As filed with the Securities and Exchange Commission on January 17, 1997
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by 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 ss.240.14a-11(c) or ss.240.14a-12
Elexsys International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charters)
- --------------------------------------------------------------------------------
(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:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
| | 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 paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
(1) Amount Previously Paid:
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
ELEXSYS INTERNATIONAL, INC.
4405 FORTRAN COURT
SAN JOSE, CALIFORNIA 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1997
TO THE STOCKHOLDERS OF ELEXSYS INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Elexsys
International, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, January 29, 1997 at 8:30 a.m. local time at the Sheraton Four Points
Hotel, Sunnyvale, California for the following purpose:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on January 10, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
[FACSIMILE SIGNATURE]
Michael S. Shimada
Secretary
San Jose, California
January 17, 1997
================================================================================
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON
IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE
HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT
THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR
NAME.
================================================================================
<PAGE>
ELEXSYS INTERNATIONAL, INC.
4405 FORTRAN COURT
SAN JOSE, CALIFORNIA 95134
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 29, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Elexsys International, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on January 29, 1997, at
8:30 a.m. local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Sheraton Hotel,
Sunnyvale, California. The Company intends to mail this proxy statement and
accompanying proxy card on or about January 17, 1997, to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on January
10, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on January 10, 1997 the Company had outstanding and entitled
to vote 9,364,435 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon. With respect to the
election of directors, stockholders may exercise cumulative voting rights. Under
cumulative voting, each holder of Common Stock will be entitled to three votes
for each share held. Each stockholder may give one candidate, who has been
nominated prior to voting, all the votes such stockholder is entitled to cast or
may distribute such votes among as many such candidates as such stockholder
chooses.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 4405
Fortran Court, San Jose, California 95134, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
1
<PAGE>
SHAREHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Company not later
than September 17, 1997 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
At the 1995 Annual Meeting of Stockholders, the stockholders approved a
proposal to adopt the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate"). Among other things, the Restated
Certificate eliminated the classification of the Company's Board of Directors in
favor of the annual election of directors. However, the Restated Certificate
provides that any incumbent director serving a term in excess of one year on
March 2, 1995, the effective date of the Restated Certificate, shall not be
required to stand for re-election until the expiration of such director's term.
Further, a director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same term as the remaining term of his
predecessor.
The Company's Bylaws presently authorize a Board of Directors composed of six
directors. Three directors will be elected at the Annual Meeting. Pursuant to
the Restated Certificate, the terms of five current directors expire at the
Annual Meeting. Two current directors, Roland G. Matthews and Peter S. Jonas,
have advised the Company that they do not wish to stand for reelection. The
Board currently has no vacancies but will have two after the Annual Meeting.
Each director to be elected will hold office until the next annual meeting of
stockholders and until his successor is elected and has qualified, or until such
director's earlier death, resignation or removal. Each nominee listed below is
currently a director of the Company and was previously elected by the
stockholders, except for Mr. Johnson, who was elected by the Board. The term of
one director, Mr. Mendelson, does not expire at the Annual Meeting.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the three nominees named below, subject to
the discretionary power to cumulate votes. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
The three candidates receiving the highest number of affirmative votes cast
at the meeting will be elected directors of the Company.
NOMINEES
Set forth below is biographical information for the individuals nominated and
for the person whose term of office as a director will continue after the Annual
Meeting.
C. BRADFORD JEFFRIES
C. Bradford Jeffries, age 66, was elected a director of the Company in
January 1996. He has been a partner of Sigma Management since 1984. Sigma
Management is the general partner of Sigma Partners I, II and III, three venture
capital funds. Mr. Jeffries is a vice president of Venture Investment Management
Company L.L.C., which he co-founded in 1993. Venture Investment Management
Company is the general partner of Venture Investment Associates, a venture
capital fund formed to acquire the venture investment portfolio of American
Express Co. Currently, Mr. Jeffries serves as a director of four private
companies. Prior to 1994, Mr. Jeffries was a partner of Cooley Godward LLP, a
private law firm and counsel to the Company, to which he continues to be of
counsel.
2
<PAGE>
ROGER W. JOHNSON
Roger W. Johnson, age 62, was elected a director of the Company in October
1996. From 1993 to March 1996, Mr. Johnson served under the Clinton
Administration as the Administrator of the U.S. General Services Administration.
