SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
AEROFLEX INCORPORATED
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
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[ ] 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: ____________________________________________________________
<PAGE>
AEROFLEX INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 18, 1999
----------------------
To our Stockholders
The annual meeting of stockholders of AEROFLEX INCORPORATED will be held at
the deSeversky Conference Center, Northern Boulevard, Old Westbury, New York
11568 on Thursday, November 18, 1999, beginning at 10:00 a.m. At the meeting,
you will be asked to vote on the following matters:
1. Election of three directors, each for a term of three years;
2. Adoption of our 1999 stock option plan; and
3. Any other matters that properly come before the meeting.
If you are a stockholder of record at the close of business on September
27, 1999, you are entitled to vote at the meeting or at any adjournment or
postponement of the meeting. This notice and proxy statement are first being
mailed to stockholders on or about October 1, 1999.
Please sign, date and return the enclosed proxy as soon as possible so your
shares may be voted as you direct.
By Order of the Board of Directors,
LEONARD BOROW
Secretary
Dated: Plainview, New York
October 1, 1999
<PAGE>
AEROFLEX INCORPORATED
35 South Service Road
Plainview, New York 11803
ANNUAL MEETING OF STOCKHOLDERS
Thursday, November 18, 1999
PROXY STATEMENT
Our annual meeting of stockholders will be held on Thursday, November 18,
1999 at the deSeversky Conference Center, Northern Boulevard, Old Westbury, New
York 11568, at 10:00 a.m. This proxy statement contains information about the
matters to be considered at the meeting or any adjournments or postponements of
the meeting.
ABOUT THE MEETING
What is being considered at the meeting?
You will be voting on the following:
. election of directors and
. adoption of a stock option plan.
In addition, our management will report on our performance during fiscal 1999
and respond to your questions.
Who is entitled to vote at the meeting?
You may vote if you owned stock as of the close of business on September
27, 1999. Each share of stock is entitled to one vote.
How do I vote?
You can vote in two ways
. by attending the meeting or
. by completing, signing and returning the enclosed proxy card.
Can I change my mind after I vote?
Yes, you may change your mind at any time before the vote is taken at the
meeting. You can do this by (1) signing another proxy with a later date and
returning it to us prior to the meeting, or (2) voting again at the meeting.
What if I return my proxy card but do not include voting instructions?
Proxies that are signed and returned but do not include voting instructions
will be voted (1) FOR the election of the nominee directors and (2) FOR the
adoption of the 1999 stock option plan.
<PAGE>
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts with brokers and/or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker and/or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is American Stock Transfer &
Trust Company, 212- 936-5100.
Will my shares be voted if I do not provide my proxy?
Your shares may be voted under certain circumstances if they are held in
the name of the brokerage firm. Brokerage firms generally have the authority to
vote customers' unvoted shares on certain "routine" matters, including the
election of directors. When a brokerage firm votes its customers' unvoted
shares, these shares are counted for purposes of establishing a quorum. At our
meeting, these shares will be counted as voted by the brokerage firm in the
election of directors, but will not be counted for all other matters to be voted
on because these other matters are not considered "routine" under the applicable
rules. If you hold your shares directly in your own name, they will not be voted
if you do not provide a proxy.
How many votes must be present to hold the meeting?
Your shares are counted as present at the meeting if you attend the meeting
and vote in person or if you properly return a proxy by mail. In order for us to
conduct our meeting, a majority of our outstanding shares as of September 27,
1999, must be present at the meeting. This is referred to as a quorum.
What vote is required to approve each item?
For each item, the affirmative vote of the holders of a majority of the
shares represented in person or by proxy and entitled to vote on the item will
be required for approval. A properly executed proxy marked "ABSTAIN" with
respect to any such matter will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
Our by-laws provide for a board of directors of not less than three nor
more than ten directors, classified into three classes as nearly equal in number
as possible, with each class serving for a three-year period. Our board of
directors now consists of nine directors. The directors in each class are:
<TABLE>
<CAPTION>
Class I Class II Class III
(To Serve Until the (To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of Annual Meeting of
Stockholders in 1999) Stockholders in 2000) Stockholders in 2001)
- --------------------- --------------------- ---------------------
<S> <C> <C>
Michael Gorin Harvey R. Blau Paul Abecassis
Donald S. Jones (1)(2) Ernest E. Courchene, Jr.(2)(3) Leonard Borow
John S. Patton(1)(3) Milton Brenner
Eugene Novikoff(2)(3)
----------
<FN>
(1) Member of Ethics Committee.
(2) Member of Audit Committee.
(3) Member of Compensation/Stock Option Committee.
</FN>
</TABLE>
Michael Gorin, Donald Jones and Eugene Novikoff are nominated for election
to Class I to hold office until our annual meeting of stockholders in 2002 or
until their successors are chosen and qualified. Messrs. Gorin and Jones are
currently serving as directors in Class I and Mr. Novikoff is currently serving
as a director in Class III.
Unless you indicate otherwise, shares represented by executed proxies will
be voted for the election as directors of Messrs. Gorin, Jones and Novikoff. If
any of them is unavailable, the shares will be voted for a substitute nominee
designated by the board of directors. We have no reason to believe that any of
the nominees will be unavailable or, if elected, will decline to serve.
Nominee Biographies
Mr. Michael Gorin has been our employee in various executive positions
since July 1985 and has been our President since October 1988, a director since
August 1990 and Chief Financial Officer since 1991. From 1986 to October 1988,
Mr. Gorin was our Vice President-Finance. From May 1980 until July 1985, Mr.
Gorin was Senior Vice President of Republic National Bank of New York. For more
than ten years prior to that, he was employed by Arthur Andersen & Co., becoming
a partner in April 1973. Mr. Gorin is licensed as a Certified Public Accountant
in the State of New York.
Vice Admiral Donald S. Jones (USN Ret.) has been a director since November
1993. Admiral Jones retired from the United States government in 1987 after more
than 37 years of service. From March 1988 to March 1990, Vice Admiral Jones was
Vice President for Government and International Affairs for Tracor Inc., a
manufacturer of electronic products and a provider of aircraft service and
repair. Since retirement, Admiral Jones also has acted as an independent
consultant.
Mr. Eugene Novikoff has been a director since June 1979. Mr. Novikoff is a
professional engineer and during the period from 1972 to 1978 was a director and
Vice President (in charge of development and engineering) for Knogo Corporation,
a manufacturing and service organization engaged in providing equipment and
devices to libraries and retail businesses to reduce losses from pilferage.
Since January 1979, Mr. Novikoff has been a self- employed consulting engineer.
<PAGE>
Standing Director Biographies
Mr. Harvey R. Blau was appointed as our Chairman of the Board and Chief
Executive Officer in October 1991. Mr. Blau had previously served as Vice
Chairman from November 1983 until October 1991 and has been a director since
1980. Mr. Blau is also Chairman of the Board and Chief Executive Officer of
Griffon Corporation and a director of Nu Horizons Electronics Corp. and Reckson
Associates Realty Corp. Mr. Blau has been a practicing attorney in the State of
New York since 1961, and is a member of the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., our general counsel.
