SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
AERO SYSTEMS ENGINEERING, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Items 22(a)(2) of Schedule A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
AERO SYSTEMS ENGINEERING, INC.
A MINNESOTA CORPORATION
358 EAST FILLMORE AVENUE
ST. PAUL, MINNESOTA 55107
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1996, AT 2:00 O'CLOCK P.M.
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TO AERO SYSTEMS ENGINEERING, INC. SHAREHOLDERS:
The annual meeting of the shareholders of Aero Systems Engineering, Inc. (the
"Company"), will be held on May 8, 1996 at 2:00 o'clock p.m., C.D.T., in the
Cafeteria at the Company's headquarters at 358 East Fillmore Avenue, St. Paul,
Minnesota 55107, for the following purposes:
1. To consider and act upon the Board of Directors' recommendation to fix
the number of directors of the Company at five.
2. To elect a Board of Directors.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The stock transfer books of the Company will not be closed. In lieu thereof, and
in accordance with the Bylaws, the Board of Directors has set the close of
business on April 15, 1996 as the record date for the determination of the
shareholders entitled to notice of and to vote at the meeting or any
adjournments thereof.
Your attention is respectfully directed to the attached Proxy Statement and the
Proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN THE
ATTACHED PROXY AND DATE, SIGN AND MAIL IT AS PROMPTLY AS POSSIBLE IN ORDER TO
SAVE THE COMPANY FURTHER SOLICITATION EXPENSE.
By order of the Board of Directors
/s/ Charles L. Rooks
Charles L. Rooks
Secretary
AERO SYSTEMS ENGINEERING, INC.
A MINNESOTA CORPORATION
358 EAST FILLMORE AVENUE
ST. PAUL, MINNESOTA 55107
612-227-7515
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1996
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GENERAL
This Proxy Statement is submitted in support of the solicitation of the attached
proxy by the Board of Directors of Aero Systems Engineering, Inc., a Minnesota
corporation ("Company"), for the annual meeting of the shareholders of the
Company (the "Annual Meeting") to be held on May 8, 1996 at 2:00 o'clock p.m. in
the Cafeteria at the Company's headquarters, 358 East Fillmore Avenue, St. Paul,
Minnesota 55107, and at any adjournments thereof. The cost of solicitation will
be borne by the Company. This Proxy Statement and the accompanying Proxy and
Notice of Annual Meeting of Shareholders is intended by the Company to be mailed
to its shareholders on or about April 16, 1996. The Company may reimburse
brokerage firms, banks, and other custodians, nominees, and fiduciaries for
expenses reasonably incurred in forwarding solicitation materials to beneficial
owners of shares.
The Annual Meeting is being held for the purposes of fixing the number of and
electing the Company's Board of Directors and to transact such other business as
may properly come before the meeting or any adjournments thereof.
The annual report of the Company for the year ended December 31, 1995, including
financial statements, is being mailed to shareholders simultaneously herewith,
but the annual report is not to be considered part of the proxy soliciting
materials.
Only holders of shares of the Company's $.20 per share par value common stock
("Common Stock") recorded at the close of business on April 15, 1996, the record
date for the Annual Meeting, will be entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. The securities of the Company
outstanding as of April 15, 1996, and which are entitled to vote at the Annual
Meeting, consist of 2,551,717 shares of Common Stock, each share being entitled
to one vote. Shareholders do not have the right to cumulate votes for the
election of directors.
The enclosed Board of Directors' proxy, when properly signed and returned to the
Company, will be voted at the Annual Meeting as directed therein. Proxies in
which no direction is given with respect to the various matters of business to
be transacted at the meeting will be voted to set the number of the Board of
Directors at five, in favor of the nominees for directors proposed by the Board
of Directors, and, as to any other matters that may properly come before the
meeting, in the best judgment of the proxy holders named in the enclosed proxy.
