PRELIMINARY
-----------
NATIONAL TECHNICAL SYSTEMS, INC.
24007 Ventura Boulevard
Calabasas, California 91302
NOTICE OF ANNUAL MEETING
To the Shareholders:
Notice is hereby given that the annual meeting of shareholders of
National Technical Systems, Inc., a California corporation, will be held at the
Los Angeles Airport Marriott Hotel, 5855 West Century Boulevard, Los Angeles,
California 90045, on Friday, June 25, 1999 at 11:00 a.m. for the purpose of
considering and acting upon the following:
1. To elect three directors for terms expiring in 2002;
2. To approve amendments to the Company's Bylaws to provide for
a range as to the number of directors;
3. To ratify Ernst & Young LLP as auditors for the year ending
January 31, 2000; and
4. To transact such other business and to consider and take
action upon any and all matters that may properly come before
the meeting or any adjournment or adjournments thereof.
Management has no information of any such other matters.
Pursuant to the provisions of the Company's Bylaws, the Board of
Directors has fixed the close of business on May 14, 1999 as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting or any adjournment thereof.
Financial information concerning the Company is contained in the
Annual Report for the fiscal year ended January 31, 1999, which accompanies this
Notice of Annual Meeting.
If you are unable to attend the meeting in person, please execute
the enclosed Proxy and return it in the enclosed self-addressed, stamped
envelope. If you later find that you can be present, you may, if you wish, vote
in person, or you may revoke your proxy or file a new proxy bearing a later date
with the Secretary at any time before the voting.
By Order of the Board of Directors
Harold Lipchik
Secretary
Dated: May 25, 1999
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<PAGE>
PRELIMINARY
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NATIONAL TECHNICAL SYSTEMS, INC.
24007 Ventura Boulevard,
Calabasas, California 91302
---------------------
PROXY STATEMENT
---------------------
SOLICITATION
The accompanying Proxy is solicited by the Board of Directors for use at
the annual meeting of shareholders to be held on Friday, June 25, 1999, or any
adjournment thereof. A Proxy may be revoked by the person giving it at any time
before it is exercised, either by giving another proxy bearing a later date or
by notifying the Secretary of the Company in writing of such revocation. The
giving of the Proxy will not affect your right to vote in person if you later
should find it convenient to attend the meeting. The Proxy will be voted in
accordance with the specifications made.
The Company will bear the entire cost of preparing, assembling, printing,
and mailing this Proxy Statement, the Proxy, and any additional material which
may be furnished to shareholders by the Company. Copies of solicitation material
may be furnished to brokerage houses, fiduciaries, and custodians to forward to
their principals, and the Company may reimburse them for their expenses in so
doing. The Company does not expect to pay any commission or remuneration to any
person for solicitation of proxies.
This Proxy Statement and the Proxy are being mailed to shareholders on or
about May 25, 1999.
Solicitation may be made by mail, personal interview, telephone, and
telegraph by officers and regular employees of the Company.
The close of business on May 14, 1999, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. The outstanding voting securities of the Company at May 14,
1999, consisted of [8,321,046] shares of no par value Common Stock. Shareholders
representing a majority of outstanding Common Stock must be present in person or
by proxy to constitute a quorum at the Annual Meeting. In voting for the
election of Directors, each shareholder has the right to cumulate his or her
votes and give one nominee a number of votes equal to the number of Directors to
be elected, multiplied by the number of shares he or she holds, or to distribute
his or her votes on the same principle among the nominees to be elected in such
manner as he or she may see fit. A shareholder may only cumulate his or her
votes if the names of his or her candidate or candidates have been placed in
nomination prior to the voting and any shareholder gives notice at the meeting
prior to the voting of that shareholder's intention to cumulate his or her
votes. The persons named in the enclosed proxy may or may not elect to give such
notice and vote the shares they represent in such a manner.