Mr. Leonard Borow has been our employee in various executive positions
since November 1989 and has been Executive Vice President and Chief Operating
Officer since October 1991, a director since November 1992 and Secretary since
November 1993. Prior to joining us, Mr. Borow was President of Comstron
Corporation, a manufacturer of fast switching frequency synthesizers and
components, which we acquired in November 1989.
Mr. Paul Abecassis has been a director since August 1998. Mr. Abecassis has
been an investment banker for the past 20 years. He joined Bear Stearns
International Limited as a Managing Director in May 1991 and became a Senior
Managing Director in September 1992. He is also a director of Bracco Diagnostics
Incorporated.
Mr. Milton Brenner, until his retirement in September 1988, had been
President of Aeroflex Laboratories Incorporated, one of our subsidiaries, for
more than 15 years. Mr. Brenner was previously a director from 1973 to 1986 and
was again elected a director in August 1988.
Mr. Ernest E. Courchene, Jr. has been a director since April 1980. Mr.
Courchene served from May 1987 to May 1992 as Vice Chairman and a director of
Digitech Industries, Inc., a manufacturer of data communications diagnostic
equipment. From May 1983 to May 1987, Mr. Courchene was President of Southport
Capital Group Ltd., an investment banking firm and from March 1980 to November
1985, he was Chairman of the Board of Harbor Electronics Inc., a manufacturer of
cable assemblies for the electronics industry.
Major General John S. Patton (USAF Ret.) has been a director since August
1985. General Patton retired from the United States government in 1978 after
more than 36 years of service. Since retirement, he has acted as an independent
analytical technical consultant.
Directors' compensation
Directors who are not our employees receive an annual fee of $10,000 and a
fee of $750 for each board of directors or committee meeting they attend.
There were
. five meetings of the board of directors during the fiscal year ended June
30, 1999,
. two meeting of the audit committee,
. four meetings of the compensation/stock option committee and
. no meetings of the ethics committee, which was formed in November 1998.
Each director attended or participated in all of the meetings of the board of
directors and his respective committees.
Our audit committee is involved in discussions with our independent
certified accountants with respect to the year end audited financial statements.
Our compensation/stock option committee recommends executive compensation and
the granting of stock options to key employees. See "Compensation/Stock Option
Committee Report on Executive Compensation." Our ethics committee is responsible
for establishing and maintaining procedures for receiving, investigating and
reporting information and reports of violations of our code of ethics. We do not
have a standing nominating committee.
<PAGE>
PROPOSAL 2 -- ADOPTION OF THE AEROFLEX INCORPORATED 1999 STOCK OPTION PLAN
Introduction
At the meeting, you will be asked to adopt the Aeroflex Incorporated 1999
Stock Option Plan . The board adopted the 1999 Option Plan on August 11, 1999,
subject to stockholder approval. Our directors, officers, other employees and
consultants, as well as those of our subsidiaries or affiliates, are eligible to
participate in the 1999 Option Plan.
We believe that our long-term success depends upon our ability to attract
and retain qualified directors, officers, employees and consultants and to
motivate their best efforts on our behalf. We believe that the 1999 Option Plan
will be an important part of our compensation of directors, officers, employees
and consultants, particularly since as of August 23, 1999, we only have
approximately 211,000 shares available for grant under all of our existing stock
option plans, including approximately 123,000 under the Outside Director Plan.
The 1999 Option Plan is set forth as Exhibit A to this proxy statement. The
principal features of the 1999 Option Plan are summarized below, but the summary
is qualified in its entirety by the full text of the 1999 Option Plan.
Stock Subject to the Plan
The stock to be offered under the 1999 Option Plan consists of shares of
our common stock, whether authorized but unissued or reacquired. Up to 1,500,000
shares of common stock may be issuable upon the exercise of all stock options
under the 1999 Option Plan. The number of shares issuable is also subject to
adjustments upon the occurrence of certain events, including stock dividends,
stock splits, mergers, consolidations, reorganizations, recapitalizations, or
other capital adjustments. No individual may be granted options to purchase more
than an aggregate of 750,000 shares of common stock pursuant to the 1999 Option
Plan.
Administration of the Plan
The 1999 Option Plan is to be administered by our board of directors or by
a compensation committee or a stock option committee consisting of no fewer than
two "non-employee directors," as defined in the Securities Exchange Act of 1934.
We expect that our compensation/stock option committee will administer the 1999
Option Plan.
Subject to the terms of the 1999 Option Plan, the board or the committee
may determine and designate the individuals who are to be granted stock options
under the 1999 Option Plan, the number of shares to be subject to options and
the nature and terms of the options to be granted. The board or the committee
also has authority to interpret the 1999 Option Plan and to prescribe, amend and
rescind the rules and regulations relating to the 1999 Option Plan.
Grant of Options
Our directors, officers, employees and consultants, as well as those of our
subsidiaries or affiliates, are eligible to participate in the 1999 Option Plan.
The options to be granted under the 1999 Option Plan will be non-qualified
stock options. The exercise price for the options will be not less than the
market value of our common stock on the date of grant of the stock option. The
committee must adjust the option price, as well as the number of shares subject
to such option, in the event of stock splits, stock dividends, recapitalizations
and certain other events involving a change in our capital.
<PAGE>
Exercise of Stock Options
Stock options granted under the 1999 Option Plan shall expire not later
than ten years from the date of grant.
Stock options granted under the 1999 Option Plan may become exercisable in
one or more installments in the manner and at the time or times specified by the
committee. Unless otherwise provided by the committee, and except in the manner
described below upon the death or Total Disability (as defined) of the optionee,
a stock option may be exercised only in installments as follows: up to one-half
of the subject shares on and after the first anniversary of the date of grant,
and up to all of the subject shares on and after the second anniversary of the
date of the grant of such option, but in no event later than the expiration of
the term of the option.
Upon the exercise of a stock option, optionees may pay the exercise price
in cash, by certified or bank cashiers check or, at our option, in shares of
common stock valued at its fair market value on the date of exercise, or a
combination of cash and stock. Withholding and other employment taxes applicable
to the exercise of an option shall be paid by the optionee at such time as the
board or the committee determines that the optionee has recognized gross income
under the Code resulting from such exercise. These taxes may, at our option, be
paid in shares of common stock.
A stock option is exercisable during the optionee's lifetime only by him
and cannot be exercised by him unless, at all times since the date of grant and
at the time of exercise, he is employed by us, any parent corporation or any of
our subsidiaries or affiliates, except that, upon termination of his employment
(other than (1) by death, (2) by Total Disability followed by death in the
circumstances provided below or (3) by Total Disability), he may exercise an
option for a period of two years after his termination but only to the extent
such option is exercisable on the date of such termination. In the discretion of
the committee, options may be transferred to (1) members of the optionee's
family, (2) a trust, (3) a family limited partnership or (4) an estate planning
vehicle primarily for the optionee's family.
