<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
NETWORKS ELECTRONIC CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
NETWORKS ELECTRONIC CORP.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 5, 1997
TO THE STOCKHOLDERS:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of
NETWORKS ELECTRONIC CORP. (the "Company") will be held at the Summerfield Suites
Hotel, 21902 Lassen Street, Chatsworth, California 91311 on December 5, 1997, at
1:30 p.m. Los Angeles time, for the following purposes:
1. To elect four directors to each hold office until the next Annual
Meeting of Stockholders or until their respective successors are
elected;
2. To transact such other business as may properly come before the meeting
and any adjournment(s) thereof.
Only holders of record of the Common Stock of the Company at the close of
business on November 5, 1997 are entitled to notice of and to vote at the Annual
Meeting and adjournment(s) thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person, even though he or she has returned a Proxy.
/S/ DAVID WACHTEL
David Wachtel
Chairman of the Board, and
Chief Executive Officer
Chatsworth, CA 91311
November 5, 1997
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
NETWORKS ELECTRONIC CORP.
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 5, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NETWORKS ELECTRONIC CORP., a California
corporation, (the "Company") for use at the 1997 Annual Meeting of Stockholders
to be held at the Summerfield Suites Hotel, 21902 Lassen Street, Chatsworth,
California 91311, at 1:30 p.m., Los Angeles time, on December 5, 1997 and any
adjournment(s) or postponement(s) thereof, for the purposes set froth herein and
in the accompanying Notice of Annual Meeting of Stockholders. Accompanying this
Proxy Statement is the Board of Directors' Proxy for the Annual Meeting, which
you may use to indicate your vote as to the proposal described in this Proxy
Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted as indicated on the proposals described in this Proxy Statement unless
otherwise directed. A stockholder may revoke his or her Proxy at any time before
it is voted either by filing with the Secretary of the Company, at its principal
executive offices, a written notice of revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and expressing a desire
to vote his or her shares in person.
The close of business on November 5, 1997 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements thereof. At the record
date, 1,671,221 shares of the Company's Common Stock, par value $0.25 per share,
were outstanding. The Common Stock is the only outstanding class of securities
entitled to vote at the meeting. At the record date, the Company had
approximately 935 stockholders of record. The Company estimates that there are
approximately 2,000 beneficial holders of the Company's Common Stock. A
stockholder is entitled to cast one vote for each share of Common Stock held on
the record date (each a "Share") on all matters to be considered at the Annual
Meeting. Abstentions and shares held by brokers that are prohibited from
exercising discretionary authority will be counted as present for the purposes
of determining if a quorum is present but will not be counted as voting.
The Company's principal executive offices are located at 9750 De Soto
Avenue, Chatsworth, California, 91311 and its telephone number is (818)
341-0440. This Proxy Statement and the accompanying Proxy were mailed to all
stockholders entitled to vote at the Annual Meeting on or about November 10,
1997.
ELECTION OF DIRECTORS
In accordance with the Articles of Incorporation and Bylaws of the Company,
the Board of Directors is elected at each annual meeting of the shareholders of
the Company. The Bylaws of the Company provide that the Board of Directors shall
consist of not less than three and not more than five members as determined from
time to time by the Board of Directors. The Board of Directors currently
consists of four directors.
CUMULATIVE VOTING
In voting for directors, a shareholder is entitled to four votes for each
share of common stock held, one for each of four directors. A stockholder may
cast his votes evenly for all directors or may cumulate such votes and cast same
for one nominee or distribute same among two or more nominees.
<PAGE> 4
NOMINEES FOR ELECTION AS DIRECTORS
The proxy holders intend to cast all votes pursuant to the authorizing
proxies received by them for the election as directors, of the four nominees
listed below. Such proxy holders reserve the right, however, to vote such
proxies cumulatively and for the election of less than all of the nominees for
directors but do not intend to do so unless nominees other than those named
herein are nominated at the meeting. In the event any of the four nominees for
directors shall become unavailable for election, it is the intention of the
proxy holders to vote for an alternate nominee who will be designated by
management. The Company has no reason to believe that any nominee will be
unwilling or unable to serve if elected as a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES LISTED BELOW
The Board of Directors proposes the election of the following nominees as
the Directors of the Company:
DAVID WACHTEL
JACK FRIERY
GLENN LINDERMAN
RODICA PATRICHI
If elected, each nominee is expected to serve until the 1998 Annual Meeting
of Shareholders. The affirmative vote of a majority of the Shares present in
person or represented by proxy at the Annual Meeting and voting on the election
of the Directors, is required for the election of each of the above named
nominees.