Mr. Johnson was also a member of the President's Management Council and the
National Economic Council. From 1982 to 1993, Mr. Johnson was Chairman,
President and Chief Executive Officer of Western Digital Corporation. Mr.
Johnson is a member of the Board of Directors of The Needham Funds, Inc., JTS
Corporation, Group Technologies, Insulectro, AST Computer and Array
Microsystems. He is currently a Regent Lecturer at the University of California
at Irvine.
MILAN MANDARIC
Milan Mandaric, age 58, has served as Chairman of the Board of Directors of
the Company since June 1994 and President and Chief Executive Officer of the
Company since October 1994. Mr. Mandaric was a director of Sanmina Corporation,
a high technology multilayer circuit board and backpanel manufacturer, from 1980
until February 1994 and President, Chief Executive Officer and Chairman of the
Board of Sanmina Corporation from 1980 until September 1989. Mr. Mandaric was
Chairman of the Board of Directors of Wireless Integrated Products, Inc., a
manufacturer of wireless systems, from July 1989 to May 1995.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
ALAN C. MENDELSON
Alan C. Mendelson, age 48, was elected a director of the Company in January
1996. He has been a partner of Cooley Godward LLP, a private law firm and
counsel to the Company, since 1980, and served as the managing partner of its
Palo Alto office from May 1990 through March 1995 and from October 1996 to the
present. Mr. Mendelson also served as Acting General Counsel of Cadence Design
Systems, Inc., an electronic design automation software company, from November
1995 to June 1996. Mr. Mendelson is currently a director of Acuson Corporation,
CoCensys, Inc. and Isis Pharmaceuticals, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1995 the Board of Directors held
four meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee, whose current members are Messrs. Jonas, Jeffries and
Mendelson, has the following principal powers, duties and functions: (i) to
recommend annually to the full Board the firm of certified public accountants to
be employed by the Company as its independent auditors for the ensuing year;
(ii) to review the engagement of the independent auditors, including the scope,
extent and procedures of the audit and the compensation to be paid therefore,
and all other matters the Committee deems appropriate; (iii) to have
familiarity, through the individual efforts of its members, with the accounting
and reporting principles and practices applied by the Company in preparing its
financial statements, including, without limitation, the policies for
recognition of revenues in financial statements; (iv) to review with management
and the independent auditors, upon completion of their audit, financial results
for the year, as reported in the Company's financial statements, supplemental
disclosures to the Securities and Exchange Commission or other disclosures; (v)
to assist and interact with the independent auditors in order that they may
carry out their duties in the most efficient and cost effective manner; (vi) to
evaluate the cooperation received by the independent auditors during their audit
examination, including their access to all requested records, data and
information, and elicit the comments of management regarding the responsiveness
of the independent auditors to the Company's needs; (vii) to review the
Company's balance sheet, profit and loss statement and statements of cash flows
and stockholders' equity for each interim period, and any changes in accounting
policy that have occurred during the interim period; (viii) to review and
approve all professional services provided to the Company by its independent
auditors and consider the possible effect of such services on the independence
of such auditors; (ix) to consult with the
3
<PAGE>
independent auditors and discuss with Company management the scope and quality
of internal accounting and financial reporting controls in effect; (x) to
investigate, review and report to the Board the proprietary and ethical
implications of any transactions, as reported or disclosed to the Committee by
the independent auditors, employees, officers, members of the Board or
otherwise, between (a) the Company and (b) any employee, officer or member of
the Board of the Company, or any affiliates of the foregoing; and (xi) to
perform such other functions and have such power as may be necessary or
convenient in the efficient and lawful discharge of the foregoing. The Audit
Committee met once during the fiscal year ended September 30, 1996.
The Compensation Committee whose current members are Messrs. Matthews,
Jeffries and Mendelson, has the following principal powers, duties and
functions: (i) to establish salaries, incentives and other forms of compensation
paid officers and other employees of the Company; (ii) to administer the various
incentive compensation and benefit plans of the Company, including the stock
option and stock purchase plans, but excluding any non-employee directors stock
option or purchase plans; (iii) to perform such other functions and have such
other powers as may be necessary or convenient in the efficient discharge of the
foregoing; and (iv) to report to the Board from time to time, or whenever it
shall be called upon to do so. The Compensation Committee met twice during the
fiscal year ended September 30, 1996.
The Company does not have a nominating committee.