The presence, in person or by proxy, of the holders of a majority of the
shares entitled to vote will constitute a quorum for the transaction of business
at the Annual Meeting.
The affirmative vote of the holders of shares of Common Stock representing
a majority of shares outstanding is required to approve the proposed amendment
to the Bylaws to permit a range of directors. A plurality of the votes cast in
person or by proxy and entitled to vote at the Annual Meeting is required for
the election of directors. The affirmative vote of a majority of votes cast at
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<PAGE>
the Annual Meeting is required for ratification of Ernst & Young LLP as auditors
for the year ending January 31, 2000 and the approval of such other matters as
may properly come before the Annual Meeting.
Abstention and broker non-votes have the same effect as votes against
proposals presented to shareholders other than the election of directors. They
have no effect on the election of directors. A broker non-vote occurs when a
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial owner.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tabulation indicates as of May 14, 1999, those persons known
to the Company to be beneficial owners of five percent or more of the Company's
Common Stock.
Number of Shares Percent of
Beneficially Owned(1) Class
--------------------- -----
Name and Address of Beneficial Owner
Aaron Cohen.......................... 1,147,918 13.8%
24007 Ventura Boulevard
Calabasas, California 91302
Jack Lin............................. 975,770 11.7%
24007 Ventura Boulevard
Calabasas, California 91302
Marvin Hoffman....................... 867,278 10.4%
24007 Ventura Boulevard
Calabasas, California 91302
Kennedy Capital Management, Inc.(2).. 462,276 5.6%
10829 Olive Boulevard
St. Louis, Missouri 63141
Luis A. and Jacqueline E. Hernandez(3) 430,425 5.2%
3069 Misty Harbor
Las Vegas, Nevada 89117
- ---------------
(1) Includes shares covered by options that are exercisable within 60 days as
follows: Cohen 3,000 and Lin 24,505, as well as shares in the National
Technical Systems Employee Stock Ownership Plan, as follows: Lin 6,528.
(2) This information is based on a Schedule 13D filed with the Securities and
Exchange Commission on or about February 5, 1999.
(3) This information is based on a Schedule 13D filed with the Securities and
Exchange Commission on or about November 13, 1995.
To the knowledge of management, no other person owns beneficially as much
as 5% of the outstanding stock of the Company. The tabulation under "Nomination
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and Election of Directors" indicates the number of shares owned beneficially by
each nominee as of the record date. The directors and executive officers of the
Company, as a group (11 persons), owned beneficially as of the record date a
total of 2,872,989 shares, or 33.7% of the outstanding stock. In addition, Mr.
Marvin Hoffman, President of XXCAL, Inc., a wholly-owned subsidiary of the
Company, owns 867,278 shares, or 10.4% of the outstanding stock.
Proposal 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine
members, who are divided into three classes of three directors. Directors are
elected for terms of three years. At the Annual Meeting, the term of office of
the Class III directors will expire and three directors will be elected to serve
for a term of three years and until their respective successors are elected.
The Board intends to cause the nomination of the three persons named
below for election as Class III directors. The directors will be elected by the
holders of the Common Stock. The persons named as proxy holders in the
accompanying form of proxy have advised the Company that they intend at the
Annual Meeting to vote the shares covered by proxies held by them for the
election of the nominees named below. If any or all of such nominees should for
any reason become unable to serve or for good cause will not serve, the persons
named in the accompanying form of proxy may vote for the election of such
substitute nominees, and for such lawful term or terms, as the Board may
propose. The accompanying form of proxy contains a discretionary grant of
authority with respect to this matter. The Board of Directors has no reason to
believe the nominees named, or any of them, will be unable to serve if elected.
All of the Class III nominees were elected members of the Board of
Directors by the shareholders at the 1996 annual meeting of shareholders. No
arrangement or understanding exists between any of the nominees and any other
person or persons pursuant to which any nominee was or is to be selected as a
director or nominee. After many years of faithful service to the Company and its
shareholders, Harry Derbyshire elected to retire from the Board of Directors,
effective January 21, 1999. Aaron Cohen was appointed by the remaining directors
to fill the vacancy created by Mr. Derbyshire's resignation.