INFORMATION WITH RESPECT TO NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
nominees, directors and executive officers of the Company as of November 5,
1997.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- -------------------------- --- ----------------------------------------------
<S> <C> <C>
NOMINEES:
David Wachtel 38 Chief Executive Officer, President, Chief
Financial Officer
Jack Friery 51 Attorney, specializing in business law and
government contracts
Glenn Linderman 38 Financial Analyst for Investech Systems
Rodica Patrichi 58 Trustee of the Mihai D. Patrichi Trust
OTHER EXECUTIVE OFFICERS:
Mohammad Tabassi 49 Vice President
</TABLE>
The executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors. Rodica Patrichi is the widow of the
Company's founder, Mihai Patrichi, and Ileana Wachtel is the wife of David
Wachtel (President & CEO), but is stepping down from her position on the Board
of Directors. No other persons have family relationships with any director or
executive officer of the Company than those stated above.
DAVID WACHTEL joined the Company in April, 1995 as its Chairman of the
Board, Chief Executive Officer, President and Chief Financial Officer. Prior to
assuming such positions, Mr. Wachtel was Managing Partner at Investech Systems
(January 1993 - April 1995), and President of Synergetic Solutions (July
1991 - July 1991). Mr. Wachtel is the husband of Ileana Wachtel and the
son-in-law of the Company's founder, the late Mihai Patrichi, and his widow,
Rodica Patrichi.
2
<PAGE> 5
GLENN LINDERMAN joined the Company's Board of Directors in November, 1994.
He is currently a Financial Analyst for Investech Systems (1997) and was
formerly Vice President of Glendale Federal Bank, FSB (January 1996). He has
previously served as Vice President of Libra Investments Inc. (February 1992 -
December 1995) and Columbia Savings & Loan (February 1988 - January 1992).
JACK FRIERY is nominated to serve on the Board of Directors to replace
Ileana Wachtel who is stepping down from her position as Director. Mr. Friery is
an attorney who represents small businesses, specializing in the areas of public
contracts and employment law (1994 - 1997). He was counsel to Hughes Aircraft
(1987-1994) and has been a member of Los Angeles Mayor Riordan's Minority
Business Opportunity Committee (1997).
RODICA PATRICHI. Mrs. Patrichi is the widow of Mihai D. Patrichi and is a
trustee of the Mihai D. Patrichi Trust.
MOHAMMAD TABASSI joined the Company in January 1987 and since July 1994 has
served as the Company's Manager of the Ordnance Division, Vice President and
Ordnance Quality Test Engineer. His other duties with the Company have included
engineering and price quoting functions.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 3 meetings during the fiscal year
ended June 30, 1997. During the fiscal year ended June 30, 1997, each director
attended 100% of the meetings of the Board of Directors held while he or she was
a director. The Board does not currently maintain any committees.
COMPENSATION OF DIRECTORS
During the year ended June 30, 1997, the Company paid fees to its directors
totaling $10,000 which consisted of $3,000 each to Glenn Linderman, Rodica
Patrichi, and Ileana Wachtel respectively and $1,000 to Barry Bartholomew (who
resigned as a Company Director in July 1996). Glenn Linderman was also paid $900
for professional consulting fees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, executive compensation for the Company was
determined by the entire Board of Directors. Mr. Wachtel, the Company's Chief
Executive Officer, as well as his spouse and his mother-in-law, serve on the
Board of Directors.
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors Report on Executive Compensation is attached hereto
as Annex "A."
