ELECTROMAGNETIC SCIENCES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1995
Notice is hereby given that the Annual Meeting of Shareholders of
Electromagnetic Sciences, Inc.(the "Company") will be held at
4:00 p.m. local Atlanta time on April 21, 1995, at the Holiday
Inn Atlanta-Peachtree Corners, 6050 Peachtree Industrial
Boulevard, N.W., Norcross, Georgia, for the following purposes:
(1) To elect seven members of the Board of Directors to
serve during the ensuing year; and
(2) To transact such other business as may properly come
before the Meeting or any adjournment thereof.
Only holders of record of common stock of the Company at the
close of business on March 10, 1995, will be entitled to notice
of and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Directors,
WILLIAM S. JACOBS, Secretary
Norcross, Georgia
March 20, 1995
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS, YOU ARE REQUESTED TO FILL IN AND SIGN THE ENCLOSED
FORM OF PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO ATTEND THE
MEETING AND DECIDE THAT YOU WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY.
<PAGE> 1
ELECTROMAGNETIC SCIENCES, INC.
660 Engineering Drive, Technology Park/Atlanta,
Norcross, Georgia 30092
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1995
GENERAL INFORMATION
Shareholders' Meeting
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Electromagnetic
Sciences, Inc. (the "Company") of proxies to be used at the
Annual Meeting of Shareholders to be held at 4:00 p.m. local
Atlanta time on April 21, 1995, at the Holiday Inn
Atlanta-Peachtree Corners, Norcross, Georgia. This Proxy
Statement is being mailed to shareholders on approximately March
22, 1995.
Matters to be Acted Upon
The following matters will be acted upon at the Annual
Meeting of Shareholders:
(1) The election of seven members of the Board of
Directors, each to serve a term of one year and thereafter until
his successor is duly elected and qualified; and
(2) The transaction of such other business as may properly
come before the Meeting or any adjournment thereof.
Revocation of Proxies
A proxy form is enclosed herewith. Any shareholder who
executes and delivers a proxy may revoke it at any time prior to
its use by giving written notice of such revocation to the
Secretary of the Company at 660 Engineering Drive, Technology
Park/Atlanta, Norcross, Georgia, 30092, or by executing and
delivering to the Secretary of the Company a proxy bearing a
later date. A proxy may also be revoked at the Annual Meeting by
any shareholder present at the Annual Meeting who elects to vote
in person.
Voting of Proxies
When the enclosed proxy is properly executed and returned,
the shares that it represents will be voted at the Annual Meeting
in accordance with the instructions noted thereon. In the
absence of such instructions, the shares represented thereby will
be voted in favor of the seven nominees for election to the Board
of Directors. The Board of Directors does not know of any other
business to be brought before the Meeting, but it is intended
that as to such other business, if any, a vote may be cast
pursuant to the proxy in accordance with the judgment of the
person or persons acting thereunder.
Only holders of record of issued and outstanding shares of
common stock of the Company at the close of business on March 10,
1995, are entitled to notice of, or to vote at, the Annual
Meeting. Each holder is entitled to one vote for each share of
common stock held on the record date. On March 10, 1995, there
were 6,837,953 shares of common stock outstanding and entitled to
vote.
<PAGE> 2
Cost of Solicitation
The cost of soliciting proxies will be borne by the Company.
Officers, directors and employees of the Company may solicit
proxies by telephone, telegraph or personal interview.
1996 Shareholder Proposals
Any proposals by shareholders intended for presentation at
the 1996 Annual Meeting must be received by the Company at its
principal executive offices, attention of the Secretary, no later
than November 27, 1995, in order to be included in the proxy
materials for that Meeting.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of members of
the Board of Directors shall be determined by the Board, which
has set that number at seven. Unless otherwise directed, it is
the intention of the persons named in the enclosed form of proxy
to vote such proxy in favor of the election of the seven persons
named below as directors of the Company. Each such person will
serve until the next Annual Meeting of Shareholders and
thereafter until his successor is elected and has qualified. In
case any of the named nominees should become unable to serve, or
for good cause will not serve, the persons named in the proxy
will have the right to use their discretion to vote for a
substitute or substitutes or to vote only for the remaining
nominees.
Assuming the presence of a quorum at the Meeting, the
nominees will be elected by favorable vote of a plurality of the
shares actually voted. Abstentions and broker non-vote shares
will be considered as present for the purposes of determining the
presence of a quorum, but will not otherwise be considered in
determining the outcome of the vote. Shares for which authority
to cast a favorable vote is affirmatively withheld will be
treated as voting shares in determining whether the requisite
plurality has been achieved.
