ELECTROMAGNETIC SCIENCES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1996
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 26, 1996,
at the Atlanta Marriott Norcross, 475 Technology Parkway, 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 8, 1996, 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 22, 1996
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.
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 26, 1996
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 26,
1996, at the Atlanta Marriott Norcross, Norcross, Georgia. This
Proxy Statement is being mailed to shareholders on approximately
March 25, 1996.
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 8,
1996, 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 8, 1996, there were 7,465,646
shares of common stock outstanding and entitled to vote.
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.
1997 Shareholder Proposals
Any proposals by shareholders intended for presentation at the
1997 Annual Meeting must be received by the Company at its principal
executive offices, attention of the Secretary, no later than December
1, 1996, 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. All nominees are currently
directors of the Company and were elected by the shareholders at the
last Annual Meeting.
Year First
Name and Principal Occupations Elected
for the Last Five Years Age Director
Anthony J. Iorillo 58 1995
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 65 1978
Private investor organizing and managing
interests in finance and real estate.
John H. Levergood 61 1995
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 Communi-
cations 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 61 1984
President, Mowell Financial Group, Inc.,
Tallahassee, Florida, an investment
counseling firm.
John E. Pippin 68 1968
Chairman of the Board of the Company;
until 1994, Dr. Pippin also served as
Chief Executive Officer.
Don T. Scartz 53 1995
Senior Vice President and Chief
Financial Officer, Treasurer of the
Company.
Thomas E. Sharon 50 1984
President and Chief Executive Officer
of the Company (since 1994); previously
President and Chief Operating
Officer of the Company.
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. Iorillo,
Lassiter, Levergood, and Mowell. 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. Lassiter and Mowell; the principal functions of this
committee, which met one time during 1995, 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
Scartz; 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 three times during the last fiscal year. During
1995, the Board created the Strategic Plan Committee with the
responsibility of meeting from time to time with the Company's senior
officers to review and discuss the Company's strategic plan and
strategic planning process. The Strategic Plan Committee consists of
Dr. Pippin and Messrs. Iorillo and Levergood, and met once during the
last fiscal year.
During the last fiscal year, there were seven 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 (excluding telephonic meetings) plus
$3,000 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.
During 1995, the foregoing options were automatically granted to
Messrs. Iorillo and Levergood, who were first elected as directors
during that year. Because Dr. Pippin was already a member of the
Board of Directors at the time he retired as an employee, he did not
receive the automatic option grant received by other non-employee
directors. Accordingly, the Board of Directors, pursuant to the
recommendation of the Compensation Committee, awarded Dr. Pippin an
option, not under any plan, for 10,000 shares, on terms substantially
identical to the automatically granted options (including an exercise
price equal to fair market value on the date of grant, or $11.75),
except that in view of Dr. Pippin's age and duties as Chairman, the
options vest in three increments over three terms of service as a
director.
At the time of Dr. Pippin's retirement as CEO, he and the
Company entered into a consulting arrangement under which he provides
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.
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.
Dr. Pippin and Mr. Mowell have served as directors of LXE Inc.,
a subsidiary of the Company, since 1989. They are currently
compensated as non-employee directors of LXE at the rate of $3,000
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. Dr. Pippin and Mr. Mowell also have served since 1993 as
directors of CAL Corporation, another subsidiary of the Company, for
which they and other non-employee directors are currently compensated
at the rate of Can$1,500 per year plus Can$500 per meeting attended.