During the fiscal year ended September 30, 1996, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the Committees
on which he served, held during the period for which he was a director or
committee member, respectively.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
the Company's Common Stock as of December 15, 1996 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on January 10, 1997;
(iii) all executive officers and directors of the Company as a group; and (iv)
all those known by the Company to be beneficial owners of more than five percent
of its Common Stock.
Beneficial Ownership(1)
------------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- ----------- ------------
Milan Mandaric(2) ...................................... 4,058,000 44.3%
Peter S. Jonas(3) ...................................... 422,000 4.5%
C. Bradford Jeffries(7) ................................ 8,438 *
Roger W. Johnson(7) .................................... 1,250 *
Roland G. Matthews(2)(4)(7) ............................ 504,730 5.4%
Alan C. Mendelson(5)(7) ................................ 15,438 *
Michael S. Shimada(4)(7) ............................... 43,625 *
W. F. "Barry" Hegarty(7) ............................... 55,000 *
Michael Giggey(6)(7) ................................... 23,000 *
All executive officers and directors
as a group (8 persons)(7) .............................. 5,131,481 54.3%
- -------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
9,364,435 shares outstanding on January 10, 1997, adjusted as required by
rules promulgated by the SEC.
(2) The mailing address of the stockholder is c/o Elexsys International, Inc.,
4405 Fortran Court, San Jose, California 95134.
(3) Shares held in the name of a family limited partnership, of which Mr. Jonas
and his wife are the general partners.
(4) Shares held in the name of a family limited partnership, of which Mr.
Matthews and his wife are the general partners.
(5) Includes 11,000 shares held by a trustee of a profit sharing trust for the
benefit of Mr. Mendelson who has sole voting and investment power with
respect to these shares.
(6) Includes 1,000 shares held by Mr. Giggey's wife in an Individual Retirement
Account.
(7) Includes shares which certain executive officers, directors and principal
stockholders of the Company have the right to acquire within 60 days after
the date of this table pursuant to outstanding options, as follows: C.
Bradford Jeffries, 3,438 shares; Roger W. Johnson, 1,250 shares; Alan C.
Mendelson, 3,438 shares; Michael S. Shimada, 34,800 shares; W. F. "Barry"
Hegarty, 25,000 shares; Michael Giggey, 14,800 shares; and all executive
officers and directors as a group, 82,726 shares.
5
<PAGE>
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent shareholders stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, covering one transaction, was filed late by Mr. Hegarty and one report,
covering two transactions, was filed late by Mr. Matthews.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Mr. Mandaric does not receive any compensation for serving on the Board in
addition to his compensation as an employee of the Company.
For his service on the Board of Directors, Mr. Jonas received $2,500 per
month for his service as a consultant to the Company. For his service as a
consultant, he received a fee of $10,500 during the fiscal year ended September
30, 1996. Benefits received by Mr. Jonas include certain medical insurance
benefits available to founding directors, in addition to the Company's general
group health plan, at a total cost to the Company for the year ended September
30, 1996 of $9,482.
For their service on the Board of Directors, Messrs. Jeffries, Johnson and
Mendelson receive an annual retainer of $7,500 and $1,500 for each meeting of
the Board attended.
For his service on the Board of Directors, Mr. Matthews received $2,500 per
month. Benefits received by Mr. Matthews include certain medical insurance
benefits available to founding directors, in addition to the Company's general
group health plan, at a total cost to the Company for the year ended September
30, 1996 of $2,824.
In the fiscal year ended September 30, 1996, the total compensation paid to
non-employee directors was $106,806. The members of the Board of Directors are
also eligible for reimbursement for their expenses incurred in connection with
attendance at Board meetings in accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only non-employee directors of the Company or an affiliate of such
directors (as defined in the Internal Revenue Code, the "Code") are eligible to
receive options under the Directors' Plan. Options granted under the Directors'
Plan are intended by the Company not to qualify as incentive stock options under
the Code.
