<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:
[_] 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 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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(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 27, 1999
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 Tuesday, April
27, 1999 at 11:00 o'clock in the morning (local time):
1. For the election of two (2) directors of the Company;
2. To consider a proposal to ratify the Board of Directors' selection of
Arthur Andersen LLP as independent auditors for the year 1999; 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 February 27, 1999 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: March 31, 1999
Stockholders are urged to sign, date and promptly mail the enclosed Proxy
in the accompanying envelope or to promptly telephone voting instructions if the
proxy so provides. 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 have provided Proxy instructions
by telephone, these may be revoked by calling the same telephone number you
originally used and following the instructions for revocation prior to 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 27, 1999
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 Tuesday, April 27, 1999,
and at any adjournment thereof. The Proxy Statement and form of Proxy are first
being sent or given to stockholders on or about March 31, 1999.
Only holders of record at the close of business on February 27, 1999 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
February 27, 1999, there were outstanding of record 509,031 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 5,597,327 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 (or voting
instructions are telephoned if so indicated on the Proxy) in time to be voted at
the Meeting, the shares represented by the Proxy will be voted in accordance
with the instructions thus provided. Signed Proxies not marked to the contrary
will be voted (1) for the election of management's nominees as directors and (2)
for the proposal to ratify the Board of Directors' selection of Arthur Andersen
LLP as independent auditors for the year 1999, 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 at the meeting, is required for
approval of Proposal 2. 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 at the meeting. 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 provided
instructions concerning the voting of the shares. 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 1, 1999, 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.
<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 2001; Class II
directors until the Annual Meeting in 1999; and Class III directors until the
Annual Meeting in 2000. At each Annual 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 1999 Annual Meeting, two directors are to be elected to hold office
until the Annual Meeting of Stockholders in 2002 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 two nominees listed below. 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.
Each of the nominees is now a director of the Company. Their present
positions with the Company as well as certain other information are set forth
below:
<TABLE>
<CAPTION>
Name Age Position With Company Director Since
- ---------------------------------- --- ---------------------------- --------------
<S> <C> <C> <C>
Paul H. Snyder.................... 52 Senior Vice President, Chief 1995
Financial Officer and Director
Donald K. Wilson, Jr.............. 63 Director 1990
</TABLE>
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 September 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 served as a consultant
with American Phoenix Corporation from 1994 to 1998. He is presently a managing
member of Green, Wilson & Associates, which provides counsel to philanthropic
organizations. He is also a director of Mechanics Savings Bank and Spencer
Turbine Company. Mr. Wilson presently chairs the Boards of Watkinson School and
the Hartford Action Plan on Infant Health. Mr. Wilson is a Class II director
whose term expires at the Annual Meeting in 1999
The other members of the Board who are not nominees for election at the Meeting
and who will continue to serve as directors following the Meeting are as
follows:
<TABLE>
<CAPTION>
Name Age Position With Company Director Since
- ---------------------------------------- --- --------------------------------- --------------
<S> <C> <C> <C>
John W. Boyer, Jr....................... 70 Director 1984
Timothy S. Cobb......................... 57 Chairman of the Board, President, 1993
Chief Executive Officer and Director
Dennis E. Foster........................ 58 Director 1998
Robert E. LaBlanc....................... 65 Director 1997
Donald E. Lyons......................... 69 Director 1989
Dennis F. Strigl........................ 52 Director 1998
</TABLE>
2
<PAGE>
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 Rittenhouse Trust
Company and a limited partner of Strategic Advisors International, Inc., a
family business consulting firm. Since 1993, Mr. Boyer has been Distinguished
Visiting Professor of Finance, Eastern College, St. Davids, Pennsylvania. Mr.
Boyer is a Class I director whose term expires at the Annual Meeting in 2001.
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 Corporation, 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. Foster became Vice Chairman of Alltel Corporation, Inc., which provides
telecommunications and information services, when it merged in 1998 with 360/0/
Communications Company, formerly Sprint Corporation's cellular and wireless
division. Mr. Foster had been President and Chief Executive Officer of 360/0/
Communications Company 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. Mr. Foster is a Class I director whose term
expires at the Annual Meeting in 2001.
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 currently a director of Storage Technology Corp., Titan Corp., a
family of Prudential Mutual Funds, and two wholly owned subsidiaries of
Singapore Technologies Pte Ltd. Mr. LaBlanc is a director of Norwood Venture
Corp. and Chairman of the Advisory Board of Edleson Technology Partners, both
venture capital companies. Mr. LaBlanc also serves as a trustee of Manhattan
College. Mr. LaBlanc is a Class III director whose term expires at the Annual
Meeting in 2000.