3
<PAGE> 6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and as to all
of the other executive officers of the Company, information concerning all
compensation paid for services to the Company in all capacities during the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- --------------------- -------
NAME OF INDIVIDUAL OTHER RESTRICTED
AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYMENTS COMPENSATION
- ------------------------- ---- -------- ------ ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Wachtel 1997 $149,989* $2,408 $ 9,981(1) $0 0 $0 $0
CEO 1996 149,989 0 5,742(2) 0 0 0 0
1995 35,884 865 16,283(3) 0 75,000 0 0
Mihai D. Patrichi 1997 0 0 2,242(4) 0 0 0 0
CEO (DECEASED) 1996 0 0 18,130(5) 0 0 0 0
1995 71,849 0 19,445(6) 0 0 0 0
Edwin J. Turner 1996 49,043 2,000 2,025(7) 0 0 0 0
Executive Vice 1995 80,326 692 0 0 500 0 0
President (retired) 0 500 0 0
Mohammad Tabassi 1997 78,525 1,237 3,073(8) 0 0 0 0
Vice President 1996 72,841 1,000 0 0 0 0 0
1995 70,621 606 0 0 500 0 0
</TABLE>
- ---------------
* Currently employed under a three year executive employment agreement
expiring April 30, 1998, calling for an annual base salary of $150,000
during the term of the agreement. Entitled to a minimum of three weeks
vacation per year, along with Company-paid benefits for both self and
dependents under any Executive Benefit Plan.
(1) Includes medical-related benefits of $9,981.
(2) Includes medical-related benefits of $5,742.
(3) Includes consulting fees of $9,500, director fees of $4,000, and
medical-related benefits of $2,783.
(4) Includes medical-related benefits of $2,242.
(5) Includes medical-related benefits of $18,130.
(6) Includes medical-related benefits of $19,445.
(7) Includes medical-related benefits of $501 and a retirement gift of $1,524.
(8) Includes medical-related benefits of $3,073.
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended June 30, 1997 to the executive
officers named in the Summary Compensation Table ("Named Executive Officers").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------ ANNUAL RATES OF
% OF TOTAL NUMBER OF STOCK PRICE
OPTIONS/SARS SECURITIES APPRECIATION FOR
NAME OF INDIVIDUAL GRANTED TO UNDERLYING OPTION TERM
AND EMPLOYEES IN OPTIONS/SARS EXERCISE OF EXPIRATION -------------------
PRINCIPAL POSITION FISCAL YEAR GRANTED BASE PRICE DATE 5% 10%
- ---------------------------- ------------ ------------ ----------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
David Wachtel............... N/A N/A N/A N/A N/A N/A
CEO
Mohammad Tabassi............ N/A N/A N/A N/A N/A N/A
Vice President
</TABLE>
4
<PAGE> 7
AGGREGATED OPTION EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS
The following table sets forth, for each of the Named Executive Officers,
certain information regarding the exercise of stock options during the fiscal
year ended June 30, 1997, and the value of options held at fiscal year end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
NAME OF INDIVIDUAL FISCAL YEAR END AT FISCAL YEAR END
AND SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
PRINCIPAL POSITION ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------ --------------- ------- -------------------- -------------------------
<S> <C> <C> <C> <C>
David Wachtel................. $75,000 $42,187 0/ 0 0/ 0
CEO
Mohammad Tabassi.............. 0 0 0/500 0/188
Vice President
</TABLE>
DEFINED BENEFIT PENSION PLAN
Retirement benefits payable under the Company's defined benefit pension
plan have been frozen since August 31, 1992. Accrued annual benefits payable at
retirement age under the plan are set forth in the following pension plan table,
which does not incorporate vesting or joint and survivor factors. Amounts
reported are straight-line annuity amounts, which are not offset by social
security.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION 5 10 15 20 25 30
- ------------ ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 3,333 $ 6,667 $10,000 $13,333 $16,667 $ 20,000
75,000 5,000 10,000 15,000 20,000 25,000 30,000
100,000 6,667 13,333 20,000 26,667 33,333 40,000
125,000 8,333 16,667 25,000 33,333 41,667 50,000
150,000 10,000 20,000 30,000 40,000 50,000 60,000
175,000 11,667 23,333 35,000 46,667 58,333 70,000
200,000 13,333 26,667 40,000 53,333 66,667 80,000
225,000 15,000 30,000 40,000 60,000 75,000 90,000
250,000 16,667 33,333 50,000 66,667 83,333 100,000
</TABLE>
Additional pension benefits for credited service in excess of 30 years
generally do not accrue. Prospective benefits payable to the Named Executive
Officers under the Company's defined benefit pension plan are applicable as
follows:
<TABLE>
<CAPTION>
ESTIMATED
NAME OF INDIVIDUAL COVERED COMPENSATION CREDITED SERVICE
---------------------------------------- -------------------- ----------------
<S> <C> <C>
David Wachtel........................... $ 0(*) 0
Mihai D. Patrichi (deceased)............ 235,527(**) 40
Edwin J. Turner (retired)............... 88,224 16
Mohammad Tabassi........................ 53,962(***) 6
</TABLE>
- ---------------
(*) Not eligible for plan participation due to plan benefit freeze at August
31, 1992.
