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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.1a-11(c)
or Section 240.1a-12
E-SYSTEMS, INC.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
E-SYSTEMS, INC.
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2)
[ ] $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 transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11;*
4) Proposed maximum aggregate value of transaction:
*Set forth amount on which the filing is calculated
and state how it was determined.
[ ] 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 date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
E-SYSTEMS, INC.
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders which will be held on Wednesday, April 27, 1994, at the
Corporate Offices, 6250 LBJ Freeway, Dallas, Texas. Notice of the
meeting and proxy statement are attached. Please read them
carefully.
This year, in addition to the election of directors, you are
being asked to approve a proposal regarding the 1994 Stock Option
Plan adopted unanimously by the Board of Directors on October 27,
1993. The plan is intended to attract able people to the Company,
to furnish key employees with an incentive to remain with the
Company and also to increase the interest of key employees in the
Company's welfare. The Board of Directors recommends unanimously
that you approve this proposal.
All stockholders are cordially invited to attend the meeting.
If you plan to attend, please return the enclosed, postage paid
request for admission so we may be sure we can accommodate all
interested stockholders. Whether or not you plan to attend the
meeting in person, you are urged to date and sign the enclosed proxy
and return it promptly in the envelope provided, to which no postage
need be affixed if mailed in the United States. If you attend the
meeting and desire to vote in person, you may revoke your proxy.
Prompt response by our stockholders will reduce the time and expense
of solicitation.
Sincerely,
Gene Keiffer
Chairman of the Board
March 25, 1994
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of E-Systems, Inc. will be
held at its Corporate Offices, 6250 LBJ Freeway, Dallas, Texas, on
Wednesday, April 27, 1994 at 10:00 a.m., Dallas time, for the
following purposes:
(1) To elect four directors, each to hold office for a term
of three years.
(2) To consider and vote upon the proposed 1994 Employee
Stock Option Plan.
(3) To transact such other business as may properly come
before the meeting or any adjournment thereof.
Only holders of E-Systems, Inc. Common Stock of record at the
close of business on March 4, 1994 are entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors,
James W. Crowley
Secretary
Dallas, Texas
March 25, 1994
P. O. Box 660248 Dallas, Texas 75266-0248 Phone (214)661-1000
<PAGE>
E-SYSTEMS, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 27, 1994
This Proxy Statement and the accompanying form of proxy are
first being mailed on or about March 25, 1994 to stockholders of
E-Systems, Inc. (the "Company") to solicit proxies for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held
April 27, 1994. The accompanying proxy is being solicited on behalf
of the Board of Directors of the Company.
Proxies in the accompanying form which are properly executed
and returned will be voted at the meeting and any adjournments
thereof in accordance with the instructions thereon. Any proxy upon
which no instructions have been indicated with respect to a
specified matter will be voted as follows: (a) FOR the election as
directors of the four persons named under "Election of Directors--
Nominees for Directors"; (b) FOR the approval of the 1994 Employee
Stock Option Plan; and (c) at the discretion of the proxy holders,
on any other matter that may properly come before the meeting or any
adjournment. Any proxy given by a stockholder may be revoked by the
stockholder at any time prior to the voting of the proxy by
delivering a written notice of revocation to the Secretary of the
Company, by executing and delivering a later-dated proxy or by
attending the Annual Meeting and voting in person.
RECORD DATE AND VOTING SECURITIES
The record date for stockholders entitled to vote at the
meeting is the close of business on March 4, 1994, at which time the
Company had issued and outstanding 33,948,943 shares of $1.00 par
value Common Stock ("Common Stock").
QUORUM AND VOTING
A majority of the shares of the Common Stock, present in person
or represented by proxy, shall constitute a quorum for purposes of
the Annual Meeting. With regard to the election of directors, votes
may be cast in favor or withheld; votes withheld will be excluded
entirely from the vote and will have no effect. With regard to the
approval of the 1994 Employee Stock Option Plan, abstentions will be
counted as present for purposes of determing quorum and will be
treated as a vote against the proposal. A broker non-vote will have
no effect on the outcome of the election of directors or the
proposal to approve the 1994 Employee Stock Option Plan. A holder
of Common Stock shall be entitled to one vote for each share held on
all matters coming before the Annual Meeting.
In order to be elected a director, a nominee must receive the
affirmative vote of the holders of a plurality of the shares
represented and entitled to vote at the meeting. The Board of
Directors recommends that the stockholders vote FOR each of the four
nominees set forth under "Election of Directors--Nominees for
Directors".
The affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote at the meeting is required to adopt
the 1994 Employee Stock Option Plan. The Board of Directors
recommends that the stockholders vote FOR the adoption of the 1994
Employee Stock Option Plan.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth persons known to the Company to
own beneficially 5% or more of the total outstanding Common Stock as
of the record date.
<TABLE>
<CAPTION>
Title of Amount and Nature of Percent of
Name and Address Class Beneficial Ownership Class of(2)
- ---------------- ----------- ----------------- -----------
<S> <C> <C> <C>
E-Systems, Inc.
Employee Stock
Ownership Trust and
Employees' Common
Retirement Trusts(1) Stock 5,986,624 Shares 17.52%
P.O. Box 660248
Dallas, Texas 75266-0248
- -----------------------------
<FN>
(1) Under the terms of the Company's Employee Stock Ownership
Plan (the "ESOP") shares of the Company's Common Stock owned by the
Company's Employee Stock Ownership Trust (the "ESOT") are, until
allocated to accounts of participating employees, voted by the
trustees of the ESOT as directed by a committee of employees (the
"Committee") appointed by the Board of Directors. The shares of the
Company's Common Stock held by the ESOT and allocated to accounts of
participating employees are required to be voted by the trustees in
accordance with the instructions of such employees. If no such
instructions are received, the allocated shares are to be voted as
the Committee in its discretion may direct. The Company has been
advised by the members of the Committee that they will instruct the
trustees of the ESOT to vote all of the shares of Common Stock which
they are entitled to vote for the election as directors of the
persons named under "Election of Directors -- Nominees for
Directors" and for the approval of the 1994 Employee Stock Option
Plan. There were 4,512,032 shares held by the ESOT as of the
record date.
Shares of the Company's Common Stock held by the
Employees' Retirement Trusts (the "Retirement Trusts") are voted as
the trustees of such trusts in their discretion shall determine.
The trustees are appointed by the Board of Directors of the Company
and may be removed by the Board of Directors at any time without
cause. The trustees of the Retirement Trusts are James W. Crowley,
Art E. Hobbs and James W. Pope all of whom are Vice Presidents of
the Company. The Company has been advised by the trustees that the
Retirement Trusts will vote all shares of Common Stock held by the
Retirement Trusts for the election as directors of the persons named
under "Election of Directors -- Nominees for Directors" and for the
approval of the 1994 Employee Stock Option Plan. There were
1,474,592 shares held by the Retirement Trusts as of the record
date.
(2) Percent was determined using an aggregate of 34,161,246
shares of Common Stock to be outstanding which includes shares
subject to options which are exercisable within 60 days.
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the Common Stock of the Company
beneficially owned as of February 4, 1994 by each Director, each
nominee for Director, by each of the named Executive Officers and by
all Executive Officers and Directors as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership of Class(1)
------------------------ -------------------- -----------
<S> <C> <C>
James A. Bitonti 1,000 *
E. F. Buehring 10,000 *
James W. Crowley 57,714(2) *
Charles A. Gabriel -0-
C. Roland Haden -0-
Terry W. Heil 51,816(3) *
Martin R. Hoffmann 500 *
E. Gene Keiffer 53,664(4) *
S. Lee Kling 11,502 *
A. Lowell Lawson 84,516(5) *
Peter A. Marino 10,439(6) *
Francine I. Neff 800 *
David R. Tacke 25,766 *
All Executive Officers and Directors as a Group
(21persons) 473,134(7) 1.38%
- ----------------------
<FN>
* Ownership of less than 1% of the outstanding Common Stock.
(1) Percent was determined using an aggregate of 34,158,895
shares of Common Stock to be outstanding, which includes shares
subject to options which are exercisable within 60 days.
(2) Includes 41,834 shares covered by options exercisable
within 60 days and 7,247 shares allocated in Mr. Crowley's ESOP
account.
(3) Includes 45,334 shares covered by options exercisable
within 60 days and 682 shares allocated in Dr. Heil's ESOP account.
(4) Includes 18,261 shares allocated in Mr. Keiffer's ESOP
account.
(5) Includes 45,000 shares covered by options exercisable
within 60 days and 5,966 shares allocated in Mr. Lawson's ESOP
account.
(6) Includes 6,667 shares covered by options exercisable
within 60 days and 272 shares allocated in Mr. Marino's ESOP
account.
(7) Of the shares of Common Stock indicated as beneficially
owned by the officers and directors as a group, 212,303 shares
represent the aggregate number of shares the group has the right to
acquire beneficial ownership within sixty days; and 49,449 shares
represent the shares allocated to their individual ESOP accounts,
including 11,504 shares from a predecessor savings and investment
plan.
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
General
The Certificate of Incorporation provides that the term of each
director elected at the Annual Meeting of Stockholders is three
years. At present the Company's Board of Directors consists of nine
directors, of whom three have terms of office expiring in 1994,
three have terms of office expiring in 1995 and three have terms of
office expiring in 1996.
