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.
- --------------------------------------------------------------------------------
(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:
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AERO SYSTEMS ENGINEERING, INC.
A MINNESOTA CORPORATION
358 EAST FILLMORE AVENUE
ST. PAUL, MINNESOTA 55107
---------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 1999, AT 2:00 P.M.
---------------------------------------
TO AERO SYSTEMS ENGINEERING, INC. SHAREHOLDERS:
The annual meeting of the shareholders of Aero Systems Engineering, Inc. (the
"Company") will be held on June 2, 1999 at 2:00 p.m., C.D.T., 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 May 3, 1999 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/ Steven R. Hedberg
-------------------------------
Steven R. Hedberg
Secretary
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AERO SYSTEMS ENGINEERING, INC.
A MINNESOTA CORPORATION
358 EAST FILLMORE AVENUE
ST. PAUL, MINNESOTA 55107
651-227-7515
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 1999
------------------------------------
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 to be held on June 2, 1999 at 2:00 o'clock p.m. at the Company's
headquarters, 358 East Fillmore Avenue, St. Paul, Minnesota 55107, and at any
adjournments thereof (the "Annual Meeting"). 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 May 5, 1999. 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.
All shares and per share amounts herein reflect a 15% dividend of the Company's
$0.20 per share par value common stock ("Common Stock") that was effective on
March 31, 1999 for all shareholders of record on March 10, 1999.
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 Annual Meeting.
The annual report of the Company for the year ended December 31, 1998, 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 Common Stock recorded at the close of
business on May 3, 1999, the record date for the Annual Meeting, will be
entitled to notice of and to vote at the Annual Meeting. The securities of the
Company outstanding as of May 3, 1999, and which are entitled to vote at the
Annual Meeting, consist of 4,401,625 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 Annual 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 Annual 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 before or at
the Annual 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
Annual 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.
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The Company may have one or more of its officers or employees communicate by
telephone, telegraph, or mail with some of the shareholders who may have omitted
to return proxies.
A quorum, consisting of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting, must be present in person or by proxy before action
may be taken at the Annual Meeting. In general, the shareholders of the Company
may take action by the affirmative vote of the holders of the greater of (i) a
majority of the voting power of the shares present and entitled to vote on a
particular item of business or (ii) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum. If an
executed proxy is returned and the shareholder has abstained from voting on any
matter, the shares represented by such proxy will be considered present at the
Annual Meeting for purposes of determining a quorum and for purposes of
calculating the vote, but they will not be considered to have been voted in
favor of such matter. If an executed proxy is returned by a broker or other
entity holding shares in "street name" which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the Annual Meeting for
purposes of determining a quorum, but they will not be considered to be
represented at the Annual Meeting for purposes of calculating the vote with
respect to such matter.
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 31, 1999 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, by
each executive officer named in the Summary Compensation Table, 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
may be 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.
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Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class (2)
- ------------------- ------------------------ --------------------
Celsius Inc. 3,522,073 80.0%
1800 Diagonal Road
Suite 230
Alexandria, VA 22314
A. L. Maxson 106,950 2.4%
5848 Long Brake Trail
Edina, MN 55438
Dr. Leon E. Ring 2,300 *
358 East Fillmore Avenue
Saint Paul, MN 55107
Robert A. Davis 5,347 *
10 Airways Blvd.
Nashville, TN 37217
All executive officers
and directors
as a group (10 persons) 136,619 3.1%
- -------------------------
* Less than 1%.
(1) Each person or group has sole voting and investment power with respect to,
and directly owns, all outstanding shares.
(2) The percentage calculation is based on 4,401,625 shares outstanding at
March 31, 1999.
PROPOSAL TO FIX NUMBER OF DIRECTORS
(Item 1)
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 13, 1998, the
shareholders fixed the number of the Company's Board of Directors at five and
elected five directors.
IT IS THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS THAT THE NUMBER OF
DIRECTORS BE SET AT FIVE.