(**) Beneficiary (wife), a current director, is receiving $48,184 per year for
life, based on 100% joint and survivor factors.
(***) Mr. Tabassi is not currently receiving any benefits under the Company's
defined benefit pension plan.
5
<PAGE> 8
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with David Wachtel, its President
and Chief Executive Officer. The agreement provides for minimum annual
compensation of $150,000 for a period of three years, expiring April 30, 1998.
The Company previously had an employment agreement with Mihai D. Patrichi, the
Company's Founder, and former President and Chief Executive Officer, who died in
November 1994. The agreement provided for minimum compensation of $180,000 per
year until the end of Mr. Patrichi's life. However, effective September 1994,
Mr. Patrichi took a salary reduction to $153,000 per year as a condition of the
Company's Chapter 11 reorganization plan. The Board of Directors has also agreed
to pay all medical and dental insurance premiums for its corporate officers,
plus the deductible expense portions operative under the Company's respective
plans.
CERTAIN TRANSACTIONS WITH MANAGEMENT
In August 1996, the Company received a $100,000 loan, with interest payable
monthly at an annual rate of 13% from its Vice President, Mohammad Tabassi. The
maturity date of this note has been extended to January 1, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater-than-ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it and written representations from certain reporting persons that
they have complied with the relevant filing requirements, the Company believes
that during the year ended June 30, 1997, all relevant Section 16(a) filing
requirements were complied with.
6
<PAGE> 9
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the shareholders of the Company's Common Stock with the
cumulative return of the NASDAQ Stock Market (US Companies) Index and the S&P
Aerospace/Defense Companies Index for the period commencing July 1, 1992 and
ending on June 30, 1997. The information contained in the performance graph
shall not be deemed "soliciting material" or to be "filed" with the SEC, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing. The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG NETWORKS ELECTRONIC CORP., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P AEROSPACE/DEFENSE INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NETWORKS ELECTONIC NASDAQ STOCK MARKET S & P
(FISCAL YEAR COVERED) CORP. (U.S.) AEROSPACE/DEFENSE
<S> <C> <C> <C>
6/92 100 100 100
6/93 13 126 130
6/94 8 127 155
6/95 13 169 215
6/96 38 218 295
6/97 21 265 375
</TABLE>
- ---------------
* $100 invested on 6/30/92 in Stock or Index -- including reinvestment of
dividends. Fiscal year ended June 30.
7
<PAGE> 10
PRINCIPAL SHAREHOLDERS
At September 27, 1997, there were six persons known to the Company who
owned of record or beneficially as much as 5% of the outstanding shares of its
voting common stock, $.25 par value. The following table reflects these
holdings, as well as the number of the Company's common shares owned directly or
indirectly by each of the Company's directors, by each of the Named Executive
Officers, and by all directors and officers as a group. In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares outstanding is deemed to include
the amount of shares beneficially owned by such person (and only such person) by
reason of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in the following table does not necessarily
reflect the person's actual voting power at any particular date.