LeVan Griffis, a member of the 1994 directors' class, died in
December 1993. Therefore, four directors are to be elected at this
Annual Meeting. The contribution to the Company and Stockholders by
Dr. Griffis will be greatly missed, as will his friendship and
guidance.
Nominees for Directors
The following are nominees for election as directors of the
Company for a term of office expiring at the Annual Meeting of
Stockholders in 1997 or until their respective successors shall have
been elected and qualified. Should any nominee become unable or
unwilling to accept nomination or election, the person or persons
voting the proxy will vote for the election of such other person as
the Board of Directors may recommend. The Board of Directors has no
reason to believe that any of the nominees will be unable or
unwilling to serve if elected, and to the knowledge of the Board of
Directors, each of the nominees intends to serve the entire term for
which election is sought.
Nominees for Election for a Three-Year Term Ending in 1997
C. Roland Haden, age 53. Dr. Haden is Vice Chancellor and Dean of
Engineering, Texas A&M University, College Station, Texas. He has
held that position since 1993. From 1991 to 1993, he was Vice
Chancellor for Academic Affairs and Provost, Louisiana State
University, Baton Rouge, Louisiana. Prior to that time he was
Professor and Dean of Engineering and Applied Sciences from 1989 to
1991; Provost, ASU West Campus, from 1988 to 1989; Vice President
for Academic Affairs from 1987 to 1988 and from 1978 to 1987,
Professor and Dean of Engineering and Applied Sciences, Arizona
State University, Tempe, Arizona. He is a fellow of the Institute
of Electrical and Electronic Engineers and the American Society for
Engineering Education and a director of Inter-Tel, Inc., which
manufactures, sells and installs digital phone sytems. Dr. Haden is
expected to be appointed March 23, 1994 to fill a vacancy on the
Board of Directors created by the death of LeVan Griffis. He is
nominated to stand for election to a full three-year term.
<PAGE>
Martin R. Hoffmann, age 62, has been a director since 1987. Mr.
Hoffmann, Attorney-at-Law, is a Senior Visiting Fellow, Center for
Technology, Policy and Industrial Development, Massachusetts
Institute of Technology, Cambridge, Massachusetts. From May 1989
until April 1993, Mr. Hoffmann served as Vice President, General
Counsel and Secretary of Digital Equipment Corporation, Maynard,
Massachusetts, a manufacturer and marketer of computer systems.
Prior to that time he was a partner in the law firm of Gardner,
Carton and Douglas of Washington, D.C. for more than ten years. Mr.
Hoffmann has held various executive positions with the Federal
Government, including that of Secretary of the Army from August 1975
to February 1977 and General Counsel to the Department of Defense
from March 1974 to August 1975. He is a member of the Board of
Advisors of Lincoln Laboratories, Boston, Massachusetts. Mr.
Hoffmann was first elected to the Board of Directors in April 1987
to fill a newly created directorship.
E. Gene Keiffer, age 64, has been a director since 1983. Mr.
Keiffer is the Chairman of the Board of the Company, having been
elected to that position on April 25, 1989. Mr. Keiffer is
scheduled to retire in August 1994, after which he will continue to
be a Director of the Company. Mr. Keiffer had served as the Chief
Executive Officer of the Company from April 25, 1989 until January
26, 1994; and as President of the Company from April 22, 1987 to
April 1989; and as Senior Vice President- Electronic Systems Group
from November 1983 to April 1987; and as Vice President and General
Manager of the Garland Division from September 1975 to November
1983. Mr. Keiffer was first elected to the Board of Directors by
the retirement of a predecessor. Mr. Keiffer is Chairman of the
Executive Committee of the Board of Directors.
<PAGE>
Francine I. Neff, age 68, has been a director since 1978. Mrs. Neff
is Vice President of NETS, Inc., Albuquerque, New Mexico, a
privately held investment company, a position she has held for at
least the past five years. She was a Vice President of Rio Grande
Valley Bank of Albuquerque, New Mexico from September 1977 until
December 1981. Mrs. Neff is a former Treasurer of the United States
and was the National Director, United States Savings Bond Division,
United States Treasury. Mrs. Neff is also a director of Hershey
Foods Corporation, D. R. Horton, Inc., homebuilders, and Louisiana-
Pacific Corporation, which produces timber and timber-related
products. She is a member of the Audit Committee and was recently
elected Chairman of the Committee. She is also a member of the
Compensation and Benefits Committee of the Board of Directors.
Directors Continuing in Office Until the 1995 Annual Meeting of
Stockholders
James A. Bitonti, age 63, has been a director since 1988. Mr.
Bitonti is Chairman and Chief Executive Officer of BITCO
International, Inc., a start-up company with offices in
Poughkeepsie, New York and Fairfax, Virginia. Until his retirement
in July 1987, Mr. Bitonti had been employed in various executive
capacities with International Business Machines Corporation. Mr.
Bitonti is a director of Crompton & Knowles Corporation, a specialty
chemical company. Mr. Bitonti was elected to the Board of Directors
of the Company in December 1988 to fill an existing vacancy on the
Board. He is a member of the Audit Committee and a member of the
Compensation and Benefits Committee of the Board of Directors.
<PAGE>
S. Lee Kling, age 65, has been a director since 1978. Mr. Kling is
Chairman of the Board of Kling Rechter & Co., a merchant banking
company which operates in partnership with Barclays Bank PLC. He
served as Chairman of the Board of Landmark Bancshares Corp., a bank
holding company located in St. Louis, Missouri from 1974 through
December 1991, when the company merged with Magna Group, Inc. He
served additionally as the company's Chief Executive Officer from
1974 through October 1990.
He is a director of Bernard Chaus, Inc., a women's apparel
manufacturer; Top Air Manufacturing Company, a manufacturer of
spraying equipment for the agricultural industry; Falcon Products,
Inc., furniture manufacturer; Hanover Direct, Inc., mail order
merchandiser; Lewis Galoob Toys, Inc.; National Beverage Company, a
manufacturer and distributor of cola and multi-branded soft drinks
and Magna Group, Inc., a bank holding company. He is a member of
the Audit Committee and until recently was its chairman. He has
been a member of the Compensation and Benefits Committee of the
Board of Directors and in January 1994 became its chairman.
David R. Tacke, age 71, has been a director since 1969. Mr. Tacke
is a rancher and an investor. From April 22, 1987 until his
retirement in April 1989, he was Chairman of the Board of Directors
and Chief Executive Offficer of the Company. He had been President
of the Company since November 1983. Mr. Tacke is a member of the
Executive Committee of the Board of Directors.
Directors Continuing in Office Until the 1996 Annual Meeting of
Stockholders
E. F. Buehring, age 78, has been a director since 1965. E. F.
Buehring was Vice Chairman of the Board of Directors from 1969 until
his retirement in 1973 and was President and Chief Executive Officer
of the Company from its beginning in 1965 until 1969.
<PAGE>
Charles A. Gabriel, age 66, has been a director since 1990. General
Gabriel joined the Board on March 28, 1990 to fill a vacancy created
by the death of John W. Dixon. Since General Gabriel's retirement
as Chief of Staff of the United States Air Force in June 1986, he
served as Executive Vice President, and subsequently, Vice Chairman,
of Hicks & Associates, a management consulting firm located in
McLean, Virginia until March 1990. Before becoming U.S. Air Force
Chief of Staff, he served as Commander in Chief of U.S. Air Forces
in Europe and Commander of Allied Air Forces, Central Europe.
General Gabriel served as Chairman of the Board of Flight
International Group, Inc., an aviation services fixed base operator
from September 1, 1991 to September 4, 1992. He is a director of
Riggs National Bank of Virginia, GEC-Marconi Electronic Systems,
Inc. and Greenwich Air Services, Inc., a company that repairs,
refurbishes and overhauls gas turbine engines.
A. Lowell Lawson, age 56, has been a director since 1983. Mr.
Lawson is the Chief Executive Officer of the Company, having been
elected to that position January 27, 1994. Mr. Lawson is also the
President of the Company, having been elected to that position April
25, 1989. Prior to that, Mr. Lawson was Executive Vice President
since April 1987 and had served in various senior executive
positions for more than 5 years. Mr. Lawson was first elected to
the Board of Directors November 1, 1983, to fill a vacancy created
by the retirement of a predecessor. Mr. Lawson is a member of the
Executive Committee of the Board of Directors.
<PAGE>
IN MEMORIAM
LeVan Griffis
1916-1993
Emeritus Director, Industrial Relations and Professor of Civil
and Mechanical Engineering, Southern Methodist University
Director of the Company: 1966-1993
Scholar, Humanitarian, Patriot, Friend and Colleague.
Meetings of the Board of Directors and Committees
The Board of Directors met eleven times during 1993. The Board
of Directors has a standing Audit Committee and a Compensation and
Benefits Committee, but does not have a Nominating Committee. Among
its functions, the Audit Committee recommends to the Board the
appointments of the firm elected to be independent certified public
accountants for the Company; reviews with the independent certified
public accountants the Company's annual audit, annual financial
statements and the independent certified public accountants' letter
to management on internal controls and other matters; reviews the
adequacy of the Company's internal controls, accounting systems and
the impact of proposed accounting policies; and reviews the
Company's credit and financial arrangements. Messrs. Gabriel,
Bitonti, Kling and Mrs. Neff are members of the Audit Committee.