The table on the following page lists the nominees and their
ages, their other positions with the Company, their principal
occupations at present and during the past five years, and the
year each was first elected as a director. Drs. Pippin and
Sharon and Messrs. Lassiter and Mowell are currently directors of
the Company and were elected by the shareholders at the last
Annual Meeting.
<PAGE> 3
Name and Principal Occupations
for the Last Five Years
Year First
Elected
Age Director
Anthony J. Iorillo 57 -
Chairman of the Board, American
Mobile Satellite Corporation,
Reston, Virginia, a major
provider of satellite-based
communications for ground vehicles,
ships and aircraft in the united
States and surrounding areas and waters
(since 1994). Previously, and until
his retirement in 1994, Mr. Iorillo
was a Senior Vice President of Hughes
Aircraft Company and President of Hughes
Telecommunications and Space Sector,
El Segundo, California, a leading
supplier and operator of communications
satellites and related network equipment.
Mr. Iorillo is also a director of Ortel
Corp.
Jerry H. Lassiter 64 1978
Private investor organizing and managing
interests in finance and real estate
(since 1991); President and Director,
First Federal Savings Bank of Georgia,
Winder, Georgia (until retirement in 1991).
John H. Levergood 60 -
President, Broadband Communications
Group, Scientific-Atlanta, Inc., Atlanta,
Georgia, which designs and produces a
broad range of advanced cable television
equipment ( since 1992). Previously, Mr.
Levergood had served as a consultant to
the Broadband Communications Group
following his retirement, in 1989, as
President and Chief Operating Officer
of Scientific-Atlanta. Mr. Levergood
is also a director of Golden Poultry,
Inc.
John B. Mowell 60 1984
President, Mowell Financial Group, Inc.,
Tallahassee, Florida, an investment
counseling firm.
John E. Pippin 67 1968
Chairman of the Board of the Company;
until 1994, Dr. Pippin also served as
Chief Executive Officer.
Don T. Scartz 52 -
Vice President - Finance, Treasurer and
Chief Financial Officer of the Company.
Thomas E. Sharon 49 1984
President and Chief Executive Officer
of the Company (since 1994); previously
President and Chief Operating Officer
of the Company.
<PAGE> 4
Committees and Meetings of the Board of Directors
The Board of Directors has designated a Compensation
Committee, which during the past year has been composed of
Messrs. Lassiter and Mowell, and Charles J. Cunningham, Jr. and
William F. Evans, who are retiring from Board service upon
election of the above nominees at the Annual Meeting. This
committee reviews and recommends to the Board compensation and
benefits for the Company's executive officers, administers the
Company's stock option plans with respect to the participation of
employees who are officers and directors, and is responsible for
reviewing and approving any related party transactions
involving the Company. The Compensation Committee met three
times during the last fiscal year. The Board has also designated
an Audit Committee composed during the past year of Messrs. Evans
and Lassiter; the principal functions of this committee, which
met one time during 1994, are to meet annually with the Company's
independent auditors, to review the Company's consolidated fiscal
year financial statements, to review the independence,
qualifications and activities of the independent auditors, and to
recommend to the Board of Directors the appointment of the
independent auditors. The Company does not have a separate
nominating committee. The Stock Incentive Plan Committee of the
Board consists of Drs. Pippin and Sharon and Messrs. Lassiter and
Mowell; this committee is generally responsible for administering
the Company's stock option plans with respect to the
participation of employees who are not officers or directors.
The Stock Incentive Plan Committee met four times during the last
fiscal year.
During the last fiscal year, there were four meetings of the
Company's Board of Directors. No director attended fewer than
75% of the aggregate of all meetings of the Board and of all
committees on which he served.
Compensation and Other Arrangements with Directors
Each director who is not an employee of the Company is
paid$1,000 per meeting attended plus $1,250 per quarter served.
Each director who is also an employee of the Company is paid $500
per meeting attended (excluding telephonic meetings) and $500
per quarter served. Committee meetings that are not held in
conjunction with a full Board meeting are separately compensated
at the rate of $500 per meeting. Travel expenses are paid to
out-of-town directors.
