SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
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Check the appropriate box:
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14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
QuesTech, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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0-11.
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<PAGE>
QuesTech, Inc.
7600-W Leesburg Pike
Falls Church, VA 22043
April 8, 1998
To Our Stockholders:
On behalf of the Board of Directors, we cordially invite you to attend the
Annual Meeting of Stockholders on Friday, May 15, 1998, at 10 A.M. at the
Embassy Suites Hotel, 8517 Leesburg Pike, Vienna, Virginia 22182. The formal
Notice of Annual Meeting and Proxy Statement, which are contained in the
following pages, outline the action to be taken by the stockholders at the
Meeting.
At the Meeting, we will elect five directors and vote on the ratification
of the appointment of an independent public accountant as Auditor for the
Company. We will also report on the progress of QuesTech and comment on matters
of current interest. During the Meeting, stockholders who are present at the
Meeting will have the opportunity to ask questions.
Please sign and return the enclosed Proxy form in the envelope provided as
soon as possible so your shares can be voted at the Meeting in accordance with
your instructions. Proxies of stockholders who attend the Meeting and vote in
person will not be voted.
We are pleased by our stockholders' interest in QuesTech and gratified
that in the past so many of you have voted your shares either in person or by
proxy. We hope that you will continue to do so. Please return your proxy card as
soon as possible.
Sincerely yours,
/s/ Vincent L. Salvatori /s/ Gerald F. Mayefskie
VINCENT L. SALVATORI GERALD F. MAYEFSKIE
Chairman of the Board and President and Chief
Chief Executive Officer Operating Officer
<PAGE>
QuesTech, Inc.
7600-W Leesburg Pike
Falls Church, Virginia 22043
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS Friday, May 15,
1998 at 10:00 A.M.
--------------------
To the Stockholders:
The Annual Meeting of Stockholders of QuesTech, Inc. will be held on
Friday, May 15, 1998, at 10:00A.M., local time, at the Embassy Suites Hotel,
8517 Leesburg Pike, Vienna, Virginia 22182, for the following purposes:
1. To elect five directors to the Company's Board of Directors;
2. To ratify the selection by the Board of Directors of Grant
Thornton LLP as the independent auditor of the Company for the
fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The close of business on March 27, 1998 has been fixed as the record date
for the determination of the stockholders entitled to notice of and to vote at
the Meeting and at any adjournment thereof
By Order of the Board of Directors,
/s/ Vincent L. Salvatori
Vincent L. Salvatori
Chairman of the Board
Chief Executive Officer
Falls Church, Virginia
April 8, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY, SIGN AND PROMPTLY RETURN THE COMPLETED PROXY
IN THE ENCLOSED SELF- ADDRESSED ENVELOPE.
<PAGE>
QuesTech, Inc.
--------------
PROXY STATEMENT
--------------
ANNUAL MEETING OF STOCKHOLDERS
May 15, 1998
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of QuesTech, Inc. ("the Company" or "QuesTech") of proxies
for use at the Annual Meeting of Stockholders to be held on May 15, 1998, and
all adjournments thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders. This Proxy Statement and Notice of Meeting,
the proxy card and the Company's Summary Annual Report to Stockholders for the
fiscal year ended December 31, 1997 are first being mailed to Stockholders on or
about April 8,1998.
If you have a disability which requires accommodation at the meeting, please
call 703-760-1016; requests must be received by April 30, 1998.
Whether or not you expect to be personally present at the meeting, you are
requested to fill in, sign, date and return the enclosed form of proxy. Any
person giving such proxy has the right to revoke it at any time before it is
voted by giving notice to the Secretary of the Company. Unless a proxy is
revoked prior to the voting thereof, all shares represented by a duly executed
proxy in the accompanying form will be voted as marked thereon or, if no
contrary instruction is given, in accordance with the recommendations of
management.
The close of business on March 27, 1998, has been fixed as the record date
for the determination of stockholders entitled to vote at the Annual Meeting of
Stockholders. As of the record date, there were outstanding and entitled to be
voted at such meeting 1,925,904 shares of common stock. These shares were held
of record by approximately 254 shareholders. Each shareholder is entitled to one
vote on each matter that comes before the meeting for each share of common stock
held by such shareholder on the record date.