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Unless otherwise directed, the proxies solicited by the Board of Directors will
be voted in favor of setting the number of the Board of Directors at five.
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 the Board of Directors at five. A
quorum consists of a majority of the shares of Common Stock entitled to vote at
the Annual Meeting.
ELECTION OF DIRECTORS
(Item 2)
The Board of Directors manages the business of the Company. The Bylaws of the
Company provide that the shareholders shall elect the Board of Directors. At the
most recent annual meeting of the Company's shareholders held on May 13, 1998,
the shareholders elected the following five directors: Christer Persson, Dr.
Leon E. Ring, Robert A. Davis, Richard A. Hoel, and A. L. Maxson.
IT IS THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS 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 the five nominees named below to the Board of
Directors. 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 June 2, 1999 or any adjournments thereof, the shares represented by the
proxies will be voted in favor of the remainder of such nominees and may also
(at 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 elect each director. A quorum consists of a majority
of the shares of Common Stock entitled to vote at the Annual Meeting.
INFORMATION ABOUT NOMINEES FOR ELECTION AS DIRECTORS
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:
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Names of Nominees Ages Director Since
----------------- ---- --------------
Christer Persson 49 September 1993
Dr. Leon E. Ring 66 November 1996
Robert A. Davis 55 April 1991
A. L. Maxson 63 May 1986
Richard A. Hoel 51 February 1998
Christer Persson has been the President and Chief Executive Officer of Celsius
Inc., a wholly-owned 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.
Dr. Leon E. Ring has been the President and Chief Executive Officer of the
Company since September 23, 1996. He was appointed to the Company's Board of
Directors in November 1996. Prior to joining the Company, Dr. Ring was employed
under a Boeing contract from April 1995 to September 1996 and served as the
Deputy Project Director -- Technical with senior technical responsibility for
the National Wind Tunnel Complex. From July 1993 to April 1995, Dr. Ring was
Senior Vice President for the FluiDyne Facilities Group at the Company. From
June 1991 to July 1993, Dr. Ring was the President of FluiDyne Engineering
Corporation ("FluiDyne"); effective July 30, 1993, the Company purchased
substantially all of the assets of FluiDyne relating to FluiDyne's business of
designing, constructing and supplying various types of test facilities, such as
wind tunnels.
Robert A. Davis has been President and Chief Executive Officer of Celsius
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.
A. L. Maxson has been a financial consultant since August 1997. From January 1,
1994 to July 1997, he was the Executive Vice President -- Finance and Chief
Financial Officer and Director of Great Lakes Aviation, Ltd. 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.
Richard A. Hoel was appointed as a Director of the Company on February 18, 1998.
He was a founder and has been a senior shareholder/partner of Winthrop &
Weinstine, P.A., the Company's law firm, since February 1979.
No 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
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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.
INFORMATION REGARDING EXECUTIVE OFFICERS
Donald N. Kamis, who is 56 years old, has been a Vice President of the Company
since September 1992. Prior to September 1992, Mr. Kamis was the Vice President
of Engineering for FluiDyne and held that position for more than five years.
Grant A. Radinzel, who is 43 years old, has been a Vice President of the Company
since June 1995. From 1985 until June 1995, Mr. Radinzel held engineering
management and project management positions with the Company.
Michael S. Browne, who is 37 years old, has been a Vice President of the Company
since March 1998. From March 1997 until March 1998, Mr. Browne was the Secretary
and Treasurer of the Company, and, in addition to these duties, he was the
Director of Test Cell Programs since September 1996. Prior to September 1996,
Mr. Browne served as Senior Project Manager for the Company and held that
position for more than five years.
Richard L. Thomalla, who is 48 years old, has been a Vice President of the
Company since March 1998. From September 1996 until March 1998, Mr. Thomalla
served the Company as Director of Business Development for Test Cells. Prior to
September 1996, Mr. Thomalla served the Company for over 21 years in various
positions, including mechanical engineering, engineering management, sales and
marketing, and project management.