Non-employee directors receive, effective on their first
date of election, an option under the 1992 Stock Incentive Plan
for the purchase of 10,000 shares of common stock. These options
have an exercise price equal to the fair market value of the
common stock on the date of grant, and become exercisable as to
2,000 shares on the date six months following the date of grant
and as to an additional 2,000 shares on each of the first through
fourth anniversaries of such six-month date. However, these
options become immediately exercisable in the event of a
third-party tender or exchange offer for the Company's common
stock, or if any person becomes the beneficial owner of 50% or
more of the outstanding common stock. The exercise price
(together with any applicable taxes) may be paid in cash, by
delivery of shares of common stock (valued at their fair market
value at the time of exercise), or by a combination of cash and
stock. Upon the optionee ceasing to be a director for any
reason, these options terminate and are forfeited to the extent
that they are not exercisable at that time. Once exercisable,
these options are non-forfeitable and remain exercisable until
the tenth anniversary of the date of grant. Upon their election
at the Annual Meeting, Messrs. Iorillo and Levergood will
automatically be granted these options. Dr. Pippin
has retired as an employee of the Company, but under the exact
terms of the 1992 Stock Incentive Plan would not receive such an
automatic grant. Accordingly, the Board of Directors, pursuant
<PAGE> 5
to the recommendation of the Compensation Committee, has awarded
an option, not under any plan, to Dr. Pippin for 10,000 shares,
on terms substantially identical to the automatically granted
options, except that in view of Dr. Pippin's age and duties as
Chairman, the options will vest in three increments over three
terms of service as a director.
The Company has a consulting arrangement with Mr. Mowell,
who provides assistance to the Company in connection with
presentations to the investment community, reviews of potential
financial transactions, and relations with financial analysts.
For his services, Mr. Mowell receives a consulting fee of
$12,000 per year plus reimbursement of expenses. The other
members of the Compensation Committee have reviewed and approved
the terms of this consulting arrangement.
Messrs. Mowell and Evans have served as directors of LXE
Inc., a subsidiary of the Company, since 1989 and 1992,
respectively. Messrs. Mowell and Evans are compensated as
non-employee directors of LXE at the rate of $1,250 per quarter
plus $1,000 per meeting attended, and $500 for attending any
committee meetings not held in conjunction with a meeting of the
LXE board. Mr. Mowell also has served since 1993 as a director
of CAL Corporation, another subsidiary of the Company, for which
he and other non-employee directors are compensated at the rate
of Can$1,500 per year plus Can$500 per meeting attended.
<PAGE> 6
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information
concerning shares of the Company's common stock beneficially
owned as of March 10, 1995, by the Company's directors, nominees
and named officers, and by persons who beneficially own more than
5% of the common stock. Except as otherwise indicated, each
person possessed sole voting and investment power with respect
to the shares shown.
Electromagnetic Sciences, Inc. Common Stock
Approximate
Amount of Percent of
Name Beneficial Ownership Class
Brinson Partners, Inc. 708,000 10.4%
209 South LaSalle
Chicago, Illinois 60604-1295
Rocker Partners Inc. 586,900 8.6%
Suite 1759
45 Rockefeller Plaza
New York, New York 10111
Wellington Management Company 491,500 7.2%
75 State Street
Boston, Massachusetts 02109
Dimensional Fund Advisors, Inc. 491,199 (1) 7.2%
1299 Ocean Avenue
Santa Monica, California 90401
Ryback Management Corporation 481,600 (2) 7.0%
7711 Carondelet Avenue
St. Louis, Missouri 63105
Charles J. Cunningham, Jr. 10,556 (3) *
William F. Evans 13,963 (3) *
Anthony J. Iorillo -0- *
Jerry H. Lassiter 15,672 (3) *
John H. Levergood -0- *
John B. Mowell 27,697 (3) *
John E. Pippin 238,115 (3) 3.3%
Don T. Scartz 51,690 (3) *
Thomas E. Sharon 238,153 (3) 3.3%
Malcolm M. Bibby 14,510 (3) *
William S. Jacobs 15,659 (3) *
Neilson A. Mackay 1,307 *
All directors and executive officers
as a group (11 persons) 663,303 9.1%
* Percentage of shares beneficially owned does not exceed 1%
(1) Dimensional Fund Advisors, Inc. (Dimensional) has advised that the
shares of which it is deemed to have beneficial ownership are held in the
portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust Company,
a Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans; Dimensional
serves as investment manager to all of these entities. Furthermore,
Dimensional disclaims beneficial ownership of all such shares.