The solicitation of this proxy is made by the Board of Directors of the
Company. The solicitation will be by mail and the expense thereof will be paid
by the Company. In addition, the solicitation of proxies may be made by
telephone or telegram by directors, officers or regular employees of the
Company. The Company may also request brokerage firms to solicit proxies of
beneficial owners and the expense thereof will be paid by the Company upon
request of such brokerage firms.
1
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
Five directors of the Company are to be elected for terms ending at the
Annual Meeting in 1999 or until their respective successors are elected and
qualified. Certain information with respect to the nominees who are proposed for
election as directors by the Company is set forth below. All of the nominees are
currently serving as Directors of the Company, have previously been elected as
Directors by the stockholders of the Company and have been proposed for election
by the Company's Nominating Committee. There are no family relationships among
any of the nominees for Director or among them and any executive officer of the
Company.
The five nominees for election as directors who receive the greatest
number of votes cast at the meeting shall be elected directors, provided that a
quorum is present. Although all nominees have consented to serve if elected and
are expected to be able to serve, if one or more is unable to do so, the proxy
holders will vote the proxies for the remaining nominees and for substitute
nominees chosen by the Board.
The Board of Directors recommends a vote FOR each of the nominees for
director of the Company.
Nominees for Election as Directors
Principal Occupation and Served as
Name Age Other Information Director Since
---- --- ------------------------ --------------
Edward G. Broenniman 61 President and Chief Executive 1996
Officer of the Piedmont Group
(which provides merchant
banking services), since 1985;
Chief Operating Officer and
Chief Financial Officer of
Hemex Inc., until June 1997;
also serves as a director of
Hemex, Inc., American
Investment Corp. and Pies on
the Go.
2
<PAGE>
Gerald F. Mayefskie 57 President and Chief Operating 1991
Officer of the Company since
1991; employed by the Company
in various executive positions
for 25 years.
Sebastian P. Musco 72 Founder, Chairman of the Board 1968
and Chief Executive Officer of
Gemini Industries, Inc.;
Vice Chairman of the Board
of Directors of the Company;
Chairman, Care Communications,
Chicago, Illinois; Director
and former president of the
International Precious Metals
Institute.
Vincent M. Russo 67 Independent consultant in 1994
logistics, since 1989; retired
as Lt. General, United States
Army (1952-1989); former
Director, Defense Logistics
Agency;
Vincent L. Salvatori 65 Chairman of the Board and 1968
Chief Executive Officer of the
Company, since 1988; Director
and Chairman of the Board of
the Company's subsidiaries;
also serves as a director of
Dynamic Engineering,
Incorporated and the
Association for Corporate
Growth, Washington, D.C.
3
<PAGE>
BOARD OF DIRECTORS AND ITS COMMITTEES
The members of the Board of Directors are elected to various committees.
The standing committees of the Board (and the respective chairman) are: Audit
Committee (Costello), Compensation Committee (Musco), Deferred Compensation
Committee (Broenniman) and Nominating Committee (Musco). There were 5 meetings
of the Board of Directors during 1997. All of the incumbent directors attended
in excess of 75% of the total number of meetings of the Board and the committees
on which they served except Messrs. Costello and Musco, who attended 71% and
60% of such meetings respectively.
The members of the Audit Committee were Robert B. Costello, Chairman,
Sebastian P. Musco, Vincent M. Russo, and Edward G. Broenniman. The Committee
met 4 times in fiscal 1997. The functions of the Audit Committee include review
and approval of: the audit plan developed by the Company's independent auditors
in connection with their annual audit of the Company's financial statements; the
results of audits performed by the Company's independent auditors; fees charged
by the independent auditors; responses to management letters issued by the
Company's independent auditors; current accounting rules and changes thereto;
the Company's internal controls; and such other related matters as the Committee
deems appropriate. The Audit Committee also makes a recommendation to the Board
of Directors with respect to selection of an independent auditor.
The members of the Compensation Committee were Sebastian P. Musco,
Chairman, Robert B. Costello, Vincent M. Russo, and Edward G. Broenniman. The
Committee met 3 times in fiscal 1997. The functions of the Compensation
Committee are to review and approve the salaries of all officers of the Company
and its subsidiaries; review and approve all salaries above a specified level to
be paid to non-officers; and review and approve awards under and administration
of the Company's stock option and bonus plans.