SECURITY OWNERSHIP
The following table sets forth certain information concerning
shares of the Company's common stock beneficially owned as of March
8, 1996, by the Company's directors 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
Amount of Approximate
Beneficial Percent of
Ownership Class
Kopp Investment Advisors, Inc. 1,119,300 (1) 15.0%
6500 Wedgewood Road
Maple Grove, MN 55311
David A. Rocker 810,452 (2) 10.9%
Suite 1759
45 Rockefeller Plaza
New York, NY 10111
Dimensional Fund Advisors, Inc. 677,706 (3) 9.1%
1299 Ocean Avenue
Santa Monica, CA 90401
Brinson Partners, Inc. 634,389 8.4%
209 South LaSalle
Chicago, IL 60604-1295
Wellington Management Company 490,100 6.6%
75 State Street
Boston, MA 02109
Anthony J. Iorillo 2,000 (4) *
Jerry H. Lassiter 15,672 (4) *
John H. Levergood 2,000 (4) *
John B. Mowell 27,543 (4) *
John E. Pippin 223,207 (4) 2.9%
Don T. Scartz 49,728 (4) *
Thomas E. Sharon 165,950 (4) 2.1%
William S. Jacobs 17,501 (4) *
Neilson A. Mackay 2,336 *
Jeffrey A. Leddy 22,774 (4) *
All directors and executive officers
as a group (11 persons) 534,711 6.9%
* Percentage of shares beneficially owned does not exceed 1%
(1) Kopp Investment Advisors, Inc. has advised that it exercises
investment discretion as to 1,113,300 shares, but does not vote the
shares nor is it the owner of record.
(2) David A. Rocker has advised that the shares to which he is
deemed to have beneficial ownership are owned by Rocker Partners, L.
P., a New York limited partnership (728,496 shares) and Compass
Holdings, Ltd., a corporation organized under the Business Companies
Ordinance of the British Virgin Islands (81,956 shares).
(3) 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. Dimensional disclaims beneficial
ownership of all such shares.
(4) Includes shares that are subject to currently exercisable
options in the amounts of 2,000 for Mr. Iorillo, 10,456 for Mr.
Lassiter, 2,000 for Mr. Levergood, 10,456 for Mr. Mowell, 94,975 for
Dr. Pippin, 37,000 for Mr. Scartz, 118,591 for Dr. Sharon, 5,000 for
Mr. Jacobs, and 17,575 for Mr. Leddy. For Mr. Mowell, Dr. Pippin
and Mr. Jacobs, these totals also include 5,000, 42,593 and 7,400
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 8,
1996, concerning shares of the common stock of the Company's
81%-owned subsidiary, LXE Inc., beneficially owned by the Company's
directors 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
Amount of Approximate
Beneficial Percent of
Ownership Class
Anthony J. Iorillo - *
Jerry H. Lassiter - *
John H. Levergood - *
John B. Mowell 26,900 (1) *
John E. Pippin 114,210 (1) 2.0%
Don T. Scartz 4,092 (1) *
Thomas E. Sharon 48,219 (1) *
William S. Jacobs 7,000 (1) *
Neilson A. Mackay - *
Jeffrey A. Leddy - *
All directors and executive
officers as a group
(11 persons) 200,421 (1) 3.5%
* Percentage does not exceed 1%
(1) Includes shares that are subject to currently exercisable
options in the amounts of 15,900 for Mr. Mowell, 95,400 for Dr.
Pippin, 40,893 for Dr. Sharon, 2,000 for Mr. Scartz, 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.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table discloses, for the years ended December 31,
1995, 1994 and 1993, the cash compensation paid by the Company and
its subsidiaries, as well as certain other compensation paid, accrued
or granted for those years, to the Chief Executive Officer and to
each of the four most highly compensated other executive officers
whose combined salary and bonus compensation for 1995 exceeded
$100,000.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term Compensation All Other
Annual Compensation Awards Compensation (1)
Securities
Underlying
Name and Restricted Options/SAR's
Principal Position Year Salary Bonus Other Stock (No. of Shares)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas E. Sharon 1995 $228,082 $ -0- $ -0- $ -0- 12,000 $21,412
President, Chief 1994 185,589 100,000 -0- 24,969 -0- 20,367
Executive Officer 1993 173,579 30,000 -0- -0- 7,500 19,920
(from July 1994)
and Director
Don T. Scartz 1995 146,931 -0- -0- -0- 7,000 26,801
Senior Vice Presi- 1994 132,505 60,000 -0- 14,981 -0- 23,906
dent and Chief 1993 124,697 20,000 -0- -0- 5,000 21,982
Financial Officer,
Treasurer
William S. Jacobs 1995 139,160 -0- -0- -0- 4,000 26,269
Vice President, 1994 133,803 30,000 -0- 9,988 -0- 23,621
General Counsel and 1993 130,065 15,000 -0- -0- 4,000 16,427
Secretary
Neilson A. Mackay 1995 130,548 15,000 -0- -0- -0- 5,673
President, CAL 1994 119,971 22,500 -0- 7,461 2,500 7,034
Corporation 1993 103,227 20,000 -0- -0- 20,000 -0-
Jeffrey A. Leddy 1995 111,931 28,000 -0- -0- -0- 5,466
President, EMS 1994 98,095 37,500 -0- 12,455 5,000 4,413
Technologies, Inc. 1993 90,922 20,000 -0- -0- 4,000 3,734
</TABLE>
See Footnotes to Summary Compensation Table.