The enclosed proxy may be revoked at any time prior to its exercise at the
meeting by the execution and exercise of a proxy bearing a later date and
notification in writing given to the Secretary of the Company prior to the
meeting. The authority of the proxy holders named in the enclosed proxy will be
suspended if the shareholder executing the proxy is present at the meeting and
elects to vote in person.
The Company may have one or more of its officers or employees communicate by
telephone, facsimile, or mail with some of the shareholders who may have omitted
to return proxies.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of March 15, 1996 by
each shareholder who is known by the Company to own beneficially more than 5% of
the outstanding Common Stock, by each director and by each nominee director, and
by all executive officers and directors as a group. If the name of a director or
nominee director is not shown, he beneficially owns no Common Stock. Except as
disclosed in the footnotes to the following table, none of the shareholders
listed below beneficially owns common stock of the Company's parent(s) or
subsidiaries other than through their ownership of the Company's Common Stock.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class (2)
Celsius Inc. 2,041,782 80.0%
1800 Diagonal Road
Suite 280
Alexandria, VA 22314
A. L. Maxson 62,000 2.4%
5848 Long Brake Trail
Edina, MN 55438
Roland P. Dilda 20,000 *
358 East Fillmore Avenue
Saint Paul, MN 55107
Robert A. Davis 3,100 *
10 Airways Blvd
Nashville, TN 37217
All executive officers
and directors
as a group (9 persons) 96,400 3.8%
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* Less than 1%.
(1) Each person or group who has sole voting and investment power with respect
to, and directly owns, all outstanding shares.
(2) The percentage calculation is based on 2,551,717 shares outstanding at
March 15, 1996.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors may be set by the
shareholders (subject to the right of the Board of Directors to increase or
decrease the number of directors as otherwise permitted by law). At the most
recent Annual Meeting of the Company's shareholders held on May 8, 1995, the
shareholders fixed the number of the Company's Board of Directors at five and
elected five directors (Christer Persson, Lennart Hednert, Roland P. Dilda,
Robert A. Davis and A.L. Maxson).
It is the recommendation of the Company's Board of Directors that the number of
directors be set at five and that the five nominees named below be elected as
directors, to serve as directors until the next Annual Meeting of the
shareholders and until their successors shall be duly elected and qualified as
directors.
Unless otherwise directed, the proxies solicited by the Board of Directors will
be voted in favor of electing five directors at the Annual Meeting and will be
voted in favor of such nominees. However, in the event of the inability or
unwillingness of one or more of these nominees to serve as a director at the
time of the Annual Meeting on May 8, 1996 or any adjournments thereof, the
shares represented by the proxies will be voted in favor of the remainder of
such nominees and may also (in the discretion of the holders of said proxies) be
voted for other nominees not named herein, in lieu of those unable or unwilling
to serve. As of the date hereof, the Board of Directors knows of no nominee who
is unwilling or unable to serve.
The affirmative vote of a majority of the shares of Common Stock of the Company
represented at the Annual Meeting at which a quorum is present either in person
or by proxy is required to fix the number of directors at five and to elect each
director. A quorum consists of a majority of the shares entitled to vote at the
Annual Meeting.
INFORMATION ABOUT NOMINEES FOR ELECTION AS DIRECTORS AND CERTAIN EXECUTIVE
OFFICERS
All of the nominees of the Board of Directors are presently serving as directors
of the Company. The names and ages of all five nominees are as follows:
Names of Nominees Ages Director Since
Christer Persson 47 September 1993
Lennart Hednert 55 June 1990
Roland P. Dilda 53 January 1994
Robert A. Davis 52 May 1991
A. L. Maxson 60 May 1986
Christer Persson has been the President and Chief Executive Officer of Celsius
Inc., a wholly-owned subsidiary of Celsius Invest AB, which is a subsidiary of
Celsius AB, a Swedish holding company, since July 1993. From January 1991 until
June 1993, he was the President and Owner of CHP Management and Business Consult
AB, a management consultant company specializing in strategic development and
corporate restructuring. Prior to January 1991, Mr. Persson was an Executive
Vice President of Gotaverken Energy AB for more than five years. Gotaverken
Energy AB designs and manufactures power plants and recovery units for the pulp
and paper industry worldwide.