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OF
CATEGORY OF BENEFICIAL OWNER OWNED CLASS(4)
--------------------------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Director Ileana Wachtel 872,660(1)(2)(3) 52.2%
9750 De Soto Avenue
Chatsworth, CA 91311
Director Rodica Patrichi 791,486(2) 47.4%
73095 Shadow Mt. Drive
Palm Desert, CA 92260
Director/Officer David Wachtel 872,660(3) 52.2%
9750 De Soto Avenue
Chatsworth, CA 91311
Director Glenn Linderman 4,000 0.2%
2101 Robinson, #1
Redondo Beach, CA 90278
Officer Mohammad Tabassi 24,013 1.4%
19442 Romar St.
Northridge, CA 91324
All persons and officers as %
a group (5 persons) 992,685 54.0
======== ========
Other Moldovita Church 90,909(5) 5.4%
c/o 73095 Shadow Mt. Drive
Palm Desert, CA 92260
======== ========
</TABLE>
- ---------------
(1) Ileana Wachtel is the wife of David Wachtel, the CEO of Networks Electronics
Corp.
(2) For each of these individuals, approximately 156,076 shares (166,076 shares
for Ileana Patrichi) are being held in the Mihai D. Patrichi trust (a total
of 790,383 shares) which currently has voting power over the holdings and in
which Ileana Wachtel and Rodica Patrichi are co-trustees.
(3) Includes shares of common stock held by the Mihai D. Patrichi Trust and
controlled by trustees including Mr. Wachtel's spouse, Ileana Wachtel, a
beneficiary.
(4) Based on 1,671,221 shares of common stock outstanding as of September 27,
1997.
(5) Rodica Patrichi is a co-trustee along with an unrelated party of a trust
that has voting power over these shares.
PROPOSALS OF SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Company's 1997 Annual Meeting and received at the Company's executive offices no
later than August 3, 1997, will be included in the Company's Proxy Statement and
form of Proxy relating to the 1997 Annual Meeting.
8
<PAGE> 11
INDEPENDENT PUBLIC ACCOUNTANTS
Hurley & Company, independent accountants, were selected by the Board of
Directors to serve as independent auditors of the Company for this fiscal year
ended June 30, 1997 and for the fiscal year ended June 30, 1998. Representatives
of Hurley & Company are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they desire to do so and will respond to
appropriate questions from shareholders.
OTHER MATTERS
The Board of Directors is not aware of any matter to be acted upon at the
Annual Meeting other than described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying proxy
will be voted in favor of the proposals described in this Proxy Statement. If
any other matter properly comes before the meeting, however, the proxy holders
will vote thereon in accordance with their best judgment.
EXPENSES
The entire cost of soliciting proxies will be borne by the Company.
Solicitation may be made by mail, telephone, telegraph, and personal contact by
officers and other employees of the Company, who will not receive additional
compensation for such services. The Company will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to forward soliciting
material to the beneficial owners of the Company's Common Stock held of record
by them and will reimburse such persons for their reasonable charges and
expenses in connection therewith.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report for the fiscal year ended June 30, 1997 which
contains the entire text of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997, is being mailed to shareholders along with this
Proxy Statement. The Annual Report is not to be considered part of the
soliciting material.
ON BEHALF OF THE BOARD OF DIRECTORS
/S/ ILEANA WACHTEL
Ileana Wachtel
Secretary
DATED: November 5, 1997
9
<PAGE> 12
ANNEX "A"
REPORT OF THE BOARD OF DIRECTORS
OF EXECUTIVE COMPENSATION
The following report of the Board of Directors shall not be deemed to be
incorporated by reference into any filing by the Company under either the
Securities Act of 1933, as amended ("Securities Act") or the Securities Exchange
Act of 1934, as amended ("Exchange Act") that incorporates future Securities Act
or Exchange Act filings in whole or in part by reference.
GENERAL
The Board of Directors does not maintain a separate compensation committee
and as a consequence all decisions regarding executive compensation are made by
the entire Board of Directors.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to (1) attract,
motivate and retain executive talent capable of achieving the strategic business
goals of the Company, (2) recognize outstanding individual contributions, and
(3) provide compensation opportunities which are competitive to those offered by
other technology companies of similar size and performance. To achieve these
goals, the Company's executive compensation program currently focuses on base
salary. In the future, the Company intends to make annual cash bonuses and long
term incentives a more important part of its compensation strategy.