Upon termination of all employment by Total Disability, the optionee may
exercise such options at any time within five years after her termination, but
only to the extent such option is exercisable on the date of such termination.
In the event of the death of an optionee (1) while our employee, or an
employee of any parent corporation or any subsidiary or affiliate, (2) within
two years after termination of all employment with us, any parent corporation or
any subsidiary or affiliate (other than for Total Disability) or (3) within five
years after termination on account of Total Disability of all employment with
us, any parent corporation or any subsidiary or affiliate, the optionee's estate
or any person who acquires the right to exercise such option by bequest or
inheritance or by reason of the death of the optionee may exercise the
optionee's option at any time within the period of five years from the date of
death. In the case of clauses (1) and (3) above, the option shall be exercisable
in full for all the remaining shares covered by it, but in the case of clause
(2) the option shall be exercisable only to the extent it was exercisable on the
date of such termination of employment.
Change in Control
In the event of a "change in control," at the option of the committee (a)
all options outstanding on the date of the change in control shall become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after the change in control
any option or portion of an option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the fair
market value (on the date of surrender) of the shares of common stock subject to
the option or portion thereof surrendered, over the aggregate purchase price for
such shares.
<PAGE>
For the purposes of the 1999 Option Plan, a change in control is defined as
. a change in control as such term is presently defined in Regulation
240.12b-(f) under the Securities Exchange Act of 1934; or
. if any "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act) other than Aeroflex or any "person" who on the date
of the adoption of the 1999 Option Plan is a director or officer of
Aeroflex, becomes the "beneficial owner" (as defined in Rule 13(d)-3
under the Exchange Act) directly or indirectly, of securities
representing twenty percent (20%) or more of the voting power of our
then outstanding securities; or
. if during any period of two (2) consecutive years during the term of
the 1999 Option Plan, individuals who at the beginning of such period
constitute the board of directors, cease for any reason to constitute
at least a majority of the board.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to the options. This
summary is not intended to be exhaustive. Among other things, it does not
describe state, local or foreign income tax consequences.
We understand that under present federal tax laws, the grant of stock
options creates no tax consequences for an optionee or for us. Upon exercising a
nonqualified stock option, the optionee must generally recognize ordinary income
equal to the "spread" between the exercise price and the fair market value of
the common stock on the date of exercise. The fair market value of the shares on
the date of exercise will constitute the tax basis for the shares for computing
gain or loss on their subsequent sale.
Compensation that is subject to a substantial risk of forfeiture generally
is not included in income until the risk of forfeiture lapses. Under current
law, optionees who are either directors, officers or more than 10% stockholders
are subject to the "short-swing" insider trading restrictions of Section 16(b)
of the Exchange Act of 1934. The Section 16(b) restriction is considered a
substantial risk of forfeiture for tax purposes. Consequently, the time of
recognition of compensation income and its amount will be determined when the
restriction ceases to apply. The Section 16(b) restriction lapses six months
after the date of exercise.
Nevertheless, an optionee who is subject to the Section 16(b) restriction
is entitled to elect to recognize income on the date of exercise of the option.
The election must be made within 30 days of the date of exercise. If the
election is made, the results are the same as if the optionee were not subject
to the Section 16(b) restriction.
If permitted by our board of directors and if the optionee pays the
exercise price of an option in whole or in part with previously-owned shares of
common stock, the optionee's tax basis and holding period for the newly-acquired
shares is determined as follows: As to a number of newly-acquired shares equal
to the number of previously-owned shares used by the optionee to pay the
exercise price, the optionee's tax basis and holding period for the
previously-owned shares will carry over to the newly-acquired shares on a
share-for-share basis, thereby deferring any gain inherent in the
previously-owned shares. As to each remaining newly acquired share, the
optionee's tax basis will equal the fair market value of the share on the date
of exercise and the optionee's holding period will begin on the day after the
exercise date. The optionee's compensation income and our deduction will not be
affected by whether the exercise price is paid in cash or in shares of common
stock.
<PAGE>
We will generally be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as an optionee is required to
recognize ordinary compensation income. We will be required to comply with
applicable federal income tax withholding and information reporting requirements
with respect to the amount of ordinary compensation income recognized by the
optionee. If our board of directors permits shares of common stock to be used to
satisfy tax withholding, such shares will be valued at their fair market value
on the date of exercise.
When a sale of the acquired shares occurs, an optionee will recognize
capital gain or loss equal to the difference between the sales proceeds and the
tax basis of the shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets. The capital gain or loss will receive
long-term capital gain or loss treatment if the shares have been held for more
than 12 months. There will be no tax consequences to us in connection with a
sale of shares acquired under an option.
Recommendation of the Board
Our board of directors believes that it is in our best long-term interests
to have available for issuance under a stock option plan a sufficient number of
shares to attract, retain and motivate our highly qualified officers, employees,
directors and consultants by tying their interests to our stockholders'
interests. Accordingly, subject to the approval of our stockholders, our board
has adopted the 1999 Option Plan under which options to acquire 1,500,000 shares
may be granted.
The affirmative vote of a majority of the votes cast on this proposal in
person or by proxy at the Annual Meeting is required for approval of the 1999
Option Plan.
Our board of directors recommends a vote FOR approval of the adoption of
the 1999 Option Plan.
<PAGE>
STOCK OWNERSHIP
The following information, including stock ownership, is submitted with
respect to our directors, each executive officer named in the "Summary
Compensation Table," for all executive officers and directors as a group and,
based solely on filings with the Securities and Exchange Commission, for each
holder of more than five percent of our common stock as of September 13, 1999:
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Director Beneficially
Name Age Occupation Since Owned(1)(2)
- ---- --- ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
Harvey R. Blau 63 Chairman and CEO July 1980 819,678 4.3% (3)
Michael Gorin 57 President August 1990 430,871 2.3% (4)
Leonard Borow 51 Executive Vice President November 1992 759,960 4.0% (5)
Carl Caruso 55 Vice President- Manufacturing -- 126,501 -- (6)
Charles Badlato 40 Treasurer and Assistant
Secretary -- 50,965 -- (7)
Paul Abecassis 49 Investment Banker August 1998 29,666 -- (8)
Milton Brenner 71 Retired August 1988 142,666 -- (9)
Ernest E. Courchene, Jr 67 Business Consultant April 1980 123,440 -- (9)
Donald S. Jones 71 Consultant November 1993 31,000 -- (10)
Eugene Novikoff 75 Self-Employed
Engineering Consultant June 1979 51,183 -- (9)
John S. Patton 81 Consultant August 1985 50,500 -- (9)
All Directors and
Officers as a Group (11 2,616,430 13.0%
persons)
AMVESCAP PLC II 1,915,770 10.3%
Devonshire Square, London
EC2M 4YR, England
Munder Capital Management 1,206,640 6.5%
480 Pierce Street
Detroit, Michigan
FMR Corp. 1,112,400 6.0%
82 Devonshire Street
Boston, MA
<FN>
(1) No officer or director owns more than one percent of our issued and
outstanding common stock unless otherwise indicated. Ownership
represents sole voting and investment power.