Lennart Hednert has been President of Celsius Invest AB, a wholly-owned
subsidiary of Celsius AB, since June 1991. Prior to June 1991, he was the Vice
President, Corporate Development, for Celsius Invest AB and held that position
for more than five years.
Roland P. Dilda has been the President and Chief Executive Officer of the
Company since January 1994. Prior to joining the Company, Mr. Dilda was employed
for 29 years with the Pratt & Whitney Group of United Technologies Corporation.
From January 1991 until April 1993, he was the President and Chief Executive
Officer of International Aero Engines (IAE), a collaboration of engine
manufacturers responsible for the design, manufacture, certification, sale, and
support of the V2500 engine family. From August 1988 to December 1990, Mr. Dilda
was a Vice President, Strategic Planning and Marketing Support, for Pratt &
Whitney.
Robert A. Davis has been President and Chief Executive Officer of FFV Aerotech,
Inc., a wholly-owned subsidiary of Celsius Inc., since January 4, 1994 and a
Director of the Company since April 1, 1991. From April 1, 1991 until January 4,
1994, he was the President and Chief Executive Officer of the Company. Prior to
joining the Company, Mr. Davis was employed for 21 years with General Electric
Co. ("GE"). From January 1990 until March 1991, he was the Service General
Manager of the GE Aircraft Engine Maintenance Center in Arkansas City, Kansas.
A. L. Maxson has been the Executive Vice President -- Finance and Chief
Financial Officer and Director of Great Lakes Aviation, Ltd. since December
1993. Mr. Maxson was a financial consultant from March 1991 until December 1993.
From August 1986 until March 1991, he was Vice President, Financial Planning,
for Northwest Airlines, Inc.
Except for A.L. Maxson, no other nominee for the Board of Directors is a
director of another company (that is, other than the Company) with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to Section 15(d) of that Act. None of the director nominees is a
director of a company registered as an investment company under the Investment
Company Act of 1940.
Laurence Grimard, who is 54 years old, has been the Vice President of Operations
of the Company since May 1992. From November 1989 until May 1992, he was the
Vice President of Marketing for the Company. From November 1988 to November
1989, he was the Vice President of Business Development for the Company.
Donald Kamis, who is 53 years old, has been the Vice President of Wind Tunnel
Programs for the Company since June 1995. From September 1992 until June 1995,
he was the Vice President of Engineering for the Company. Prior to September
1992, Mr. Kamis was the Vice President of Engineering for FluiDyne Engineering
Corporation and held that position for more than five years.
Grant A. Radinzel, who is 40 years old, has been Vice President of Engineering
of the Company since June 1995. From 1985 until June 1995, Mr. Radinzel held
various engineering management and project management positions with the Company
since.
Charles L. Rooks, who is 42 years old, has been the Chief Financial Officer,
Treasurer and Secretary of the Company since March 1995. From 1992 until March
1995, Mr. Rooks was a management consultant with GlobaLinx in Tokyo, Japan. For
more than twelve years prior to 1992, Mr. Rooks held various financial positions
with General Dynamics at the Fort Worth, Texas division.
INFORMATION CONCERNING BOARD OF DIRECTORS
During the fiscal year ended December 31, 1995, the Board of Directors held four
formal meetings. All of the nominees who were Directors of the Company attended
all of the meetings held in 1995. Board members also met informally during the
year to discuss various aspects of the business affairs of the Company.