The Audit Committee met four times during 1993.
The Compensation and Benefits Committee recommends to the Board
of Directors the salaries for all Company officers, and approves and
sets the salaries for all employees whose annual salary exceeds
$120,000. The Committee determines and authorizes the annual
incentive compensation for officers and other employees. The
Committee also grants stock options and restricted stock awards to
certain key employees under the Company's Stock Option Plans. Mr.
Kling and Mrs. Neff are members of the Compensation and Benefits
Committee. Mr. Bitonti became a member of the Committee on January
27, 1994. The Committee met four times and acted by unanimous
written consent thirteen times during 1993.
<PAGE>
EXECUTIVE COMPENSATION
The following table shows cash compensation of the Chief
Executive Officer and the four other most highly compensated
executive officers of the Company whose cash compensation exceeds
$100,000, for the fiscal years 1993, 1992 and 1991.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
- ----------------------------------------------------- -------------------------
Other
Annual Securities
Name and Compensa- Restricted Underlying All Other
Principal Fiscal Salary Bonus Stock Options/ Compen-
Position Year ($) ($)(1) tion(2) Awards($)(3) SAR's(#)(4) sation($)(5))
- --------------- ------ ------ ------ ------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
E. Gene Keiffer 1993 580,380 440,000 0 126,750 40,000/0 526,914
Chairman of 1992 537,533 440,000 0 0 0/0 491,861
the Board 1991 507,580 440,000 0 130,280 50,000/0 464,315
Officer
A. Lowell Lawson 1993 425,017 345,000 0 84,500 25,000/0 367,150
President and 1992 397,815 345,000 0 0 0/0 288,169
Chief Operating 1991 362,768 345,000 0 58,626 30,000/0 244,048
Officer
Terry W. Heil 1993 304,508 225,000 0 63,375 10,000/0 263,062
Senior Vice 1992 300,682 225,000 0 0 0/0 182,475
President 1991 287,191 225,000 0 69,136 20,000/0 153,939
Peter A. Marino 1993 295,169 175,000 0 63,375 10,000/0 99,297
Senior Vice 1992 290,305 165,000 60,031 0 0/0 89,210
President 1991 52,885 100,000 0 67,500 10,000/0 1,049
James W. Crowley 1993 284,060 180,000 0 42,250 10,000/0 184,656
Vice President, 1992 277,739 175,000 0 0 0/0 115,772
Secretary and 1991 262,203 175,000 0 42,281 14,000/0 159,728
General Counsel
- -------------
<FN>
(1) The Company, in keeping with its compensation practices, uses
the term "incentive compensation" rather than "bonus".
(2) Other Annual Compensation for Mr. Marino includes relocation
and moving expenses for the year ended December 31, 1992 only.
(3) Dividends are paid on restricted stock awards at the same time
and at the same rate as paid to all stockholders. On December 31,
1993, Mr. Keiffer held 9,350 restricted shares having a then current
value of $396,206. Mr. Lawson held 7,400 restricted shares having a
then current value of $313,575, Dr. Heil held 5,800 restricted
shares having a then current value of $245,775; Mr. Marino held
3,500 restricted shares having a then current value of $148,312; and
Mr. Crowley held 5,000 restricted shares having a then current value
of $211,875.
(4) None of the named individuals holds SAR's, and the company does
not intend to grant SAR's.
(5) Included for Mr. Keiffer is $518,806 which represents an
accrual in connection with a supplemental executive retirement plan
(the "SERP"). The SERP accrual for Mr. Lawson was $361,212; Dr.
Heil, $257,474; Mr. Marino, $93,950 and Mr. Crowley, $178,413. Also
includes for each individual $4,692 allocated in the E-Systems, Inc.
Employee Stock Ownership Plan, a qualified ERISA plan, and
splitdollar premiums paid as follows: Mr. Keiffer, $3,416; Mr.
Lawson, $1,246; Dr. Heil, $896; Mr. Marino, $655 and Mr. Crowley,
$1,551. The split dollar life insurance maintained by the Company
pays two times the annual salary life insurance benefit to active
executives and a two times final salary to retired executives. The
amount included is calculated in accordance with tax regulations
from actuarial tables, which factors are multiplied by the current
amount of the benefit due the executive based on current
compensation or in the case of retired executives, final
compensation.
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth certain information on option grants in
fiscal 1993 to the Named Executive Officers. The Company does not have
any outstanding SAR's.
<TABLE>
<CAPTION>
Percent Potential Realizable
of Total Exer- Value at Assumed
Number of Options/ cise Annual Rates of Stock
Securities SAR's or Price Appreciation
Underlying Granted Base for Option Term(2)
Options/SAR's to Employees Price Expiration ---------------------
Name Granted(#)(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
- -------------- -------------- ------------ ------- ----------- -------- ---------
<C> <C> <C> <C> <C> <C> <C>
E. G. Keiffer 40,000 4.6% 43.38 11/15/03 1,091,200 2,765,600
A. Lowell
Lawson 25,000 2.9% 43.38 11/15/03 682,000 1,728,500
Terry W. Heil 10,000 1.2% 43.38 11/15/03 272,800 691,400
Peter A.
Marino 10,000 1.2% 43.38 11/15/03 272,800 691,400
James W.
Crowley 10,000 1.2% 43.38 11/15/03 272,800 691,400
All
Stockholders(3) N/A N/A N/A N/A $924 million $2.3 billion
- ------------------
<FN>
(1) All options listed were granted pursuant to the 1988 Stock
Option Plan. Option exercise prices are at the market price when
granted; the options have a term of 10 years and vest in thirds
annually over a three year period beginning with the first
anniversary date of the grant. The exercise price and federal tax
withholding may be paid in cash or with shares of Common Stock.
(2) Figures shown under "Potential Realizable Value" are the pre-
tax gains which would be recognized if an executive exercised all of
his 1993 options on November 15, 2003 and Common Stock price had
grown between November 16, 1993 and November 15, 2003 at the 5% and
10% assumed growth rates set by the Securities and Exchange
Commission from $43.38 to $70.66 and $112.52 per share,
respectively. The amounts shown are not intended to forecast
possible future appreciation, if any, for the price of Common Stock.
Since options have been granted at market value, no gain to the
optionees is possible without an increase in stock price, which will
benefit all stockholders commensurately.
(3) These amounts represent the increase in market value of
outstanding shares of Common Stock (33,884,797 shares) as of
December 31, 1993, that would result from the same stock price
growth assumptions used to show the Potential Realizable Values for
the Named Executive Officers.
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT DECEMBER 31, 1993
Shown below is information with respect to the exercise of
stock options during fiscal year 1993 and certain information with
respect to unexercised options to purchase the Company's Common
Stock granted under the 1982 Employee Stock Option Plan and the 1988
Employee Stock Option Plan to the Named Executive Officers and held
by them at December 31, 1993.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, December 31,
Shares 1993 1993
Acquired Value ------------- -------------
on Exer- Real- Exercisable/ Exercisable/
Name cise(#) ized($) Unexercisable Unexercisable
- --------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
E. Gene
Keiffer 136,767 1,624,838 16,667/56,666 163,420/163,410
A. Lowell
Lawson 61,100 787,495 45,000/35,000 517,975/98,050
Terry W.
Heil 0 0 45,334/16,666 524,890/65,360
Peter A.
Marino 0 0 6,667/13,333 57,503/28,747
James W.
Crowley 19,600 213,962 41,834/14,666 511,957/45,750
- -----------------------
<FN>
(1) The value of the unexercised in-the-money options represents
the difference between the exercise price and the market price on
December 31, 1993.
</TABLE>
<PAGE>
COMPENSATION AND BENEFITS COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of
Directors (the "Committee"), which is composed entirely of
independent outside directors, has established a compensation
philosophy that seeks to enhance the performance of the Company and
thus shareholder value, by linking executive compensation with
Company performance. The Committee has the responsibility of
establishing appropriate compensation levels for Company officers
which are consistent with our compensation philosophy resulting in
total compensation that is both competitive and reflective of
individual and overall Company performance.
During the course of performing its duties, the Committee
reviews compensation data and analysis provided by both internal
compensation specialists and independent professional compensation
consulting firms. In addition, during 1993 the Committee was
advised and furnished information by an independent compensation
consultant concerning the Company's overall approach to executive
compensation
In designing the compensation program, the Committee has
established the following:
-- Compensation levels should be such that the Company can
effectively attract, reward and retain talented and well-qualified
executives.
-- Executive compensation should relate meaningfully to value
created for shareholders and achievement of the Company's short-term
and long-term objectives.
-- A significant portion of executive compensation should be
based on factors which emphasize a pay for performance approach.
- Stock ownership should be encouraged to align the
financial interests of the Company's executives with those of its
shareholders.
The Company's executive compensation is based on the following
major components, which are intended to serve the overall
compensation philosophy:
<PAGE>
Base Salary
The Committee annually reviews each officer's salary. In
determining the appropriate salary amount, the Committee considers
level of responsibility, experience, time in position, individual
performance, internal equity and external competitive pay practices.