The members of the Deferred Compensation Committee were Mr. Broenniman,
Chairman, and Messrs. Musco, Russo, and Mayefskie. This Committee met once
during fiscal 1997. It is responsible for administering the Company's two
deferred compensation plans, including selection of participants, determination
of benefits, review of the Plans performance and amending the Plans.
The members of the Nominating Committee were Mr. Musco, Chairman, Dr.
Costello and Mr. Salvatori. This Committee met once during fiscal 1997. It is
responsible for selecting candidates for nomination as directors for the next
year and submitting its recommendations to the full Board for its approval and
eventual submission to the shareholders.
Mr. Salvatori is a member of the Nominating Committee. He serves on all
other Committees in an ex officio capacity.
4
<PAGE>
EXECUTIVE OFFICERS
All officers of the Registrant are elected annually by the Board of
Directors at the meeting of the directors immediately following the annual
meeting of shareholders. Messrs. Salvatori and Mayefskie are employed pursuant
to the terms of employment agreements, the current terms of which will expire
November 23, 1999 and November 16, 1999, respectively. (See "Employment
Agreements" below.)
There are no arrangements or understandings between any officer and any
other person pursuant to which the officer was selected. Information with
respect to Executive Officers of the Registrant is set forth below:
Positions with the Company Held Position
Name(1) And during Past Five Years Since Age
- ------- -------------------------- ------------- ---
Joseph P. O'Connell Chief Financial Officer March 1989 54
William M. Fairl Senior Vice President May 1996 49
Asst. Vice President-Group Jan. 1993
Manager
Joe W. Rigby Senior Vice President Aug. 1996 57
Major General, U.S. Army Oct. 1986
Michael P. Rivera Vice President, General Sept. 1997 51
Counsel & Secretary
Vice President, General Dec. 1989
Counsel and Secretary of Union
Switch & Signal Inc.
Michael Stankosky Senior Vice President April, 1997 54
Vice President, U.S. and April, 1992
International Business
Development of Science
5
<PAGE>
Applications International
Corporation.
Douglas Wood Senior Vice President Aug. 1997 53
Director, U.S. Army, CECOM, Jan. 1992
Intelligence & Electronic
Warfare Directorate
(1) Please refer to the section of this Proxy Statement entitled "Nominees for
Election as Directors" for information about Messrs. Salvatori and Mayefskie.
6
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS COMPENSATION
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------- ------------------------
Name and Other Annual Options All Other
Principal Position Year Salary($) Bonus($)(1) Compensation(2) SARs(#) Compensation(3)
- ------------------ ---- --------- -------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Vincent L. Salvatori 1997 254,862 60,000 60,000 30,000 42,412
Chairman and Chief 1996 238,057 60,000 65,000 0 49,979
Executive Officer 1995 208,863 35,000 60,000 30,000 31,415
Gerald F. Mayefskie 1997 217,672 50,000 20,000 20,000 37,099
President and Chief 1996 199,060 50,000 21,671 0 38,051
Operating Officer 1995 179,262 25,000 20,000 20,000 36,583
William M. Fairl 1997 159,624 40,000 0 10,000 19,033
Senior Vice President 1996 137,887 20,000 0 10,000 15,776
1995 112,734 12,000 0 5,000 15,302
Joe W. Rigby 1997 161,469 32,374 0 10,000 2,843
Senior Vice President 1996 40,881 8,459 0 10,000 997
1995 0 0 0 0 0
Timothy Siegel 1997 139,467 27,000 0 5,000 23,899
Vice President 1996 140,004 50,000 0 0 10,398
1995 124,623 12,000 0 5,000 22,131
</TABLE>
- ----------
(1) Includes bonus earned for 1996 and paid in 1997.
(2) Includes $20,000, $21,671 and $20,000 as director fees for Messrs. Salvatori
and Mayefskie for 1997, 1996 and 1995 respectively, and $45,000, $43,329 and
$45,000 as a fee for Mr. Salvatori serving as Chairman of the Board of Directors
for 1997, 1996 and 1995 respectively.