The Board appointed an Audit Committee in 1991 consisting of A. L. Maxson and
has annually reconfirmed the appointment of Mr. Maxson to this Committee. The
duties of the Audit Committee are to establish and maintain direct contact with
the Company's independent auditors to review the adequacy of the Company's
accounting and financial reporting procedures, the adequacy and effectiveness of
the Company's system of internal accounting controls, the scope and results of
the annual audit, and any other matters relative to the audit of the Company's
accounting and financial affairs that the Audit Committee or the independent
auditors deem necessary or appropriate.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table summarizes the compensation paid by the Company for services
rendered in all capacities during each of the years ended December 31, 1993,
1994 and 1995 to the Company's Chief Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
<S> <C> <C> <C> <C> <C>
Roland P. Dilda(1) 1993 -- -- -- --
President and 1994 $144,000 $ -0- $11,769 $90,149(2)
Chief Executive Officer 1995 146,900 15,408 12,000 5,162(2)
Robert A. Davis(1) 1993 $157,500 $23,625 $12,000 $ 2,894(3)
Former President and Chief 1994 3,635 -0- 231 127(3)
Executive Officer 1995 -0- -0- -0- -0-
</TABLE>
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(1) Roland P. Dilda replaced Mr. Davis as President and Chief Executive Officer
of the Company on January 4, 1994.
(2) Consists of $855 and $902 of group life insurance premiums paid by the
Company for Mr. Dilda in 1994 and 1995, respectively, $4,260 of
contributions made in 1995 by the Company on behalf of Mr. Dilda under the
Company's 401(k) profit-sharing plan, and $89,294 of relocation expenses
paid by the Company for Mr. Dilda in 1994. See "Report of Board of
Directors on Executive Compensation."
(3) Consists of $759, $78 and $0 of group life insurance premiums paid by the
Company for Mr. Davis in 1993, 1994 and 1995, respectively, and $2,135, $49
and $0 of contributions made in 1993, 1994 and 1995, respectively, by the
Company on behalf of Mr. Davis under the Company's 401(k) profit-sharing
plan.
SUMMARY OF PLANS
GROUP LIFE INSURANCE
The Company provides group life insurance to all of its full-time employees. The
amount of group life insurance on each full-time employee is equal to 150% of
the employee's base salary, which excludes any bonus paid to an employee
pursuant to any bonus plan adopted by the Company. To the extent that such
insurance coverage exceeds $50,000 for any employee, such employee recognizes
the cost of such excess insurance as taxable income. The group life insurance
premiums paid on behalf of the individuals named in the Summary Compensation
Table are included therein under the heading "Other Compensation."
401(k) PROFIT SHARING PLAN
The Company's ASE Retirement/Savings Plan ("Profit Sharing Plan") is a
profit-sharing plan under Sections 401(a) and 401(k) of the Internal Revenue
Code of 1986, as amended ("Code"). Eligible employees may choose to reduce their
salary or wages from the Company by not less than 1% nor more than 15% (subject
to a maximum reduction of $8,996 per year) and have such amounts contributed to
IDS Trust ("Trustee") pursuant to the terms of the Profit Sharing Plan. In 1994,
contributions up to 3% of the employee's compensation were matched at a rate of
50% by the Company ("Matching Contributions"). As of January 1, 1995,
contributions up to 6% of the employee's compensation are matched at a rate of
50% by the Company. In addition, the Company may, but is not obligated to, make
additional contributions to the Profit Sharing Plan. Both the Matching
Contributions and the additional discretionary contributions are limited to the
Company's accumulated net profits (prior to any deduction of contributions to
the Profit Sharing Plan and any federal, state or local income taxes). The
maximum annual allocation to an employee's account (including earnings, losses
and forfeitures) is the lesser of (i) 25% of their salary or wages, or (ii)
$30,000. All contributions under the Profit Sharing Plan are invested (pursuant
to several investment choices) by the Trustee.
Distributions of the vested portions of an employee's account balance will
typically occur on the employee's retirement (age 65), death, or disability or
after their tenth anniversary in the Profit Sharing Plan. Distributions will be
made in the form of a lump sum, annuity or installment method of distribution,
at the discretion of the employee. During the years ending December 31, 1993,
1994 and 1995, $271,762, $573,599 and $112,699, respectively, were distributed
by the Profit Sharing Plan. A distribution of $69,897 was made to Robert A.