BASE SALARY
Base salaries for executive officers are determined on an annual basis by
evaluating each executive officer's position, duties, responsibilities, tenure,
performance and potential contributions to the Company. This determination also
takes into account the compensation practices of similarly situated companies
for comparable positions. The financial performance of the Company is also
considered. Finally, factors consistent with the Company's overall compensation
policy are taken into account. During fiscal 1997, Mr. Wachtel was Chief
Executive Officer of the Company. Mr. Wachtel's annual base salary rate of
$149,989 was determined based upon Mr. Wachtel's services to the Company, the
financial performance of the Company in the fiscal year ended June 30, 1996, and
the salaries received by similarly situated executives at other companies. The
Company also provides to its employees (including the chief executive officer
and other officers of the Company) medical insurance and other customary
employee benefits.
ANNUAL CASH BONUSES
Although executive officers are currently eligible for annual incentive
bonuses in amounts determined at the discretion of the Board of Directors, the
Company does not currently emphasize this method of compensation. In the future,
the Company may make greater use of annual cash bonuses as part of its
compensation program. It is anticipated that the grant of future cash bonuses
will be made subjectively, taking into account factors such as the financial
performance of the Company, increases in shareholder value, the achievement of
corporate goals and individual performance.
LONG-TERM INCENTIVES
The Networks Electronic Corp. 1996 Stock Incentive Plan was adopted at the
1996 Annual Meeting. The Board of Directors intends to provide the Company's
executive officers with long-term incentive compensation through grants of stock
options and related awards. The Board of Directors believes that stock options
and related awards will provide the Company's executive officers the opportunity
to purchase or otherwise acquire and maintain an equity interest in the Company
and to share in the appreciation of the value of the Common Stock. The Board of
Directors believes that stock options and related awards directly motivate an
executive to maximize long-term shareholder value. It is anticipated that the
grant of each option and/or related award will
A-1
<PAGE> 13
be considered subjectively, considering factors such as the individual
performance of executive officers and competitive compensation packages in the
industry.
SUMMARY
The Board of Directors believes that its executive compensation philosophy
of paying its executive officers as described in this report serves the
interests of the Company and the Company's shareholders.
David Wachtel
Glenn Linderman
Ileana Wachtel
Rodica Patrichi
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<PAGE> 14
NETWORKS ELECTRONIC CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF NETWORKS ELECTRONIC CORP.
The undersigned hereby appoints David Wachtel as proxy with the power
to appoint his substitute and hereby authorizes him to represent and to vote,
as designated on the reverse, all shares of common stock of Networks Electronic
Corp. ("Networks") held on record by the undersigned on November 5, 1997 at the
Annual Meeting of Shareholders to be held on December 5, 1997 or any adjournment
thereof.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
<PAGE> 15
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
NETWORKS ELECTRONIC CORP.
DECEMBER 5, 1997
-- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED --
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
___
Please mark your
X votes as in this
___ example.
<S> <C> <C>
WITHHOLD
AUTHORITY
to vote for the
FOR nominees vested at right
1. ELECTION OF ___ ___ NOMINEES: David Wachtel The undersigned hereby revokes any other proxy
DIRECTORS, Glenn Linderman to vote at such Meeting, and hereby ratifies and
as provided in ___ ___ Rodica Patrichi confirms all that said proxy may lawfully do by
Networks Proxy Jack Friery virtue hereof. With respect to such other business
Statement; that may properly come before the meeting and any
adjournments thereof, said proxy is authorized to
(Instructions: To withhold authority for a nominee, vote in accordance with its best judgement.
line through or otherwise strike out name in the
list at right.) THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS SET FORTH ON THE ABOVE. THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY
TO VOTE FOR THE ELECTION OF THE DIRECTORS NAMED
ABOVE AND AS SAID PROXY SHALL DEEM ADVISABLE
ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE
MEETING, UNLESS OTHERWISE DIRECTED.
The undersigned acknowledges receipt of a
copy of the Notice of Annual Meeting and
accompanying Proxy Statement dated November 5,
1997 relating to the Meeting.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
</TABLE>