(3) For 1997, 1996 and 1995 respectively, includes life and medical insurance
premiums of
7
<PAGE>
$17,269, $20,123 and $18,247 for Mr. Salvatori, $17,194, $15,097 and $13,735 for
Mr Mayefskie, $11,418, $10,702 and $10,876 for Mr. Fairl, $2,790, $975 and 0 for
Mr. Rigby, and $8,840, $8,401 and $8,722 for Mr. Siegel; reimbursement of
medical expenses pursuant to an executive reimbursement plan of $2,174, $1,976
and $864 for Mr. Salvatori, 0, 0 and $995 for Mr. Mayefskie, $4,962, $2,420 and
$1,777 for Mr. Fairl, 0, 0 and 0 for Mr. Righy, and 0, 0 and $1,890 for Mr.
Siegel; vacation payoff of $16,342, $22,996 and $9,689 for Mr. Salvatori,
$15,228, $15,382 and $15,902 for Mr. Mayefskie, 0, 0 and 0 for Mr. Fairl, 0, 0
and 0 for Mr. Rigby, and $14,000, 0 and $9,616 for Mr. Siegel; long-term
disability insurance premiums of $3,810, $2,173 and $2,052 for Mr. Salvatori,
$3,096, $5,926 and $5,645 for Mr. Mayefskie, $2,653, $2,654 and $2,649 for Mr.
Fairl, $53, $22 and 0 for Mr. Rigby, and $1,059, $1,997 and $1,903 for Mr.
Siegel; and long-term care insurance of $2,816, $2,711 and 0 for Mr. Salvatori,
$1,581, $1,646 and 0 for Mr. Mayefskie, 0, 0 and 0 for Mr. Fairl, 0, 0 and 0 for
Mr. Rigby, and 0, 0 and 0 for Mr. Siegel.
Option /SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------- ----------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ SARs Granted to Exercise
Granted Employees or Base
in Fiscal Price Expiration
Name # Year ($/Sh) Date 5%($) 10%($)
- ---- ------------- ---------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Vincent L. Salvatori 30,000 17.1 7.70 12/6/07 94,779 264,169
Gerald F. Mayefskie 20,000 11.4 7.00 12/6/07 77,186 190,113
William M. Fairl 10,000 5.7 7.00 12/6/07 38,593 95,056
Joe W. Rigby 10,000 5.7 7.00 12/6/07 38,593 95,056
Timothy Siegel 5,000 5.7 7.00 12/6/07 19,296 47,528
</TABLE>
8
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option /SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)(1)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Vincent L. Salvatori 0 0 12,000/42,000 28,200/42,300
Gerald F. Mayefskie 0 0 8,000/28,000 22,000/33,000
William M Fairl 0 0 5,000/20,000 6,750/4,500
Joe W Rigby 0 0 2,000/18,000 0/0
Timothy Siegel 0 0 3,000/7,000 6,750/4,500
</TABLE>
- ----------
(1) Value of In-the-Money-Options. For purposes of this valuation, the
year-end stock price of $6.75 is being utilized. Thus, all options with an
exercise price less than $6.75 were in-the-money.
DIRECTORS COMPENSATION
Each director receives a fee at an annual rate of $20,000 plus
reimbursement for expenses incurred in connection with attendance at Board or
Committee Meetings. In addition, Mr. Salvatori receives a fee of $40,000 for
serving as Chairman of the Board of Directors; Mr. Musco receives a fee of
$20,000 for serving as Vice Chairman of the Board; and Dr. Costello receives a
fee of $10,000 for serving as Chairman of the Audit Committee.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with its Chairman and Chief
Executive Officer, Vincent L. Salvatori, and its President and Chief Operating
Officer, Gerald F. Mayefskie. Mr. Salvatori's agreement is for a period of three
years and, since its inception in 1979, it has been renewed annually by the
Board of Directors. The agreement was most recently renewed in November 1997.
Mr. Salvatori's agreement provides for life-time medical, health and dental
coverage identical to the coverage then provided by the Company's group and
executive health plans, for long-term care insurance, for life insurance in the
sum of $300,000, and for the payment of five years of total compensation in the
event of either Mr. Salvatori's voluntary or involuntary termination.
Mr. Mayefskie's employment agreement is for a period of two years and,
since its inception in 1991, it has been renewed annually by the Board of
Directors. The agreement was most recently renewed in November 1997. Mr.
Mayefskie's agreement provides for life-time medical, health and dental coverage
identical to the coverage then provided by the Company's group and executive
health plans, for long-term care insurance, for life insurance in the sum of
$300,000, and for payment of two years of compensation in the event of either
Mr. Mayefskie's voluntary or involuntary termination.