Option grants under the Directors' Plan are non-discretionary. Each person
who is after September 30, 1995, elected for the first time to be a non-employee
director, automatically receives, on the date of his or her election, an option
to purchase 15,000 shares of Common Stock of the Company. On the day following
the annual meeting of stockholders of the Company of each year, each member of
the Company's Board of Directors who is not an employee of the Company and has
served as a non-employee director for at least four months or, where specified
by the non-employee director, an affiliate of such director, is automatically
granted under the Directors' Plan, without further action by the Company, the
Board of Directors or the stockholders of the Company, an option to purchase
5,000 shares of Common Stock of the Company. No other options may be granted at
any time under the Directors' Plan. The exercise price of options granted under
the Directors' Plan is 100% of the fair market value of the Common Stock subject
to the option on the date of the option grant. Options granted under the
Directors' Plan become exercisable over a four-year period in 48 equal monthly
installments. Such vesting is conditional upon continued service as a
non-employee director. The term of options granted under the
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<PAGE>
Directors' Plan is ten years. In the event of a merger of the Company with or
into another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, the vesting of each option
will accelerate and the option will terminate if not exercised prior to the
consummation of the transaction.
During the last fiscal year, the Company granted an option to purchase 15,000
shares to each of Messrs. Jeffries and Mendelson who were elected directors for
the first time, at an exercise price per share of $16.375 and $15.625,
respectively which was 100% of the fair market value of such Common Stock on the
date of grant (based on the closing sales price reported in the Nasdaq National
Market for the date of grant). As of December 30, 1996, no options had been
exercised under the Directors' Plan. On January 16, 1997, these options were
terminated.
Directors also are eligible to receive stock option grants under the 1995
Stock Option Plan (the "1995 Option Plan"). Option grants under the 1995 Option
Plan are discretionary and are intended by the Company not to qualify as
incentive stock options under the Internal Revenue Code.
During the last fiscal year, the Company granted an option to purchase 15,000
shares to each of Messrs. Jeffries and Mendelson at an exercise price of $9.625
per share which was 100% of the fair market value of such Common Stock on the
date of grant. These options were partially vested at the time of grant with the
remainder becoming exercisable over a four year period in equal monthly
installments. Such vesting is conditional upon continued service as a director.
The term of options granted under the 1995 Option Plan is ten years. In the
event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change-in-control transaction
involving the Company, the vesting of each option will accelerate and the option
will terminate if not exercised prior to the consummation of the transaction.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended September 30, 1994, 1995
and 1996, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its three other executive officers at September 30, 1996
(the "Named Executive Officers") or such shorter period as the individuals were
employed by the Company as executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation
----------------------------
Compensation Awards
--------------------------------- ----------------------------
Other Annual Securities All Other
Name And Principal Salary Bonus Compensation Underlying Compensation
Position Year ($)(1) ($) ($)(2) Options (#)(2) ($)(4)
- -------------------------- ---- ------- -------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Mandaric ............ 1996 235,385 0 0 0 0
Chairman of the Board and 1995 12 50,000 0 0 0
Chief Executive Officer 1994 -- -- -- -- --
W. F. "Barry" Hegarty .... 1996 181,835 0 4,000 100,000 (3)(4) 10,140
President and Chief 1995 105,000 60,000 0 100,000 5,070
Operating Officer 1994 -- -- -- -- --
Michael S. Shimada ........ 1996 123,237 0 21,600 30,000 (3)(4) 11,118
Vice President, Finance, 1995 130,000 15,000 5,040 0 5,559
Chief Financial Officer 1994 106,290 0 0 47,000 107,106
and Secretary
Michael Giggey ............ 1996 160,004 22,500 4,620 44,000 (3)(4) 5,242
Vice President, Sales 1995 -- -- -- -- --
and Marketing 1994 -- -- -- -- --
- ---------------
<FN>
(1) Includes amounts earned but deferred at the election of the executive.
(2) Includes perquisites consisting of (i) automobile allowance, and (ii) cost
of housing paid by the Company ($17,820 in the case of Mr. Shimada in
1996). As permitted by rules promulgated by the Securities and Exchange
Commission ("SEC"), no amounts are shown with respect to certain
"perquisites" where such amounts do not exceed the lesser of 10% of the sum
of the amount in salary and bonus columns or $50,000.
(3) In August 1996 the Company repriced options granted in May 1996. This
figure includes both grants even though the issuance of the latter repriced
option grants cancelled the former. Includes repriced options treated as
new grants as follows: Mr. Hegarty, 25,000 shares; Mr. Shimada, 15,000
shares; and Mr. Giggey, 1,200 shares. (See "Option Repricing Information"
below.) The Company has not issued any stock appreciation rights.
(4) Includes (i) the dollar value of premiums paid on life insurance for the
benefit of the named insured and (ii) the cash surrender value of a life
insurance policy implemented in 1987 for the benefit of Mr. Shimada and
transferred to him in February 1994.
