30, 1995
NUMBER OF OPTIONS
NAME EXERCISABLE UNEXERCISABLE TOTAL
Martin B. Bloch 100,000 100,000
Joseph P. Franklin 50,000 50,000
Leonard Martire 22,400 7,500 29,900
Mark Hechler 34,500 7,500 42,000
Marvin Meirs 39,500 7,500 47,000
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 1995 approximated the increase in cash surrender
value of such insurance policies. The annual benefit provided
under the program in fiscal 1995 upon retirement at age 65 or
death is as follows: Martin B. Bloch - $100,000, Leonard
Martire - $40,000, Mark Hechler - $50,000 and Marvin
Meirs - $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, 1990 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, 1995.
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., and Trimble Navigation, Inc.
Cumulative Total Shareholder Return for
Five-Year Period Ending April 30, 1995
Employment Contracts and Change-In-Arrangements
None of the Named Officers are employed by the Company pursuant
to employment agreements. The Company does not have any
material compensatory plans or arrangements with any of its
employees, including the Named Officers, 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.
Certain Transaction
On January 27,1995, registrant agreed with Richard C. Blum &
Associates L.P. ("RCBA"), one of its major shareholders, to
acquire in a private transaction, 225,000 shares of registrant's
common stock (the "Stock") from BK Capital Partners III, L.P.,
and RCBA affiliate, at a per share price of 4 1/4, totaling
$956,250. On the date of the agreement, the bid and asked
prices for registrant's stock, as quoted on the American Stock
Exchange, Inc., were 4 1/4 and 4 1/2, and the closing price was
4 1/4. The transaction closed on January 31,1995.
At the time of the agreement RCBA and its affiliates owned a
total of 876,350 shares of Stock which constituted 16.64% of
registrant's outstanding shares. Presently, RCBA and its
affiliates own a total of 651,350 shares of the Stock which
constitutes 12.96% of registrant's outstanding shares.
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,
1995. 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 1996 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, 1996.
ANNUAL REPORT
A copy of the Company's combined Annual Report and Form 10-K,
including the financial statements and the financial statement
schedules thereto, for the fiscal year ended April 30, 1995 is
being mailed to Stockholders concurrently with the mailing of
this Proxy Statement. For a charge of $50, the Company agrees
to provide all Stockholders with a copy of the exhibits to the
Form 10-K, who requested such a copy.
By Order of the Board of Directors,
MARK HECHLER,
Acting Secretary
Dated: September 1, 1995