<PAGE>
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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Salient 3 Communications, Inc.
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SALIENT 3 COMMUNICATIONS, INC.
P.O. Box 1498 Reading, Pa. 19603
NOTICE OF ANNUAL MEETING OF HOLDERS OF CLASS B COMMON STOCK
TO BE HELD APRIL 29, 1998
Notice is hereby given that the Annual Meeting of holders of Class B Common
Stock of SALIENT 3 COMMUNICATIONS, INC. (the "Company") will be held at The Inn
at Reading, 1040 Park Road North, Wyomissing, Pennsylvania, on Wednesday, April
29, 1998 at 11:00 o'clock in the morning (local time):
1. For the election of three (3) directors of the Company;
2. To consider a proposal to increase the number of shares of Company stock
available under the Long Term Incentive Plan;
3. To consider a proposal to increase the number of shares of Company stock
available under the Directors' Stock Option Plan;
4. To consider a proposal to increase the number of shares of Company stock
available under the Direct Stock Purchase Plan;
5. To consider a proposal to ratify the Board of Directors' selection of
Arthur Andersen LLP as independent auditors for the year 1998; and
For the transaction of such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only holders of record of issued and outstanding shares of Class B Common
Stock of the Company at the close of business on March 2, 1998 are entitled to
notice of, and to vote at, the meeting. Such stockholders may vote in person or
by proxy. The stock transfer books of the Company will not be closed.
By order of the Board of Directors
Thomas F. Hafer
Secretary
Reading, Pennsylvania
Dated: April 9, 1998
Stockholders are urged to sign, date and mail the enclosed Proxy promptly in
the accompanying envelope. The Proxy is revocable at any time by a written
instrument signed in the same manner as the Proxy and received by the Secretary
of the Company at or before the Annual Meeting. If you attend the meeting, you
may, if you wish, revoke your Proxy by voting in person.
<PAGE>
SALIENT 3 COMMUNICATIONS, INC.
P.O. Box 1498 Reading, Pa. 19603
(610) 856-5500
PROXY STATEMENT ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING - APRIL 29, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Salient 3 Communications,
Inc. (the "Company") for use at the Annual Meeting of holders of Class B Common
Stock of the Company (the "Meeting") to be held at The Inn at Reading, 1040 Park
Road North, Wyomissing, Pennsylvania, at 11:00 A.M. on Wednesday, April 29,
1998, and at any adjournment thereof. The Proxy Statement and form of Proxy are
first being sent or given to stockholders on or about April 9, 1998.
Only holders of record at the close of business on March 2, 1998 of the
outstanding shares of the Company's Class B Common Stock are entitled to vote at
the Meeting. The holders of a majority of the Class B Common Stock issued and
outstanding and present in person or represented by proxy at the Meeting shall
be requisite for and shall constitute a quorum. Only directors of the Company,
"active employees" of the Company and its subsidiaries in which the Company
owns, directly or indirectly, 100% of the voting shares, and certain trusts for
the benefit of such employees, are entitled to hold Class B Common Stock. On
March 2, 1998, there were outstanding of record 573,047 shares of the Company's
Class B Common Stock. Such eligible stockholders are entitled on all matters to
cast one vote for each share held of record. In addition, there were
outstanding of record on such date 5,848,191 shares of the Company's Class A
Common Stock, excluding treasury shares. Holders of Class A Common Stock are
not eligible to vote at the Meeting.
If the enclosed Proxy is appropriately marked, signed and returned in time to
be voted at the Meeting, the shares represented by the Proxy will be voted in
accordance with the instructions marked thereon. Signed proxies not marked to
the contrary will be voted (1) for the election of directors, (2) for the
proposal to increase the number of shares of Company stock available under the
Long Term Incentive Plan, (3) for the proposal to increase the number of shares
of Company stock available under the Directors' Stock Option Plan, (4) for the
proposal to increase the number of shares of Company stock available under the
Direct Stock Purchase Plan, (5) for the proposal to ratify the Board of
Directors' selection of Arthur Andersen LLP as independent auditors for the year
1998, and, as the proxy holders may in their discretion determine, on any other
matter which may properly come before the Meeting or any adjournment or
adjournments thereof.
Directors are elected by the affirmative vote of a plurality of the votes of
the shares entitled to vote, present in person or represented by proxy.
Stockholders are not entitled to cumulative voting in the election of directors.
An affirmative vote of a majority of shares of Class B Common Stock entitled to
vote, present in person or represented by proxy, is required for approval of
Proposals 2 through 5. Abstentions, votes withheld and broker non-votes
(described below) are counted in determining whether a quorum is present.
Abstentions with respect to any proposal other than the election of directors
will have the same effect as votes against the proposal, because approval
requires a vote in favor of the proposal by a majority of the shares entitled to
vote, present in person or represented by proxy. Broker non-votes occur when a
broker or other nominee holding shares for a beneficial owner does not vote on a
proposal because the beneficial owner has not checked one of the boxes on the
proxy card. Broker non-votes will have no effect on the outcome of any of the
matters to be voted upon at the Meeting.
STOCKHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 2, 1998, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FROM THOMAS F. HAFER, SECRETARY OF THE
COMPANY, AT SALIENT 3 COMMUNICATIONS, INC., P.O. BOX 1498, READING, PA 19603,
(610) 856-5500.
2
<PAGE>
1. ELECTION OF DIRECTORS
A. NOMINEES FOR DIRECTOR
The Board is classified into three classes of directors with staggered terms
of office. Class I directors serve until the Annual Meeting in 1998; Class II
directors until the Annual Meeting in 1999; and Class III directors until the
Annual Meeting in 2000. At each Annual Meeting following the 1997 meeting, the
successors to the class of directors whose term then expires shall be elected to
hold office for a term expiring at the third succeeding Annual Meeting.
At the 1998 Annual Meeting, three directors are to be elected to hold office
until the Annual Meeting of Stockholders in 2001 and until their successors are
elected and have qualified. It is the intention of the persons in the
accompanying proxy to vote all shares represented thereby for the election of
the three nominees listed below. Any stockholder who wishes to withhold from
the proxy holder's authority to vote for the election of one or more directors
may do so by marking his or her proxy to that effect. Should any nominee become
unable to accept nomination or election, the proxy holders may exercise their
voting power in favor of such other person or persons as the Board of Directors
of the Company may recommend. The Board of Directors, however, has no reason to
believe that any of the nominees listed below will be unable to serve as a
director. Elections of directors are to be determined by a plurality vote.
Two of the nominees are now directors of the Company. Their present positions
with the Company as well as certain other information with respect to all
nominees are set forth below:
<TABLE>
<CAPTION>
Year In Which
First Became
Name Age Position With Company Director
- -------------------- --- --------------------- -------------
<S> <C> <C> <C>
John W. Boyer, Jr... 69 Director 1984
Donald E. Lyons..... 68 Director 1989
</TABLE>
Mr. Boyer retired in May 1993 as Chairman of Philadelphia Suburban
Corporation whose principal subsidiary, Philadelphia Suburban Water Company, is
a regulated water utility. Mr. Boyer served in various senior executive
positions with that company since 1981. He is a director of Philadelphia
Suburban Corporation, Betz Laboratories, Inc. and Rittenhouse Trust Company.
Since 1993, Mr. Boyer has been Distinguished Visiting Professor of Finance,
Eastern College, St. Davids, Pennsylvania.
For five years prior to his retirement in 1987, Mr. Lyons served as Chief
Executive Officer and President of the Power Systems Group of Combustion
Engineering, Inc., a supplier of technology, equipment and services to the power
and process industries. Mr. Lyons is also Chairman of the Board of CANISCO
Resources, Inc.
The nonincumbent nominee, Mr. Dennis E. Foster, 57, has been President and
Chief Executive Officer of 360 Degrees Communications Company, formerly Sprint
Corporation's cellular and wireless division, since January 1996. Mr. Foster
joined Sprint in 1992 as Senior Vice President of operations for its local
telecommunications division and became President and Chief Operating Officer of
its cellular and wireless division in March 1993. Prior to joining Sprint, Mr.
Foster held management positions in the areas of marketing, regulatory and
corporate strategic planning, as well as operational assignments with AT&T and
GTE. He serves as Chairman of the Board of the Cellular Telephone Industry
Association's Foundation for Wireless Telecommunications. He also serves on the
board of trustees of Rush-Presbyterian St. Luke's Medical Center in Chicago and
the University of Findlay in Ohio.
3
<PAGE>
The other members of the Board who are not nominees for election at the Meeting
are as follows:
<TABLE>
<CAPTION>
Year In Which
First Became
Name Age Position With Company Director
- ---------------------------------------- --- --------------------------------- -------------
<S> <C> <C> <C>
Timothy S. Cobb......................... 56 Chairman of the Board, President, 1993
Chief Executive Officer and Director
Robert E. LaBlanc....................... 64 Director 1997
Paul H. Snyder.......................... 51 Senior Vice President, Chief 1995
Financial Officer and Director
Donald K. Wilson, Jr.................... 62 Director 1990
</TABLE>
Mr. Cobb has been Chairman of the Board since July 1995, Chief Executive
Officer of the Company since March 1994, and President and Chief Operating
Officer of the Company since October 1993. He served as President of
Gilbert/Commonwealth, Inc., then a subsidiary of the Company, from January 1991
to September 1993 and as President of GAI-Tronics, a subsidiary of the Company,
from June 1988 to December 1991. Mr. Cobb is a Class III director whose term
expires at the Annual Meeting in 2000.
Mr. LaBlanc has served as President of Robert E. LaBlanc Associates, an
information technologies consulting and investment banking firm, since 1981.