Compensation Committee Interlocks and Insider Participation
None of the members of the Company's Compensation Committee was, during fiscal
1997, an officer or employee of the Company or any of its subsidiaries, a former
officer of the Company or any of its subsidiaries or had any relationship with
the Company required to be disclosed in this Proxy Statement, except Vincent L.
Salvatori who served as an ex officio member of the Compensation Committee and
as the Company's Chief Executive Officer and Robert B. Costello, whose
consulting agreement with the Company is discussed in "Related Party
Transactions" below.
Compensation Committee Report on Executive Compensation
The Company's compensation program for executive officers is established
and administered by the Compensation Committee of the Board of Directors (the
"Committee"), which is composed entirely of non-employee directors (Mr.
Salvatori is an ex officio member). The goals of the program are to enhance the
Company's performance and to increase shareholder value. To accomplish these
goals, the Committee has developed a compensation program designed to attract,
motivate and retain the superior executives who are critical to the long term
success of the Company. The compensation program links the financial interests
of executives to the success of the Company and the financial interests of
shareholders.
10
<PAGE>
The Committee has historically viewed compensation as a total package that
includes cash compensation (base salary, annual cash incentives and insurance
premiums) and long term compensation (primarily stock options). Basic principles
underlying the compensation program include:
o Maximize shareholder value.
o Retain, reward and motivate key employees.
o Compensate for performance.
o Reward teams results.
o Build executive stock ownership.
The compensation decisions of the Committee are guided by recommendations
of the Company's Chief Executive Officer (except for decisions regarding his
personal compensation). These decisions and recommendations are based primarily
upon performance evaluations and published descriptive or comparative
information regarding compensation practices of similar companies. In connection
with its annual review of the Company's executive compensation program, the
Committee has confirmed that the program remains competitive and should be
effective in promoting achievement of the goals of the program.
The Committee also reviewed the compensation program in light of Internal
Revenue Code Section 162(m), which generally limits to $1 million the corporate
deduction for compensation paid to the executive officers named in the Summary
Compensation Table unless certain requirements are met. At this time the Company
does not have any officers whose compensation is potentially subject to the
limitations on deductibility set forth in Section 162(m). Therefore, the
Committee has not yet adopted a policy with respect to the limitation of
deductibility of such compensation.
Cash Compensation
In 1997, base salary levels for executives were determined by adjusting
their 1996 salaries so that achieved annual base salary levels would approximate
the median level achieved by similarly situated executives. These levels were
then adjusted on an individual basis by a subjective evaluation of each
executive's scope of responsibilities, level of experience and individual
performance and contribution to the business. As a result, base salary levels
for executive officers (excluding the Chief Executive Officer) were increased
within a range of 6% to 14% over 1996 levels.
In addition, annual cash incentive awards were paid in 1997 in recognition
of superior performance by selected executives during 1996, when Company
revenues increased despite continuing difficult economic conditions in the
defense contracting markets and continuing
11
<PAGE>
investment in the Company's manufacturing subsidiary. The amount of the award
was determined on the basis of a subjective evaluation of each executive's
contribution to the success of the Company in attaining its performance
objectives and the executive's base salary level. Bonuses paid in 1997 varied
from 4% to 29% of base salary (excluding the Chief Executive Officer).
Long Term Compensation
Long term compensation, which consists primarily of incentive stock
options, is specifically focused on the Company's longer term objectives. It is
designed to motivate executives to improve the long term performance of the
Company's stock and the total return to shareholders. The Committee decides upon
participation and the size of awards by subjectively evaluating an individual
executive's potential to make significant contributions to the Company's
financial results, level of management responsibility and individual performance
and potential. During 1997, options for 72,000 shares of the Company's stock
were granted to 7 key employees of the Company (excluding the Chief Executive
Officer).
Chief Executive Officer Compensation
The Committee established the 1997 compensation of Vincent L. Salvatori,
the Company's Chief Executive Officer, using substantially the same criteria
that were used to determine compensation levels for the Company's other
executive officers.
Mr. Salvatori's base salary and bonus were determined on the basis of the
Company's performance in relation to its 1996 budget and a comparison of Mr.