<PAGE> 7
(2) Ryback Management Corporation has advised that it holds shared voting
and dispositive power with Lindner Fund, Inc., for which Ryback serves as
investment manager.
(3) Includes shares that are subject to currently exercisable options in
the amounts of 10,456 for Dr. Cunningham, 11,697 for Mr. Evans, 10,456 for Mr.
Lassiter, 11,697 for Mr. Mowell, 116,642 for Dr. Pippin, 41,000 for Mr.
Scartz, 194,142 for Dr. Sharon, 9,300 for Dr. Bibby, and 5,000 for Mr. Jacobs.
For Mr. Mowell, Dr. Pippin and Mr. Jacobs, these totals also include 5,000,
42,593 and 6,150 shares, respectively, as to which each person shares voting
and investment power with family members but disclaims beneficial interest.
The following table sets forth certain information as of March 10, 1995,
concerning shares of the common stock of the Company's 73%-owned subsidiary,
LXE Inc., beneficially owned by the Company's directors, nominees and named
officers. Except as otherwise indicated, each person possessed sole voting
and investment power with respect to the shares shown.
LXE Inc. Common Stock
Approximate
Amount of Percent of
Name Beneficial Ownership Class
Charles J. Cunningham, Jr. - *
William F. Evans 11,000 (1) *
Anthony J. Iorillo - *
Jerry H. Lassiter - *
John H. Levergood - *
John B. Mowell 26,900 (1) *
John E. Pippin 114,760 (1) 2.0%
Don T. Scartz 4,092 (1) *
Thomas E. Sharon 45,768 (1) *
Malcolm M. Bibby 96,284 1.7%
William S. Jacobs 7,000 (1) *
Neilson A. Mackay - *
All directors and executive
officers as a group
(11 persons) 305,804 (1) 5.4%
* Percentage does not exceed 1%
(1) Includes shares that are subject to currently exercisable options in
the amounts of 10,000 for Mr. Evans, 15,900 for Mr. Mowell, 95,400 for Dr.
Pippin, 2,000 for Mr. Scartz, 40,893 for Dr. Sharon, and 5,000 for Mr.
Jacobs. The total for Mr. Mowell also includes 1,000 shares, and for Mr.
Jacobs 300 shares, as to which each shares voting and investment power with a
family member, but disclaims beneficial interest.
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table discloses, for the years ended December 31, 1994, 1993
and 1992, the cash compensation paid by the Company and its subsidiaries, as
well as certain other compensation paid, accrued or granted for those years,
to each person who served as Chief Executive Officer during 1994, and to
certain other current or former executive officers whose combined salary and
bonus compensation for 1994 exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table Long-Term Compensation All Other<F1>
Annual Compensation Awards Compensation
Securities
Underlying
Name and Restricted Options/SAR's
Principal Position Year Salary Bonus Other<F2> Stock<F3> (No. Of Shares)<F4>
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Pippin 1994 $237,578 $100,000 $ 0 $ 0 0 $32,310
Chairman of the Board, 1993 237,578 0 0 0 8,500 ELMG 32,249
Chief Executive Officer 1992 237,578 0 0 0 0 2,319
(until July 1994)
Thomas E. Sharon 1994 185,589 100,000 0 24,969 0 20,367
President, Chief 1993 173,579 30,000 0 0 7,500 ELMG 19,920
Executive Officer (from 1992 167,565 0 0 0 0 21,380
July 1994) and Director
Malcolm M. Bibby 1994 158,017 35,000 0 0 0 18,942
President, LXE Inc. 1993 156,478 0 0 0 0 17,386
(until August 1994) 1992 149,144 44,000 0 0 4,000 LXEI 32,992
Don T. Scartz 1994 132,505 60,000 0 14,981 0 23,906
Vice President, Finance 1993 124,697 20,000 0 0 5,000 ELMG 21,982
and Treasurer 1992 114,112 0 0 0 2,000 LXEI 17,596
William S. Jacobs 1994 133,803 30,000 0 9,988 0 23,621
Vice President, General 1993 130,065 15,000 0 0 4,000 ELMG 16,427
Counsel and Secretary 1992 93,275 0 0 0 5,000 ELMG 421
5,000 LXEI
Neilson A. Mackay 1994 119,971 22,500 0 7,461 2,500 ELMG 7,034
President, CAL 1993 103,227 20,000 0 0 20,000 ELMG 0
Corporation (from
January 1993)
<PAGE> 9
Footnotes to Summary Compensation Table:
<F1>
For 1994, includes, in the case of Dr. Pippin, $2,310 in Company matching
contributions under its 401(k) plan and $30,000 based on allocation formulas
under the Company's age-weighted defined contribution retirement plan; in the
case of Dr. Sharon, $2,310 in matching contributions under the 401(k) plan,
$8,326 in benefits associated with a split-dollar life insurance arrangement,
and $9,731 under the defined contribution retirement plan; in the case of Dr.