Prior to that, he was Vice Chairman of Continental Telecom, Inc., a major
telecommunications services company now merged with GTE. Mr. LaBlanc began his
career in the former Bell System and served as telecommunications analyst and
general partner with Salomon Brothers, Inc. before joining Continental. Mr.
LaBlanc is a Class III director whose term expires at the Annual Meeting in
2000.
Mr. Snyder was appointed Vice President of the Company in September 1995 and
Senior Vice President in February 1997. He has been Chief Financial Officer of
the Company since August 1995. He served as Vice President and Chief Financial
Officer of The Dreyfus Corporation from August 1994 until joining the Company.
For more than five years prior to joining Dreyfus, Mr. Snyder served as Senior
Vice President and Chief Financial Officer of Mellon PSFS. Mr. Snyder is a
Class II director whose term expires at the Annual Meeting in 1999.
Mr. Wilson retired in 1994 as Executive Vice President of The Hartford Steam
Boiler Inspection and Insurance Company, which is engaged in insurance
underwriting, investments and engineering. Mr. Wilson had served in various
executive positions with that company since 1970. He is also a director of
Mechanics Savings Bank in Hartford, Connecticut, and Spencer Turbine Company in
Windsor, Connecticut. He is presently serving as a consultant with American
Phoenix Corporation of Connecticut. Mr. Wilson is a Class II director whose
term expires at the Annual Meeting in 1999
B. MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors held a total of nine regular and special meetings
during 1997. Each incumbent director attended at least 75% of the total number
of meetings of the Board and committees of the Board held while he was a member
thereof.
The Board of Directors has established the following committees:
An audit committee consisting of J.A. Sutton, Chairman (resigned from the
Board September 24, 1997), D.K. Wilson, Jr., and D. E. Lyons which held two
meetings in 1997. This committee is primarily concerned with the effectiveness
of the Company's internal financial control systems and of the audits of the
Company's financial statements by the Company's independent accountants. Its
duties include recommending the selection of independent accountants; reviewing
the scope of audits to be conducted by independent accountants and internal
auditors and the results of such audits; and appraising the Company's financial
reporting activities and accounting policies.
4
<PAGE>
An executive development committee consisting of J. W. Boyer, Jr., Chairman,
R. E. LaBlanc, and J.A. Sutton (resigned from the Board September 24, 1997)
which held two meetings in 1997. The committee assists the Board in structuring
compensation and incentive plans for management, and assists management in the
review of candidates, succession and development of directors, officers and
management. Its duties include reviewing and recommending to the Board
compensation and other benefits for directors, officers and management; serving
as any committee required by incentive compensation plans for such Company
personnel; and reviewing with the Chief Executive Officer the internal
organization and key manpower planning and development of the Company.
The Board of Directors has not formed a separate standing nominating
committee.
C. BENEFICIAL OWNERSHIP OF EQUITY SECURITIES BY CERTAIN PERSONS
As of March 2, 1998, the number and percentage of equity securities of the
Company beneficially owned by (i) each of the directors or nominees for
director, (ii) each Executive Officer named in the Summary Compensation Table,
(iii) all Executive Officers and directors of the Company as a group and (iv)
all holders of more than five percent (5%) of the Class B Common stock are set
forth in the following table:
<TABLE>
<CAPTION>
CLASS B PERCENTAGE CLASS A PERCENTAGE
Individuals COMMON STOCK OF CLASS (1) COMMON STOCK OF CLASS(1)
----------- ---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
J. W. Boyer, Jr.................... 3,000 (2) *% 1,500 *
T. S. Cobb......................... 174,671 (2)(3)(4) 27.5 --- ---
D. E. Foster....................... --- --- --- ---
T. F. Hafer........................ 57,709 (2)(3)(4) 9.7 --- ---
R. E. LaBlanc...................... 1,000 * --- ---
D. E. Lyons........................ 5,960 (2) 1.1 --- ---
P. H. Snyder....................... 57,144 (2)(3)(4) 9.7 --- ---
D. K. Wilson, Jr................... 7,895 (2) 1.4 --- ---
All Executive Officers, directors
as a group........................ 307,379 (2)(3)(4) 44.8 1,500 *
Merrill Lynch & Company (5) 284,167 49.6 125,852 2.2
R.S. Newlan 40,830 (6) 7 --- ---
G.E. Troendle 52,121 (6) 8.9 --- ---
- -------------
</TABLE>
(1) Asterisks indicate beneficial ownership of less than 1% of the
outstanding shares of the class.
(2) Includes options held by Messrs. Boyer, Cobb, Hafer, Lyons, Snyder and
Wilson to purchase 3,000, 62,867, 22,250, 3,000, 16,000, and 6,000 shares,
respectively, of Class B Common Stock exercisable within 60 days.
(3) Includes shares purchased through March 2, 1998 on behalf of Mr. Cobb, Mr.
Snyder and Mr. Hafer under the Company's Stock Purchase Program and shares
for Mr. Hafer from contributions to the Payroll Stock Ownership portion of
the Retirement Savings Plan.