Steven R. Hedberg, who is 46 years old, has been the Secretary and Treasurer of
the Company since March 1998. In addition to these duties, Mr. Hedberg has been
the Company's Chief Financial Officer since March 1998. Prior to joining the
Company on January 19, 1998, Mr. Hedberg was employed for more than 20 years
with Control Data Systems, Inc.
INFORMATION CONCERNING BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of Directors held four
formal meetings and adopted one action in lieu of meeting. All of the nominees
who were Directors of the Company attended all of the meetings held in 1998
while they were directors of the Company. 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. On
February 18, 1998, Richard A. Hoel also was appointed to the Audit Committee.
The Board reconfirmed the appointments of Messrs. Maxson and Hoel to the
Committee on March 17, 1999. 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
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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 sets forth information concerning the compensation of the
Chief Executive Officer of the Company for services rendered in all capacities
during each of the years ended December 31, 1998, 1997 and 1996, and for the
only other executive officer of the Company (the "Named Executive Officers")
whose total salary and bonus for the fiscal year ended December 31, 1998
exceeded $100,000 for services in all capacities to the Company. No other
executive officer in 1998 earned an annual salary and bonus totaling in excess
of $100,000.
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>
Dr. Leon E. Ring 1998 $159,000 $ 15,000 $ 0 $5,747(2)
----
Director, President and 1997 $151,500 $ 0 $ 6,000 $5,564(2)
----
Chief Executive Officer 1996 $ 37,500(1) $ 0 $ 0 $1,265(2)
----
Donald N. Kamis 1998 $103,541 $ 9,280 $ 0 $3,744(3)
----
Vice President, 1997 $ 99,841 $ 0 $ 0 $5,267(3)
----
Wind Tunnel Programs 1996 $ 96,451 $ 3,000 $ 0 $3,429(3)
----
</TABLE>
- ----------------------------
(1) Dr. Leon E. Ring replaced Roland P. Dilda as President and Chief Executive
Officer effective September 23, 1996.
(2) Consists of $977, $840 and $140 of group life insurance premiums paid by
the Company for Dr. Ring in 1998, 1997 and 1996, respectively, and $4,770,
$4,724 and $1,125 of contributions made in 1998, 1997 and 1996,
respectively, by the Company on behalf of Dr. Ring under the Company's
401(k) retirement/savings plan.
(3) Consists of $638, $551 and $532 of group life insurance premiums paid by
the Company for Mr. Kamis in 1998, 1997 and 1996, respectively, and $3,106,
$4,716 and $2,897 of contributions made in 1998, 1997 and 1996,
respectively, by the Company on behalf of Mr. Kamis under the Company's
401(k) retirement/savings 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
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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 Named Executive
Officers are included therein under the heading "All Other Compensation."
401(k) PROFIT SHARING PLAN
The Company's ASE Retirement/Savings Plan ("Retirement/Savings Plan") is a
retirement/savings 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 $9,500 per year) and have such amounts contributed to
MetLife Defined Contribution Group ("MDCG") under the terms of the
Retirement/Savings Plan; these amounts are not taxed to the employee at the time
of contribution to the Retirement/Savings Plan. In addition, eligible employees
may elect to reduce their salary or wages from the Company by not less than 1%
nor more than 10% and have such amounts contributed to MDCG under the terms of
the Retirement/Savings Plan; these amounts are taxed to the employee at the time
of contribution to the Retirement/Savings Plan. As of January 1, 1995,
contributions up to 6% of the employee's compensation are matched at a rate of
50% by the Company ("Matching Contributions"). In addition, the Company may, but
is not obligated to, make additional contributions to the Retirement/Savings
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 Retirement/Savings 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 Retirement/Savings
Plan are invested (pursuant to several investment choices) by the trustee for
the Retirement/Savings Plan. The Company's trustee for the Retirement/Savings
Plan was changed, effective September 30, 1996, from IDS Trust to Chase
Manhattan Bank Trust. MDCG is agent to the Chase Manhattan Bank Trust.