The names of the nominees for Class III directors and the Class I
and Class II directors who will continue in office after the Annual Meeting
until the expiration of their respective terms, together with certain
information regarding them, including the amount of Common Stock beneficially
owned by them, are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Common Stock of
the Company Bene-
Year ficially Owned of
Director Term Will May 14, Percent
Name Age Position or Office Since Expire 1999(1)(2) of Class
---- --- ------------------ ----- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Nominees for Class III Directors
- --------------------------------
Aloysius Casey 67 Chairman of the Board of the Company 1989 2002* 27,321 **
Jack Lin 66 President and Chief Executive Officer 1975 2002* 975,770 11.7%
of the Company
Robert Lin 41 Founder, President and Chief Executive 1988 2002* 103,505 1.2%
Officer of MTI-Marketing Techniques,
Inc.
Directors Continuing in Office:
- -------------------------------
Class I Directors
- -----------------
Richard Short 56 Group President of the Company 1988 2000 99,948 1.2%
William Traw 61 Senior Vice President of the Company 1988 2000 80,873 1.0%
William McGinnis 40 Executive Vice President of the 1994 2000 42,681 **
Company
Class II Directors
- ------------------
Aaron Cohen 62 Vice Chairman of the Board; Senior 1997 2001 1,147,918 13.8%
Executive Vice President of the
Company; Group President of the
Company
Arthur Edelstein 61 Senior Vice President of the Company 1980 2001 334,545 4.0%
Ralph Clements 66 President of Clements and Associates 1975 2001 1,134 **
- --------------------------
* If elected at the annual meeting
**Less than 1%
<FN>
(1) Includes shares covered by options exercisable within 60 days, as follows:
Clements, 625; Edelstein, 34,500; Cohen, 3,000; Short, 32,000; Traw, 32,000;
McGinnis, 14,000; Casey, 6,000; J. Lin, 24,505; and R. Lin, 2,500.
(2) Includes shares in the National Technical Systems Employee Stock Ownership
Plan, as follows: Edelstein, 4,744; Short, 2,970; Traw, 3,110; McGinnis,
1,856 and J. Lin, 6,528.
</FN>
</TABLE>
General Casey retired from the United States Air Force in 1988 after a
34-year career. At the time of his retirement he was the Commander of the Space
Division, Air Force Systems Command, Los Angeles Air Force Base California.
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<PAGE>
Mr. Jack Lin is a founder and President of the Company and has been
associated with the Company and its predecessors continuously since 1961.
Mr. Robert Lin is the founder, President and Chief Executive Officer of
MTI-Marketing Techniques, Inc. a privately-owned manufacturer and distributor of
products for the advertising specialty and premium markets, for more than five
years. Robert Lin is the son of Jack Lin.
Mr. Clements has been President of Clements and Associates, a Sherman Oaks,
California financial and economic consulting firm, for more than five years.
Mr. Edelstein is Senior Vice President of the Company and has been associated
with the Company and it predecessors continuously since 1962.
Mr. Cohen is a founder and Senior Executive Vice President of the Company, as
well as President of the IT Solutions Segment Group. He has been associated with
the Company since 1961.
Mr. Short is President of the Engineering and Evaluation Group and has been
associated with the Company and its predecessors continuously since 1975.
Mr. Traw is Senior Vice President of the Company and Chief of Operations of
the Engineering and Evaluation Group. Mr. Traw has been associated with the
Company and its predecessors continuously since 1963.
Mr. McGinnis is Executive Vice President of the Company and has been
associated with the Company since 1980.
The Board of Directors of the Company held three regular meetings and two
special meetings during the last fiscal year. Mr. Derbyshire attended 50% of the
meetings prior to his resignation. No other director attended less than 75% of
the meetings of the Board or of the committees of which he was a member.