(4) Includes awards through March 2, 1998 of 58,500 shares of restricted stock
for Mr. Cobb and 21,500 shares of restricted stock each for Mr. Snyder and
Mr. Hafer. 20,000 of the restricted shares for Mr. Cobb and 8,000 each for
Mr. Snyder and Mr. Hafer are subject to stockholder approval of Proposal 2
described later in this Proxy Statement.
5
<PAGE>
(5) Merrill Lynch & Company, 265 Davidson Avenue, Somerset, NJ 08873 holds
through controlled nominees shares of the Company's Class B and Class A
Common Stock as trustee on behalf of present and past employees pursuant to
various employee benefit plans of the Company.
(6) The shares owned by R.S. Newlan and G.E. Troendle, respectively President
and Executive Vice President of Resource Consultants, Inc., 1960 Gallows
Road, Vienna, Virginia 22182, a subsidiary of the Company, include (i)
options held by Messers. Newlan and Troendle to purchase 13,500 and 12,100
shares, respectively, of Class B Common Stock exercisable within 60 days and
(ii) shares purchased through March 2, 1998 on behalf of Messrs. Newlan and
Troendle under the Company's Stock Purchase Program and the Resource
Consultants, Inc. 401(k) Profit Sharing Plan.
D. EXECUTIVE COMPENSATION AND OTHER INFORMATION
Board Committee Report on Executive Compensation
The Executive Development Committee of the Board assists the Board in
structuring compensation arrangements and incentive plans for the officers and
senior management of the Company. Decisions on compensation and the grant of
incentives are generally made by the members of the Committee, each of whom is a
non-employee director. All decisions by the Committee relating to the
compensation and incentives for the Company's officers are submitted to the full
Board for ratification or revision. Set forth below is the Committee's report
on the 1997 compensation of the Executive Officers of the Company.
Compensation Policies Toward Executive Officers
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the
allowable tax deduction of compensation paid by a publicly-held corporation to
its chief executive officer and its other four most highly compensated executive
officers employed at year-end, subject to certain pre-established objective
performance-based exceptions. The Committee intends to take Section 162(m) into
account when formulating its compensation policies for the Company's Chief
Executive Officer and its two other Executive Officers and to comply with
Section 162(m), if and where the Committee determines compliance to be
practicable and in the best interests of the Company and its stockholders.
The Committee utilizes the services of Sibson & Company, Inc., independent
compensation consultants, on an ongoing basis.
The Committee has established a compensation policy for the Company as
follows:
. Salary will be the basic compensation mechanism.
. The Annual Incentive Program, discussed below, will be used to provide
specific growth oriented incentives and rewards for achieving targeted
performance.
. Grants of stock options and/or restricted stock, coupled with a loan program
approved by stockholders in 1996, will be used to align management's
interests with stockholders' interests and encourage long-term investment
and interest in overall Company performance.
. Other benefit programs will be used to encourage ownership and retention of
Company stock by management personnel and employees generally.
The Committee applies these policies directly to the Executive Officers,
presidents of the Company's subsidiaries and certain other management personnel.
The Committee also reviews the compensation policies and practices of the
subsidiaries for general alignment and appropriateness across and between
subsidiary units.
6
<PAGE>
Relationship of Performance Under Compensation Plans
Salaries
Each year the Committee evaluates the salaries of the officers of the
Company. These are compared with information available about salaries in the
Company's industry, trends in executive salaries, and the performance of the
individuals. Depending upon the officer involved, the Committee may utilize
salary information relating to comparable companies or companies in other
businesses in which subsidiaries of the Company are engaged. The various
factors considered in the salary increase decision are not formally weighted and
the Committee uses subjective judgment in making its decisions.
The salary levels for Mr. Cobb and the other Executive Officers were slightly
above the median for companies within the same industry and of comparable size
to the Company. No salary increases were granted in 1997 to Mr. Cobb, Mr.
Snyder or Mr. Hafer.
Annual Incentive Program
In addition to the Executive Officers, the officers and key management of the
Company and its subsidiaries participate in an annual incentive program. Under
the program, incentive awards are made annually based on performance measured
against predetermined targets. For 1997, the targets for Executive Officers
were based on achieving financial performance levels related to the earnings per
share from continuing operations of the Company. In 1997, Mr. Cobb had a maximum
incentive opportunity equal to 100% of his salary and Messrs. Snyder and Hafer
had maximum incentive opportunities equal to 70% of their salaries. None of the
Executive Officers received an incentive award under this program for 1997.
The Board did award Messrs. Hafer and Snyder a bonus of 10% of their 1997
salary for their efforts throughout the year in selling a major portion of the
Company's real estate, marketing and selling certain subsidiary companies and
acquiring others in the telecommunications industry.