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. Mr. Lyons is a Class I director whose term expires at the
Annual Meeting in 2001.
Mr. Strigl has served as President and Chief Executive Officer of Bell
Atlantic Mobile since 1991 and as Group President and Chief Executive Officer of
Bell Atlantic Global Wireless Group since 1997, both providing cellular
telephone and wireless communications networks and equipment. He joined Bell
Atlantic Mobile in 1989, serving as Vice President-Product Management for
Network Services and later as Vice President-Operations and Chief Operating
Officer, and a member of the Board of Directors of New Jersey Bell. Mr. Strigl
is a director of General Magic Incorporated, Grupo Iusacell S.A. de C.V. and the
Cellular Telecommunications Industry Association, serving as Chairman of the
latter for 1996-1997. Mr. Strigl was appointed to the Board on July 29, 1998,
filling a vacancy existing at that time. He serves as a Class III director
whose term will expire at the Annual Meeting in 2000.
3
<PAGE>
B. MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors held a total of six regular and special meetings
during 1998. 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 D. K. Wilson, Jr., Chairman, J. W. Boyer,
Jr., D. E. Foster, R. E. LaBlanc and D. E. Lyons which held two meetings in
1998. 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.
An executive development committee consisting of J. W. Boyer, Jr., Chairman,
R. E. LaBlanc, D. E. Foster, D. E. Lyons and D. K. Wilson which held four
meetings in 1998. 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 February 27, 1999, 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.................... 5,400(2) 1.0% 6,500 *
T. S. Cobb......................... 227,572(2)(3)(4) 37.8 --- ---
D. E. Foster....................... 2,000 * --- ---
T. F. Hafer........................ 75,097(2)(3)(4) 13.9 --- ---
R. E. LaBlanc...................... 18,000 3.5 --- ---
D. E. Lyons........................ 8,828(2) 1.7 --- ---
P. H. Snyder....................... 78,767(2)(3)(4) 14.7 --- ---
D. E. Strigl....................... --- --- 200 *
D. K. Wilson, Jr................... 11,495(2) 2.2 --- ---
All Executive Officers, directors
as a group (nine persons).......... 427,159(2)(3)(4) 62.7 6,700 *
Merrill Lynch & Company (5)........ 169,907 33.4 193,613 3.5
</TABLE>
- ---------------------
(1) Asterisks indicate beneficial ownership of less than 1% of the outstanding
shares of the class.
4
<PAGE>
(2) Includes options held by Messrs. Boyer, Cobb, Hafer, LaBlanc, Lyons, Snyder
and Wilson to purchase 5,400, 92,914, 30,000, 3,000 5,400, 26,000, and 9,600
shares, respectively, of Class B Common Stock exercisable within 60 days.
(3) Includes shares purchased through February 27, 1999 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 February 27, 1999 of 80,500 shares of restricted
stock for Mr. Cobb and 30,300 shares of restricted stock each for Mr. Snyder
and Mr. Hafer.
(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.
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 1998 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.
5
<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 increase was granted in 1998 to Mr. Cobb; Mr. Snyder
and Mr. Hafer each received a $10,000 increase.
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 1998, 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 1998, Mr. Cobb had a maximum
incentive opportunity equal to 150% of his salary and Messrs. Snyder and Hafer
had maximum incentive opportunities equal to 70% of their salaries. For 1998,
Mr. Cobb was awarded a bonus of 38.5% of his salary; Messrs. Snyder and Hafer
were awarded a bonus of 28.6% and 29.3% of their respective salaries.
Stock Incentive Plans
Stock Options
-------------
In 1998, 327,000 stock options were granted to 216 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 other employees were
awarded in December, 1998 and were based on each individual's position and
performance during 1998 respectively. The options granted to Messrs. Cobb,
Snyder and Hafer represented 16.8%, 6.7% and 5.7%, respectively, of the total
options granted.
Restricted Stock
----------------
In 1998, 45,000 shares of restricted stock were awarded to 7 officers and
managers of the Company based on the individuals' performances in 1998. These
shares will not be available to the recipients until the end of 2008, subject to
possible release of the restrictions at the end of 2001 if predetermined
cumulative earnings per share targets are achieved. Shares issued to Messrs.
Cobb, Snyder and Hafer represent 48.9%, 19.6%, and 19.6%, respectively, of the
total 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
6
<PAGE>
annual installments. Under the provisions of the Plan, $153,188 was advanced to
three individuals during 1998 for the purchase of Company stock. Advances to Mr.
Snyder and Mr. Hafer represented 34.5% and 6.7%, respectively, of the total. The
largest aggregate amount of indebtedness outstanding during 1998 under the Plan
for Messers. Cobb, Snyder and Hafer was $392,000, $213,075 and $100,313,
respectively. Their outstanding balances for March 31, 1999, are $392,000,
$162,386, and $85,107, respectively.