Davis in 1994. In 1993, 1994 and 1995 no other distributions were made to any
executive officer of the Company, including those named in the Summary
Compensation Table. Benefit amounts credited during 1993, 1994 and 1995 pursuant
to the Profit Sharing Plan for the individuals named in the Summary Compensation
Table, the distribution or unconditional vesting of which are not subject to
future events, are included in the Summary Compensation Table under the heading
"All Other Compensation."
1987 EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors adopted an employee incentive stock option plan
effective September 9, 1987 ("1987 Stock Option Plan"), and the Company's
shareholders approved the 1987 Stock Option Plan at the Annual Meeting of
Shareholders on May 4, 1988. Pursuant to the 1987 Stock Option Plan, the Board
of Directors of the Company is authorized to grant options (qualified under
Section 422A of the Internal Revenue Code) to purchase up to 110,000 shares of
Common Stock to the Company's employees (including employees who are also
officers or directors). This number may be increased upon recommendation by the
Company's Board of Directors and approval by the Company's shareholders. All
employees of the Company or its subsidiaries are eligible to receive options
under the 1987 Stock Option Plan. The 1987 Stock Option Plan terminates on
September 9, 1997 unless terminated at an earlier date pursuant to its terms.
Under the 1987 Stock Option Plan, the Company's Board of Directors may grant
options at an exercise price which is not less than the fair market value of the
Common Stock at the time the option is granted. However, should an option be
granted under the 1987 Stock Option Plan to an employee who, at the time of the
grant of the option, owns more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, the exercise price must be
equal to at least one hundred ten percent (110%) of the fair market of the
Common Stock on the date of the grant of the option. The number of shares
subject to options granted pursuant to the 1987 Stock Option Plan and the date
such options are granted are determined in the sole discretion of the Board of
Directors based upon no objective formula or measure. The 1987 Stock Option Plan
contains restrictions on the transferability and the time of exercise of the
options. The options issued under the 1987 Stock Option Plan terminate three
years after issuance. From and after the date of the grant of an option under
the 1987 Stock Option Plan, the option is exercisable to the extent of 33-1/3%
of the total number of shares of Common Stock subject to the option; from and
after the first anniversary date of the grant of the option, the option is
exercisable to the extent of 66-2/3% of the total number of shares subject to
the option; from and after the second anniversary date of the grant of the
option, the option is exercisable to the extent of 100% of the total number of
shares subject to the option. The shares of Common Stock purchasable under the
1987 Stock Option Plan are transferable only under limited circumstances. At
December 31, 1995, no options were outstanding under the 1987 Stock Option Plan,
and during the fiscal year ended December 31, 1995, no options were granted
under the 1987 Stock Option Plan.
STOCK OPTION PLAN FOR DIRECTORS
The Company adopted a Stock Option Plan and Agreement effective September 9,
1987 ("Directors' Plan") under which the Chairman of the Company's Board of
Directors is authorized to grant options to purchase shares of Common Stock only
to members of the Board at an exercise price of $1.25 per share. The Chairman
has sole authority, in his absolute discretion, to determine which of the
members of the Board of Directors shall receive options under the Directors'
Plan, the time when options shall be granted, and the number of shares to be
optioned. However, the Chairman has no authority whatsoever in connection with
the grant of options to the Chairman. The Company's President, or if the
Chairman and the President are the same person, the Company's Secretary, has the
sole authority, in his absolute discretion, with regard to all decisions
relating to the grant of options under the Directors' Plan to the Chairman. The
Directors' Plan provides that options to purchase up to 100,000 shares of Common
Stock may be granted thereunder. This number may be increased upon
recommendation by the Company's Board of Directors and approval by the Company's
shareholders.