Stock Incentive Plans
Stock Options
In 1997, 502,100 stock options were granted to 119 employees, managers and
officers of the Company. The Executive Officers and others each received
options potentially exercisable for shares of the Company's Class B Common
Stock. The options for Messrs. Cobb, Snyder and Hafer and certain other
employees were awarded in January and December, 1997 and were based on each
individual's position and performance during 1996 and 1997 respectively.
Options were granted to certain other individuals, either as a condition of
employment with the Company or as a result of an acquisition by the Company.
The options granted to Messrs. Cobb, Snyder and Hafer represented 19.9%, 8% and
6.8%, respectively, of the total options granted.
Restricted Stock
In 1997, 80,000 shares of restricted stock were awarded to 7 officers and
managers of the Company. 39,000 shares of the Company's Class B Common Stock
were awarded in January 1997 based on the individuals' performances in 1996.
The shares and dividends relating to the January 1997 award are not available to
the recipients until the end of fiscal 2006; however, grant restrictions on all
or a portion of the shares could lapse at the end of 1999 if predetermined,
specific cumulative earnings per share targets are achieved. 41,000 shares of
the Company's Class B Common Stock were awarded in December 1997 based on the
individuals' performances in 1997. These shares will not be available to
7
<PAGE>
the recipients until the end of 2007, subject to possible release of the
restrictions at the end of 2000 if predetermined, specific cumulative earnings
per share targets are achieved.
The shares issued to Messrs. Cobb, Snyder and Hafer represent 50%, 19.4%, and
19.4%, respectively, of the total restricted shares awarded.
Stock Purchase Assistance Plan
Selected key executives of the Company and certain subsidiaries may be
extended Company loans for the purpose of acquiring Company stock as well as to
refinance loans previously incurred in the purchase of Company stock. All loans
are full recourse loans, evidenced by promissory notes, and secured by the
shares purchased or refinanced with loan proceeds. Loan interest, at the
Company's approximate cost of borrowing, is payable quarterly with principal
payments generally due in 10 equal annual installments.
Under the provisions of the Plan, $475,000 was advanced to two individuals
during 1997 for the purchase of Company stock. An advance to Mr. Cobb
represented 48.4% of the total.
It is the intent of the Company that stock purchased as a result of the
exercise of options, receipt of restricted stock and stock acquired with
proceeds of Company loans will be held by the executives as long-term personal
assets. The Company believes that this will align management's interest with
stockholders' interests in the future performance of the Company. Based on
certain minimum collateral requirements, stock purchased with a loan from the
Stock Purchase Assistance Plan is held by the Company until the loan is repaid.
Restricted stock is held by the Company until the stock vests. However, there
are no contractual or other restrictions limiting the disposition of such stock
thereafter.
EXECUTIVE DEVELOPMENT COMMITTEE
JOHN W. BOYER, JR., CHAIRMAN
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Prior to 1997, the Company had announced its intention to focus its business
on the manufacturing and sales of telecommunications equipment and services. In
the first quarter of 1997, the Company elected discontinued operations
accounting treatment for SRA Technologies, Inc. (SRA) and Resource Consultants,
Inc. (RCI), its two remaining subsidiaries not in the telecommunications field,
and for its real estate holdings. By the middle of 1997, SRA and most of the
company's real estate had been sold and negotiations for the sale of RCI were
underway.
As a result, the Peer Group used to compare returns to Company stockholders
up to 1997 is no longer appropriate since it focused on technical and consulting
services. For 1997 and the future, the Company will use a new Peer Group made
up of all of the companies in the S & P Small Cap 600 Communications Equipment
Companies Index. This group, with its emphasis on telecommunications equipment
and containing several direct competitors of the Company's telecommunications
subsidiaries, will provide a more accurate comparison for the returns on Company
stock. The chart below includes the new Peer Group as well as the old Peer
Group. The old Peer Group is made up of companies contained within the Standard
Industry Code 8711 which must file an Annual Report with the Securities and
Exchange Commission. Use of the old Peer Group will be discontinued hereafter.
The following graph shows the cumulative total stockholder return on the
Company's Class A Common Stock over the last five fiscal years as compared to
the returns of the Nasdaq Stock Market Index and the Peer Groups just described.
The graph assumes $100 was invested on December 31, 1992 in each company
involved and all dividends were reinvested.