Bibby, $4,285 in matching contributions under the 401(k) plan and the Employee
Stock Purchase Plan, and $14,657 under the defined contribution
retirement plan; in the case of Mr. Scartz, $2,651 in matching contributions
under the 401(k) and stock purchase plans, $9,984 under split-dollar insurance
arrangements, and $11,271 under the defined contribution retirement plan; in
the case of Mr. Jacobs, $3,680 in matching contributions under the 401(k) and
stock purchase plans, $11,247 under split-dollar insurance arrangements, and
$8,694 under the defined contribution retirement plan; and in the case of Dr.
Mackay, $1,274 in matching contributions under the Employee Stock Purchase
Plan and $5,760 under the separate defined contribution retirement plan
maintained by CAL Corporation. In each case, the split-dollar insurance
arrangement benefit is the sum of (i) the premiums paid by the Company
attributable to the term insurance portion of the policy, plus (ii) the
implicit value of the balance of the premium, treating such balance as an
interest-free loan to the scheduled termination date of the arrangement, based
on interest and discount rates of 8%. The defined contribution retirement
plan was first implemented in 1993; prior to 1993, retirement benefits accrued
under a defined benefit plan that has been terminated.
<F2>
Does not include personal benefits that do not exceed the applicable
reporting threshold for any officer.
<F3>
Represents the value, based on an $11.75 market price on the date of
award, of 2,125 shares awarded in January 1995 to Dr. Sharon, 1,275 shares to
Mr. Scartz, 850 shares to Mr. Jacobs, and 635 shares to Dr. Mackay. None of
the named executive officers holds any other shares of restricted stock. The
shares of restricted stock vest one year after the award date, subject
to continued service for such year. Any dividends paid on shares of
restricted stock would be subject to the same restrictions as the shares.
<F4>
No SAR's have been issued. Each of the officers in this table, other than
Dr. Mackay, is also an officer or director of the Company's 73%-owned
subsidiary, LXE Inc., and, as such, is eligible for option grants in the stock
of either the Company (ELMG) or LXE Inc. (LXEI).
</TABLE>
Option Exercises During Last Fiscal Year and Year-End Option Values
The following chart sets forth certain information with respect to the
named executives concerning the exercise in 1994 of options in the Company's
common stock, and unexercised options in the Company's stock held as of
December 31, 1994:
<TABLE>
<CAPTION>
Number of shares Under- Value of Unexercised
Year Ended lying unexercised Options In-the-Money Options at
December 31, 1994 Held at December 31, 1994 December 31, 1994
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
John E. Pippin -0- $ -0- 116,642 8,500 $ 558,925 $ 52,625
Thomas E. Sharon -0- -0- 194,142 19,500 1,017,300 47,625
Malcolm M. Bibby -0- -0- 9,300 -0- 51,150 -0-
Don T. Scartz -0- -0- 41,000 12,000 248,875 31,350
William S. Jacobs -0- -0- -0- 17,000 -0- 46,105
Neilson A. Mackay -0- -0- -0- 22,500 -0- 124,688
</TABLE>
<PAGE> 10
The following chart sets forth certain information with respect to the
named executives concerning the exercise in 1994 of options in LXE Inc., the
Company's 73%-owned subsidiary, and unexercised LXE options held as of
December 31, 1994:
<TABLE>
<CAPTION>
Year Ended Number ofShares Under- Value of Unexercised
December 31, 1994 lying LXE Options held at In-the-Money LXE Options
LXE Shares December 31,1994 at December 31, 1994
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
John E. Pippin -0- $ -0- 95,400 -0- $1,095,192 $ -0-
Thomas E. Sharon 18,732 200,919 40,893 -0- 469,452 -0-
Malcolm M. Bibby 47,000 421,872 112,000 -0- 1,285,760 -0-
Don T. Scartz -0- -0- -0- 21,875 -0- 190,601
William S. Jacobs -0- -0- -0- 5,000 -0- -0-
</TABLE>
Option Grants During Last Fiscal Year
The following named executive was granted options in the Company's
stock during 1994:
<TABLE>
<CAPTION>
Number Percentage of
of Shares Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration Grant Date
Name Granted Fiscal 1994 (per share) Date Present Value<F>
<S> <C> <C> <C> <C> <C>
Neilson A. Mackay 2,500 2.3% $ 8.25 10/18/00 $ 6,625
<F1>
Based upon the Black-Scholes option pricing model, assuming 0.35 expected volatility, a 6.9% risk-free
rate of return, no dividend yield, and three years to time of exercise.