In collaboration with a compensation consulting firm, the Committee
devised a mechanism whereby the performance factors of peer companies
were graphed against the total revenues of the companies. A line of
best fit through these points on the graph results in a "regression
curve", which is then drawn through the area where the Company's
total revenues fall. Since executive compensation tends to correlate
with Company total revenues, the curve allows the Committee to project
what the Chief Executive's or Chief Operating Officer's salary in the
peer companies compensation would be if that company's revenues were
the same as E-Systems. A similar regression curve may be plotted on other
performance factors, although other factors tend not to correlate
with compensation as much as do revenues. In every case the Named
Executive's actual base and total compensation was below the predicted
amount for the peer companies, adjusted for their respective sizes.
These curves allows the Committee to project what the expected
compensation of the Company's senior executives would be correlated to
the performance factors of the other companies. The predicted amount
was used simply to confirm the reasonableness of the judgment of the
Committee. Although the Committee does not target compensation to a
quartile, the regression curve analysis results in a mid-point compensation
amount. Since the Committee has found the executives' compensation to
be below this point in every case, their compensation, by definition,
may be regarded as falling in the second quartile of all similar cases.
The peer companies used in the regression analysis were: Hughes Aircraft
Company, Rockwell International, Lockheed Corp., Raytheon Co., TRW Inc.,
Texas Instruments, Honeywell Inc., Martin Marietta, Textron Inc., Litton
Industries, Northrop Corp., Loral Corp., Harris Corp. and Perkin-Elmer.
Selection of these peer companies differs from the companies used
in the performance graph. This difference is accounted for by the
consulting firm's judgment as well as the availability of the
required data.
<PAGE>
Incentive Compensation
The annual incentive award is that portion of compensation which
is adjusted upward or downward based on performance. The
Committee places a significant portion of the executive's total cash
compensation in this category in order to focus management attention
on annual performance results that in turn enhance shareholder
value.
At the beginning of each year, the Chief Executive Officer presents
to the Board a proposed business plan which contains specific performance
goals. The principal financial performance measures include sales,
profits, bookings and backlog. After review and consideration, the
approved plan is accepted by the Board as an appropriate standard for
measuring performance during the forthcoming year. In addition to the
comparison of actual performance against the business plan, the Committee
also considers other performance measures such as return on assets,
return on capital and profitability. The Company's performance is
evaluated in each of these categories and compared with the performance
of peer companies to establish a relative performance position. Other
general management performance dimensions such as leadership, teamwork
and other subjective considerations are also then taken into account.
Sales were modestly up in 1993 and operating profit performance
constituted a new record high for the Company.
In determining the amount of incentive compensation to be paid,
the Committee considers the performance measures previously
described and other compensation survey data to ensure that
incentive compensation awards are in keeping with the stated
compensation philosophy and that, when added to base salaries,
result in a reasonable and competitive total cash compensation
package that appropriately reflects the Company's relative size and
performance. Although a minimum base salary level for each Named
Executive Officer is set by the Committee, incentive compensation
is based on performance.
Employment Contracts
For many years the Board of Directors of the Company and the
Compensation and Benefits Committee have used employment contracts
for specified executives to attract, retain, motivate and reward
these executives. See the section elsewhere in this Proxy Statement
entitled "Employment Agreements". The employment agreements specify
an adjustable minimum rate of salary compensation for each of the
named executives, therefore, the Committee may increase, but not
reduce, each executive's salary. Incentive compensation may vary in
the Committee's discretion upward or downward as discussed elsewhere
in this report. Likewise, long-term incentives and other
compensation provisions of the agreement specify that the executive
shall participate in such plans and benefits, but the Committee and
the Board of Directors are free to vary the specified benefits in
accordance with their best judgment.
<PAGE>
Long-Term Incentives
Long-Term incentives are provided to align the financial
interests of the Company's executives, and other key individuals who
contribute to the success of the Company, with those of the
shareholders. To accomplish this, the Company primarily uses stock
options as its long-term incentive vehicle.
Stock options are granted at 100 percent of the prevailing market
value on the day of grant and to encourage a longer term persepctive,
become exercisable in thirds over a three-year period. Therefore,
the options are of value to the recipients only if shareholders also
benefit from stock price appreciation. It should also be noted that
the Committee has not repriced outstanding options, again reinforcing
the philosophy that recipients do not benefit from stock price
appreciation unless shareholders also benefit.
In limited circumstances and for special long-term incentives,
restricted stock awards are used. Generally, these restricted stock
awards contain a ten-year vesting restriction which also encourages
long-term employment with the Company.
The number of stock options and/or restricted stock awards granted
is based on the recipient's position and level of responsibility,
the resulting opportunity to impact on the success of the Company,
competitive practices of peer companies and other relevant factors.
The granting of stock options is done on a broad base of key
employees and currently includes approximately five percent of total
employment. The less frequently used restricted stock award is
made to a smaller group currently consisting of approximately one
percent of all employees, all of whom may be participants in the stock
option awards, but each of whom has been identified by the management
and confirmed by the Committee as being someone for whom special
incentive/retention awards are desirable. The selection of individuals
for participation in the stock option programs is accomplished by means
of management/supervisory recommendaton and Committee approval. In most
cases (and particularly so with a high technology company like E-Systems)
the management's success in identifying, rewarding and retaining such
people is critical to the enterprise's future success and is measurable,
in part, by the current success of the business.
In determining the Chief Executive Officer's compensation for 1993,
the Committee took into account all of the performance measures and other
factors previously described, as well as their perception of his past
and expected future contributions. Record operating profits were achieved
with improved margins that reflected an appropriate focus on program
performance. Dividends were increased by nine percent. The Committee
has taken note of the Company's successes in pursuit of non-traditional
business and the Company's performance in a year of operating in a
depressed worldwide economy coupled with declines in defense spending.
The Committee's analysis also indicates that the Company's
performance continues to exceed the surveyed companies' averages,
using the criteria discussed above under "Incentive Compensation".
The total cash compensation of the Company's Chief Executive Officer
is below the survey's predicted value and below the median and
average compensation levels paid to chief executive officers at peer
companies.
Federal Income Tax Considerations
In 1993, the Internal Revenue Code was amended to place a $1
million cap on the deductibility on compensation paid to executives
of publicly held corporations. The Committee took this change into
account, however upon review of the available regulations and
interpretations, decided that it would not make the deductibility of
the Company's compensation for federal income tax purposes a
criterion to be used in establishing compensation of the named
executives during the present review cycle. The Committee took into
consideration the belief that very little, if any, of the current
consideration levels of these executives will be subject to the cap.
The Committee continues to recognize that compensation should meet
standards of reasonableness and necessity, which have been part of
the Internal Revenue Code for many years.
This report of the Compensation and Benefits Committee shall
not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing
under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent it shall be specifically
incorporated by reference; and shall not otherwise be deemed filed
under such Acts.
This report is being submitted by the remainder of the members
of the Compensation and Benefits Committee after the death of its
Chairman, LeVan Griffis, on December 22, 1993.
S. Lee Kling
Francine I. Neff
<PAGE>
The following graph reflects a comparison of the cumulative total
return (change in stock price plus reinvested dividends) of the
Common Stock from January 1, 1988 through December 31, 1993 with
the Standard & Poor's 500 Composite Index and the Standard & Poor's
Aerospace-Defense Index.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
E-Systems, Inc., S&P 500 and S&P Aerospace-Defense Indices
<CAPTION>
Base
Year
1988 1989 1990 1991 1992 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 100 131.69 127.60 166.47 179.15 197.21
S&P Aerospace
and Defense 100 118.17 123.35 147.46 155.13 201.78
E-Systems, Inc. 100 107.27 122.49 137.65 153.74 166.38
</TABLE>
Salaried Retirement Plan
The persons named in the Summary Compensation Table participate
in the E-Systems, Inc. Retirement System Plan (the "Salaried
Retirement Plan"), a defined benefit plan. In 1993, the Company
contributed $34,969,581 to the Salaried Retirement Plan, which
covers approximately 12,000 employees. These benefits are not
subject to any Social Security offset.
Supplemental Executive Retirement Plan
Effective June 1, 1982 the Board of Directors of the Company
adopted the E-Systems, Inc. Supplemental Executive Retirement Plan
(the "Supplemental Plan") for the purposes of providing to selected
executive employees of the Company retirement income as a supplement
to compensation and employee benefits otherwise payable. The
participants are those persons selected by the Board of Directors
with the approval of the Chairman of the Board and Chief Executive
Officer and the Compensation and Benefits Committee of the Board of
Directors. Only officers and other key employees, who are expected
to contribute materially to the success of the Company's business by
their ability, ingenuity and industry, are eligible to participate.
Benefits payable under the Supplemental Plan constitute general
obligations of the Company. The Supplemental Plan may be amended or
discontinued by the Board of Directors at any time; however, such
amendment or discontinuance shall not adversely affect the rights
of, or reduce the benefits payable to, a participant (or
beneficiary) under the Supplemental Plan who has been selected for
participation prior to the effective date of such amendment or
discontinuance.