8
<PAGE>
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/92 12/93 12/94 12/95 12/96 12/97
SALIENT 3 COMMUNICATIONS, INC. 100 81 78 73 84 77
OLD PEER GROUP (PRE 1997) 100 82 60 73 81 75
NEW PEER GROUP (1997) 100 133 150 241 252 215
NASDAQ STOCK MARKET - US 100 115 112 159 195 240
</TABLE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal 1997, 1996 and 1995, the cash compensation
paid by the Company, as well as other compensation paid, accrued or awarded for
those years, to the Company's Chief Executive Officer and to each of the
remaining most highly compensated Executive Officers whose total annual salary
and bonus exceeded $100,000 in fiscal 1997 (collectively, the "Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS
ANNUAL --------------------------------
COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#)(1) COMPENSATION($)
- ---------------------- ---- --------- ---------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
T. S. COBB 1997 390,000 0 540,000 (2) 100,000 29,300 (3)
PRESIDENT & CHIEF 1996 389,423 390,000 231,250 37,000 28,846
EXECUTIVE OFFICER 1995 374,998 95,700 --- 60,000 28,904
P. H. SNYDER 1997 200,000 20,000 208,875 (2) 40,000 24,300 (3)
SR. VICE PRESIDENT & 1996 199,615 100,000 75,000 12,000 32,800
CHIEF FINANCIAL OFFICER 1995 89,423 60,000 --- 10,000 10,357
T. F. HAFER 1997 195,000 19,500 208,875 (2) 34,000 24,300 (3)
SR. VICE PRESIDENT, GENERAL 1996 194,615 97,500 75,000 12,000 23,846
COUNSEL & SECRETARY 1995 169,808 50,200 --- 4,000 23,904
</TABLE>
(1) See footnote 1 to the following Stock Option table.
9
<PAGE>
(2) Restricted stock was awarded in January and December 1997. Mr. Cobb
received a total of 40,000 shares, Mr. Snyder 15,500 shares and Mr. Hafer
15,500 shares. All restricted stock is Class B Common Stock and will vest
and be distributed at the end of ten years or at the end of the three year
period following the award if certain earnings per share goals are met for
that period. Any dividends on the stock will be held by the Company and
distributed when the stock vests. 20,000 of the restricted shares for Mr.
Cobb and 8,000 restricted shares each for Mr. Snyder and Mr. Hafer are
subject to stockholder approval of Proposal 2 described later in this Proxy
Statement. The aggregate value at the end of fiscal 1997 of the 58,500
shares of restricted stock held by Mr. Cobb was $658,125, $241,875 for the
21,500 shares held by Mr. Snyder, and $241,875 for the 21,500 shares held by
Mr. Hafer.
(3) Includes in 1997: (a) for Mr. Cobb, Mr. Snyder, and Mr. Hafer, Company
contributions of $11,200 to each of their accounts under the Company's
Retirement Savings Plan and $3,100 to each of their accounts in the
Company's Stock Purchase Program; (b) for Mr. Cobb, Mr. Snyder and Mr.
Hafer, taxable expense reimbursements of $15,000, $10,000 and $10,000,
respectively.
STOCK OPTIONS
The following table contains information concerning the stock options granted
to Executive Officers during 1997 under the Company's Long Term Incentive Plan:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM ($)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------
NAME GRANTED(1) 1997 PER SHARE ($) DATE 5% 10%
- -------------- ---------- ----------- ------------- -------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
T. S. COBB 50,000 9.96% 14.25 1/6/07 448,087 1,135,542
50,000 9.96 12.75 12/10/07 400,920 1,016,011
P. H. SNYDER 20,000 3.98 14.25 1/6/07 179,235 454,217
20,000 3.98 12.75 12/10/07 160,365 406,404
T. F. HAFER 17,000 3.39 14.25 1/6/07 152,350 386,084
17,000 3.39 12.75 12/10/07 136,313 345,444
- -------------
</TABLE>
(1) Options cannot be exercised for at least two years from the date of grant.
The exercise price is the fair market value of the stock on the date of
grant. The options granted December 10, 1997 are subject to stockholder
approval at the Meeting of an increase in the number of shares available
under the Long Term Incentive Plan. See Proposal 2.
AGGREGATE OPTION EXERCISES AND YEAR-END VALUES
The following table shows stock options exercised by Executive Officers
during 1997, including the aggregate value of any gains on the date of exercise.
In addition, this table includes the number of shares of Class B Common Stock
covered by both exercisable and non-exercisable stock options as of January 2,
1998. Also reported are the values for "in-the-money" options which represent
the positive spread between the exercise price of outstanding stock options and
the year-end price of Company Class A Common Stock.
10
<PAGE>
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
----------------------------- ---------------------------
SHARES
ACQUIRED VALUE NOT NOT
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE EXERCISABLE(2) EXERCISABLE EXERCISABLE(2)
- -------------- -------------- --------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
T. S. COBB ---- ---- 44,367 165,133 ---- ---
T. F. HAFER ---- ---- 16,250 46,000 ---- ---
P. H. SNYDER ---- ---- 10,000 52,000 ---- ---
- ------------
</TABLE>
(1) Determined by deducting the exercise price from the January 2, 1998 market
price of the Company's common stock.
(2) Future exercise is subject to continued employment by the Company for at
least two years from the date the options were granted, subject to
acceleration for retirement, death or total disability.