Salvatori's base salary and bonus with the base salaries and bonuses of chief
executive officers of similarly situated companies. In considering base salary
compensation for 1997, the Committee was pleased that the Company continued to
operate on a profitable basis and to increase revenues. Accordingly, for 1997,
Mr. Salvatori's base salary was increased by 9% over 1996, and he was paid a
bonus of $60,000
During 1997, Mr. Salvatori was granted options for 30,000 shares of the
Company's stock in accordance with and subject to the terms of the Company's
1996 Incentive Stock Option Plan.
COMPENSATION COMMITTEE
Sebastian P. Musco
Edward G. Broenniman
Vincent M. Russo
Vincent L. Salvatori (ex officio)
12
<PAGE>
STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of March 26, 1998 (except as
otherwise noted), with respect to the beneficial ownership of Common Stock by
each person known by the Company to beneficially own more than 5 % of its
outstanding Common Stock, each nominee for Director, each executive officer of
the Company named in the Summary Compensation Table herein, and all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Rights to Acquire
Beneficial Ownership
Name and Address Sole Voting Shared Voting under Options
of Beneficial Owner & Investment & Investment Exercisable Within Percent of
Power Power 60 days (1) Class
- ------------------- ----- ----- ----------- -----
<S> <C> <C> <C> <C>
Steven N. Bronson (2) 127,771 -- -- 6.7
2101 W. Commercial Blvd
Suite 1500
Ft. Lauderdale, FL 33309
Stock Employee -- 472,978 -- 24.7
Compensation Trust(3)
("SECT")
c/o QuesTech, Inc.
7600-W Leesburg Pike
Falls Church, VA 22043
Edward G. Broenniman 2,500 (4) -- *
Gerald F. Mayefskie 4,000 64,176(5) 12,000 3.6
Sebastian P. Musco(6) 150,480 5,000(7) 1,000 8.1
Vincent M. Russo 700 5,000(8) 1,000 *
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Vincent L. Salvatori(6) 37,888 210,410(9) 18,000 13.0
William M. Fairl 2,500 25,000(10) 5,000 1.4
Joe W. Rigby 0 20,000(11) 2,000 1.0
Timothy Siegel 1,000 7,050(12) 3,000 *
All directors and 205,320 658,114(13) 42,000 45.0
executive officers
as a group
(12 persons)
</TABLE>
* Represents less than 1 % of the outstanding Common Stock
- --------------------------------------------------------------------------------
(1) Also included under the `Shared Voting & Investment Power" column of
this table because of the ability to direct the vote, tender or exchange of
these shares under the SECT (see footnote 2).
(2) Based on publicly available information, includes 15,710 shares in the
name of Barber & Bronson Inventory Trading Account.
(3) The SECT is governed by the Amended and Restated Stock Employee
Compensation Trust Agreement effective as of March 25, 1998 (the `SECT
Agreement') and was originally established by the Company effective December 31,
1993. This trust holds shares of Common Stock of the Company for the purpose of
funding the Company's stock option plans. The members of the Board of Directors
of the Company serve as the Trustees of the SECT. Pursuant to the SECT
Agreement, shares held in the SECT are voted, tendered or exchanged by the
Trustees based on the instructions of the Company's current employees or
non-employee directors who participate in those plans that are funded by the
SECT, for which reason these shares may be considered to be subject to shared
voting and investment power. For purposes of voting, tendering or exchanging
shares of the SECT, each plan participant is assigned the number of shares equal
to the total number of shares of Common Stock covered by all of the
participant's option grants under the plans, and the participant's instructions
are followed by the Trustees with respect to those shares. Any assigned shares
for which no instructions are received are voted, tendered or exchanged in
proportion to the instructions that have been received from the other
participants; any unassigned shares are voted in the same
14
<PAGE>
proportion as those for which voting instructions are received, but will not be
tendered or exchanged. In view of the foregoing, the SECT and its Trustees
disclaim any beneficial ownership of the securities held in the SECT.
(4) Excludes 472,978 shares held in the SECT for which Mr. Broenniman
serves as a Trustee and as to which he disclaims any beneficial interest.
(5) Includes 40,000 shares subject to stock option grant (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Mayefskie can
direct the vote, tender or exchange under the SECT (see footnote 2); excludes
432,978 shares held in the SECT for which Mr. Mayefskie serves as a Trustee and
as to which he disclaims any beneficial interest.
(6) Mr. Musco and Mr. Salvatori are parties to a Fourth Shareholders
Agreement of QuesTech, Inc., dated December 16, 1983, as amended, under which
they have agreed to vote their respective shares for one another as directors of
the Company.