</TABLE>
No option grants in LXE's stock were made during 1994 to the named executives.
<PAGE> 11
Employment Agreement
The Company has an employment agreement with Dr. Sharon for services as an
executive officer. This agreement originally would have expired on December
31, 1993, but during 1992 was extended to December 31, 1996, and in 1994 was
further extended to December 31, 1998. The specified minimum annual salary,
as amended in 1994, is Dr. Sharon's current salary of $200,000. In addition,
Dr. Sharon is entitled to bonuses in amounts determined by the Board of
Directors. In the event of disability, the salary would be continued at 100%
less the amount of any other Company-sponsored disability benefits. In the
event of death, 50% of the salary amount would be paid to Dr. Sharon's estate
for the remainder of the contract term. In the event of a change in control
of the Company after which Dr. Sharon resigned or his employment was
terminated other than for cause or breach of the agreement, or due to death or
disability, the Company would be obligated to pay to Dr. Sharon an amount
determined by obtaining the product of (a) the greater of (i) his aggregate
taxable compensation for the calendar year preceding the calendar year in
which his employment expires, or (ii) his annualized salary for the calendar
year in which his employment expires plus the greater of his aggregate bonus
paid during either such year or the prior calendar year, and (b) the period
expressed in years from the date his employment expires to the latest to occur
of (I) December 31, 1998, (ii) the latest extension, if any, of the expiration
date of his term of employment, or (iii) the third anniversary of the date on
which the change of control occurs, which product shall be discounted to
present value. However, the amount payable to Dr. Sharon in connection with a
change in control may not exceed the maximum amount that the Company would be
entitled to deduct as compensation expense for federal income tax purposes.
Retirement Arrangements with John E. Pippin
During 1994, Dr. Pippin retired as Chief Executive Officer after serving
in that or equivalent positions from the Company's formation in 1968. At the
end of 1994, he also retired as a full-time employee. Dr. Pippin is
continuing to serve as Chairman of the Board of the Company and of its CAL
Corporation subsidiary, and as a member of the LXE Board, and in such
capacities will provide services and receive compensation on the same basis as
other non-employee members of those Boards. In addition, Dr. Pippin has
agreed to provide consulting services to the Company's current CEO for a
period of three years. Such services are to be provided one day per week,
plus additional days as requested by the CEO and agreed to by Dr. Pippin, and
generally relate to the Company's strategic planning, proposed acquisitions,
restructuring and integration of acquired businesses, and management
organization and performance. Compensation is $5,000 per month, plus $1,000
per day for additional days. During the consulting period, Dr. Pippin will be
included in the Company's group life and health insurance plans for executive
officers, but will not otherwise participate in employee benefit plans. He
will also continue to be provided an office and secretarial services, an
automobile, and certain tax planning and return services. If during the
three-year period Dr. Pippin becomes unable to provide services due to his
death or disability, the basic monthly payments would be continued until the
end of the three years.
<PAGE> 11
Compensation Committee Report
on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report with respect to certain aspects of executive compensation:
The Compensation Committee believes it is important to adopt compensation
policies that attract and retain experienced and well-qualified executive
officers, and that provide significant incentives for financial and business
achievements that benefit the Company's shareholders. As a result, the
Compensation Committee seeks to maintain the salary component of each
officer's compensation at a moderate level, provides bonuses based heavily on
financial performance, and also provides stock options whose value depends on
appreciation in the market value of the Company's common stock. The
Committee does not employ any formulas that tie executive compensation to
specific performance measures in a pre-determined manner. In exercising its
judgment on compensation matters, and in seeking to adhere to the foregoing
guidelines, the Committee considers, but does not use in any pre-determined
manner, information provided through the American Electronics Association
annual compensation survey, particularly data for electronics companies having
revenues similar to those of the Company. Members of the Committee also
familiarize themselves with, but do not use on any specific quantitative
basis, published information about compensation policies and practices of
other companies believed to have product, size and/or geographic
characteristics similar to those of the Company.