COMPENSATION COMMITTEE INTERLOCKS
There were no Executive Development Committee interlocks during 1997.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has no formal contracts of employment with its Executive
Officers. In 1989, the Board of Directors adopted a Benefit Equalization Plan
which provides supplemental retirement income to several retired officers of the
Company and its subsidiaries. In 1997, the Board added Messrs. Cobb, Snyder and
Hafer to the Plan. Payments under the Plan will be made to those three
Executive Officers only to the extent that income from Social Security, the
Company-paid portions of Company retirement plans, the value of any restricted
stock which has vested by the passage of time, and retirement income plans of
other employers do not equal 50% of an individual's average annual salary for
the three highest paid years. In the event of a change of control, as defined
in the Plan, any payments due will be accelerated, such payments being
essentially the present value of the stream of payments which would have been
made had there been no change of control. The Plan is unfunded and terminates
for an individual upon termination of employment for any reason other than
retirement, death or disability.
DIRECTOR COMPENSATION
Each Board Member, other than officers of the Company, receives an annual
retainer of $18,000; committee chairmen receive an additional $5,000. Each such
director also receives $1,000 for each committee or Board meeting attended.
Messrs. Boyer and Lyons each received a $1,000 fee for a special assignment in
1997.
In 1996, the Board adopted and the Stockholders approved the Directors' Stock
Option Plan. Under the terms of that plan, each non-employee Board member may
elect to receive stock options in lieu of all or a specified portion of his
annual retainer to be earned during that year.
11
<PAGE>
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE LONG TERM
INCENTIVE PLAN.
The Long Term Incentive Plan was adopted by the Board of Directors and
approved by the stockholders in 1996. The purposes of the Plan are to provide
long term incentive compensation to officers, executives and other key employees
who contribute to the growth and success of the Company and its subsidiaries;
to attract and retain individuals of outstanding ability; and to align the
interests of such officers, executives and other key employees with the
interests of the Company's stockholders. Participants are selected by a
committee of the Board. Although the Plan permits awards to be made to any
employee of the Company, the committee has limited participation in the plan to
employees holding positions of significant responsibility or whose performance
or potential will benefit the future success of the Company. Approximately 120
employees currently occupy positions which would be considered for awards under
the Plan.
Since the Plan's adoption on March 15, 1996, 80 employees of the Company have
received stock awards under the Plan. All have received restricted stock and/or
non-statutory stock options. 59 of the employees receiving awards are from
subsidiary companies acquired since the Plan was adopted. Of the 500,000 shares
of Company common stock originally available under the Plan, 75,500 have been
awarded as restricted stock and options have been granted on 419,750 shares
under the Plan, leaving 4,750 shares available for future awards.
The Board believes that the Plan has helped the Company compete for and retain
high-caliber personnel. This is particularly important in this acquisition
phase of the Company's growth when it is vital to retain key employees of new
subsidiaries. The Board believes that it is in the best interest of the Company
to continue the Plan. To do this, it is necessary to make additional shares of
the Company available for Plan awards. Accordingly, the Board recommends that
the stockholders approve the addition of 600,000 shares of Company common stock
for use by the Plan.
Currently, the Plan limits restricted stock awards to 230,000 of the original
500,000 shares available, which is 46% of the total. With the addition of
600,000 shares to the Plan, the Board believes it is reasonable to increase the
restricted stock limit to 506,000 shares, retaining the 46% limit effectively
contained within the Plan.
Awards under the Plan may be in the form of any of the following: non-
statutory stock options; incentive stock options; restricted stock; performance
units; stock equivalent units; dividend equivalents; stock appreciation rights;
and other stock-based awards. All stock awards are in common stock of the
Company. No single participant may receive awards (i) in the form of options
and/or stock appreciation rights with respect to more than 20% of the available
shares and (ii) for more than 40,000 shares of restricted stock in any one year.
The Plan provides that the option price pursuant to which common stock of the
Company may be purchased will not be less than 100% of the fair market value of
the Company's Class A Common Stock on the date the stock option is awarded. On
March 2, 1998, the fair market value of the Class A Common Stock as reported on
the Nasdaq Stock Market was $11.625. The term of each option may not exceed 10
years and will be fixed by the committee.
The members of the committee of the Board who select participants can not
receive awards under the Plan. The Board may amend, suspend or terminate the
Plan at any time. No award may be made under the Plan after March 15, 2006.
No amendments of the Plan are proposed other than the addition of the 600,000
shares to be available for awards under the Plan and increasing the restricted
share limit to 506,000 shares.
12
<PAGE>
3. PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE
DIRECTORS' STOCK OPTION PLAN.
The Directors' Stock Option Plan was also approved by the stockholders in
1996. The Plan is intended to encourage and enable acquisition of Company stock
by directors in order to promote a close identity of interests between the
Company, its directors and its stockholders. All non-employee directors are
eligible to participate in the Plan. There are currently four persons so
eligible, and this will increase by one if Mr. Foster is elected at the Meeting.