Footnotes to Summary Compensation Table:
(1) For 1995, includes in the case of Dr. Sharon, $2,310 in
matching contributions under the 401(k) plan, $8,118 in benefits
associated with a split-dollar life insurance arrangement, and
$10,984 under the defined contribution retirement plan; in the
case of Mr. Scartz, $2,939 in matching contributions under the
401(k) plan and Employee Stock Purchase Plan, $9,753 under
split-dollar insurance arrangements, and $14,109 under the
defined contribution retirement plan; in the case of Mr. Jacobs,
$3,826 in matching contributions under the 401(k) and stock
purchase plans, $12,236 under split-dollar insurance
arrangements, and $10,207 under the defined contribution
retirement plan; in the case of Dr. Mackay, $2,572 in matching
contributions under the stock purchase plan and $3,101 under the
separate defined contribution retirement plan maintained by CAL
Corporation; and in the case of Mr. Leddy, $1,679 in matching
contributions under the 401(k) plan and $3,787 under the defined
contribution retirement plan. 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.
(2) Does not include personal benefits that do not exceed the
applicable reporting threshold for any officer.
(3) 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, 635
shares to Dr. Mackay and 1,060 shares to Mr. Leddy. None of the
named executive officers holds any other shares of restricted
stock. The shares of restricted stock vested 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.
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 1995
of options in the Company's common stock, and unexercised options
in the Company's stock held as of December 31, 1995:
<TABLE>
Number of Shares Under- Value of Unexercised
Year Ended lying Unexercised Options In-the-Money Options at
December 31, 1995 Held at December 31, 1995 December 31, 1995
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas E. Sharon 75,551 $542,162 118,591 19,500 $465,748 34,688
Don T. Scartz 4,000 43,000 37,000 12,000 187,750 23,125
William S. Jacobs -0- -0- 5,000 8,000 12,500 18,500
Neilson A. Mackay -0- -0- -0- 22,500 -0- 99,375
Jeffrey A. Leddy 4,470 40,658 17,575 17,000 84,391 78,250
</TABLE>
The following chart sets forth certain information with respect to
the named executives concerning the exercise in 1995 of options in LXE Inc.,
the Company's 81%-owned subsidiary, and unexercised LXE options held as of
December 31, 1995:
<TABLE>
Year Ended Number of Shares Under- Value of Unexercised
December 31, 1995 lying LXE Options Held at In-the-Money LXE Options at
LXE Shares December 31, 1995 December 31, 1995
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Thomas Sharon -0- $-0- 40,893 -0- $118,312 -0-
Don T. Scartz -0- -0- 2,000 19,875 -0- 53,961
William S. Jacobs -0- -0- 5,000 -0- -0- -0-
</TABLE>
Option Grants During the Last Fiscal Year
The following named executives were granted options in the Company's
stock during 1995:
<TABLE>
Number of Percentage of
Shares Total Options Exercise
Underlying Granted to 0r
Options Employees in Base Price Expiration Grant Date
Granted Fiscal 1995 Per Share Date Present Value*
<S> <C> <C> <C> <C> <C>
Thomas E. Sharon 12,000 17.4% $11.75 1/27/01 $47,880
Don T. Scartz 7,000 10.1 11.75 1/27/01 27,930
William S. Jacobs 4,000 5.8 11.75 1/27/01 15,960
</TABLE>
* Based upon the Black-Scholes option pricing model, assuming 0.44 expected
volatility, a 4.9% risk-free rate of return, no dividend yield, and three
years to time of exercise.