At December 31, 1995, no options to purchase shares of Common Stock were
outstanding under the Directors' Plan, and in the fiscal year ending December
31, 1995, no options to purchase shares were granted under the Directors' Plan.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Mr. Robert A. Davis dated
April 1, 1992, which provided for an initial term of one year; the original term
was automatically renewable for successive one-year periods unless the Agreement
was terminated at an earlier date. The Agreement provided for a base salary of
$157,000 for the year ended March 31, 1993, subject to adjustment for each year
thereafter as determined by the Company's Board of Directors. The Agreement also
provided for an annual incentive bonus to be determined based upon various
specified criteria. See "Election of Directors--Report of Board of Directors on
Executive Compensation." The Company also agreed under the Agreement to provide
Mr. Davis with term life insurance equal to 2-1/2 times Mr. Davis' base salary.
Mr. Davis was entitled to a severance payment and benefits if his employment was
terminated by the Board for reasons other than "cause," consisting of a cash
severance payment equal to one year's salary, a continuation of group medical
and life insurance coverage, and a pro-rated bonus payment. The Employment
Agreement was terminated on January 4, 1994 by mutual agreement of the Company
and Mr. Davis.
The Company entered into an Employment Agreement with Mr. Roland P. Dilda dated
December 10, 1993, which provides for an initial term of one year. The original
term is automatically renewable for successive one-year terms unless the
Agreement is terminated at an earlier date. The Agreement provides for a base
salary for the year ended December 31, 1994 of $144,000. The base salary is to
be adjusted annually on January 1 of each year. Salary increase adjustments of
2% and 4% were made effective January 1, 1995 and January 1, 1996, respectively.
The Agreement also provides for an annual incentive bonus based on certain
performance criteria set forth in the Agreement; these criteria may be adjusted
from time to time by the Board in its sole discretion but upon consultation with
Mr. Dilda. The maximum incentive bonus that may be paid with respect to any year
cannot exceed 50% of the base salary paid during that year. Under the Agreement,
Mr. Dilda receives a car allowance and is entitled to participate in any
profit-sharing plan, life insurance, health insurance, dental insurance,
disability insurance or any other fringe benefits which the Company may from
time to time make available to its salaried or executive employees; however, the
Company agreed under the Agreement to provide Mr. Dilda with term life insurance
equal to 2-1/2 times his annual base salary. Under the Agreement, if Mr. Dilda's
employment is terminated by the Board of Directors for reasons other than
"cause" (as that term is defined in the Agreement), including, but not limited
to, the termination of Mr. Dilda's employment as a result of the acquisition by
a third party of a controlling ownership of the Company owned by Celsius Inc.,
Mr. Dilda is to receive a cash severance payment equal to one year of the base
salary in effect at the time of his termination; a continuation of the group
medical insurance coverage; and a pro-rated bonus.
The Company entered into an Employment Agreement with Mr. Laurence N. Grimard
effective July 1, 1990. The Employment Agreement provides that the initial term
of Mr. Grimard's employment is two years. Thereafter, either party may terminate
the employment upon three months' prior notice. This Employment Agreement does
not address compensation or benefits and provides that the duties of Mr.
Grimard shall be determined by the Company's President.
COMPENSATION OF DIRECTORS
During 1995, Mr. A.L. Maxson received an aggregate of $10,000 (plus
reimbursement of out-of-pocket expenses in carrying out his responsibilities as
a director) for serving on the Board of Directors of the Company and for serving
on the Board's Audit Committee. The other members of the Board of Directors
received in 1995 no compensation for serving as Directors but received
reimbursement of out-of-pocket expenses incurred in carrying out their
responsibilities as Directors of the Company.
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
All of the members of the Board of Directors of the Company, with the exception
of Mr. Roland P. Dilda, are not executive officers of the Company or its
subsidiaries. All members of the Board, except Mr. A.L. Maxson, serve as
directors or executive officers of companies the capital stock of which is owned
by the Company's ultimate parent, Celsius AB, or subsidiaries of such parent.
The Company's Board of Directors is responsible for ensuring that compensation
for executives is consistent with the Company's compensation philosophy. The
Board believes that the Company's executive compensation is reasonable given its
financial performance and as compared to other similar companies in the
industry.