(2) Includes options currently exercisable or exercisable within 60 days
under our 1989 Non-Qualified Stock Option Plan, 1993 Outside Director
Stock Option Plan, 1994 Non-Qualified Stock Option Plan, 1996 Stock
Option Plan and 1998 Stock Option Plan.
(3) Includes 47,533 shares reserved pursuant to a deferred compensation
agreement and options currently exercisable or exercisable within 60
days to purchase 550,000 shares of common stock. Also includes 4,651
shares held by the Blau, Kramer, Wactlar & Lieberman, P.C. Profit
Sharing Plan and 110,058 shares owned by his wife, to which Mr. Blau
disclaims beneficial ownership.
(4) Includes options currently exercisable or exercisable within 60 days
to purchase 316,667 shares of common stock.
(5) Includes options currently exercisable or exercisable within 60 days
to purchase 316,667 shares of common stock. Also includes 8,888 shares
owned by his wife to which Mr. Borow disclaims beneficial ownership.
<PAGE>
(6) Includes options currently exercisable or exercisable within 60 days
to purchase 65,000 shares of common stock.
(7) Includes options currently exercisable or exercisable within 60 days
to purchase 45,000 shares of common stock.
(8) Includes options currently exercisable to purchase 11,666 shares of
common stock.
(9) Includes options currently exercisable to purchase 50,000 shares of
common stock.
(10) Includes options currently exercisable to purchase 30,000 shares of
common stock.
</FN>
</TABLE>
MANAGEMENT
Our Officers
Our officers are:
Name Position Held
---- -------------
Harvey R. Blau Chairman of the Board (Chief Executive Officer)
Michael Gorin President (Chief Financial Officer and Principal
Accounting Officer)
Leonard Borow Executive Vice President (Chief Operating Officer)
and Secretary
Carl Caruso Vice President - Manufacturing
Charles Badlato Treasurer and Assistant Secretary
- ----------
Mr. Carl Caruso has been employed by us as Vice President of Aeroflex
Laboratories Incorporated since November 1989 and has been our Vice President -
Manufacturing since February 1997. Prior to joining us, Mr. Caruso was Vice
President of Comstron Corporation which we acquired in November 1989.
Mr. Charles Badlato has been employed by us in various financial positions
since December 1987 and has been our Treasurer since February 1994. From May
1981 until December 1987, Mr. Badlato was employed by various certified public
accounting firms, most recently as an audit manager with Touche Ross & Co. Mr.
Badlato is licensed as a certified public accountant in the State of New York.
<PAGE>
Summary Compensation Table
The following table sets forth information with respect to our
Chairman/Chief Executive Officer and each of our other executive officers who
were serving as of June 30, 1999 for services rendered for the years ended June
30, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- -------------------------------------------------
Other Annual Restricted Stock Long-Term All Other
Name and Fiscal Compensation Stock Option Incentive Compensation
Principal Position Year Salary(1) Bonus (2) Awards Awards(#) Plan Payouts (3)
------------------ ------ -------- ----- ------------ ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harvey R. Blau 1999 $278,532 $473,353(4) $ -- $ -- 225,000 -- $ 944
Chairman and Chief 1998 220,667 (4) -- -- 250,000 -- 805
Executive Officer 1997 216,471 212,010 -- -- 200,000 -- 754
Michael Gorin 1999 $352,532 $631,137 $ -- $ -- 150,000 -- $5,501
President and Chief 1998 300,250 420,000 -- -- 125,000 -- 4,939
Financial Officer 1997 281,261 212,010 -- -- 50,000 -- 5,283
Leonard Borow 1999 $352,532 $631,137 $ -- $ -- 150,000 -- $4,192
Executive Vice 1998 300,250 420,000 -- -- 125,000 -- 4,149
President-Chief 1997 281,261 212,010 -- -- 50,000 -- 4,309
Operating Officer
Carl Caruso 1999 $174,881 $ 95,000 $ -- $ -- -- -- $3,723
Vice President - 1998 186,399 50,000 -- -- 50,000 -- 2,857
Manufacturing 1997 173,564 60,000 -- -- 35,000 -- 3,022
Charles Badlato 1999 $138,859 $ 55,000 $ -- $ -- 25,000 -- $3,427
Treasurer and 1998 128,562 40,000 -- -- 40,000 -- 2,889
Assistant Secretary 1997 120,875 30,000 -- -- 15,000 -- 3,084
</TABLE>
<TABLE>
(1) "Salary" includes contributions to our 401(k) Plan by each of the
executive officers listed below for the fiscal years ended June 30,
1999, 1998 and 1997, as follows:
Name 1999 1998 1997
<S> <C> <C> <C>
Michael Gorin $10,788 $9,449 $11,242
Leonard Borow $12,899 $9,414 $10,262
Carl Caruso $10,198 $9,524 $10,073
Charles Badlato $ 9,074 $9,565 $10,175
(2) Other annual compensation does not include amounts of certain
perquisites and other non-cash benefits which we provide since those
amounts are not more than the lesser of (a) $50,000 or (b) 10% of the
total annual base salary and bonus disclosed for the officer.
(3) All other compensation includes the compensation component of certain
life insurance policies and our matching contribution to the 401(k)
Plan.
(4) Pursuant to his deferred compensation agreement, Mr. Blau elected to
defer $157,784 he was entitled to receive for the fiscal year ended
June 30, 1999 and $406,843 he was entitled to receive for the fiscal
year ended June 30, 1998 and receive this incentive compensation in
common stock valued at its market price. Accordingly, we have reserved
8,272 shares of common stock for Mr. Blau's incentive compensation for
the fiscal year ended June 30, 1999 and 39,261 shares of common stock
for the fiscal year ended June 30, 1998.
</TABLE>
<PAGE>
Employment Agreements
Effective March 1, 1999, we entered into new employment agreements with
each of Messrs. Blau, Gorin and Borow. The agreements expire June 30, 2004.
Pursuant to these agreements
. Mr. Blau receives a base salary of $275,000, subject to semi-annual cost of
living adjustments, and an annual bonus equal to 3 percent of our
consolidated pre-tax earnings for each fiscal year;
. Mr. Gorin receives a base salary of $350,000, subject to semi-annual cost
of living adjustments and an annual bonus equal to 3 percent of our
consolidated pre-tax earnings for each fiscal year;
. Mr. Borow receives a base salary of $350,000, subject to semi-annual cost
of living adjustments and an annual bonus equal to 3 percent of our
consolidated pre-tax earnings for each fiscal year.
Each employment agreement further provides for a three-year consulting
period after the termination of employment during which each executive will
receive consulting payments in an annual amount equal to two-thirds of his last
annual base salary. The employment agreements also provide for life insurance
and for the continuation of certain benefits following death or disability.
