Via: EDGAR
March 31, 1998
Securities and Exchange Commission
Judiciary Plaza
455 Street N.W.
Washington D.C. 20549
Attention: Filing Desk
Re: Electromagnetic Sciences, Inc. (the "Company")
File No. 0-6072 -- Definitive Proxy Material
Ladies and Gentlemen:
Accompanying this letter is the definitive form of Proxy
Statement being used in connection with the solicitation of
proxies for the Company's Annual Meeting to be held on May 1,
1998, together with the form of Proxy being used in connection
with such solicitation. These documents are submitted for filing
pursuant to Rule 14a-6(b) under the Securities Exchange Act of
1934.
The enclosed proxy materials are being released to the Company's
shareholders on approximately April 1, 1998, accompanied by the
Company's 1996 Annual Report to its shareholders. Seven copies
of that report are being forwarded by mail to the Commission on
the date hereof.
Please direct any inquiries concerning this filing to the
undersigned.
Very truly yours,
ELECTROMAGNETIC SCIENCES, INC.
By: /s/William S. Jacobs
William S. Jacobs
Vice President and General Counsel
ELECTROMAGNETIC SCIENCES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 1998
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 May 1, 1998, at
the Atlanta Marriott Norcross, 475 Technology Parkway, N.W.,
Norcross, Georgia, for the following purposes:
(1) To elect six 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 20, 1998, 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 30, 1998
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 MAY 1, 1998
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 May 1,
1998, at the Atlanta Marriott Norcross, Norcross, Georgia. This
Proxy Statement is being mailed to shareholders on approximately
March 30, 1998.
Matters to be Acted Upon
The following matters will be acted upon at the Annual Meeting
of Shareholders:
(1) The election of six 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 six 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 20,
1998, 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 20, 1998, there were 8,632,322
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.
1999 Shareholder Proposals
Any proposals by shareholders intended for presentation at the
1999 Annual Meeting must be received by the Company at its principal
executive offices, attention of the Secretary, no later than December
4, 1998, 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 six. 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 six 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. Except for Messrs. Smith and
Thagard, 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
- ------------------------------------------ --- -----------
Jerry H. Lassiter 67 1978
Private investor organizing and managing
interests in finance and real estate.
John B. Mowell 63 1984
President, Mowell Financial Group, Inc.,
Tallahassee, Florida, an investment
counseling firm.
Don T. Scartz 55 1995
Senior Vice President and Chief
Financial Officer, Treasurer of the
Company.
Thomas E. Sharon, Ph.D. 52 1984
President and Chief Executive Officer
of the Company (since 1994); previously
President and Chief Operating
Officer of the Company.
Elvie L. Smith 72 --
Mr. Smith is a Director of Pratt & Whitney
Canada, Inc., a Canadian subsidiary of Pratt
& Whitney, Inc. engaged in the design and
manufacture of aircraft engines. Mr. Smith
was Chief Executive Officer of Pratt &
Whitney Canada, Inc. from 1980 to 1985, and
served as its Chairman from 1984 to 1994.
Since 1987, he has also served as a director
of CAL Corporation, an Ottawa, Ontario, sub-
sidiary of the Company.
Norman E. Thagard, M.D. 54 --
Since 1996, Professor, Bernard F. Sliger
Eminent Scholar Chair, Florida State University,
Director of College Relations, College of
Engineering, Florida A&M University - Florida
State University, and aerospace consultant.
From 1978 until 1996, Dr. Thagard served as a
NASA astronaut, participating in four Shuttle
missions and one mission aboard the Russian Mir
Space Station, for a total of 140 days in space.
Committees and Meetings of the Board of Directors
The Board of Directors has designated a Compensation Committee,
which during the past year has comprised Messrs. Lassiter and Mowell,
John E. Pippin, Anthony J. Iorillo and John H. Levergood. 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 are to meet 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. This
Committee met one time during 1997, and its members also consulted on
various occasions during the year with members of the accounting
staff and the independent auditors. The Stock Incentive Plan
Committee of the Board consists of Dr. Sharon and Messrs. Levergood
and Scartz; this committee, which met two times during the last
fiscal year, 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 Company's Board does not maintain a standing nominating
committee. However, because three of the current members of the
Board are not standing for election to further terms, the Board
designated an ad hoc committee, consisting of Dr. Sharon and Messrs.