<PAGE>
Each of the persons named in the Summary Compensation Table and
five other Corporate Officers are covered by the Supplemental Plan,
which provides for a retirement benefit equal to a specified percentage
of the participant's "Average Monthly Compensation". Amounts payable
under the Supplemental Plan are reduced by payments under the Salaried
Plan and the recipient's primary Social Security benefit. "Average
Monthly Compensation" is defined as the sum of (i) the salary paid
the employee during the three consecutive years out of the ten years
preceding retirement or disability which yields the highest monthly
amount when divided by 36 and (ii) the incentive compensation paid
the employee during the three consecutive years out of the ten years
preceding retirement or disability which yields the highest monthly
amount when divided by 36. The amounts of compensation given on an
annual basis in the Summary Compensation Table for each of the persons
covered by the Supplemental Plan somewhat overstate the covered
compensation used in calculating the Average Monthly Compensation,
primarily because of the difference between the accrual method required
by the Summary Compensation Table and the cash basis used in the
Supplemental Plan calculations.
The Company has placed an amount of funds approximately
equivalent to the actuarial present value of benefits payable under
the Supplemental Plan and certain employment contracts for
retirement, disability and survivor's benefits with an independent
trustee who will distribute the benefit as required under the
Supplemental Plan and such employment contracts. The trust is
irrevocable and has received favorable rulings by the Internal
Revenue Service. The funds in the trust would be subject to the
claims of the creditors of the Company in the event of the Company's
insolvency or bankruptcy. The establishment and funding of the
trust will not increase the benefits due to any participant.
<PAGE>
PENSION PLAN TABLE
The following table illustrates the approximate annual
retirement benefit for the Named Executive Officers listed in the
Summary Compensation Table. The amounts shown are made up of the
Primary Social Security Benefit (which can be estimated at
approximately $12,000 per year), a joint and survivor pension from
the Salaried Retirement Plan (not more than the current statutory
limit on such pensions of $118,800 per annum) and the benefit from
the Supplemental Plan. Calculations for years of service under the
Supplemental Plan are not affected once vesting occurs and all Named
Executive Officers listed in the Summary Compensation Table are
fully vested. See "Employment Contracts" for a description of the
reduced actual amounts to be paid involving certain of the Named
Executive Officers if the contracts are not renewed to the mandatory
retirement age of 65 for corporate officers.
<TABLE>
<CAPTION>
Remuneration
(Average Annual
36-Month Years of Service
Compensation)(1) (at age of retirement)(2)
- ------------------------------------------------------------------
14 15 24 38 43
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
400,000 260,000 260,000 260,000 260,000 260,000
600,000 390,000 390,000 390,000 390,000 390,000
800,000 520,000 520,000 520,000 520,000 520,000
1,000,000 650,000 650,000 650,000 650,000 650,000
1,200,000 780,000 780,000 780,000 780,000 780,000
- ------------
<FN>
(1) Average annual 36 month compensation includes the salary and
incentive compensation for the 36 consecutive months of highest such
earnings during the last ten years of employment, but excludes the
other forms of compensation included in the Summary Compensation
Table.
(2) The years of credited service under the Supplemental Plan for
the Named Executive Officers is as follows: Mr. Keiffer: 43 years;
Mr. Lawson: 29 years; Dr. Heil: five years; Mr. Marino: three years
and Mr. Crowley 23 years.
</TABLE>
Employment Agreements
Mr. Keiffer is employed under an agreement effective October
25, 1989, whereby he has agreed to render his exclusive services to
the Company for a period ending August 25, 1994, when he attains the
mandatory retirement age of 65. Mr. Keiffer was previously employed
under a contract which provided for full vesting of all benefits as
of his 60th birthday in August of 1989. These benefits provide for
a minimum compensation of $560,000 per year. Mr. Keiffer may also
receive such incentive compensation and increases above his minimum
salary as the Board of Directors may from time to time approve.
These agreements provide that upon Mr. Keiffer's retirement, he
shall receive a monthly retirement benefit equal to 65% of his
Average Monthly Compensation as defined in the Supplemental Plan.
Mr. Keiffer and his wife are to receive medical, hospital and
surgical insurance coverage in accordance with levels of benefits
maintained by the Company for its executive officers for the
remainder of their lives.
Upon Mr. Keiffer's death, his widow is to receive 50% of the
retirement amount for the remainder of her life. Should Mr. Keiffer
become permanently disabled, he is entitled to retire as of the
onset of such disability with no diminution in the retirement
benefit.
<PAGE>
During the period any benefits are being paid to Mr. Keiffer
under the disability or retirement provisions, he has agreed not to
engage in any activities which are directly or indirectly
competitive with or in conflict with the interest of the Company.
The contract also provides that the employee may be terminated for
"cause", defined as the employee's willful refusal, without
reasonable excuse, to render services on substantially a full-time
basis, conviction of a crime involving moral turpitude, or breach of
a covenant not to engage in competing or conflicting activities
during the term of the agreement.
The agreement also provides for the continuation of certain of
his business and other perquisites after retirement. These include
dues, fees and assessments, and business, but not personal, expenses
to maintain membership in three specified country clubs; preparation
of federal and state income tax returns, and upon death, preparation
of the estate tax returns; estate planning services; home security
service, including monitoring and neighborhood patrol as applicable;
not less than $250,000 accidental death and dismemberment insurance
coverage; and business travel accident insurance in an amount of not
less than $300,000 for Mr. Keiffer and $150,000 for his wife.
The Company has agreed to furnish Mr. Keiffer as well as other
corporate officers, including those persons named in the Summary
Compensation Table, certain pre- and post-retirement life insurance
benefits. An amount equal to two times their respective annual
salaries is to be provided prior to retirement for all corporate
officers and for all, except Mr. Keiffer, following their
retirement. After Mr. Keiffer retires, the Company is to provide a
life insurance benefit equal to two times his annual salary and
incentive compensation for the most recent completed year prior to
his retirement. The value of this insurance benefit has been
included in the Summary Compensation Table.
Mr. Lawson is employed under an agreement effective September
27, 1989 as amended which extends the contract's expiration date to
January 16, 1998. Under the agreement, he has agreed to render his
exclusive services to the Company. After November 30, 1991, Mr.
Lawson has vested benefits under the Supplemental Plan, which he may
receive following his attaining age 60 on January 16, 1998. The
terms and benefits of his employment agreement are otherwise
essentially identical to those described for Mr. Keiffer, except
that the minimum annual compensation is $465,000.
In December 1990 the Board approved an employment contract for
Dr. Heil, which replaced a previous contract that expired October
12, 1990. The new agreement provides for a five-year term to
February 24, 1995 and two consecutive automatic renewals for an
additional five years to February 24, 2000, and three years to
February 24, 2003, respectively, if neither Dr. Heil nor the Company
notify the other that no renewal is to occur. As of November 22,
1993, Dr. Heil's agreement was amended, effective December 1, 1993,
vesting his benefits under the Supplemental Plan, which he may
receive upon his reaching age 60 on February 24, 1998. At that
time, he may retire and receive a pension equal to 50 percent of
Average Monthly Compensation, as that term is defined in the
Supplemental Plan. If Dr. Heil completes the renewal period to age
62, the retirement benefit increases to 55 percent of Average
Monthly Compensation and if he completes the second renewal period
to age 65, the retirement benefit will be 65 percent of Average
Monthly Compensation. Other terms of the employment contract are
essentially identical to those described previously for Mr. Keiffer,
except that the minimum annual compensation is $295,000.
Mr. Crowley has been employed under an agreement effective June
28, 1978, as amended, whereby he agreed to render his exclusive
services to the Company for a period ending February 1990. The
benefits under this contract are fully vested and Mr. Crowley may
retire at any time by furnishing the Board of Directors reasonable
notice thereof. Terms of the employment contract are essentially
identical to that described for Mr. Keiffer, except that the minimum
annual compensation is $280,000.
Mr. Marino is employed under an agreement dated October 14, 1991
and amended on December 1, 1993 vesting the benefits under the
Supplemental Plan for less than 10 years' service. The agreement
provides for a five-year term to October 19, 1996 and three
automatic consecutive renewals for five years to October 14, 2001,
two years to February 3, 2004, and two years to February 3, 2007,
respectively, if neither Mr. Marino nor the Company notify the other
that no renewal is to occur. At February 3, 2002, Mr. Marino will
be 60 years of age. If the contract is not extended beyond February
3, 2001, he may retire and receive a retirement benefit equal to 50
percent of Average Monthly Compensation as that term is defined in
the Supplemental Plan. If Mr. Marino completes the second renewal
period to age 62, the retirement benefit increases to 55 percent of
Average Monthly Compensation, and if he completes the third renewal
period to age 65, the retirement benefit will be 65 percent of
Average Monthly Compensation. Other terms of the employment contract
are essentially identical to those described for Mr. Keiffer, except
that the minimum annual compensation is $285,000.
In each of the aforementioned employment contracts, the Company
has assumed the obligation to pay certain fees and expenses of
counsel incurred if legal action is required by an executive to
enforce his rights under the contract.
<PAGE>
Director's Compensation and Retirement
Directors of the Company are paid a retainer fee of $1,800 per month
and $1,120 for each board meeting attended. Directors are also paid
$1,100 per committee meeting for meetings attended, except that the
Chairman of the committee is paid $1,400. Directors who are officers
of the Company and Mr. Tacke receive no additional compensation for
their services as Directors or Committee Member
In August of 1987 the Board of Directors established a retirement
policy. Directors with ten years or more of service on the Board
at the time of retirement are eligible for post-retirement remuneration
equal to 100% of the annual Board retainer in effect at the time of
retirement payable monthly for a term equal to the length of service
of such director on the Board. Upon the director's death, the
surviving spouse is entitled to receive the amount of the remainder
of such term or until the spouse's death, whichever occurs first.