In February 1997, we entered into an employment agreement with Mr. Caruso
for the period February 5, 1997 to February 5, 2000. The agreement provides for
an annual salary of $180,000, together with cost of living increments.
In the event that we terminate the employment of any of these four
individuals without cause, the terminated employee is entitled to receive his
salary and incentive payment, if any, for the remainder of the contract term.
The employment agreements for Messrs. Blau, Gorin and Borow further provide that
in the event there is a change in the control of the company, as defined
therein, each executive has the option, exercisable within one year after such
event, to terminate his employment agreement. Upon such termination, he has the
right to receive as a lump sum payment the compensation (including incentive
bonus, if any) remaining to be paid for the balance of the term of the
agreement. In addition, we will provide the executive with a tax gross-up
payment to cover any excise tax due. Mr. Caruso's employment agreement provides
that in the event there is a change in control he has the option, exercisable
within six (6) months of becoming aware of such event, to terminate his
employment agreement. Upon such termination, Mr. Caruso has the right to receive
his base salary for the remainder of the term of the contract.
In May 1997, we entered into a deferred compensation agreement with Mr.
Blau which was approved by stockholders in November 1997 and which provides that
Mr. Blau can elect to defer all or any portion of the incentive compensation
payable to him pursuant to his employment agreement and receive such deferred
compensation in cash or common stock. For the fiscal year ended June 30, 1999,
Mr. Blau elected to defer 25% of his incentive compensation and receive all of
such deferred compensation in common stock.
Stock Option Plans
We currently have five stock option plans the 1989 Non-Qualified Stock
Option Plan, the Outside Director Stock Option Plan, the 1994 Non-Qualified
Stock Option Plan, the 1996 Stock Option Plan and the 1998 Stock Option Plan.
The plans were designed for the purpose of strengthening our ability to attract
and retain in our employ persons of training, experience and ability and to
furnish additional incentives to key employees, consultants and directors.
In December 1993, the board of directors adopted, subject to stockholder
approval obtained in November 1994, the Outside Director Plan which, as amended
in November 1996, covers 500,000 shares of common stock and expires in 2003. The
Outside Director Plan provides for an annual grant to each non-employee director
of options to purchase 10,000 shares of common stock. The plan is administered
by a committee of two or more members of the board of directors who determine,
among other things, the individuals to whom options should be granted and the
purchase price of the shares with the exception that no option may be granted at
less than market value at the time of grant and options may only be exercised
before the expiration of ten years from the date of grant.
<PAGE>
The 1989 Plan, 1994 Plan, 1996 Plan and 1998 Plan each covers 1,500,000
shares of our common stock. The 1989 Plan, (which expires in 1999), the 1994
Plan, (which expires in 2004) and the 1998 Plan (which expires in 2008), all
permit the granting of Non-Qualified Options to our officers and other senior
executives and management, supervisory personnel and consultants and, for
the1989 Plan and the 1998 Plan, also directors. The 1996 Plan, which expires in
2006, permits the granting of both non-qualified and incentive stock options to
our officers and employees. These plans are administered by a committee of two
or more members of the board of directors who determine, among other things, (1)
the individuals to whom options shall be granted, (2) the time or times at which
options shall be granted, (3) the number of shares to be subject to each option,
(4) the purchase price of the shares, (5) the vesting of each option and (6) the
term of each option, with the exception that no option can be granted at less
than market value at the time of grant and options may only be exercised before
the expiration of five years from the date of grant (or ten years for the 1996
Plan and 1998 Plan). Each option granted under these plans may be exercised only
during the continuance of an optionee's employment or service with us, except
under certain circumstances.
<PAGE>
Stock Option Grants in Last Fiscal Year(1)
The following table sets forth all stock option grants to the named
executive officers during the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants(1) for Option Term(1)(5)
--------------------------------------------- -------------------------------------
% of Total
Options
Granted to
Employees/
Options Directors/ Exercise Stock Stock
Granted Consultants in Price Expiration Price Dollar Price Dollar
Name (#)(2) Fiscal Year(3) ($/Sh)(2) Date 5%(4) Gain 10%(4) Gain
---- ------- ---------------- --------- ---------- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harvey R. Blau 225,000 19.5% $ 10.44 08/12/08 $17.01 $1,478,250 $27.08 $3,744,000
Michael Gorin 150,000 13.0 10.44 08/12/08 17.01 985,500 27.08 2,496,000
Leonard Borow 150,000 13.0 10.44 08/12/08 17.01 985,500 27.08 2,496,000
Charles Badlato 25,000 2.2 17.56 02/02/09 28.60 276,000 45.55 699,750
- ----------
<FN>
(1) All grants are under the 1996 Plan or the 1998 Plan. Dollar gains are
based on the assumed annual rates of appreciation of the exercise
price of each option for the term of the option.
(2) Grants were made at 100% of the market value of our common stock on
the date of grant. Grants vest 33- 1/3% on each of the first, second
and third anniversaries of the date of grant.
(3) Total options granted to employees, consultants and directors in 1999
was for 1,155,500 shares of common stock.
(4) The stock price represents the price of our common stock if the
assumed annual rates of stock price appreciation are achieved over the
term of each of the options.
(5) The increases in market value of our stock for all stockholders as of
September 13, 1999, assuming annual rates of stock price appreciation
from June 30, 1999 (closing stock price of $19.75 per share) over the
ten year period used in this table, aggregate approximately $231
million at a 5% rate and approximately $585 million at 10%.
</FN>
</TABLE>
<PAGE>
Aggregate Option/Stock Appreciation Rights Exercises in Last Fiscal Year and
Fiscal Year-End Option/Stock Appreciation Rights Values
The following table sets forth information concerning options exercised
during the year ended June 30, 1999, by the named executive officers and the
value of unexercised options held by them as of June 30, 1999:
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money
Shares Options/SARs at Options/SARs at
Acquired on Value Fiscal Year End Fiscal Year End(1)
------------------------- --------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harvey R. Blau 365,000 $3,424,563 391,667 458,333 $5,791,667 $5,028,646
Michael Gorin 290,000 2,725,118 225,000 250,000 3,387,500 2,609,375
Leonard Borow 290,000 2,725,118 225,000 250,000 3,387,500 2,609,375
Carl Caruso 25,804 265,069 56,667 53,333 851,667 527,396
Charles Badlato 23,415 238,958 40,000 65,000 610,000 403,750
- ----------
<FN>
(1) Based upon the closing price of our common stock of $19.75 on June 30, 1999.
</FN>
</TABLE>
Supplemental Executive Retirement Plan
Effective January 1, 1994, we established the Aeroflex Incorporated
Supplemental Executive Retirement Plan ("SERP") for certain of our officers. No
benefits were payable prior to January 1, 1996.