The Company's Board of Directors has an Audit Committee consisting of
Messrs. Casey and Clements. The function of the Audit Committee is to meet with
the independent certified public accountants engaged by the Company to review
(a) the scope and findings of the annual audit, (b) accounting policies and
procedures and the Company's financial reports, and (c) the internal controls
employed by the Company. The Audit Committee held two meetings during the year.
The Compensation Committee of the Board of Directors considers and makes
recommendations to the Board of Directors on salaries, bonuses and other forms
of compensation for the Company's executive officers. The Compensation Committee
currently consists of Messrs. Clements and Casey. The Compensation Committee met
twice during the year.
The Stock Option Committee of the Board of Directors makes recommendations
regarding the grant of stock options. The Committee, which consists of Messrs.
R. Lin and Clements, met once during the year.
The Nominating Committee, which currently consists of Messrs. J. Lin and
Casey, selects nominees for election to the Board of Directors. The Nominating
Committee met once during the year.
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<PAGE>
Employee-directors receive no additional compensation for serving on the
Board. General Casey was paid an annual fee of $41,086 and a bonus of $10,271 in
his capacity as Chairman of the Board. Each other director received $11,406 in
annual retainer fees and $2,852 in bonuses. Directors also are reimbursed for
expenses which they reasonably incur in the performance of their duties as
directors of the Company. During the fiscal year ended January 31, 1999, a total
of $1,000 was paid to General Casey and $12,555 to Ralph Clements for consulting
services.
EXECUTIVE COMPENSATION
The following information is furnished with respect to the Chief Executive
Officer and the other most highly compensated executive officers of the Company
whose aggregate direct remuneration from the Company during the fiscal year
ended January 31, 1999 exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- --------------------------- -------------------------
Name and Principal Other Annual Restricted Stock Options/ LTIP All Other
Position Year Salary($) Bonus($) Compensation($)(1) Award(s)($) SARs(#) Payouts($) Compensation($)
- ----------------- ---- --------- --------- ----------------- ----------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Lin 1999 339,836 50,000 0 0 0 0 0
President and Chief 1998 316,650 82,500 0 0 0 0 0
Executive Officer 1997 294,097 60,000(2) 0 0 0 0 0
Aaron Cohen 1999 155,650 21,000 0 0 0 0 0
Senior Executive Vice 1998 124,759 32,500 0 0 0 0 0
President 1997 - - 0 0 0 0 0
Arthur Edelstein 1999 205,961 31,000 0 0 0 0 0
Senior Vice 1998 192,487 50,000 0 0 0 0 0
President 1997 179,637 36,000 0 0 0 0 0
Richard Short 1999 135,425 21,000 0 0 0 0 0
Group President 1998 124,759 32,500 0 0 0 0 0
1997 115,905 23,000 0 0 0 0 0
William Traw 1999 135,425 21,000 0 0 0 0 0
Senior Vice President 1998 124,759 32,500 0 0 0 0 0
1997 115,905 23,000 0 0 0 0 0
- ------------------
<FN>
(1) Does not include perquisites or personal benefits which are the lesser of
$50,000 or 10% of the total annual salary and bonus reported for the
Named Executive Officer.
(2) Fair market value of 26,608 shares of restricted National Technical
Systems, Inc. common stock at a value of $60,000 taken as a bonus in lieu
of cash in 1997.
</FN>
</TABLE>
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
During the fiscal year ended January 31, 1999, the Compensation Committee
of the Board of Directors (the "Compensation Committee") was composed of Mr.
Clements, who is an independent, non-employee director, as well as Mr.
Derbyshire, who was an independent, non-employee director prior to his
resignation in January, 1999. General Casey, also an independent, non-employee
director, has been appointed by the Board to fill the vacancy on the
Compensation Committee created by Mr. Derbyshire's resignation. See the
description of the Compensation Committee functions above.