In addition, during active service and the retirement period a death
benefit in the amount of $100,000 payable to the director's surviving
spouse is provided. The mandatory retirement age for management
directors who are corporate officers, including the Chairman of the
Board and Chief Executive Officer, is 65. For outside directors,
the mandatory retirement age is 70. All incumbent 1987 directors
were excepted from mandatory retirement, although each may avail
himself or herself of the provisions of the retirement policy as
adopted. If a director has served five years or more on the Board
but has not attained retirement age, a pro rata benefit is payable
to the director or surviving spouse upon inability to continue service
due to illness, disability or infirmity. No retirement benefit or
death benefit is payable to a management director who is a participant
in the Supplemental Executive Retirement Plan or is receiving supplemental
pension benefits payable pursuant to an employment contract.
<PAGE>
PROPOSAL TO APPROVE THE
1994 EMPLOYEE STOCK OPTION PLAN
On October 27, 1993, the Board of Directors of the Company
adopted, subject to approval by the stockholders, the 1994 Employee
Stock Option Plan (the "1994 Plan") for key employees of the
Company. If approved, the 1994 Plan will be effective January 1,
1994, and 2,000,000 shares of the authorized but unissued shares of
Common Stock of the Company will be reserved for issuance of stock
options, stock appreciation rights and restricted awards. The 1994
Plan incorporates the provisions for the use of the Stock
Appreciation Rights Plan which were included in an earlier SAR plan
adopted by the Board of Directors January 30, 1979, and approved and
ratified by the stockholders at the Annual Meeting held April 18,
1979, as amended. The earlier SAR Plan has expired. No stock
options, SAR's or restricted stock awards have been granted under
the 1994 Plan. The affirmative vote of the holders of a majority of
the shares of Common Stock present in person or by proxy and
entitled to vote at the annual meeting is required to adopt the 1994
Plan. A copy of the 1994 Plan is attached as Exhibit I.
The 1994 Plan is specifically designed for the granting of
stock options which do not qualify as "incentive stock options"
under the applicable federal tax statutes. Adjustments may be made
in the number of shares authorized, as well as the number and price
of shares subject to outstanding options and awards by the
Compensation and Benefits Committee of the Board of Directors (the
"Committee") in the event of a stock dividend, stock split or share
combination or any other reclassification or reorganization of the
Company. The Committee is made up of three outside directors.
The 1994 Plan provides that, in addition to stock options,
shares of the Common Stock may be awarded to key employees,
registered in their names and placed in escrow as restricted stock
awards. Voluntary disposition of such shares by the employee will
be restricted prior to the earliest to occur of the following
events: (a) the employee's retirement under the retirement program
of the Company or one of its affiliates, then in effect; (b) the
employee's death; (c) in extraordinary cases, with the consent of
the Committee, delivery of such shares to the employee following the
employee's termination of employment prior to retirement or death;
or (d) expiration of the period of time specified in the award, not
to exceed ten years. The awards are made by the Committee, which
may, at the time of making an award, impose additional restrictions
upon the voluntary disposition and the release from escrow of the
shares awarded (such as, without limitation, permitting such
disposition and release only in installments over a period of years)
as the Committee may deem to be in the vest interests of the Company
and the employee concerned.
The 1994 Plan provides that the exercise price of each non-
statutory option granted thereunder shall not be less than the fair
market value of the shares at the date of grant. A restricted share
award will be made at a nominal price of $1.00 per share.
Under the terms of the 1994 Plan, the exercise period for
options shall not be for a period of more than ten years from the
date of grant, and the Committee may provide for the exercise of
options in installments and on such terms, conditions and
restrictions as may be determined by the Committee. The options are
not transferable except by will and by the laws of descent and
distribution. If employment is terminated for any reason, provision
is made in the 1994 Plan for exercise of those options exercisable
at the date of termination under certain circumstances and within a
specified period. Options may be exercised by a holder in
accordance with the terms of the original grant following the
holder's normal retirement or disability retirement from the
Company. Shares subject to an option which is terminated or which
expires will again be available for grants under the 1994 Plan. In
addition, options may be granted under the 1994 Plan to persons
holding existing options under the 1994 Plan or any other plans of
the Company.
<PAGE>
For federal income tax purposes, the grant of an option or a
SAR under the 1994 Plan will not result in taxable income to the
optionee and no taxable income will be recognized by an employee who
receives a restricted stock award pursuant to the 1994 Plan until
the time at which the restrictions terminate. The exercise of
options granted under the 1994 Plan, and the delivery from escrow of
shares awarded pursuant to such plan, are conditioned upon the
employee's paying the amount of any withholding tax imposed at the
time under any provision of the Internal Revenue Code or any law of
any other taxing jurisdiction requiring payment of such taxes. The
spread between the market value of the shares on the date of option
or SAR exercise, or on the date award shares are delivered form
escrow, and the price paid for the shares or the option price is
taxable to the employee as ordinary income under current federal tax
laws. The amount of such spread is also deductible by the Company
as additional compensation subject to certain limitations on
compensation to executives whose total compensation exceeds
$1,000,000. In the case of restricted stock awards, the employee
may either pay the withholding tax or instruct the escrow holder to
sell for the employee's account, at the best reasonably obtainable
price, so many of the shares as may be necessary to obtain the
amount to pay such tax and to deliver the balance of the shares to
the employee.
The Committee may permit an employee to pay the exercise price
for an option or an award and any required withholding tax by
delivering shares of the Company's Common Stock valued at current
market prices in exchange for additional shares upon exercise of the
employee's option.
The Committee may terminate options and revoke share awards in
the event a participant commits a criminal act resulting in his or
her termination of employment.
The Board of Directors may amend, alter or discontinue the 1994
Plan, but may not, without the approval of, or ratification by, the
stockholders, increase the number of shares authorized to be issued
under the 1994 Plan, materially increase the benefits accruing to
participants in the 1994 Plan, or change the class of employees who
are eligible to participate in the 1994 Plan. Without further
action of the Board of Directors, the 1994 Plan will terminate on
December 31, 2003, and no options or awards will be granted after
that date under the 1994 Plan. Approximately 900 employees are
currently eligible to participate in the granting of options and
awards under the 1994 Plan. The 1994 is administered by the
Committee, which determines the employees to whom options or
restricted stock awards will be granted, the number of shares to be
subject to options or awards, and other terms and conditions
governing the options and awards.
<PAGE>
The SAR provisions of the 1994 Plan provide that the Committee
may award to key officers and employees at the time options are
granted pursuant to the 1994 Plan, or by amendment to an option
granted previously under the 1994 Plan, a SAR as an alternative to
the exercise of all or part of any option awarded. The SAR permits
the optionee to surrender to the Company all or any unexercised
portion of an option which is presently exercisable and to receive
from the Company Common Stock, cash, or a combination of Common
Stock and cash having an aggregate value equal to the amount by
which the fair market value of the Common Stock at the date of
surrender exceeds the exercise price. The Committee is entitled to
determine the proportion of stock and cash delivered to the employee
upon exercise of a SAR, taking into account, among other things, the
assistance that may be necessary or useful to give the employee in
meeting income tax liabilities arising form the exercise of the SAR.
Common Stock subject to the surrendered portion of the option
upon exercise of a SAR shall not be made the subject of another
option under the 1994 Plan. SAR's are not transferable by the
optionee otherwise than by will or the laws of descent and
distribution, and are exercisable during the optionee's lifetime by
the optionee only. Other conditions of the SAR Plan are similar to
those of the 1994 Plan, and each SAR granted is subject to such
other terms and conditions as the Committee shall impose, including
conditions on exercise as may be required to satisfy Rule 16b-3
under the Securities Exchange Act of 1934, as amended (or as
required by any successor provision in effect from time to time).
The closing price of the Company's Common Stock on the New York
Stock Exchange on March 4, 1994, was $43.50 per share.
Management of the Company believes that granting of options,
restricted stock awards and SAR's to key employees of the Company
will increase their interest in the Company's welfare. The key
employees to whom these grants and awards are made are those whom
the management believes primarily responsible for management, growth
and protection of the business of the Company. The management also
believes that the granting of options and awards furnishes an
incentive to such key employees to remain in the continuous service of
the Company and will assist in the attraction of able persons to
to employment opportunities with the Company. At March 4, 1994, only
125,750 shares remain available for future grants under all earlier
stock option plans. For these reasons, the directors believe that
approval of the 1994 Plan will be beneficial to the Company and its
stockholders and recommend adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1994
EMPLOYEE STOCK OPTION PLAN.
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young, certified
public accountants, who have been the independent public accountants
for the Company since 1965, to continue in that capacity for the
year 1994. Representatives of Ernst & Young are expected to be
present at the Annual Meeting and will be afforded an opportunity to
make remarks if they desire to do so and will respond to appropriate
questions.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by the
Company for possible inclusion in the proxy materials relating to
the 1995 Annual Meeting of Stockholders is November 22, 1994.