Lassiter, Levergood and Mowell, with authority and responsibility to
review qualifications of prospective directors and to determine the
Board's nominations, as set forth in this Proxy Statement, for
election at the 1998 Annual Meeting.
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 (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.
Each current non-employee director has previously received an
option 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.
The 1997 Stock Incentive Plan (the "1997 Plan") provides similar
automatic option grants to future non-employee directors (including
Messrs. Smith and Thagard) at the time of their initial election.
The 1997 Plan also provides to both future and current non-employee
directors automatic annual grants, beginning after five years of
service, of options to acquire 2,500 shares, at an exercise price
equal to fair market value on the date of grant, and first
exercisable six months after that date. Messrs. Lassiter and Mowell
first received these additional option grants in 1997, and will
receive further such grants upon re-election as directors at the
Annual Meeting. For all of these options granted to non-employee
directors, 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.
At the time of Dr. Pippin's retirement as CEO, he and the
Company entered into a consulting arrangement under which he has
provided consulting services to the Company's current CEO. Such
services are 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 has been included in the Company's group life and health
insurance plans for executive officers, but does not otherwise
participate in employee benefit plans. He has also been provided an
office and secretarial services, an automobile, and certain tax
planning and return services. The consulting agreement with Dr.
Pippin had an initial term of three years ending December 31, 1997.
At that time, it was extended, with the approval of the other members
of the Compensation Committee, through April 30, 1998.
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.
Mr. Smith serves as a director of CAL Corporation, a subsidiary
of the Company. For this service, he is currently compensated at the
rate of Can$1,500 per year plus Can$1,000 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
20, 1997, by the Company's directors and named officers, and as of
December 31, 1997 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.
Amount of Approximate
Beneficial Percent of
Ownership Class
------------ -----------
Kopp Investment Advisors, Inc. 1,810,328 (1) 21.0%
6500 Wedgewood Road
Maple Grove, MN 55311
Dimensional Fund Advisors, Inc. 638,649 (2) 7.4%
1299 Ocean Avenue
Santa Monica, CA 90401
Brinson Partners, Inc. 527,200 6.1%
209 South LaSalle
Chicago, IL 60604-1295
Wellington Management Company LLP 466,000 5.4%
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc. 439,800(3) 5.1%
100 East Pratt Street
Baltimore, MD 21202
Anthony J. Iorillo 6,000 (4) *
Jerry H. Lassiter 18,837 (4) *
John H. Levergood 2,000 (4) *
John B. Mowell 34,425 (4) *
John E. Pippin 219,525 (4) 2.5%
Don T. Scartz 50,449 (4) *
Thomas E. Sharon 148,520 (4) 1.7%
Elvie L. Smith 350 (4) *
Norman E. Thagard -0- *
John J. Farrell 6,791 (4) *
William S. Jacobs 21,899 (4) *
Jeffrey A. Leddy 24,538 (4) *
All directors and executive officers
as a group (13 persons) 568,013 6.4%
- ---------------------------------------
* Percentage of shares beneficially owned does not exceed 1%
(1) Kopp Investment Advisors, Inc. has advised that it exercises
investment discretion as to 1,726,028 shares, but does not vote the
shares nor is it the owner of record.
(2) 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.
(3)These securities are owned by various individual and
institutional investors which T. Rowe Price Associates, Inc. (Price
Associates)serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes
of the reporting requirements of the Securities Exchange Act of 1934
Price Associates expressly disclaims beneficial ownership of such
securities.
(4) Includes shares that are subject to currently exercisable
options in the amounts of 6,000 for Mr. Iorillo, 12,500 for Mr.