Compensation Policies. Policies governing the compensation of the
Company's executives are established and monitored by the Compensation
Committee. All decisions relating to the compensation of the Company's
executives during 1999 were made by the Compensation Committee.
In administering its compensation program, the Compensation Committee
follows its belief that compensation should reflect the value created for
shareholders while supporting the Company's strategic goals. In doing so, the
compensation programs reflect the following themes:
1. The Company's compensation programs should be effective in
attracting, motivating, and retaining key executives;
2. There should be a correlation of the compensation awarded to an
executive, the performance of the Company as a whole, and the
executive's individual performance;
3. The Company's compensation programs should provide the executives a
financial interest in the Company similar to the interests of the
Company's shareholders; and
4. The Company's compensation program should strike an appropriate
balance between short and long term performance objectives.
Elements of Compensation Programs
- ---------------------------------
At least annually, the Committee reviews the Company's executive officer
compensation programs to ensure that pay levels and incentive opportunities are
competitive and reflect the performance of the Company. The three basic
components of the program, each of which is intended to serve the overall
compensation philosophy, are as follows:
Base Salary - Base salary levels are, in part, established through
comparisons with companies of similar size engaged in the same or similar
business as that of the Company. Actual salaries are based on individual
performance of the executive officer within the salary range reflecting job
evaluation and market comparisons. Base salary levels for executive officers are
reviewed annually and established within a range deemed by the Committee to be
reasonable and competitive. The Committee recommended increases in base salary
for the executive officers in fiscal 1999 ranging from approximately 5% to 7%.
Annual Incentives - The Company's executive officers are eligible to
participate in the annual incentive compensation program whose awards are based
on the attainment of certain operating and individual goals. The objective of
this program is to provide competitive levels of compensation in return for the
attainment of certain financial objectives that the Committee believes are
primary factors in the enhancement of shareholder value. In particular, the
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<PAGE>
program seeks to focus the attention of executive officers towards earnings
growth. Bonuses for executive officers of the Company under this program are
intended to be consistent with targeted awards of companies of similar size and
engaged in the same or similar business as that of the Company. Actual awards
are subject to adjustment up or down, at the discretion of the Committee, based
on the Company's overall performance. For fiscal 1999, the Compensation
Committee awarded bonuses to executive officers, based upon the performance
measures discussed above, equal to approximately 15% of the executive officer's
base salary. The bonuses are reflective of the Company's overall improvement in
earnings and total shareholder return in fiscal 1999.
Long-term Incentives - As an important element in retaining and motivating
the Company's senior management, the Committee believes that those persons who
have substantial responsibility for the management and growth of the Company
should be provided with an opportunity to increase their ownership of Company
stock. Therefore, executive officers and other key employees are eligible to
receive stock options from time to time, giving them the right to purchase
shares of Common Stock of the Company at a specified price in the future. The
number of stock options granted to executive officers is based on various
factors, including the respective scope of accountability, strategic and
operational goals and anticipated performance and contributions of the
individual executive.
Chief Executive Officer's Compensation
- --------------------------------------
Mr. J. Lin's compensation is determined pursuant to the principles noted
above. The Committee, in considering his compensation for fiscal 1999, reviewed
his existing compensation arrangements, comparable compensation for chief
executive officers of other companies and the performance of both Mr. J. Lin and
the Company. The Committee made the following determinations regarding Mr. J.
Lin's compensation:
o Based upon Mr. J. Lin's and the Company's fiscal 1999 performance, the
Company increased Mr. J. Lin's base salary by 5%.
o Based upon Mr. J. Lin's and the Company's fiscal 1999 performance, the
Company awarded Mr. J. Lin a cash bonus in the amount of $50,000.
Policy with Respect to Internal Revenue Code Section 162(m).