The Board annually evaluates the performance and compensation of the Company's
Chief Executive Officer ("CEO") and its other executive officers. The Board's
deliberations regarding annual salaries and incentive bonuses are made without
the presence of the CEO or any other affected executives. Annual base salaries
for both the CEO and the other executive officers are established on the basis
of a number of factors, including general performance of the Company and
competitive norms. Although the Board takes into account corporate performance
generally in determining annual base salaries, there is no specific formula
relating corporate performance to annual salaries.
The Company's policy with respect to executive officer compensation includes the
following beliefs:
1. The Company believes that its compensation system should attract and
retain experienced, highly qualified executive officers.
2. The Company believes in pay for performance based on specific written
goals and objectives and that executive compensation should have a
substantial component of incentive compensation based on performance.
3. The Company believes that its executive compensation level should be
measured by comparison to similar companies as well as other factors,
such as an individual's contributions and performance.
4. The Company believes that the overall compensation level of the
Company's executive officers should take into account the overall
performance of the Company as compared to similar companies.
DETERMINATION OF COMPENSATION OF CHIEF EXECUTIVE OFFICER
The CEO's total annual compensation consist of two elements -- annual base
salary and annual incentive bonus. Mr. Dilda's annual base salary for 1995 was
determined in part by comparison to the annual salaries of chief executive
officers of other companies of similar size and complexity of the Company. The
annual incentive bonus component of Mr. Dilda's 1995 compensation was determined
by establishing certain levels of financial performance of the Company as
compared to the pre-determined annual budget and certain other factors. The
factors and performance thresholds for 1995 were determined in the first quarter
of that year by agreement between Mr. Dilda and Mr. Christer Persson, the
Chairman of the Board. For the year ended December 31, 1995, 80% of Mr. Dilda's
total available incentive bonus was based on the Company reaching certain levels
of net income in 1995 as compared to the annual budget. The remaining 20% of Mr.
Dilda's 1995 incentive bonus was determined in the Board's discretion after
reviewing his overall performance. In 1995, Mr. Dilda received an annual
incentive bonus of $15,408.
The Board believes that its current compensation philosophy and approach has
served the Company's stockholders fairly, and it plans to continue the same
compensation philosophy and approach for the foreseeable future.
By the Board of Directors:
Christer Persson, Chairman
Lennart Hednert, Vice Chairman
Robert A. Davis
A. L. Maxson
Roland P. Dilda
PERFORMANCE GRAPH
The following graph shows changes over the past five-year period in the value of
$100 invested in: (1) the Company's Common Stock; (2) Nasdaq Stock Market; and
(3) a group of thirty-eight companies (including the Company) in the engineering
services industry. The year-end values of each investment are based on share
price appreciation plus any dividends paid in cash, with the dividends
reinvested on the date they were paid. The calculations exclude trading
commissions and taxes.
[GRAPHIC OMITTED]
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1990
1990 1991 1992 1993 1994 1995
Nasdaq 100 128 130 156 163 212
Industry Group 100 122 101 96 67 85
Aero Systems 100 60 40 50 27 37
CERTAIN TRANSACTIONS
Celsius AB guaranteed certain bank lines of credit granted to the Company by
Skandinaviska Enskilda Banken ("SEB"). In addition, during 1995, Celsius AB and
its affiliates provided customer assistance and consulting services to the
Company. As consideration for such guarantees, customer assistance, and
consulting services, the Company incurred and paid interest charges (or fees) to
Celsius Inc. (a wholly-owned subsidiary of Celsius Invest AB, which is a
subsidiary of Celsius AB, a Swedish holding company) in the amount of $205,000
during the year ending December 31, 1995. During 1995, the bank lines of credit
to the Company from SEB were in the amount of $6,000,000. To secure the
guarantees by Celsius AB of such lines of credit and to secure any other present
or future obligations of the Company to Celsius AB, the Company has granted
security interests to Celsius Inc. in substantially all of the Company's assets.
The existence and continued availability of the bank lines of credit from SEB
are dependent upon, among other things, the continued guarantees of Celsius AB,
and there can be no assurance that such guarantees will continue indefinitely.