Lassiter, 2,000 for Mr. Levergood, 24,425 for Mr. Mowell, 79,050 for
Dr. Pippin, 35,500 for Mr. Scartz, 86,169 for Dr. Sharon, 350 for Mr.
Smith, 13,000 for Mr. Jacobs, 19,000 for Mr. Leddy. and 308,994 for
all directors and officers as a group. For Mr. Mowell, Dr. Pippin
and Mr. Jacobs, these totals also include 5,000, 42,593 and 6,325
shares, respectively, as to which each person shares voting and
investment power with family members but disclaims beneficial
interest.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table discloses, for the years ended December 31,
1997, 1996 and 1995, 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 1997 exceeded
$100,000.
<TABLE>
Summary Compensation Table
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 1997 $273,863 $100,000 $ -0- $ -0- 15,000 $22,856
President, Chief 1996 252,603 25,000 -0- -0- 20,000 21,344
Executive Officer 1995 228,082 -0- -0- -0- 12,000 21,412
(from July 1994)
and Director
Don T. Scartz 1997 169,634 55,000 -0- -0- 8,000 29,571
Senior Vice Presi- 1996 157,321 20,000 -0- -0- 10,000 27,134
dent and Chief 1995 146,931 -0- -0- -0- 7,000 26,801
Financial Officer,
Treasurer
John J. Farrell 1997 194,539 50,000 -0- -0- 8,000 22,977
Senior Vice President 1996 180,863 20,000 -0- -0- 9,500 21,918
and President-Wireless 1995 107,699 -0- -0- 78,000 35,000 10,677
Products Group
William S. Jacobs 1997 149,856 30,000 -0- -0- 5,000 28,368
Vice President, 1996 144,398 15,000 -0- -0- 6,000 27,221
General Counsel and 1995 139,160 -0- -0- -0- 4,000 26,269
Secretary
Jeffrey A. Leddy 1997 159,053 40,000 -0- -0- 6,000 8,617
Vice President 1996 129,626 25,000 -0- -0- 8,000 5,778
1995 111,931 28,000 -0- -0- -0- 5,466
</TABLE>
Footnotes to Summary Compensation Table:
(1) For 1997, includes in the case of Dr. Sharon, $2,375 in
matching contributions under the 401(k) plan, $6,882 in benefits
associated with a split-dollar life insurance arrangement, and
$13,599 under the defined contribution retirement plan; in the
case of Mr. Scartz, $3,221 in matching contributions under the
401(k) plan and Employee Stock Purchase Plan, $8,517 under split-
dollar insurance arrangements, and $17,833 under the defined
contribution retirement plan; in the case of Mr. Farrell, $4,801
in matching contributions under the 401(k) and stock purchase
plans, $9,755 under split-dollar insurance arrangements, and
$8,421 under the defined contribution retirement plan; in the
case of Mr. Jacobs, $4,121 in matching contributions under the
401(k) and stock purchase plans, $11,489 under split-dollar
insurance arrangements, and $12,758 under the defined
contribution retirement plan; and in the case of Mr. Leddy,
$2,371 in matching contributions under the 401(k) plan and $6,246
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%.
(2) Does not include personal benefits that do not exceed the
applicable reporting threshold for any officer.