- ------------------------------------------------------------
In 1993, the Internal Revenue Code of 1986 (the "Code") was amended to add
Section 162(m). Section 162(m), and regulations thereunder adopted in 1995,
place a limit of $1,000,000 on the amount of compensation that may be deducted
by the Company in any year with respect to certain of the Company's most highly
compensated officers. Section 162(m) does not, however, disallow a deduction for
qualified "performance-based compensation" the material terms of which are
disclosed to and approved by shareholders. At the present time, the Company's
executive officer compensation levels are substantially below the $1,000,000 pay
limit and the Company believes that it will most likely not be affected by the
regulation in the near future. Where appropriate in light of specific
compensation objectives, the Board intends to take necessary actions in the
future to minimize the loss of tax deductions related to compensation.
COMPENSATION COMMITTEE
Ralph Clements
Aloysius Casey
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INFORMATION CONCERNING STOCK OPTIONS
The following table sets forth certain information at January 31, 1999 and
for the fiscal year then ended with respect to stock options granted to the
individuals named in the Summary Compensation Table above. No stock appreciation
rights have been granted and no options have been granted at an option price
below fair market value on the date of the grant.
<TABLE>
OPTION GRANTS IN THE LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Appreciation
Individual Grants for the Option Term (1)
---------------------------------------------------------------------- ---------------------------------------
Number of % of total Exercise At 0% At 5% At 10%
Securities Options/SAR's or Base Annual Annual Annual
Underlying Options/ Granted to all Price per Expiration Growth Growth Growth
Name of Executive SAR's Granted Employees Share Date Rate Rate Rate
- ------------------ ------------- --------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Jack Lin 64,150 (2) 10.02% $6.204 11/1/2008 - $ 250,308 $ 634,329
Aaron Cohen 54,150 (3) 8.46% $6.233 11/1/2008 $ 212,260 $ 537,908
Arthur Edelstein 42,900 (4) 6.70% $5.780 11/1/2008 - $ 155,934 $ 395,168
Richard Short 25,000 (5) 3.91% $5.500 11/1/2008 - $ 86,473 $ 219,140
William Traw 25,000 (5) 3.91% $5.500 11/1/2008 - $ 86,473 $ 219,140
<FN>
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any on stock option exercises or stock holdings are dependent on
the future performance of the stock and overall market conditions. There can
be no assurance that the amounts reflected in this table will be achieved.
(2) Includes 7,260 non-qualified options at $6.750 per share, 6,890 incentive
stock options at $6.750 per share and 50,000 incentive stock options at
$6.05 per share. All options become exercisable at 25% per year starting
November 4, 1999.
(3) Includes 14,150 incentive stock options at $6.750 per share and 40,000
incentive stock options at $6.05 per share. All options become exercisable
at 25% per year starting November 4, 1999.
(4) Includes 9,600 incentive stock options at $6.750 per share and 33,300
incentive stock options at $5.50 per share. All options become exercisable
at 25% per year starting November 4, 1999.
(5) All options become exercisable at 25% per year starting November 4, 1999.
</FN>
</TABLE>
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<PAGE>
The following table sets forth information concerning the exercise of stock
options during the fiscal year ended January 31, 1999 by each of the named
executive officers and the fiscal year end spread on unexercised "in-the-money"
options.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
<CAPTION>
Number of Unexercised Value of Unexercised
In-the-money Options/ In-the-money Options/
SARs at FY-End SARs at FY-End($)(1)
-------------------------- --------------------------
Shares Acquired Value
Name on Exercise(#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Lin - - 24,505 24,000 45,326 39,704
Aaron Cohen 26,000 55,348 3,000 3,000 5,531 5,531
Art Edelstein - - 34,500 14,500 71,109 26,734
Richard Short 5,000 8,828 32,000 12,000 66,500 22,125
William Traw 5,000 17,656 32,000 12,000 66,500 22,125
- ---------------
<FN>
(1) Market Value of underlying securities at exercise date, minus the exercise
or base price of "in-the-money" options/SARs. "Value Realized" is on a
pre-tax basis.