As reflected in the Summary Compensation Table, the bonus compensation
paid to executive officers is highly affected by the Committee's evaluation of
financial performance, primarily the level of and changes in earnings, during
the year in question. In particular, in view of the disappointing earnings
reported for 1992, no bonuses were paid for that year to executive officers,
other than Dr Bibby, whose bonus compensation was based on the performance of
the LXE subsidiary. For 1993, earnings per share doubled, but the level of
earnings was adversely affected by a 90% decline in earnings per share at the
LXE subsidiary. Based on these results, and on evaluations of each officer's
individual contributions during the year, the Committee awarded bonuses to
executive officers other than the CEO and Dr. Bibby; in the Committee's view,
these bonuses were moderate in amount. In 1994, the Company achieved strong
improvements in profitability; in addition, the Committee believes that
management achieved significant progress in defining and implementing business
strategies that utilize the diverse technical expertise and market position of
each of the Company's three operating subsidiaries, with the objective of
broadening the Company's overall opportunities in commercial wireless
communications markets. Based on these considerations, the Committee awarded
increased bonuses for 1994; in order to encourage stock ownership by the
executive officers, and to help align their interests with those of the
shareholders, a portion of each bonus (except that awarded to Dr. Pippin,
who has retired as CEO and an employee) was in the form of shares of the
Company's common stock that require a year of further service before they may
be sold by the officer.
In determining salary levels and bonuses for individual officers, the
Committee considers each officer's performance of his responsibilities and
contributions to the Company's results. As to officers other than the Chief
Executive Officer, the Committee relies heavily in this regard on the CEO's
evaluations.
In addition to salary and annual bonuses, the Company has from time to
time granted stock options to the CEO and other executive officers, in order
to provide long-term incentive compensation directly linked to growth in
shareholder value. The CEO and other named executive officers currently
hold options as indicated in the option table appearing above. Based on these
<PAGE> 12
existing holdings, the Committee did not grant further options to executive
officers during 1994, except for options to subsidiary presidents, including
Dr. Mackay, granted in conjunction with a general grant to approximately 100
senior employees other than parent company officers.
No change in the salary compensation of Dr. Pippin was made during the
last five years of his service as CEO. During 1993 and 1994 he received as
salary approximately the minimum amount specified in an employment agreement
that was approved by the Committee and the Board in 1988 and was in effect
through 1992. In July 1994, Dr. Pippin retired as CEO, but continued as a
full-time employee and as Chairman of the Board. In connection with these
developments, the Committee reviewed Dr. Pippin's salary compensation for the
balance of the year. Because the Committee expected that Dr. Pippin would
provide valuable support to Dr. Sharon during the leadership transition
process, and also expected Dr. Pippin to continue active involvement in
ongoing efforts to improve the Company's profitability, and in view of both
the level of Dr. Pippin's salary and the extended period since it had been
adjusted, the Committee concluded that his salary should remain at its
then-current level through December 1994, after which Dr. Pippin retired as a
full-time employee. In connection with Dr. Sharon's selection as CEO, the
Committee reviewed Dr. Sharon's performance over the years as he had assumed
increasingly responsible roles, including service as President and Chief
Operating Officer since 1987, and also reviewed his role in formulating the
Company's current business strategy. The Committee concluded that Dr.
Sharon's salary compensation should be increased to reflect his additional
responsibilities as CEO, and did so by approximately 15%, to the current level
of $200,00 per year, which is below the midpoint for CEO's of similar-sized
companies included in the American Electronics Association's Survey.
The bonuses for Drs. Pippin and Sharon are not based on any quantitative
formula. As discussed above, the Committee concluded that increased bonuses
were appropriate in 1994 for all executive officers, and sought to award
bonuses to each of the officers, including Drs. Pippin and Sharon, that were
appropriate for their relative positions and perceived contributions and
levels of responsibility. In the case of Dr. Pippin, the Committee noted
that, at his request, he had not received a bonus in 1992 or 1993, but that
during those years he had provided effective leadership in restructuring and
redirecting the Company's operations with a view to achieving higher levels of
profitability, as occurred in 1994. With respect to Dr. Sharon, his bonus
reflects the Committee's favorable evaluation of his performance in continuing
to define and redirect the Company's business strategy, both in his role as
CEO of the Company and as CEO and President of the LXE subsidiary,
whose former President resigned during the year.