Options are granted automatically on the first day of each Plan year which
begins July 1. Options are issued to each director who has filed an election to
receive stock options in lieu of all or a specified portion of his annual
retainer to be earned during the next Plan year. Options granted under the Plan
will entitle the optionee to purchase shares of Company common stock at a price
equal to 75% of the fair market value of the stock on the date of grant. The
number of options for shares of stock each director will be entitled to receive
is determined by dividing such director's annual retainer (or the portion
thereof which the director has elected to receive as stock options) by 25% of
the fair market value of a share of Company Class A Common Stock. Options
granted have a term of 20 years but may not be exercised before the twelve-month
anniversary of the date upon which they were granted. Of the 50,000 shares
originally available for the Plan, 29,400 options have been awarded to five
directors. The 20,600 shares remaining available are expected to be inadequate
for future awards of options under the Plan. The Board proposes to amend this
Plan by increasing the available shares by an additional 75,000 shares of
Company stock. No other amendments to the Plan are proposed.
4. PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE DIRECT STOCK
PURCHASE PLAN.
The Direct Stock Purchase Plan began in 1991 as a means by which employees of
the Company and its subsidiaries could purchase Class B Common Stock of the
Company directly from the Company and avoid paying brokerage commissions. At
present, 2,100 employees can participate in the Plan. The purchase price is the
closing price for Company Class A Common Stock as published in the last issue of
the Wall Street Journal preceding the date of purchase. The Company made
available 200,000 shares of stock under the Plan for this purpose, of which
20,901 remain. The Company is benefited by making it convenient for employees
to invest their own funds in the stock of the Company and proposes to amend this
Plan by increasing the available shares by an additional 100,000 shares of
Company stock. No other amendments to the Plan are proposed.
5. PROPOSAL TO RATIFY THE BOARD OF DIRECTORS' SELECTION OF ARTHUR ANDERSEN LLP
AS INDEPENDENT AUDITORS FOR THE YEAR 1998.
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent accountants, to audit the accounts of the Company for the year 1998
and requests that such selection be ratified by stockholders. Although
submission to stockholders of the appointment of the independent auditors is not
required by law, the Board of Directors, in accordance with its long-standing
policy of seeking annual stockholder ratification of the selection of auditors,
believes it appropriate that such selection be ratified by the stockholders. The
Company has been advised that neither that firm nor any of its partners has any
material direct or indirect relationship with the Company or its subsidiaries.
A representative from Arthur Andersen will attend the Meeting, will have an
opportunity to make a statement if so desired, and will be available to respond
to appropriate questions at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 THROUGH 5.
STOCKHOLDER PROPOSALS
If a holder of Class B Common Stock has a proposal which he or she intends to
present at the 1999 Annual Meeting, it must be received by the Company on or
before December 9, 1998 in order to be considered for inclusion in the Company's
Proxy Statement and Proxy for such meeting. Stockholder
13
<PAGE>
proposals should be submitted to Thomas F. Hafer, Secretary of the Company, at
the address indicated on the first page of this Proxy Statement.
OTHER MATTERS
The Board of Directors does not intend to bring any other matter before the
Meeting and has not been informed of any other business which others may bring
before the Meeting. However, if any other matters should properly come before
the Meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying Proxy to vote on such matters as they, in their
discretion, may deem advisable.
The Company will pay all costs of soliciting Proxies in the accompanying
form. Solicitation will be made by mail, and officers and other employees of
the Company may also solicit Proxies by telephone, telecopy or personal
interview.
By order of the Board of Directors,
Thomas F. Hafer,
Secretary
April 9, 1998
14
<PAGE>
SALIENT 3 COMMUNICATIONS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING APRIL 29, 1998
The undersigned hereby appoints TIMOTHY S. COBB and PAUL H. SNYDER, and each of
them, with full power of substitution, attorneys and proxies to represent the
undersigned at the annual meeting of Salient 3 Communications, Inc. to be held
on Wednesday, April 29, 1998, and at any adjournment thereof, and to there vote,
as indicated below, all shares of Class B Common Stock that the undersigned
would possess if personally present.
MARK ALL CHOICES LIKE THIS [X] SIGN AS YOUR NAME APPEARS ON YOUR STOCK, DATE
AND RETURN IN ENCLOSED ENVELOPE.
1. Election of Directors [_] Vote for all (except as marked to the contrary
below)
[_] Withhold from voting for all
[_] J.W. Boyer, Jr. [_] D.E. Foster [_] D.E. Lyons
For Against Abstain
2. Proposal to Approve amendment
of the Long Term Incentive [_] [_] [_]
Plan by adding 600,000 shares.
For Against Abstain
3. Proposal to Approve amendment
of the Directors' Stock Option [_] [_] [_]
Plan by adding 75,000 shares.
For Against Abstain
4. Proposal to Approve amendment
of the Direct Stock Purchase [_] [_] [_]
Plan by adding 100,000 shares.
For Against Abstain
5. Proposal to Ratify the Board's
selection of Arthur Andersen LLP [_] [_] [_]
as independent auditors for 1998.
- ---------------------------- ------------------------------- ---------
SIGNATURE OF STOCKHOLDER PLEASE PRINT YOUR NAME ALSO DATE