MISCELLANEOUS
The management knows of no matter other than those described
herein that will be presented for consideration at the meeting. If,
however, other matters come before the meeting, the proxy holders
intend to vote the proxy in accordance with their best judgment in
the interest of the Company.
The cost of solicitation of proxies, including the cost of
reimbursing brokers for forwarding proxies and proxy statements to
their principals, will be borne by the Company. Proxies may be
solicited without extra compensation by officers and employees of
the Company by telephone, telegraph or personally. Arrangements may
also be made with brokerage houses and other custodians, nominees
and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and the
Company may reimburse them for reasonable out-of-pocket expenses
incurred by them in connection therewith.
The Company has also retained D. F. King & Co., Inc., 77 Water
Street, New York, New York 10005 to aid in the solicitation of
proxies from the holders of its Common Stock and will pay D. F. King
& Co., Inc. a sum of approximately $15,500 as a fee for its services
and will reimburse it for its out-of-pocket expenses.
The Annual Report to Stockholders covering the year 1993, which
includes financial statements, is being mailed to stockholders with
this Proxy Statement but does not constitute a part of the proxy
solicitation materials.
Please date, sign and return the proxy at your earliest
convenience in the enclosed envelope. No postage is required for
mailing in the United States. A prompt return of your proxy will be
appreciated as it will save the expense of further mailings.
By Order of the Board of Directors,
JAMES W. CROWLEY
Secretary
Dallas, Texas
March 25, 1994
<PAGE>
E-SYSTEMS, INC.
6250 LBJ Freeway
Dallas, Texas 75240
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints E. Gene Keiffer and James W. Crowley,
or either of them, with power of substitution, as Proxies to vote
all stock of E-Systems, Inc., owned by the undersigned at the Annual
Meeting of Shareholders to be held at 6250 LBJ Freeway, Dallas,
Texas, on Wednesday, April 27, 1994, at 10:00 Dallas time, upon the
matters as specified herein:
Election of Directors Nominees: (change of address)
C. Roland Haden, Martin R. Hoffmann, -------------------------
E. Gene Keiffer and Francine I. Neff -------------------------
-------------------------
-------------------------
(If your address has changed,
please provide new address
and mark the box on the
reverse side of this card.)
You may specify your choices by marking the boxes on the reverse
side, but you do not need to mark any boxes if you want to vote as
recommended by the Company's Board of Directors. The proxies cannot
vote your shares unless you sign and return this proxy card.
<PAGE>
/x/ Please mark your
votes as in this
example.
1. Election of Directors
(See Reverse)
For Withheld
/ / / /
- ------------------------------------
For, except as marked to the contrary above.
2. Approval of the 1994 Employee Stock Option Plan
For Against Abstain
/ / / / / /
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
/ / Change of
Address Provided
SIGNATURE(S) --------------------------------- DATE ----------
Please sign EXACTLY as your name appears. RETURN THIS INSTRUCTION
CARD SO THAT IT WILL REACH THE TRUSTEES NOT LATER THAN 5:00 P.M.,
APRIL 19, 1994.
<PAGE>
EXHIBIT 1
E-SYSTEMS, INC.
1994 EMPLOYEE STOCK OPTION PLAN
This 1994 Stock Option Plan adopted by the Board of Directors
of E-Systems, Inc. on October 27, 1993, effective January 1, 1994.
W I T N E S S E T H:
1. Purpose. The Plan is to provide key employees with a
proprietary interest in the Company through the granting of options
to purchase shares of the Company and the granting of awards of
shares of the Company to key employees subject to certain
restrictions, as more specifically hereinafter set forth, for the
following purposes:
(a) to increase the interest in the Company's welfare of those
key employees who share primary responsibility for the management,
growth and protection of the business of the Company;
(b) to furnish an incentive for such employees to continue
their employment and to reward prior and continuing accomplishments
in connection with their employment; and
(c) to provide a means through which the Company may attract
able persons to enter its employment.
2. Administration. The Plan shall be administered by the
Compensation and Benefits Committee ("Committee") composed of
members of the Board. The Committee, which shall consist of three
members unless otherwise set a greater number by the Board, shall be
appointed and vacancies shall be filled by the Board. The Committee
shall keep minutes of its activities.
3. Participants. The Committee shall determine from time to
time those key employees of the Company or of any Subsidiary
corporation of the Company to whom options or stock awards are to be
granted and the number of shares optioned or granted to each such
employee. Such employees upon the grant of options or award of
shares to them shall become participants in the Plan.
4. Restrictions on Eligibility. No option shall be granted
to or award made to:
(a) any director of the Company who is not an employee of the
Company or any of its Subsidiary corporations;
(b) any executive officer in an amount in excess of 10% of the
total number of options granted to all persons in a calendar year;
or
(c) any person who is the beneficial owner of 5% or more of
the total combined voting power or value of all classes of stock of
the Company or a Subsidiary corporation; or who upon exercise of the
option granted or award of the stock awarded would become the
beneficial owner of 5% or more of such combined voting power or
value of all classes of stock of the Company.
5. Shares Subject to the Plan. The Committee from time to
time may provide for options and awards of Common Stock under this
Plan not in excess of an aggregate of 2,000,000 shares of the Common
Stock of the Company. These shares shall be made available from
either the authorized but unissued Common Stock of the Company or
treasury stock held by the Company. Other than shares that have been
subject to Stock Appreciation Rights hereunder, any shares that by
reason of the expiration of an option or otherwise are no longer
subject to purchase pursuant to an option granted, or are no longer
subject to delivery under an award made, under the Plan may be re-
offered under the Plan.
6. Allotment of Shares. The Committee shall determine the
number of shares of Common Stock to be offered from time to time by
grant of options or awards to key employees of the Company or its
Subsidiary corporations. The selection of an employee as a
participant in any grant of options or awards under the Plan shall
not be deemed to either entitle such employee to, or to disqualify
such employee from, any participation in any other grant of options
or awards under the Plan.
7. Grant of Options and Awards. The Committee shall be
responsible for and authorized to grant options and awards under the
Plan. The grant of options and awards shall be evidenced by
agreements containing such terms and provisions as are approved by
the Committee, but not more favorable than the terms of the Plan.
The Company shall execute such agreements upon instruction from the
Committee. Stock Appreciation Rights may be granted from time to
time with respect to any options granted under the Plan, as an
alternative method of exercise of any option. All provisions, terms
and conditions of the E-Systems, Inc. Stock Appreciation Rights Plan
("SAR Plan") adopted January 30, 1979 and approved and ratified by
the stockholders on April 18, 1979, and as amended, are incorporated
herein by reference. For purposes of such incorporation by
reference, the "Stock Option Plan" as defined in the SAR Plan shall
be deemed to include this Plan.
8. Option and Award Price. The price of the Common Stock
with respect to which an option or award is granted pursuant to this
plan shall be determined by the Committee on the date of grant or
award. The exercise price of each option shall be the fair market
value of the shares on the date of option grant. The consideration
for a restricted stock award shall be nominally $1.00 per share. The
Committee shall also determine the fair market value of the stock on
the date of grant, and shall set forth the determination in its
minutes; provided if the stock is listed on a recognized securities
exchange, the fair market value will be taken as the reported
average price of the stock on such exchange on the date of grant of
the option or award, or if no sale of the stock shall have been
reported on such date of grant, on the next preceding day when a
sale was reported.
9. Stock Option Exercise Period. The option period shall
commence on the date the Committee authorizes the grant of an
option. The Committee may provide any period of time for exercising
an option, provided that no option shall be for a period of more
than 10 years from the date of grant of the option by the Committee.
The Committee may provide for the exercise of options in
installments and upon such terms, conditions and restrictions as may
be determined by the Committee.
10. Rights in Event of Death of Optionee. If a participant
dies prior to termination of his or her rights to exercise an option
in accordance with the provisions of the stock option agreement
without having exercised his or her option as to all shares covered
thereby, the Committee may provide that the option may be exercised
by the participant's estate or a person who acquired the right to
exercise the option by bequest or inheritance or by reason of the
death of the participant, vesting the right to all unexercised
shares as of the date of the participant's death; provided the
period during which the option may be so exercised shall not
continue beyond the earlier of 10 years from the date of grant of
the option or two years from the date of the participant's death.
11. Stock Appreciation Rights. At the discretion of the
Committee, any option granted, under the Stock Option Plan may
include a Stock Appreciation Right, either at the time of grant or,
with the consent of the optionee, by amendment. In exercising its
discretion hereunder, the Committee shall bear in mind the purpose
of the Plan is to encourage the ownership by key employees of the
Company's Common Stock.
A Stock Appreciation Right shall entitle the optionee (or
any person having the right to exercise the option after his death
pursuant to paragraph 10) to surrender to the Company unexercised
all or any part of that portion of the option that is presently
exercisable and to receive Common Stock, cash or a combination of
Common Stock and cash, as the Committee shall determine. Such
Common Stock, cash or Common Stock plus cash, shall have an
aggregate value equal to the amount by which (i) the fair market
value (on the date of surrender) of the Common Stock subject to the
portion of the option surrendered, exceeds (ii) a valuation
determined by the Committee at the time that the Stock Appreciation
Right is granted. In determining, in its sole discretion, what
portion, if any, of the amount to which the optionee is entitled
shall be paid in cash, rather than Common Stock, the Committee may
take into account, among other things, the amount of assistance it
may be necessary or useful to give the optionee in meeting his
income tax liabilities arising from exercise of the Stock
Appreciation Right.