On February 15, 1994, the Company borrowed $4,000,000 from Celsius Inc. to be
repaid over a five-year term. The loan bears interest at the annual rate of
6.7%. The proceeds from the loan were used to reduce the Company's short-term
borrowings under its line of credit. Currently, $2,000,000 is classified as
long-term debt with the remaining $800,000 classified as short-term debt. The
loan is secured by a mortgage on the Company's facilities. Principal and
interest is due in semi-annual installments that began August 15, 1994 and will
extend through February 15, 1999.
OTHER BUSINESS
All items of business intended by the management to be brought before the
meeting are set forth in this Proxy Statement, and the management knows of no
other business to be presented. If other matters of business not presently known
to the Board of Directors shall be properly raised at the Annual Meeting, the
person named as the proxies will vote on such matters in accordance with their
best judgment.
FUTURE SHAREHOLDER PROPOSALS
Under the Securities Exchange Act of 1934, the shareholders of the Company have
certain rights to have shareholder proposals included within the Proxy Statement
of the Company for the Company's Annual Shareholders' Meeting in 1997. Any
voting shareholder desiring to submit a proposal for consideration at the 1997
Annual Meeting should forward the proposal so that it will be received in the
Company's principal executive offices no later than December 20, 1996. Proposals
received by that date that are proper for consideration at the Annual Meeting
and otherwise conform to the rules of the Securities and Exchange Commission
will be included in the 1997 Proxy Statement. Due to the technical nature of the
rights of shareholders and the Company in this area, a shareholder desiring to
make a shareholder proposal should consider consulting his or her personal legal
counsel with respect to such rights.
By Order of the Board of Directors
/s/ Charles L. Rooks
Charles L. Rooks
Dated: April 15, 1996 Secretary
AERO SYSTEMS ENGINEERING, INC.
A MINNESOTA CORPORATION
358 EAST FILLMORE AVENUE
ST. PAUL, MINNESOTA 55107
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Roland P. Dilda and A. L. Maxson, and each of them, are hereby appointed
Proxies, each with the power to appoint his substitute, to represent and to
vote, as designated below, all shares of common stock of Aero Systems
Engineering, Inc. held of record by the undersigned on April 15, 1996 at the
Annual Meeting of Shareholders to be held on May 8, 1996 or any adjournment
thereof.
1. PROPOSAL TO FIX NUMBER OF DIRECTORS AT FIVE:
___ FOR ___ AGAINST ___ ABSTAIN
2. ELECTION OF DIRECTORS:
___ FOR all nominees listed below except as marked to the contrary below.
___ WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name below.)
Christer Persson, Lennart Hednert, A.L. Maxson, Roland P. Dilda, Robert A. Davis
In the event of the inability or unwillingness of one or more of these nominees
to serve as a director at the time of the Annual Meeting on May 8, 1996 or of
any adjournments thereof, the shares represented by the proxies will be voted in
favor of the remainder of such nominees and may also, in the discretion of the
holders of said proxies, be voted for other nominees not named herein, in lieu
of those unable or unwilling to serve. As of the date hereof, the Board of
Directors knows of no nominee who is unwilling or unable to serve.
(continued, and to be signed and dated, on the reverse side)
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting; management is not presently aware of
any such matters to be presented for action at the meeting.
The undersigned hereby ratifies and confirms all that the proxies shall lawfully
do or cause to be done by virtue hereof and hereby revokes all proxies
previously given to vote such shares.
This Proxy, when properly executed, shall be voted in the manner indicated by
the undersigned stockholder, but if no direction is made, this Proxy will be
voted in favor of fixing the number of Directors at five and for the directors
named in the Proxy Statement.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, or in some other fiduciary capacity, please give full title
as such.
DATED: ____________, 1996
If a corporation, please sign in full corporate name by president or other
authorized officer(s). If a partnership, please sign in partnership name by
authorized person(s).
Signature
Signature if held jointly
(PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.)