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 Retirement/Savings Plan. Distributions can
be made in the form of a lump sum, annuity or installment method of payment, at
the discretion of the employee. During the years ending December 31, 1998, 1997,
and 1996, $690,276, $616,546 and $977,000, respectively, were distributed by the
Retirement/Savings Plan. In 1998, 1997, and 1996 no distributions were made to
any executive officer of the Company, including the Named Executive Officers.
Benefit amounts credited during 1998, 1997 and 1996 pursuant to the
Retirement/Savings Plan for the Named Executive Officers, 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."
STOCK OPTION PLAN FOR DIRECTORS
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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, 1998, no options to purchase shares of Common Stock were
outstanding under the Directors' Plan, and in the fiscal year ending December
31, 1998, no options to purchase shares were granted under the Directors' Plan.
EMPLOYMENT AGREEMENT
The Company entered into an Employment Agreement with Dr. Leon E. Ring dated
September 20, 1996, and amended on February 19, 1999, which provides for a term
of two-years, eleven months and nineteen days. The Agreement also provides for
an annual base salary of $150,000 for the year ended September 23, 1997, with a
base salary adjustment upon completion of twelve months of employment. Dr.
Ring's base salary was increased to $156,000 for the twelve-month period ended
September 23, 1998 and September 23, 1999. 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 Dr. Ring. 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, Dr. Ring is entitled to participate
in any retirement/savings plan, life insurance, health insurance, dental
insurance, disability insurance or any other fringe benefit 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 Dr. Ring with term
life insurance equal to two and one-half (2-1/2) times his annual base salary.
Under the Agreement, if Dr. Ring's employment is terminated by the Board of
Directors for reasons other than "cause" (as that term is defined in the
Agreement), Dr. Ring is to receive a cash severance payment equal to three
months' base salary in effect at the time of the termination and a pro-rated
bonus.
COMPENSATION OF DIRECTORS
During 1998, Messrs. A. L. Maxson and Richard A. Hoel received an aggregate of
$8,000 and $6,000, respectively, (plus reimbursement of out-of-pocket expenses
in carrying out their responsibilities as a Director) for serving on the Board
of Directors of the Company and for serving on the Board's Audit Committee. In
1998, the other members of the Board of Directors
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received 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
During the year ended December 31, 1998, all of the members of the Board of
Directors of the Company, with the exception of Dr. Leon E. Ring, were not
executive officers or employees of the Company or its subsidiaries. All other
members of the Board in 1998, except Messrs. A. L. Maxson and Richard A. Hoel,
also served as directors or executive officers of companies the capital stock of
which is owned directly or indirectly (that is, through its subsidiaries) by the
Company's ultimate parent, Celsius AB. 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"). The Board's deliberations regarding annual
salary and incentive bonus are made without the presence of the CEO. Annual base
salary for the CEO is established on the basis of a number of factors, including
general performance of the Company and competitive standards. Although the Board
takes into account corporate performance generally in determining annual base
salary, there is no specific formula relating corporate performance to annual
salary.
The Company's policy with respect to the compensation of its executive officers,
including its CEO, 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. Dr. Ring's annual base salary for 1998 was
determined in part by comparison to
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the annual salaries of chief executive officers of other companies of similar
size and complexity of the Company. The annual incentive bonus component of Dr.
Ring's 1998 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
1998 were determined in the first quarter of that year by agreement between Dr.
Ring and Mr. Christer Persson, the Chairman of the Board. For the year ended
December 31, 1998, 80% of Dr. Ring's total available incentive bonus was based
on the Company reaching certain levels of net income in 1998 as compared to the
annual budget. The remaining 20% of Dr. Ring's 1998 incentive bonus was
determined in the Board's discretion after reviewing his overall performance.