(3) Does not include certain options granted in 1997 with respect
to 1996 service and previously reported in the 1996 Summary
Compensation 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 1997
of options in the Company's common stock, and unexercised options
in the Company's stock held as of December 31, 1997:
<TABLE>
Number of Shares Under- Value of Unexercised
Year Ended lying Unexercised Options In-the-Money Options at
December 31, 1997 Held at December 31, 1997 December 31, 1997
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas E. Sharon 20,347 $396,789 86,169 35,000 $1,047,923 35,000
Don T. Scartz 15,000 221,250 35,500 32,906 497,000 90,645
William S. Jacobs -0- -0- 16,750 11,000 148,250 10,500
John J. Farrell -0- -0- -0- 52,500 -0- 425,375
Jeffrey A. Leddy 3,500 33,688 19,000 22,000 281,750 134,000
</TABLE>
Option Grants During the Last Fiscal Year
<TABLE>
Number of Percentage of
Shares Total Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted Fiscal 1997 Per Share Date Present Value(2)
- ------ ---------- ------------ ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Sharon 20,000(1) 7.4% $18.50 1/23/07 $277,200
15,000 5.6 23.50 7/25/07 264,090
Don T. Scartz 10,000(1) 3.7 18.50 1/23/07 138,600
8,000 3.0 23.50 7/25/07 140,848
William S. Jacobs 6,000(1) 2.2 18.50 1/23/07 83,160
5,000 1.9 23.50 7/25/07 88,030
John J. Farrell 9,500(1) 3.5 18.50 1/23/07 131,670
8,000 3.0 23.50 7/25/07 140,848
Jeffrey A. Leddy 8,000(1) 3.0 18.50 1/23/07 110,880
6,000 2.2 23.50 7/25/07 105,636
</TABLE>
(1) Granted in 1997 with respect to 1996 service and previously reported
in the 1996 Summary Compensation Table.
(2) Based upon the Black-Scholes option pricing model, assuming 0.60 expected
volatility, a 5.7% weighted average risk-free rate of return, no dividend
yield, and 10 years to exercise.
Employment Agreement
The Company has an employment agreement with Dr. Sharon for services as
an executive officer. This agreement originally expires on December 31,
1998, and specifies minimum annual 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 would 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 the Company's compensation
policies should be designed to attract and retain experienced and well-
qualified executive officers, and to 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 long-term appreciation in
the market value of the Company's common stock.
During 1996, the Committee engaged Arthur Andersen & Co. as
compensation consultant to assist the Committee in reviewing the
Company's executive compensation program, and in developing a more
formalized structure for determining annual and long-term incentive
arrangements. As a result of this review, the Committee and Board
implemented the following executive compensation program for 1997.
Base Salary. In determining 1997 base salaries, the Committee
received a report from its compensation consultant with respect to the
median level of competitive salary ranges for comparably sized companies
in similar industries. The Committee also considered, as it has in the
past, information provided through the American Electronics Association
annual compensation survey, particularly data for companies having
revenues similar to those of the Company. In exercising its judgment
with respect to base salary adjustments, the Committee has not used
these survey materials in any pre-determined mathematical manner.
However, the Committee has sought to maintain executive officer base
salaries at levels near the median for comparable positions in
comparable companies, with modest deviations based on evaluations of the
experience, qualifications and contributions of individual officers.
Annual Incentive Compensation. Following the Committee's review,
the Committee recommended to the Board of Directors, and the Board
adopted, the Company's Executive Annual Incentive Compensation Plan.
Under this Plan, a target bonus is designated, as a percentage of base
salary, for each executive officer at the beginning of each calendar
year. As implemented for 1997, actual incentive compensation could
vary from zero to 150% of the target. The extent (from zero to 150%) to
which 70% of the target would be paid depended upon achievement by the
Company of specified levels of profit before tax for the year and, in
the case of operating subsidiary officers, on attainment by the
subsidiary of specified profit before taxes. The extent to which the
remaining 30% would be paid is determined by reference to performance
against individual qualitative goals. The Committee retained the right
to modify, either up or down, the incentive compensation otherwise
payable based on achievement of financial goals, in the event of unusual
circumstances, as determined by the Committee, affecting the Company's
or subsidiary's financial performance during the year.
The incentive compensation awards to executive officers, as set
forth in the Summary Compensation Table, were determined under the
Executive Annual Incentive Plan, reflecting that during 1997 the Company
significantly improved its financial performance and exceeded threshold
target levels of profitability, but did not fully achieve beginning-of-
year earnings objectives. The awards also reflect downward adjustments
based on the level of cash used during the year, and to take into
account the effects on reported earnings of certain non-operating items.
Finally, the rewards reflect the Committee's evaluations (based as to
other officers on reviews provided by the CEO) of each officer's
achievement of individual qualitative goals and, in the case of
operating subsidiary officers, adjustments believed appropriate as a
result of changes during the year in such factors as competitive
circumstances, currency exchange rates and job responsibilities.