Submitted by the members of the Compensation Committee:
John B. Mowell, Chairman
Charles J. Cunningham, Jr.
William F. Evans
Jerry B. Lassiter
Compensation Committee Interlocks
and Insider Participation
As stated above, the members of the Compensation Committee during 1994 were
Dr. Cunningham and Messrs. Evans, Lassiter and Mowell. Mr. Evans is a former
officer of the Company, having served as Senior Vice President from 1985 to
1988.
<PAGE> 13
Shareholder Return
The annual changes for the five-year period shown in the following table are
based on the assumption that $100 had been invested in the common stock of
Electromagnetic Sciences, Inc. and each index on December 31, 1989.
Comparison of Five-Year Cumulative Total Return
Electromagnetic Sciences, Inc. Common Stock (ELMG)
S&P Composite-500 and S&P High Technology Composite Indices
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
ELMG 100.00 106.00 220.00 128.00 134.00 194.00
S&P 500 100.00 96.98 126.42 136.05 149.76 151.74
S&P High Tech 100.00 102.12 116.50 121.31 149.30 174.01
</TABLE>
<PAGE> 14
COMPLIANCE WITH REPORTING OBLIGATIONS
Pursuant to Section 16(a) of the Securities Exchange Act, each executive
officer, director and beneficial owner of 10% or more of the Company's common
stock is required to file certain forms with the Securities and Exchange
Commission. A report of beneficial ownership of the Company's common
stock on Form 3 is due at the time such person becomes subject to the
reporting requirement and a report on Form 4 or 5 must be filed to reflect
changes in beneficial ownership occurring thereafter. Based on written
statements and copies of forms provided to the Company during and for 1994 by
persons subject to the reporting requirements, the Company believes that all
Forms 3, 4 and 5 required to be filed by such reporting persons during 1994
were filed on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick acted as the Company's independent public accountants
during the last fiscal year and, it is anticipated, will continue to act as
such during the current fiscal year. A representative of KPMG Peat Marwick is
expected to be present at the Annual Meeting to respond to appropriate
questions, and will have the opportunity to make a statement if he desires to
do so.
AVAILABLE INFORMATION
The Company files Annual Reports on Form 10-K with the Securities and
Exchange Commission. A copy of the Annual Report for the fiscal year ended
December 31, 1994 (except for exhibits thereto) may be obtained, free of
charge, upon written request by any shareholder to Electromagnetic Sciences,
Inc., Attn..: Don T. Scartz, Treasurer, 660 Engineering Drive, P. O. Box
7700, Norcross, Georgia 30091-7700. Copies of all exhibits to the Annual
Report are available upon a similar request, subject to payment of a $.15 per
page charge to reimburse the Company for its expenses.
Norcross, Georgia
March 20, 1995
<PAGE> 15
Following is the text of the proxy card which accompanies the definitive proxy
statement for the 1995 Annual Shareholders' Meeting:
ELECTROMAGNETIC SCIENCES, INC.
The undersigned hereby appoints JOHN E. PIPPIN, THOMAS E.
SHARON and WILLIAM S. JACOBS, and each of them with individual
power of substitution, proxies to appear and vote all shares of
the common stock of Electromagnetic Sciences, Inc. That the
undersigned may be entitled to vote at the Annual Meeting of
Shareholders to be held on the 21st day of April 1995, and at all
adjournments thereof, as indicated with respect to the following
matters:
(1) To vote FOR Or WITHHOLD AUTHORITY to vote for electing
the following six members of the Board of Directors, except as
marked to the contrary:
Anthony J. Iorillo, Jerry H. Lassiter, John H. Levergood, John B.
Mowell, John E. Pippin, Don T. Scartz, Thomas E. Sharon.
INSTRUCTIONS: If he or she so chooses, any shareholder may
withhold authority to vote for any nominee by lining through or
otherwise striking out the name of such nominee. The above-named
proxies will vote for the election of any nominee whose name is
not deleted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
LISTED NOMINEES.
(2) In accordance with their best judgment upon such other
matters as may properly come before the Annual Meeting or any
adjournment thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY INSTRUCTIONS
INDICATED HEREON. IF NO INDICATION IS MADE, IT WILL BE VOTED
"FOR" THE LISTED NOMINEES.
The Board of Directors is not aware of any matters to be
presented for action at the Annual Meeting of Shareholders, other
than the election of Directors.
This proxy is revocable at any time prior to its use.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE.