For 1998, Dr. Ring received an annual incentive bonus of $43,680 which was paid
in March 1999.
The Board believes that its current compensation philosophy and approach has
served the Company's shareholders fairly, and it plans to continue the same
compensation philosophy and approach for the foreseeable future.
By the Board of Directors:
Christer Persson, Chairman
Robert A. Davis
Richard A. Hoel
A. L. Maxson
Dr. Leon E. Ring
PERFORMANCE GRAPH
The following graph and table show changes during the period since December 31,
1993 through December 31, 1998 in the value of $100 invested in: (1) the
Company's Common Stock; (2) The Nasdaq Stock Market (U.S.); and (3) a group of
33 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.
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FIVE YEAR CUMULATIVE TOTAL RETURNS
Value of $100 invested on December 31, 1993
[PLOT POINTS CHART]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Nasdaq (U.S.) $100 $105 $136 $169 $207 $292
Industry Group 100 70 88 104 126 118
Company 100 53 73 60 87 125
CERTAIN TRANSACTIONS
Celsius Inc. has guaranteed certain bank lines of credit granted to the Company
by Skandinaviska Enskilda Banken ("SEB"). In addition, during 1998, Celsius Inc.
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 AB, a Swedish holding company) in the amount
of $160,000 during the year ending December 31, 1998. During 1998, the bank
lines of credit to the Company from SEB were in the amount of $6,000,000. To
secure the guarantees by Celsius Inc. of such lines of credit and to secure any
other present or future obligations of the Company to Celsius Inc., 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 Inc., 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 annual rate of interest for the loan was 6.7%.
The proceeds from the loan were used to reduce the Company's short-term
borrowings under its line of credit. This loan was paid in full on February 15,
1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and
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directors and persons who own more than ten percent of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Based upon inquiries made by the Company of its
executive officers and directors and of inquiries made of Celsius Inc., which is
the only person known to the Company which owns more than ten percent of the
Common Stock, the Company believes that during 1998 its officers and directors
and Celsius Inc. met all applicable Section 16(a) filing requirements, with one
exception. On March 26, 1996, the Board of Directors adopted a resolution
appointing Grant A. Radinzel as a Vice President of the Company, which was
retroactively effective to June 1995. A Form 3 reporting the appointment was
filed on February 17, 1999. The Form 3 filing was late due to the Company's
administrative oversight. Mr. Radinzel has not beneficially owned any Common
Stock of the Company since his appointment to the position of Vice President.
OTHER BUSINESS
All items of business intended by management to be brought before the Annual
Meeting are set forth in this Proxy Statement, and 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 "Exchange Act"), 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 2000. If a shareholder intends to present a proposal at the Company's annual
meeting to be held in 2000 and seeks to have the proposal included in the
Company's Proxy Statement relating to that meeting, pursuant to Rule 14a-8 under
the Exchange Act, the proposal must be received by the Company no later than the
close of business on January 5, 2000. If a shareholder wants to present a matter
at the annual meeting to be held in 2000 that is outside of the processes of
Rule 14a-8 and thus is not entitled to be included in the Company's Proxy
Statement for that meeting, notice of the matter must be given to the Company by
March 21, 2000. After that date, such proposal will be considered untimely and
the Company's proxies will have discretionary voting authority with respect to
such matter. Any proposals should be directed to the Secretary of the Company at
the Company's executive offices. 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/ Steven R. Hedberg
-----------------------------
Steven R. Hedberg
Dated May 3, 1999 Secretary
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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
A. L. Maxson and Gary Sommerland, 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 May 3, 1999 at the Annual
Meeting of Shareholders to be held June 2, 1999 on 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, A.L. Maxson, Dr. Leon E. Ring, Robert A. Davis,
Richard A. Hoel
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 June 2, 1999 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, at 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)
At their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting; management is not presently
aware of any such matters to be presented for action at the Annual Meeting.
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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: ____________, 1999 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.)
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