</FN>
</TABLE>
8
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
During the last fiscal year, the Company granted options to three executive
officers under its 1995 Incentive Stock Option Plan (the "1995 Option Plan"). As
of September 30, 1996, options to purchase a total of 851,450 shares were
outstanding under the 1995 Option Plan, 1994 Incentive Stock Option Plan (the
"1994 Option Plan"), 1984 Non-Qualified Stock Option Plan (the "1984 Option
Plan") and the 1983 Employee Stock Option Plan (the "1983 Option Plan"), and
options to purchase 618,240 shares remained available for grant under the 1995
Option Plan and 1994 Stock Option Plan.
The following table shows for the fiscal year ended September 30, 1996,
certain information regarding options granted to and held at year end by, the
Named Executive Officers:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------
Number Of % Of Total Potential Realizable Value
Securities Options/ at Assumed Annual Rates
Underlying Granted To of Stock Price Appreciation
Options/ Employees in Exercise or for Option Term(1)
Granted Fiscal Year Base Price Expiration ---------------------------
Name (#) (2) (%)(3) ($/Sh) Date 5% ($) 10% ($)
- ------------ ---------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Hegarty ..... 25,000 (4) 3.4% 12.000 03/10/06 189,000 477,000
25,000 (5) 3.4% 9.625 08/14/06 151,594 382,593
50,000 6.8% 12.250 10/22/06 385,875 973,875
Mr. Shimada ..... 15,000 (4) 2.1% 12.000 03/10/06 113,400 285,200
15,000 (5) 2.1% 9.625 08/14/06 90,956 229,556
10,000 1.4% 12.250 10/22/06 77,175 194,775
Mr. Giggey ..... 12,000 (4) 1.6% 12.000 03/10/06 90,720 228,960
12,000 (5) 1.6% 9.625 08/14/06 72,765 183,645
20,000 2.7% 12.250 10/22/06 154,350 389,550
<FN>
- ------------------
(1) The potential realizable value is based on the ten-year term of the option
at its time of grant. It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock price. No
gain to the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
(2) Options generally vest over a four-year period, 25% per year with a
ten-year term. The options will fully vest upon a change of control, as
defined in the Company's 1995 Option Plan. The Board of Directors may
reprice options under the terms of the 1995 Option Plan. (See description
of 1995 Option Plan under "Executive Compensation--Compensation of
Directors" for additional features of the 1995 Option Plan.)
(3) Based on 733,100 options granted under the 1995 Option Plan in the fiscal
year ended September 30, 1996.
(4) Grant cancelled upon issuance of repriced option.
(5) Repriced options treated as new grants.
</FN>
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996, AND
VALUE OF OPTIONS AT END OF FISCAL 1996
<TABLE>
<CAPTION>
Number Of Securities Underlying Value Of Unexercised In-the-Money
Shares Value Unexercised Options at FY-End (3) Options at FY-End (4)
Acquired On Realized --------------------------------- ----------------------------------
Name Exercise (#) ($)(1) Exercisable Unexercisable(2) Exercisable Unexercisable(2)
- -------------- ------------- -------- ----------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mandaric . -- -- -- -- -- --
Mr. Hegarty .. -- -- 25,000 150,000 185,875 375
Mr. Shimada .. -- -- 94,400 67,600 341,900 520,725
Mr. Giggey ....9,400 140,775 11,500 46,200 134,612 322,825
<FN>
- --------------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price without taking into
account any taxes that may be payable in connection with the transaction.
(2) Reflects shares vested and unvested at September 30, 1996.
(3) Includes both "in-the-money" and "out-of-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock at September 30, 1996. (4) Fair market value of the
Company's Common Stock at September 30, 1996 ($16.375) minus the exercise
price of the options.
</FN>
</TABLE>
OPTION REPRICING INFORMATION
The following table shows certain information concerning the repricing of
options received by the Named Executive Officers during the last ten years.