No option grants in LXE's stock were made during 1995 to the named executives.
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 $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.
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 has not employed
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 annual financial performance, primarily
the level of and changes in earnings, as measured both absolutely
and against beginning-of-the-year internal targets. During
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 the then-President of LXE; in the Committee's view, these
bonuses were moderate in amount. In 1994, the Company achieved
strong improvements in profitability; in addition, the Committee
believed that management achieved significant progress in
defining and implementing strategies to broaden the Company's
overall opportunities in commercial wireless communications
markets. Based on these considerations, the Committee awarded
increased bonuses for 1994; however, to encourage stock
ownership by the executive officers, and to help align their
interests with those of the shareholders, a portion of each bonus
was in the form of shares of the Company's common stock that
required a year of further service before they could be sold by
the officer. For 1995, the Company's earnings declined by 55%
due to losses incurred at LXE, and the Committee concluded that
no bonuses should be paid to executive officers, except for the
bonuses to Mr. Leddy, based on improved performance during the
year at the EMS Technologies subsidiary, and to Dr. Mackay, based
on his effective handling during the year of various issues
confronting the CAL Corporation subsidiary.
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
existing holdings, during 1995 the Committee granted the option
amounts also indicated in the above tables. The Committee had
not granted any options to executive officers during 1994, except
for options to subsidiary presidents, including Dr. Mackay and
Mr. Leddy, granted in conjunction with a general grant to
approximately 100 senior employees other than parent company
officers.
In connection with Dr. Sharon's selection as CEO in 1994,
the Committee reviewed his 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. At that time, 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 $200,000 per year, which was below the midpoint for CEO's
of similar-sized companies included in the American Electronics
Association's Survey. In the spring of 1995, based on the
Committee's favorable evaluation of Dr. Sharon's contributions
and development as CEO, on his continuing progress in defining
and pursuing long-term strategies to broaden the Company's
markets, and on the positive financial results achieved in 1994,
Dr. Sharon's salary compensation was further increased to the
level of $225,000 per year, which remained below the midpoint for
CEO's of similar-sized companies included in the American
Electronics Association's 1994 survey.
Bonuses for Dr. 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 Dr. Sharon, that were appropriate for their relative
positions and perceived contributions and levels of
responsibility. With respect to Dr. Sharon, his bonus reflected
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 had
resigned during the year. For 1995, the Committee acknowledged
that Dr. Sharon had significant achievements during the year,
particularly including continued development and implementation
of product, marketing and organizational strategies to achieve
growing participation in commercial wireless communications
markets; selection and employment of a new LXE President with
long-term experience in commercial markets for wireless
communications products; and initiation of product development
and marketing programs to address product transition problems
that LXE has periodically encountered in recent years. However,
in view of the Company's disappointing financial performance
during 1995, the Committee chose to not award any bonus
compensation to Dr. Sharon for that year.
Submitted by the members of the Compensation Committee:
John B. Mowell, Chairman
Anthony J. Iorillo
Jerry B. Lassiter
John H. Levergood
Shareholder Return
The annual changes for the five-year period shown in the
following graph are based on the assumption that $100 had been
invested in the common stock of Electromagnetic Sciences, Inc.
and each index on December 31, 1990.
Comparison of Five-Year Cumulative Total Return
Electromagnetic Sciences, Inc. Common Stock (ELMG)
S&P Composite-500 and S&P High Technology Composite Indices
Company/Index Dec90 Dec91 Dec92 Dec93 Dec94 Dec95
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
S&P High Tech Comp 100 114.08 118.79 146.13 170.31 245.32
ELMG 100 207.55 120.75 126.42 183.02 166.04
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 1995 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 1995 were
filed on a timely basis, except that an option to Dr. Pippin for
10,000 shares was reported for June 1995 when the option became
partially exercisable, rather than for January when the option
was granted.
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, 1995 (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
itsexpenses.
Norcross, Georgia
March 22, 1996