The Normal Retirement Age under the SERP is 70. The SERP would provide an
annual benefit of 50% of Final Average Pay. "Final Average Pay" means the
average of the three highest paid calendar years out of the last ten prior to
retirement. Benefits are also payable, on a reduced basis, for early retirement
after the sum of a participant's age and years of service equals 70 and the
participant attains age 55. Retirement benefits are payable for life, with a
guarantee of 10 years of payments. In addition, the SERP provides a
pre-retirement death benefit payable for 10 years to the participant's
beneficiary and a disability benefit with a guarantee of 10 years of payment;
provided that any disability benefit shall be reduced by the amount of the
disability benefit payable under the participant's employment agreement, if any.
A "rabbi" trust has been established to which contributions are made
annually to provide for the benefits under the SERP. The trust is funding the
benefits partially through insurance contracts.
The following tables show the projected annual benefits payable at age 70
under the SERP. The number of years of credited service of the participants as
of June 30, 1999 are: Mr. Blau, 18; Mr. Gorin, 13; Mr. Borow, 21; and Mr.
Badlato, 11.
<PAGE>
<TABLE>
<CAPTION>
Supplemental Executive Retirement Plan Table
Annual Benefit at Normal Retirement
Final Average Years of Service
Annual Pay(1) 10 15 20
------------- -------- -------- --------
<S> <C> <C> <C>
$ 50,000 $ 25,000 $ 25,000 $ 25,000
100,000 50,000 50,000 50,000
200,000 100,000 100,000 100,000
400,000 200,000 200,000 200,000
500,000 250,000 250,000 250,000
1,000,000 500,000 500,000 500,000
- ----------
<FN>
(1) Average of a participant's highest three years' compensation out of
the last ten prior to retirement as reported on Form W-2 but excluding
stock related compensation and including deferred compensation.
</FN>
</TABLE>
Board of Directors Interlocks and Insider Participation
During fiscal 1999, our Compensation/Stock Option Committee consisted of
Messrs. Robert Bradley, Eugene Novikoff and John S. Patton. None of them were
our officers or employees during fiscal 1999 nor did they have any relationship
with us which requires disclosure in this proxy statement.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation/Stock
Option Committee Report on Executive Compensation" and "Common Stock
Performance" will not be deemed to be filed or to be proxy soliciting
material or incorporated by reference in any prior or future filings by us
under the Securities Act of 1933 or the Securities Exchange Act.
COMPENSATION/STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of our executive officers is generally determined by the
Compensation/Stock Option Committee of our board of directors, subject to
applicable employment agreements. Each member of the Compensation/Stock Option
Committee is a director who is not employed by us or any of our affiliates. The
following report with respect to certain compensation paid or awarded to our
executive officers during fiscal 1999 is furnished by the directors who
comprised the Compensation/Stock Option Committee during fiscal 1999.
General Policies
Our compensation programs are intended to enable us to attract, motivate,
reward and retain the management talent required to achieve our corporate
objectives, and thereby increase shareholder value. It is our policy to provide
incentives to our senior management to achieve both short-term and long-term
objectives and to reward exceptional performance and contributions to the
development of our businesses. To attain these objectives, our executive
compensation program includes a competitive base salary, cash incentive bonuses
and stock-based compensation. See "Management Employment Agreements".
Stock options are granted to employees, including our executive officers,
by the Compensation/Stock Option Committee under our option plans. The Committee
believes that stock options provide an incentive that focuses the executive's
attention on managing Aeroflex from the perspective of an owner with an equity
stake in the business. Options are awarded with an exercise price equal to the
market value of common stock on the date of grant. Among our executive officers,
the number of shares subject to options granted to each individual generally
depends upon the level of that officer's responsibility. The largest grants are
<PAGE>
awarded to the most senior officers who, in the view of the Compensation/Stock
Option Committee, have the greatest potential impact on our profitability and
growth. Previous grants of stock options are reviewed but are not considered the
most important factor in determining the size of any executive's stock option
award in a particular year.
From time to time, the Compensation/Stock Option Committee may utilize the
services of independent consultants to perform analyses and to make
recommendations to the Committee relative to executive compensation matters. No
compensation consultant is paid on a retainer basis.
Relationship of Compensation to Performance and
Compensation of Chief Executive Officer
The Compensation/Stock Option Committee annually establishes, subject to
the approval of the board of directors and any applicable employment agreements,
the salaries which will be paid to our executive officers during the coming
year. In setting salaries, the Compensation/Stock Option Committee takes into
account several factors, including competitive compensation data, the extent to
which an individual may participate in the stock plans maintained by us, and
qualitative factors bearing on an individual's experience, responsibilities,
management and leadership abilities, and job performance.
For fiscal 1999, pursuant to the terms of his employment agreement with us,
our Chairman received a base salary and additional compensation (See "Employment
Agreements"). The Compensation/Stock Option Committee also recommended the
issuance of, and the Chairman received, options to purchase 225,000 shares of
common stock at $10.44 per share.
The Compensation Committee:
Eugene Novikoff
Ernest E. Courchene, Jr.
John S. Patton
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than ten percent of a registered class of our
equity securities ("Reporting Persons") to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange (the "NYSE"). These Reporting
Persons are required by SEC regulation to furnish us with copies of all Forms 3,
4 and 5 they file with the SEC and NYSE. Based solely upon our review of the
copies of the forms it has received, we believe that all Reporting Persons
complied on a timely basis with all filing requirements applicable to them with
respect to transactions during fiscal 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Chairman, Mr. Blau is also Chairman of the Board and Chief Executive
Officer of Griffon Corporation. During fiscal 1999, a subsidiary of Griffon
Corporation purchased products from us for an aggregate $409,000 in various arms
length transactions. Mr. Blau is a member of the law firm of Blau, Kramer,
Wactlar & Lieberman, P.C., our general counsel. We have engaged Blau, Kramer,
Wactlar & Lieberman, P.C. in the past and intend to continue to retain them on
an ongoing basis. For the year ended June 30, 1999, we paid Blau, Kramer,
Wactlar & Lieberman, P.C. approximately $393,000 in legal fees.
<PAGE>
COMMON STOCK PERFORMANCE
The following graph provides a comparison of cumulative stockholder return
among us, Standard and Poors' 500 companies and Standard and Poors' electronics
(instrumentation) companies from June 1994 to August 1999:
Begin: 06/30/1994
Period End: 08/31/1999
AEROFLEX INC (ARX) End: 08/31/1999
<TABLE>
<CAPTION>
Beginning
Transaction Closing No. Of Dividend Dividend Shares Ending Cum. Tot.
Date* Type Price** Shares*** per Share Paid Reinvested Shares Return
- ----- ----------- -------- ---------- --------- -------- ---------- ------ --------
<S> <C> <C> <C> <C> <C>
6/94 Begin 4,000 25,00 25,000 100,00
6/95 Year End 4,750 25,00 25,000 118,75
6/96 Year End 6,125 25,00 25,000 153,13
6/97 Year End 5,125 25,00 25,000 128,13
6/98 Year End 10,375 25,00 25,000 259,38
6/99 Year End 19,750 25,00 25,000 493,75
8/99 End 16,375 25,00 25,000 409,38
<FN>
* Specified ending dates or ex-dividends dates.