(7) Includes 5,000 shares subject to stock option grants (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Musco can
direct the vote, tender or exchange under the SECT (see footnote 2); excludes
467,978 shares held in the SECT for which Mr. Musco serves as a Trustee and as
to which he disclaims any beneficial interest.
(8) Includes 5,000 shares subject to stock option grants (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Russo can
direct the vote, tender or exchange under the SECT (see footnote 2); excludes
467,978 shares held in the SECT for which Mr. Russo serves as a Trustee and as
to which he disclaims any beneficial interest.
(9) Includes 60,000 shares subject to stock option grants (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Salvatori can
direct the vote, tender or exchange under the SECT (see footnote 2); excludes
412,978 shares held in the SECT for which Mr. Salvatori serves as a Trustee and
as to which he disclaims any beneficial interest.
(10) Includes 25,000 shares subject to stock option grants (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Fairl can
direct the vote, tender or exchange under the SECT (see footnote 2).
(11) Includes 20,000 shares subject to stock option grants (including
options listed in the
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<PAGE>
"Rights to Acquire Beneficial Ownership under Options Exercisable Within 60
Days" column of this table) as to which Mr. Rigby can direct the vote, tender or
exchange under the SECT (see footnote 2).
(12) Includes 7,000 shares subject to stock option grants (including
options listed in the `Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which Mr. Siegel can
direct the vote, tender or exchange under the SECT (see footnote 2).
i(13) Includes 199,000 shares subject to stock option grants (including
options listed in the "Rights to Acquire Beneficial Ownership under Options
Exercisable Within 60 Days" column of this table) as to which these persons can
direct the vote, tender or exchange under the SECT (see footnote 2).
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Pursuant to Section 16 of the Securities Exchange Act of 1934, directors
and executive officers of the Company are required to file reports with the
Securities and exchange Commission indicating their holdings of and transactions
in the Common Stock. 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, all such persons have complied with all filing
requirements for the 1997 calendar year.
Related Party Transactions
Since 1992, the Company has had a Consultancy Agreement with director
Robert B. Costello. On May 17, 1996, the Board of Directors approved an amended
Consultancy Agreement. Pursuant to this amended Agreement, Dr. Costello was
authorized to provide the Company no more than 96 hours of consulting services
during the 12-month period ending May 16, 1997 at a rate of $2,000/day plus
expenses. The consulting services provided by Dr. Costello were determined by
the Company's President and Chief Operating Officer in the areas of marketing,
support and technical assistance and were subject to the approval of the
Company's Chairman and Chief Executive Officer. During 1997, Dr. Costello was
paid $4010 for such consulting services. This amount was on a basis at least as
favorable to the Company as could have been obtained from an unaffiliated party.
The Consultancy Agreement was not renewed for 1998.
16
<PAGE>
Stockholder Return Performance Presentation
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock against
the cumulative total return of the NASDAQ Composite Index and the Dow Jones
Equity Market Aerospace and Defense Index for the period of five years
commencing January 1, 1992 and ended December 31, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG QUESTECH, INC., THE NASDAQ STOCK MARKET (US) INDEX AND THE
DOW JONES AEROSPACE & DEFENSE INDEX
[The following table was represented as a line chart in the printed material]
DOW JONES AEROSPACE
Date QUESTECH, INC. NASDAQ STOCK MARKET (U.S.) & DEFENSE
- ---- -------------- -------------------------- ---------
12/92 100 100 100
12/93 131 115 129
12/94 194 112 145
12/95 475 159 253
12/96 375 195 336
12/97 338 240 355
* $100 INVESTED ON 12/31/92 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
17
<PAGE>
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders at the Annual Meeting, the
Board of Directors, on recommendation of the Audit Committee, has selected Grant
Thornton LLP, independent public accountants, as auditors of the Company for the
fiscal year ending December 31, 1998. Grant Thornton has audited the accounts of
the Company since it became a public corporation in 1984. Representatives of the
firm will be present at the Annual Meeting and will be afforded the opportunity
to make a statement, if desired, and will be available to respond to appropriate
questions relating to the Company's 1997 financial statements.
The Board of Directors recommends a vote FOR approval of the appointment
of Grant Thornton LLP as independent auditors for the Company for 1998.