Long-Term Incentives -- Stock Options. 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. As a result of the Committee's review and
the recommendations of its compensation consultant, the Committee
believes that options should be granted annually and on a systematic
basis at levels determined to be competitively appropriate. However,
the Committee has not adopted a formal program for automatically
granting options, and annual grants will remain in the Committee's
discretion. In general, the Committee believes that early in each year
options should be granted having a calculated value, based on the Black-
Scholes model, equal to a substantial percentage of each officer's base
salary. All options would be granted at exercise prices equal to market
value on the date of grant, and would require a substantial period of
service before they could be exercised. The Committee also believes
that the percentage of base salary that should be used in determining
annual stock option awards should increase with an officer's level of
responsibility and his or her potential to affect shareholder value.
The option awards included in the Summary Compensation Table reflect the
Committee's approach to annual option grants.
Compensation of the Chief Executive Officer. For 1997, Dr.
Sharon's base salary was increased from $245,000 to $275,000 per year.
This increase occurred following review by the Committee of compensation
data for other public companies engaged in similar businesses, and for
companies included in the American Electronics Association's 1996
executive compensation survey. In each case, the data was analyzed
based on company revenues. Following the increase, Dr. Sharon's base
salary remained below the midpoint for CEO's of similar-sized companies
included in the AEA survey. The Committee based Dr. Sharon's salary
increase on the available comparative data, and on its favorable view of
Dr. Sharon's continuing efforts to organize the Company's various
technical and marketing resources to better address potential commercial
wireless communications opportunities.
As discussed above, Dr. Sharon's bonus compensation for 1997, like
that of other executive officers, reflects that while the Company's
financial performance significantly improved during 1997, it did not
fully attain beginning-of-the-year earnings objectives. It also reflects
the Committee's favorable evaluation of Dr. Sharon's leadership in
achieving revenue growth by identifying and addressing potential
commercial wireless communications markets, as well as negative
adjustments based on non-operating income items and the Company's use of
cash during the year.
Following review of the report of its compensation consultant, the
Committee concluded that for 1997 an annual grant of stock options,
having a Black-Scholes valuation of approximately 90% of base salary,
constitutes an appropriate level of long-term incentive compensation for
the CEO. The stock options included in the Summary Compensation Table
were granted based on this approach.
Submitted by the members of the Compensation Committee:
Jerry H. Lassiter, Chairman
Anthony J. Iorillo
John H. Levergood
John B. Mowell
John E. Pippin
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, 1992.
Comparison of Five-Year Cumulative Total Return
Electromagnetic Sciences, Inc. Common Stock (ELMG)
S&P Composite-500 and S&P High Technology Composite Indices
Base Years Ending
Period
12/92 12/93 12/94 12/95 12/96 12/97
----- ----- ----- ----- ----- -----
S&P 500 Index 100 110.08 111.53 153.45 188.68 251.63
Technology-500 100 123.01 143.37 206.51 292.98 369.43
ELMG 100 104.69 151.57 137.51 240.64 253.14
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1997 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 1997 were filed
on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP 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 LLP 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, 1997 (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 30, 1998
PROXY CARD
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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 1st day of May, 1998, 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.
Jerry H. Lassiter, John B. Mowell, Don T. Scartz, Thomas E. Sharon, Elvie L.
Smith, Norman E. Thagard
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.
ELECTROMAGNETIC SCIENCES, INC.
To Shareholders:
Please mark this proxy on the reverse side, date and sign this proxy
below, and return it to us promptly in the enclosed envelope, which requires
no postage. Please sign exactly as your name appears below and indicate any
change of address.
Dated: , 1998
------------
BE SURE TO DATE THIS PROXY
----------------------- (L.S.)
----------------------- (L.S.)
Signature(s) should correspond
with name(s) on reverse side.
When signing in a fiduciary or
representative capacity, give
full title as such.