Common Stock subject to the surrendered portion of the
option shall not be made the subject of another option under the
Stock Option Plan. References in this Plan to "options" shall
include any Stock Appreciation Right associated with any option if
applicable.
12. Special Provisions with Respect to Restricted Stock
Awards. The following special restrictions apply to the award of
shares by the Committee:
(a) Shares of Common Stock awarded pursuant to this Plan
shall be issued and registered in the name of the employee
participant and placed in escrow. The participant may not
voluntarily dispose of such award shares prior to the earliest of
the following events:
(i) the participant's retirement under any retirement
plan of the Company or a Subsidiary corporation;
(ii) the participant's death;
(iii) in extraordinary cases, with the consent of the
Committee, delivery of such shares to the participant following the
participant's termination of employment prior to retirement or
death; or
(iv) expiration of the period of time specified in the
award, not to exceed ten years.
(b) The Committee may, but need not, at the time of making of
an award, or at any subsequent time prior to expiration of the
restrictions set forth in subparagraph (a) above, impose additional
restrictions on voluntary disposition and release from escrow of the
shares awarded pursuant to this Plan, including, without limitation,
permitting disposition and release of shares only in installments
over a period of years.
(c) In order to administer restrictions required or permitted
on the release and delivery of award shares to a participant the
certificates evidencing such shares awarded hereunder, although
issued in the name of the participant, shall be held in escrow by an
escrow agent appointed from time to time by the Company, subject to
delivery to the participant or to the Company at such times and in
such amounts as shall be directed by the Committee under the terms
of this Plan or the agreement of award with the participant. A
participant's acceptance of an award of shares pursuant to the Plan
shall constitute such participant's irrevocable power of attorney to
the escrow agent to cause the transfer and delivery to the Company
of any such award shares which the Committee shall direct to be so
transferred and delivered pursuant to the provisions of this Plan or
of the award agreement with the participant.
(d) Unless otherwise provided by the Committee, the voting
rights on restricted shares shall belong to each participant with
respect to those share awards held in escrow. Dividends, if any, on
shares held in escrow shall be paid to each participant unless the
Committee provides otherwise at the time of making the award.
13. Payments and Withholding Tax.
(a) As to option shares, full payment for shares purchased
upon exercise of an option shall be made at the time of exercise.
Any federal, state or local taxes required to be paid by or withheld
from the employee at the time of exercise shall also be paid or
withheld prior to delivery of any shares upon such exercise. The
exercise price of an option may be paid by delivering shares of the
Company's Common Stock valued at current market prices in exchange
for additional shares upon exercise of an employee's option. Payment
may also be made by delivering a properly executed exercise notice
together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds to pay
the exercise price and, if applicable, any required federal, state
and local taxes required to be collected by, or withheld by, the
Company in connection with such exercise. No participant shall have
any rights as a stockholder until such shares are issued upon
exercise of the options.
(b) Provision for or payment by the participant of any state,
federal or local withholding taxes attributable to the exercise of
an option or delivery of any award shares shall be made in a manner
satisfactory to the Company. The Committee in its sole discretion
may permit a participant to elect to have the Company withhold, or
to tender back to the Company, the number of shares necessary to
satisfy the payment of any taxes required to be paid by reason of
the exercise of an option or the delivery of any award shares.
(c) As to award shares, upon the satisfaction of any
conditions for delivery to the employee otherwise set forth in the
Plan or in the share award agreement with the participant, shares
will be delivered to the participant only upon payment by him to the
Company of the amount of any withholding tax which may be imposed
thereon under the provisions of the Internal Revenue Code as then in
effect or any law of any other taxing jurisdiction requiring payment
of any such taxes or withholding tax. Should such participant fail
to make the required payment within 30 days following the date of
removal of restrictions on the delivery of such shares, such
participant shall be deemed to have instructed the escrow agent to
sell for such participant's account at the best price reasonably
obtained as many of the shares deliverable to such participant as
may be necessary to obtain the amount of the required tax payment
and the balance of such shares shall then be delivered to the
participant.
14. Issuance of Shares. The provisions governing options
granted and shares awarded under this Plan shall be evidenced in an
appropriate agreement with each participant and shall set forth such
terms, conditions, restrictions and agreements as the Committee may
provide; however, no such agreement shall conflict with the terms of
this Plan and, in the event of any such conflict, the provisions of
this Plan shall be deemed to control.
15. Capital Adjustments. The number of shares authorized in
the aggregate for this Plan shall be adjusted, and the number of
shares of Common Stock covered by each outstanding option or award
granted by this Plan and the option price (where applicable) thereof
shall be subject to an equitable adjustment, as determined by the
Committee, to reflect any stock dividend, stock split, or share
combination, or to reflect any exchange of shares, recapitalization,
merger, consolidation, reorganization, liquidation, or the like, of
or by the Company.
16. Non-assignability. The options and awards granted
pursuant to this Plan shall not be transferable (other than by will
or by the laws of dissent and distribution) assigned, pledged or
hypotheticated in any way whether by operation of law or otherwise,
or be subject to execution, attachment or similar process. Upon any
attempt to so transfer, assign, pledge, hypotheticate, or upon the
levy by reason of any attachment or similar process, contrary to the
provisions hereof, of any option or award, such option or award
shall immediately become null and void. During a participant's
lifetime options shall be exercisable only by, and awards
deliverable only to, him or her.
17. Termination of Options Rights and Awards. The Committee
may provide for the termination of options and the revocation of
share awards in the case of a participant's termination of
employment with the Company or a Subsidiary corporation for cause
for defalcation, theft, embezzlement, falsification of records with
intent to defraud or any act involving moral turpitude or crime
constituting a felony. Upon such termination of employment, the
participant's rights to exercise any options granted pursuant to
this Plan or to receive any shares awarded pursuant hereto shall
cease. In the case of award shares the Committee shall direct the
escrow agent to return all forfeited shares to the Company.
18. Interpretation. The Committee shall interpret this Plan
and shall prescribe such rules and regulations in connection with
the operation of the Plan as it shall determine to be necessary or
advisable for the administration hereof consistent with the purposes
herein contained. The Committee shall have the power and authority
to rescind, amend and modify its rules and regulations.
19. Amendment or Discontinuation. This Plan may be amended,
altered or discontinued by the Company without approval of the
stockholders, except the Board of Directors shall not have the power
or authority to change the employees or class of employees who are
eligible to participate in the Plan, increase the aggregate number
of shares which may be issued under options and awards or materially
increase the benefits accruing to participants under the Plan. In
the event any law, rule or regulation issued or promulgated by the
Internal Revenue Service, New York Stock Exchange, Securities and
Exchange Commission or other governmental agency requires the Plan
to be amended, the Plan will be amended at the time and all options
and awards granted and outstanding will be subject to such
amendment.
20. Effect of the Plan. Neither the adoption of this Plan nor
any action of the Board or Committee shall be deemed to give any
officer or employee any right to be granted an option or award with
respect to the Common Stock of the Company or to any other rights
whatsoever except as may be evidenced by a stock option agreement or
share award agreement and any amendment thereto, duly executed on
behalf of the Company, and then only to the extent and on terms and
conditions expressly set forth therein. The granting of any option
or award shall neither be deemed to be an employment contract, nor
create any employment relationship other than "at will".
21. Term. Unless sooner terminated by action of the Board,
this Plan shall terminate December 31, 2003 and no options or awards
may be granted pursuant hereto after such date.
22. Definitions. For purposes of this Plan, unless the
context requires otherwise, the following words shall have the
meanings indicated
(a) "Plan" shall mean this 1994 Employee Stock Option
Plan as amended from time to time in accordance with the terms
thereof.
(b) "Company" shall mean E-Systems, Inc. and its
successors and assigns.
(c) "Board" shall mean the Board of Directors of E-
Systems, Inc. and its successors and assigns.
(d) "Committee" shall mean the Compensation and Benefits
Committee appointed by the Board and described in Paragraph 2.,
Administration, of this Plan.
(e) "Common Stock" shall mean the $1.00 par value common
stock of the Company subject to the right of the Company to change
the authorized number of shares of such class and to provide no par
or change in par value for such stock.
(f) "Subsidiary corporation" shall mean any corporation
(other than the employer corporation) in an unbroken chain of
corporations beginning with the employer corporation if, at the time
of the granting of the option or making of the award hereunder, each
of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in
such chain.
23. Effectiveness of the Plan. This Plan shall be subject to
approval and ratification on or before next regular or special
stockholders' meeting of the Company by the vote of the holders of
the majority of the shares of stock of the Company present or
represented at the meeting to which the Plan is submitted. Subject
to such approval and ratification, the Plan is effective January 1,
1994. Options and awards may be granted under the Plan prior to
such approval and ratification, but each such option or award
granted shall be subject to the approval and ratification of the
Plan by the stockholders. If the Plan shall not be so approved and
ratified, all options and awards granted shall be of no effect. The
date of the grant of any option or award granted prior to such
approval and ratification by the stockholders shall be determined
for all purposes as if the option or award had not been subject to
such approval and ratification; however, no option granted may be
exercised and no award made may be delivered to a participant prior
to such approval and ratification.