** All Closing Prices and Dividends are adjusted for stock splits and stock
dividends.
*** 'Begin Shares' based on $100 investment.
</FN>
</TABLE>
<PAGE>
MISCELLANEOUS INFORMATION
KPMG LLP, our independent auditors for the fiscal year ended June 30, 1999,
has advised us that a representative of the firm plans to be present at our
annual meeting, with the opportunity to make a statement if he desires to do so,
and will be available to respond to appropriate questions. As of the date of
this proxy statement, our board of directors does not intend to present at the
meeting any matters not described in the form of Proxy. If any proposal not set
forth in this proxy statement is presented for action at the meeting, we intend
to vote the shares represented by proxies with respect to such matters in
accordance with the judgment of the persons voting them.
We will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by mail, certain of our officers and regular employees
may solicit proxies by telephone, telegraph or personal interview. We may also
request brokerage houses, other custodians, nominees and fiduciaries who are
record holders of stock to forward soliciting material to the beneficial owners
of the stock they hold of record, and we may reimburse them for their expenses
in forwarding solicitation material to the beneficial owners.
We must receive stockholder proposals with respect to our next annual
meeting of stockholders by no later than June 2, 2000 for us to consider
including them in our next Proxy Statement.
A copy of our annual report has been mailed to every stockholder as of
September 27, 1999. The annual report is not to be considered proxy soliciting
material.
By Order of the Board of Directors,
LEONARD BOROW
Secretary
Dated: October 1, 1999
Plainview, New York
<PAGE>
Exhibit "A"
Aeroflex Incorporated
1999 Stock Option Plan
----------------------
SECTION 1. GENERAL PROVISIONS
------------------
1.1. Name and General Purpose
------------------------
The name of this plan is the Aeroflex Incorporated 1999 Stock Option Plan
(hereinafter called the "Plan"). The Plan is intended to be a broadly-based
incentive plan which enables Aeroflex Incorporated (the "Company") and its
subsidiaries and affiliates to foster and promote the interests of the Company
by attracting and retaining directors, officers and employees of, and
consultants to, the Company who contribute to the Company's success by their
ability, ingenuity and industry, to enable such directors, officers, employees
and consultants to participate in the long-term success and growth of the
Company by giving them a proprietary interest in the Company and to provide
incentive compensation opportunities competitive with those of competing
corporations.
1.2 Definitions
-----------
a. "Affiliate" means any person or entity controlled by or under common
control with the Company, by virtue of the ownership of voting
securities, by contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or in
any person directly or indirectly controlling the Company, which shall
mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(2) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); or
(b) if any "person" (as such term is used in Section 13(d) and 14(d)
of the Exchange Act) other than the Company or any "person" who on the
date of this Agreement is a director or officer of the Company,
becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the
Exchange Act) directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the voting power of the
Company's then outstanding securities; or
(c) if during any period of two (2) consecutive years during the term
of this Plan, individuals who at the beginning of such period
constitute the Board of Directors, cease for any reason to constitute
at least a majority thereof.
d. "Committee" means the Committee referred to in Section 1.3 of the
Plan.
e. "Common Stock" means shares of the Common Stock, par value $.10 per
share, of the Company.
f. "Company" means Aeroflex Incorporated, a corporation organized under
the laws of the State of Delaware (or any successor corporation).
g. "Fair Market Value" means the closing market price of the Common Stock
on the New York Stock Exchange consolidated reporting system on the
trading day prior to the date of the grant or on any other date on
which the Common Stock is to be valued hereunder. If no sale shall
have been reported on the New York Stock Exchange consolidated
reporting system on such date, Fair Market Value shall be determined
by the Committee.
<PAGE>
h. "Non-Employee Director" shall have the meaning set forth in Rule 16(b)
promulgated by the Securities and Exchange Commission ("Commission").
i. "Option" means any option to purchase Common Stock under Section 2 of
the Plan.
j. "Option Agreement" means the option agreement described in Section 2.4
of the Plan.
k. "Participant" means any director, officer, employee or consultant of
the Company, a Subsidiary or an Affiliate who is selected by the
Committee to participate in the Plan.
l. "Subsidiary" means any corporation in which the Company possesses
directly or indirectly 50% or more of the combined voting power of all
classes of stock of such corporation.
m. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disabled an optionee. The Committee, whose
decisions shall be final, shall make a determination of Total
Disability.
1.3 Administration of the Plan
--------------------------
The Plan shall be administered by the Board or by the Committee appointed
by the Board consisting of two or more members of the Board all of whom shall be
Non-Employee Directors. The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by it
without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 Eligibility
-----------
Stock Options may be granted only to directors, officers, employees of, or
consultants to, the Company or a Subsidiary or Affiliate. Subject to Section
1.5, any person who has been granted any Option may, if he is otherwise
eligible, be granted an additional Option or Options.
1.5 Shares
------
The aggregate number of shares reserved for issuance pursuant to the Plan
shall be 1,500,000 shares of Common Stock, or the number and kind of shares of
stock or other securities which shall be substituted for such shares or to which
such shares shall be adjusted as provided in Section 1.6. No individual may be
granted Options to purchase more than an aggregate 750,000 shares of Common
Stock pursuant to the Plan.
Such number of shares may be set aside out of the authorized but unissued
shares of Common Stock or out of issued shares of Common Stock acquired for and
held in the Treasury of the Company, not reserved for any other purpose. Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason prior to its exercise in full will again be available for Options
thereafter granted during the balance of the term of the Plan.
<PAGE>
1.6 Adjustments Due to Stock Splits,
Mergers, Consolidation, Etc.
--------------------------------
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common Stock or other securities which are
reserved for issuance under the Plan and the number of shares or other
securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all Options outstanding on the date of such Change in Control
shall become immediately and fully exercisable, and (b) an optionee will be
permitted to surrender for cancellation within sixty (60) days after such Change
in Control any Option or portion of an Option which was granted more than six
(6) months prior to the date of such surrender, to the extent not yet exercised,
and to receive a cash payment in an amount equal to the excess, if any, of the
Fair Market Value (on the date of surrender) of the shares of Common Stock
subject to the Option or portion thereof surrendered, over the aggregate
purchase price for such Shares under the Option.
1.7 Non-Alienation of Benefits
--------------------------
Except as herein specifically provided, no right or unpaid benefit under
the Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.8 Withholding or Deduction for Taxes
----------------------------------
If, at any time, the Company or any Subsidiary or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise, the
Participant shall be required to pay to the Company or such Subsidiary or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company, the Company or such Subsidiary or Affiliate may
accept a sufficient number of shares of Common Stock to cover the amount
required to be withheld.
1.9 Administrative Expenses
-----------------------
The entire expense of administering the Plan shall be borne by the Company.