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Number of Market Length of
Securities Price of Exercise Original Option
Underlying Stock at Price At Term Remaining
Options/sars Time of Time of at Date of
Repriced or Repricing or Repricing or New Exercise Repricing or
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) Amendment
- ------------------------- ------- ------------ ------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
W. F. "Bary" Hegarty ...... 8/15/96 25,000 9.625 12.00 9.625 9.58 years
President and Chief
Operating Officer
Michael S. Shimada ......... 8/15/96 15,000 9.625 12.00 9.625 9.58 years
Vice President, Finance,
Chief Financial Officer
and Secretary
Michael Giggey ............. 8/15/96 12,000 9.625 12.00 9.625 9.58 years
Vice President, Sales
and Marketing
</TABLE>
10
<PAGE>
SEVERANCE ARRANGEMENTS
The Company has severance arrangements (the "Arrangements") with each of
Messrs. Shimada and Hegarty (the "Executives"). If an Executive's employment is
terminated without cause by the Company, the Executive will receive monthly
payments equal to his monthly salary at the time of termination for six months,
in the case of Mr. Hegarty, or 12 months, in the case of Mr. Shimada, or until
his earlier reemployment. In the case of Mr. Shimada, if there is a change in
control of the Company and his employment is terminated within 18 months
following the change in control, either without cause by the Company or for good
reason by him, he will instead receive a lump sum cash payment equal to two
years' salary.
If any portion of the Executive's severance compensation under the
Arrangement (i) exceeds the total amount of payments or benefits which could be
received by the Executive from the Company pursuant to Section 280G of the Code;
or (ii) is subject to the excise tax imposed by Section 4999 of the Code, such
payments or benefits shall be reduced to the extent necessary to comply with the
limitation.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Compensation Committee makes all decisions regarding compensation of
executive officers. The primary components of executive compensation consist of
annual compensation, which includes base salaries and annual bonuses, and
long-term compensation through the grant of options to purchase Common Stock.
Though the aim of the Company is to maximize stockholder value, compensation for
the executive officers is not primarily related to the overall performance of
the Company. The Compensation Committee's principal philosophy is one of
fairness and executive officers are judged on their individual merits, which is
the standard of evaluation for all employees of the Company.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation Committee has determined that certain stock options granted
under the Company's 1995 Option Plan with an exercise price of at least equal to
the fair market value of the Company's common stock on the date of grant may be
treated as "performance-based compensation."
The base salary levels of executive officers, other than Mr. Mandaric, are
determined periodically by evaluating the performance of the executive officers
and their contributions to the Company, and their responsibilities, experience
and potential. During fiscal year 1996, Mr. Mandaric received a salary for the
first time since coming to the Company as its Chairman and Chief Executive
Officer in fiscal year 1996. Mr. Mandaric had not received a salary previously
at his own request. However, at the end of fiscal year 1995, the Board of
Directors, as the Committee's predecessor with respect to the responsibility for
setting executive compensation, determined that the Company had made sufficient
progress in turning around its financial results that it was no longer
appropriate to permit Mr. Mandaric to forego reasonable compensation. Mr.
Mandaric's salary is now determined in the same manner and based, in part, on
the same criteria as other executive officers. In addition a number of factors
related to the performance of the Company were considered including increases in
revenues and net income over the prior year, increases in stock price and market
capitalization of the Company and balance sheet improvements, such as greater
working capital and stockholders' equity.
The annual bonuses are determined in the discretion of the Board of Directors
based on individual performance and the financial performance of the Company.
The Company has a discretionary profit
11
<PAGE>
sharing bonus plan that provides for payment of bonuses to all eligible
employees from an aggregate bonus pool set by the Committee based on the overall
performance of the Company. Except for Mr. Giggey, the Company did not award
bonuses for fiscal 1996 to executive officers.
For newly employed executive officers, stock options are granted as required
by competitive conditions. With respect to other employees, the Company believes
that employee equity ownership provides significant additional motivation to
executive officers to maximize value for the Company's stockholders. The
Committee typically grants stock options at least once each year to executive
officers and other key employees. These grants are based on a variety of
factors, including total options outstanding and total unvested options
outstanding for each officer and key employee, the financial performance of the
Company and assessment of personal performance. Whereas bonuses recognize
specific annual operational achievements, the Company considers the cumulative
stock option grants as a measure of the individual's long-term potential impact
on the Company's results. The Committee feels that stock options are the best
method of providing incentives for executive officers to maximize the long-term
success of the Company. Notwithstanding the foregoing, the Committee has not
granted options to Mr. Mandaric as it deems him already sufficiently motivated
to maximize the Company's value to stockholders based on his ownership of 44.3%
of the outstanding shares of the Company.