(2) Represents the difference between the closing price of the Company's Stock
on January 31, 1999 and the exercise of the options.
</FN>
</TABLE>
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns
on investment for the Company, the Russell 2000 Index and the S&P Technology
Sector (formerly S&P High Tech Composite) Index. The stock price performance
shown on the graph below is not necessarily indicative of future price
performance.
Cumulative Total Return
- --------------------------------------------------------------------------------
1/94 1/95 1/96 1/97 1/98 1/99
- --------------------------------------------------------------------------------
National Technical Systems, Inc. 100 77 70 76 217 153
Russell 2000 100 94 122 145 172 176
S&P Technology Sector 100 112 165 256 309 578
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COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company's officers, directors and consultants are required to file
initial reports of ownership and reports of change in ownership with the
Securities and Exchange Commission. Officers and directors are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on information provided to the Company by individual officers,
directors and consultants, the Company believes that during fiscal 1999 all
filing requirements applicable to officers and directors have been complied
with.
Proposal 2. APPROVAL OF AMENDMENTS TO THE COMPANY'S BYLAWS PROVIDING
FOR RANGE OF DIRECTORS
The Company's Bylaws currently provide for a fixed number of nine directors.
The Board of Directors has unanimously recommended that the shareholders approve
a proposal to amend the Bylaws of the Company to change the size of the Board of
Directors from a fixed number of nine to a range with a minimum of nine and a
maximum of to 17 and with the exact number of directors to be established
from time to time by the vote of a majority of the directors.
The Board of Directors believes flexibility in the number of directors
serving on the Board is in the best interests of both the Company and its
shareholders. The directors believe that a Board with between nine and to 17
members will be able to benefit from a diversity in experience, while
sacrificing neither efficiency nor communications among the directors. The
proposal to authorize the Board of Directors to vary its size from a minimum of
nine to a maximum of to 17 will also afford the Board additional flexibility
to adjust the size of its membership as appropriate under varying circumstances
that may exist in the future.
The full text of Section 3.2 of the Bylaws of the Company, as currently in
effect and as proposed to be amended, is set forth as Exhibit A, to this Proxy
Statement. The preceding description of this proposed amendment to the Bylaws of
the Company is qualified in its entirety by reference to Exhibit A.
The Company also proposes to amend the Bylaws to provide for a corresponding
change in the three classes of directors, so that each class shall consist of an
equal or close to equal number of directors.
The full text of Section 3.3 of the Bylaws of the Company, as currently in
effect and as proposed to be amended, is set forth as Exhibit B to this Proxy
Statement. The preceding description of this proposed amendment to the Bylaws of
the Company is qualified in its entirety by reference to Exhibit B.
Pursuant to the Bylaws of the Company, approval of the proposed amendments
requires the affirmative vote of holders of a majority of the outstanding shares
of the Common Stock. Each abstention and broker non-vote will have the same
effect as a vote "against" this proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED AMENDMENTS
DESCRIBED ABOVE AND RECOMMENDS A VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS SHAREHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
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<PAGE>
Proposal No. 3 - RATIFICATION OF AUDITORS
The Board of Directors has selected Ernst & Young LLP as auditors for the
Company for the year ending January 31, 2000. That firm became auditors for the
Company during the fiscal year ended January 31, 1990. The Board recommends
ratification of this action.
Representatives of Ernst & Young LLP are expected to be present at the
meeting and will be given the opportunity to make a statement if they desire to
do so. It is also expected that they will be available to respond to appropriate
questions from shareholders at the meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE
FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR THIS PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR
PROXIES.