1.10 General Conditions
------------------
a. The Board or the Committee may, from time to time, amend, suspend or
terminate any or all of the provisions of the Plan, provided that,
without the Participant's approval, no change may be made which would
alter or impair any right theretofore granted to any Participant.
b. With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Option in any manner not
inconsistent with the terms of the Plan, including, without
limitation, and irrespective of the provisions of Section 2.3(c)
below, to accelerate the date or dates as of which an installment of
an Option becomes exercisable.
<PAGE>
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional incentive
compensation arrangements for employees of the Company or such
Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the right of
the Company or any Subsidiary or Affiliate to terminate a
Participant's employment with the Company (or such Subsidiary or
Affiliate) at any time.
e. Any decision or action taken by the Board or the Committee arising out
of or in connection with the construction, administration,
interpretation and effect of the Plan shall be conclusive and binding
upon all Participants and any person claiming under or through any
Participant.
f. No member of the Board or of the Committee shall be liable for any act
or action, whether of commission or omission, (i) by such member
except in circumstances involving actual bad faith, nor (ii) by any
other member or by any officer, agent or employee.
1.11 Compliance with Applicable Law
------------------------------
Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock, or grant any Option with respect
thereto, unless it is advised by counsel of its selection that it may do so
without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 Effective Dates
---------------
The Plan was adopted by the Board on August 11, 1999, subject to approval
by the stockholders of the Company. The Plan shall terminate on August 10, 2009.
Section 2. OPTION GRANTS
-------------
2.1 Authority of Committee
----------------------
Subject to the provisions of the Plan, the Committee shall have the sole
and complete authority to determine (i) the Participants to whom Options shall
be granted; (ii) the number of shares to be covered by each Option; and (iii)
the conditions and limitations, if any, in addition to those set forth in
Section 2 hereof, applicable to the exercise of an Option, including without
limitation, the nature and duration of the restrictions, if any, to be imposed
upon the sale or other disposition of shares acquired upon exercise of an
Option.
Stock Options granted under the Plan shall be non-qualified stock options.
The Committee shall have the authority to grant Options.
2.2 Option Exercise Price
---------------------
The price of stock purchased upon the exercise of Options granted pursuant
to the Plan shall be the Fair Market Value thereof at the time that the Option
is granted.
The purchase price is to be paid in full in cash, certified or bank
cashier's check or, at the option of the Company, Common Stock valued at its
Fair Market Value on the date of exercise, or a combination thereof, when the
Option is exercised and stock certificates will be delivered only against such
payment.
<PAGE>
2.3 Option Grants
-------------
Each Option will be subject to the following provisions:
a. Term of Option
An Option will be for a term of not more than ten years from the
date of grant.
b. Exercise
(i) By an Employee:
--------------
Unless otherwise provided by the Committee and except in the
manner described below upon the death of the optionee, an Option
may be exercised only in installments as follows: up to one-half
of the subject shares on and after the first anniversary of the
date of grant, up to all of the subject shares on and after the
second such anniversary of the date of the grant of such Option
but in no event later than the expiration of the term of the
Option.
An Option shall be exercisable during the optionee's lifetime
only by the optionee and shall not be exercisable by the optionee
unless, at all times since the date of grant and at the time of
exercise, such optionee is an employee of or providing services
to the Company, any parent corporation of the Company or any
Subsidiary or Affiliate, except that, upon termination of all
such employment or provision of services (other than by death,
Total Disability, or by Total Disability followed by death in the
circumstances provided below), the optionee may exercise an
Option at any time within two years thereafter but only to the
extent such Option is exercisable on the date of such
termination.
Upon termination of all such employment by Total Disability, the
optionee may exercise such Options at any time within five years
thereafter, but only to the extent such Option is exercisable on
the date of such termination.
In the event of the death of an optionee (i) while an employee of
or providing services to the Company, any parent corporation of
the Company or any Subsidiary or Affiliate, or (ii) within two
years after termination of all such employment or provision of
services (other than for Total Disability) or (iii) within five
years after termination on account of Total Disability of all
such employment or provision of services, such optionee's estate
or any person who acquires the right to exercise such option by
bequest or inheritance or by reason of the death of the optionee
may exercise such optionee's Option at any time within the period
of five years from the date of death. In the case of clauses (i)
and (iii) above, such Option shall be exercisable in full for all
the remaining shares covered thereby, but in the case of clause
(ii) such Option shall be exercisable only to the extent it was
exercisable on the date of such termination of employment.
(ii) By Persons other than Employees:
-------------------------------
If the optionee is not an employee of the Company or the parent
corporation of the Company or any Subsidiary or Affiliate, the
vesting of such optionee's right to exercise his Options shall be
established and determined by the Committee in the Option
Agreement covering the Options granted to such optionee.
Notwithstanding the foregoing provisions regarding the exercise
of an Option in the event of death, Total Disability, other
termination of employment or provision of services or otherwise,
in no event shall an Option be exercisable in whole or in part
after the termination date provided in the Option Agreement.
<PAGE>
c. Transferability
---------------
An Option granted under the Plan shall not be transferable
otherwise than by will or by the laws of descent and
distribution, or to the extent permitted by the Board or the
Committee to (i) a member or members of the optionee's family,
(ii) a trust, (iii) a family limited partnership or (iv) a
similar estate planning vehicle primarily for members of the
optionee's family.
2.4 Agreements
----------
In consideration of any Options granted to a Participant under the
Plan, each such Participant shall enter into an Option Agreement with the
Company providing, consistent with the Plan, such terms as the Committee may
deem advisable.
<PAGE>
AEROFLEX INCORPORATED
The undersigned hereby appoints Harvey R. Blau and Leonard Borow, or
either of them, attorneys and Proxies with full power of substitution in each of
them, in the name and stead of the undersigned to vote as Proxy all the stock of
the undersigned in Aeroflex Incorporated, a Delaware corporation, at the annual
meeting of stockholders scheduled to be held November 18, 1999 and any
adjournments thereof.
(Continued and to be signed on reverse side)
SEE REVERSE
SIDE
<PAGE>
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote FOR the following proposals:
1. Election of the following nominees, as set forth in the proxy
statement NOMINEES: Michael Gorin, Donald S. Jones and Eugene Novikoff
FOR WITHHOLD
/ / / /
all nominees authority
listed below to vote
(Instruction: To withhold authority to vote for any individual
nominee, print the nominee's name on the line provided below)
-----------------------------------------------------------------------
2. Proposal to adopt the 1999 Stock Option Plan
For Against Abstain
/ / / / / /
3. Upon such other business as may properly come before the meeting or
any adjournment thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. SHAREHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ABOVE.
IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE PROPOSALS SET
FORTH ABOVE.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
SIGNATURE _____________________________________________________________________
SIGNATURE(S) __________________________________________________________________
DATED: __________________________________________________________________, 1999
(Note: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing, giving
full title as such. If a signer is a corporation, execute in full
corporate name by authorized officer. If shares are held in the name
of two or more persons, all should sign.)