A sustained decline in the market price of the Company's common stock in 1996
resulted in a substantial number of stock options granted pursuant to the 1995
Stock Option Plan on or after August 9, 1995 having an exercise price in excess
of the then current market price of $10.00 per share. The Committee therefore
determined on August 15, 1996 to reprice all such options with exercise prices
in excess of $10.00 per share at the then prevailing market price of $9.625 per
share. The Committee took this action in order to restore the incentive for
employees who hold such options, in order to encourage them to remain as
employees of the Company and to exert their maximum efforts on behalf of the
Company.
Compensation Committee
Alan C. Mendelson
Roland G. Matthews
C. Bradford Jeffries
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was chartered in January 1996 and
consists of Messrs. Jeffries, Matthews and Mendelson. Prior to the establishment
of the Committee, the Board of Directors reviewed compensation issues. Mr.
Matthews, a member of the Compensation Committee, served as an officer of the
Company from September 1980 to March 1993. Mr. Jonas, a member of the Board,
served as an officer of the Company from September 1980 to October 1994, during
which period he served as President and Chief Executive Officer of the Company
from February 1993 to October 1994. Additionally, Mr. Mandaric, the Company's
President and Chief Executive Officer, serves as Chairman of the Board.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on September 30, 1991 for (i) the Company's Common Stock, (ii) the
NASDAQ Stock Market - U.S. Index and (iii) a Peer Group consisting of Altron,
Incorporated. (ALRN), Circuit Systems, Inc. (CSYI), Data- Design Laboratories,
Inc. (DDL), Hadco Corp. (HDCO), Merix Corp. (MERX), Parlex Corp. (PRLX), Sanmina
Corp. (SANM), Sheldahl Inc., (SHEL) and Sigma Circuits, Inc. (SIGA) (the "Peer
Group"). All values assume reinvestment of the full amount of all dividends and
are calculated as of September 30 of each year:
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ELEXSYS INTERNATIONAL INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
Cumulative Total Return
-------------------------------------------------
9/91 9/92 9/93 9/94 9/95 9/96
Peer Group 100 112 227 221 473 507
Nasdaq Stock Market-US 100 106 147 148 204 242
ELEXSYS INTERNATIONAL INC 100 89 44 58 678 494
* $100 INVESTED ON 9/30/91 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
- ---------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended or the Exchange Act whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
13
<PAGE>
CERTAIN RELATIONSHIPS
Mr. Mendelson is a partner of, and Mr. Jeffries is of counsel to, Cooley
Godward LLP which provided general legal representation to the Company during
the fiscal year ended September 30, 1996 and continues to serve in such
capacity.
CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche, which has been the Company's independent certified public
accountants since the Company's inception, will continue to serve in that
capacity for the current fiscal year. It is anticipated that representatives of
Deloitte & Touche will be present at the Meeting and will be provided with an
opportunity to make a statement if they so desire and to respond to appropriate
questions from stockholders.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
[FACSIMILE SIGNATURE]
Michael S. Shimada
Secretary
January 17, 1997
14
<PAGE>
ELEXSYS INTERNATIONAL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF ELEXSYS INTERNATIONAL, INC.
For the Annual Meeting of Stockholders--January 29, 1997
MILAN MANDARIC and ALAN C. MENDELSON are hereby appointed proxies (each with
power to act alone and with power of substitution) to vote all shares which the
undersigned would be entitled to vote at the 1997 Annual Meeting of Stockholders
of Elexsys International, Inc. (the "Company") at the Sheraton Four Points
Hotel, 100 North Mathilda Avenue, Sunnyvale, California 94089 at 8:30 a.m. local
time on January 29, 1997, and all adjournments thereof, on the matters set forth
below, and in their discretion upon any other matters brought before the
meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN
ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
1. ELECTION OF DIRECTORS
FOR [ ] Milan Manderic, Roger W. Johnson and C. Bradford Jeffries
WITHHOLD AUTHORITY [ ] to vote for all nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name.)
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
Dated _______________________ , 19__
____________________________________
Signature
____________________________________
Signature
[ ] I/We Plan to Attend the Meeting.
Please be sure to date this Proxy and
sign exactly as your name appears
herein; joint owners should each
sign; if by a corporation, sign in
the manner usually employed by it; if
by a fiduciary, the fiduciary's title
should be shown.
PLEASE SIGN, DATE AND MAIL THIS PROXY TODAY. YOUR VOTE IS IMPORTANT.