OTHER MATTERS
Management is not aware of any other matters to be presented for action at
the meeting or any adjournment thereof. However, if any matters come before the
meeting, it is intended that shares represented by Proxy will be voted in
accordance with the judgment of the persons voting them.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of shareholders intended to be presented at the next annual
meeting (to be held in June 2000) must be received by the Company at its
principal executive office located at 24007 Ventura Boulevard, Calabasas,
California 91302, not later than February 1, 2000.
-13-
<PAGE>
P R O X Y
NATIONAL TECHNICAL SYSTEMS, INC.
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
Friday, June 25 1999 at 11:00 a.m.
The undersigned hereby appoints Aaron Cohen and Ralph Clements, and each
of them, attorneys and agents with power of substitution, to vote, as designated
below, all stock of the undersigned at the above meeting and at any adjournment
or adjournments thereof.
(1) Election of Directors
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) [ ] listed below [ ]
Aloysius Casey, Jack Lin and Robert Lin
(INSTRUCTION: to withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
-------------------------------------------------------------
(2) To approve amendments to the Company's Bylaws to provide for a range in
the number of directors serving on the Company's Board of Directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To ratify the selection of Ernst & Young LLP as auditors for the fiscal
year ending January 31, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
adjournments thereof.
(OVER)
<PAGE>
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES
FOR DIRECTOR AND FOR EACH OF THE PROPOSALS SET FORTH IN THE PROXY STATEMENT.
Dated _______________________, 1999
-----------------------------------
Signature of Shareholder
-----------------------------------
Signature of Shareholder
Please sign exactly as your name appears
hereon. Please date, sign and return the
Proxy promptly in the enclosed envelope.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If the signature
is for a corporation, please sign full
corporate name by authorized officer. If
the shares are registered in more than
one name, all holders must sign
<PAGE>
EXHIBIT A
Amendment to Section 3.2 of the Bylaws
of
NATIONAL TECHNICAL SYSTEMS, INC.
The full text of Section 3.2 of the Company's Bylaws, as currently in effect,
reads as follows:
Section 3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be NINE (9) until changed by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw adopted by the vote
or written consent of holders of a majority of the outstanding shares entitled
to vote; provided, however, that an amendment reducing the fixed number of
directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting, or the shares not consenting in the case of
action by written consent, are equal to more than 16-2/3% of the outstanding
shares entitled to vote.
The full text of Section 3.2 of the Company's Bylaws, as proposed to be amended,
reads as follows:
Section 3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be not less than NINE (9) nor more than SEVENTEEN (17). The
exact number of authorized directors shall be set from time to time by the board
of directors. An amendment to this bylaw adopted by the vote or written consent
of holders of a majority of the outstanding shares entitled to vote which
reduces the number of directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to more than
16-2/3% of the outstanding shares entitled to vote.
<PAGE>
EXHIBIT B
Amendment to Section 3.3 of the Bylaws
of
NATIONAL TECHNICAL SYSTEMS, INC.
The full text of Section 3.3 of the Company's Bylaws, as currently in effect,
reads as follows:
Section 3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.
The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist of three directors. The term
of the initial Class I directors shall terminate on the date of the 1997 annual
meeting of shareholders; the term of the initial Class II directors shall
terminate on the date of the 1998 annual meeting of shareholders; and the term
of the initial Class III directors shall terminate on the date of the 1999
annual meeting of shareholders. At each annual meeting of shareholders beginning
in 1997, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional directors of any class elected to fill a vacancy resulting
from an increase in such a class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
The full text of Section 3.3 of the Company's Bylaws, as proposed to be amended,
reads as follows:
Section 3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.
The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist of an equal or close to
equal number of directors. The term of the initial Class I directors shall
terminate on the date of the 1997 annual meeting of shareholders; the term of
the initial Class II directors shall terminate on the date of the 1998 annual
meeting of shareholders; and the term of the initial Class III directors shall
terminate on the date of the 1999 annual shareholders. At each annual meeting of
shareholders beginning in 1997, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected to
fill a vacancy resulting from an increase in such a class shall hold office for
a term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