Vote Required
The affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock represented at the Annual Meeting is required
to elect directors, to approve the appointment of the independent auditors and
to act on any other matters properly brought before the meeting. Shares
represented at the Annual Meeting by proxies which are marked "withhold
authority" with respect to any of the matters before the meeting have the same
effect as if the shares represented thereby were voted against such matter.
Broker non-votes will be treated as not represented at the Meeting as to this
matter only.
SUBMISSION OF 1999 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting scheduled to be held on May 21, 1999, must be received by the Company by
January 20, 1999 for inclusion in the Company's proxy statement and proxy
relating to that meeting. Upon receipt of any such proposal, the Company will
determine whether or not to include such proposal in the proxy statement and
proxy in accordance with the Company's By-laws and SEC regulations governing the
solicitation of proxies.
In order for a stockholder to nominate a candidate for director, the
stockholder must comply with the notice and procedural requirements set forth in
the Company's By-laws governing nomination of directors. Notice of the
nomination must be received by the Company no later than the date set forth
above. The stockholder filing the notice of nomination must also describe
various matters regarding the nominee, including but not limited to such
information as name, address, occupation and shares held.
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<PAGE>
In order for a stockholder to bring other business before a stockholders
meeting, timely notice must be received by the Company within the time Limits
described above. Such notice must include a description of the proposed
business, the reasons therefor and other specified matters. These requirements
are separate from and in addition to the requirements a stockholder must meet to
have a proposal included in the Company's proxy statement.
In each case the notice must be given to the Secretary of the Company,
whose address is 7600-W Leesburg Pike, Falls Church, Virginia 22043. Any
stockholder desiring a copy of the Company's By-laws will be furnished one
without charge upon written request to the Secretary.
OTHER MATTERS
The Board of Directors of the Company knows of no business which is to be
brought before the Meeting, other than as set forth above. However, if any other
business properly comes before the Meeting, it is the intention of the persons
named in the accompanying form of proxy to vote in accordance with their best
judgment with respect to such business.
It is important that proxies be returned promptly. Stockholders are urged
to date and sign the enclosed proxy and return it promptly in the accompanying
envelope.
By the Order of the Board of Directors
/s/ Vincent L. Salvatori
Vincent L. Salvatori
Chairman of the Board and
Chief Executive Officer
Falls Church, Virginia
April 8, 1998
19
<PAGE>
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QUESTECH, INC.
PROXY CARD ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders May 15, 1998
The undersigned hereby appoints V.L. Salvatori and G.F. Mayefskie, and
each of them, as proxies to represent the undersigned at the 1998 Annual Meeting
of Stockholders of QuesTech, Inc. ("QTI") to be held at the Embassy Suites
Hotel, Fall Church, Virginia 22043, on Friday, May 15, 1998 at 10 AM Eastern
Daylight Time, or at any adjournment or adjourments thereof, and to vote upon
the following matters the number of shares which the undersigned would be
entitled to vote if personally present.
(Continued and to be DATED and SIGNED on REVERSE SIDE)
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<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
QUESTECH, INC.
May 15, 1998
Please Detach and Mail in the Envelope Provided
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A |X| Please mark your
votes as in this
example using
dark ink only.
VOTE
WITHHELD
FOR all nominees from the Nominees: Vincent L. Salvatori
listed at right nominee(s) Gerald F. Mayefskie
Sebastian P. Musco
1. Election of |_| |_| Vincent M. Russo
Directors Edward G. Broenniman
Instructions. To withhold authority to vote for any
individual strike a line through that nominee's
name:
FOR AGAINST ABSTAIN
2. Ratification of Grant Thornton as |_| |_| |_|
Independent Auditors.
3. Upon such other matters as may properly come before the meeting or
any adjournment or adjournments thereof.
PLEASE MARK, SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE.
NO POSTAGE NEEDED IF MAILED IN THE UNITED STATES.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR AS DIRECTED. IF NO CONTRARY INSTRUCTIONS ARE GIVEN.
THE SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEES SET FORTH AT LEFT AND FOR THE RATIFICATION OF GRANT
THRONTON AS INDEPENDENT AUDITORS.
Stockholders Signature _________________________________ Dated ___________, 1998
NOTE: Signature(s) should follow exactly the name(s) on the stock certificate.
All co-owners should sign. Electors and Administrators may sign as such.
Attorneys-in-fact should sign both names.
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