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
In order to compare returns to Company stockholders, the Company uses a Peer
Group made up of all of the companies in the S & P Small Cap 600 Communications
Equipment Companies Index, which emphasizes telecommunications equipment and
contains several direct competitors of the Company's telecommunications
subsidiaries.
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 Group just described.
The graph assumes $100 was invested on December 31, 1993 in each company
involved and all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SALIENT 3
COMMUNICATIONS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
[line chart appears here]
Cumulative Total Return
----------------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
Salient 3
Communications, Inc. 100 97 90 104 96 71
Peer Group 100 116 197 196 173 161
NASDAQ Stock Market (U.S.) 100 98 138 170 209 293
7
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal 1998, 1997 and 1996, 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 $100,000 in fiscal 1998 (collectively, the "Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
-------------------------
ANNUAL RESTRICTED SECURITIES
NAME AND COMPENSATION STOCK UNDERLYING ALL OTHER
-------------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#)(1) COMPENSATION($)
- ----------------------------- ---- ------- ---------- ------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
T. S. Cobb 1998 390,000 150,000 209,000(2) 55,000 29,113(3)
President & Chief 1997 390,000 0 540,000 100,000 29,300
Executive Officer 1996 389,423 390,000 231,250 37,000 28,846
P. H. Snyder 1998 210,000 60,000 83,600(2) 22,000 24,113(3)
Sr. Vice President & 1997 200,000 20,000 208,875 40,000 24,300
Chief Financial Officer 1996 199,615 100,000 75,000 12,000 32,800
T. F. Hafer 1998 205,000 60,000 83,600(2) 18,700 24,113(3)
Sr. Vice President, General 1997 195,000 19,500 208,875 34,000 24,300
Counsel & Secretary 1996 194,615 97,500 75,000 12,000 23,846
</TABLE>
- ----------------
(1) See footnote 1 to the following Stock Option table.
(2) Restricted stock was awarded in December 1998. Mr. Cobb received a total of
22,000 shares and Messers Snyder and Hafer 8,800 shares each. 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. The aggregate value at the end of fiscal 1998 of the 80,500
shares of restricted stock held by Mr. Cobb was $734,563, $276,488 for the
30,300 shares held by Mr. Snyder, and $276,488 for the 30,300 shares held by
Mr. Hafer.
(3) Includes in 1998: (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 $2,913 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 $10,000,
respectively.
STOCK OPTIONS
The following table contains information concerning the stock options granted
to Executive Officers during 1998 under the Company's Long Term Incentive Plan:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION OPTION TERM ($)
---------------------
NAME GRANTED(1) 1998 PER SHARE ($) DATE 5% 10%
- -------------- ---------- ---- ----------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
T. S. Cobb 55,000 16.8% 9.50 12/9/08 328,597 832,730
P. H. Snyder 22,000 6.7 9.50 12/9/08 131,439 333,092
T. F. Hafer 18,700 5.7 9.50 12/9/08 111,723 283,128
</TABLE>
8
<PAGE>
(1) Options cannot be exercised for at least two years from the date of grant.
The exercise price is the fair market value of the stock on the date of
grant.
AGGREGATE OPTION EXERCISES AND YEAR-END VALUES
The following table shows stock options exercised by Executive Officers
during 1998, including the aggregate value of any gains on the date of exercise.
In addition, this table includes the number of shares of Class B Common Stock
covered by both exercisable and non-exercisable stock options as of January 1,
1999. Also reported are the values for "in-the-money" options which represent
the positive spread between the exercise price of outstanding stock options and
the year-end price of Company Class A Common Stock.
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(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 ---- ---- 67,914 194,086 ---- ---
T. F. Hafer ---- ---- 21,500 58,700 ---- ---
P. H. Snyder ---- ---- 16,000 68,000 ---- ---
</TABLE>
- -------------------
(1) Determined by deducting the exercise price from the January 1, 1999 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 1998.
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, and the value of any
restricted stock which has vested by the passage of time 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.
9
<PAGE>
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.
2. PROPOSAL TO RATIFY THE BOARD OF DIRECTORS' SELECTION OF ARTHUR ANDERSEN LLP
AS INDEPENDENT AUDITORS FOR THE YEAR 1999.
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent accountants, to audit the accounts of the Company for the year 1999
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 PROPOSAL 2.
STOCKHOLDER PROPOSALS
If a holder of Class B Common Stock has a proposal which he or she intends to
present at the 2000 Annual Meeting, it must be received by the Company on or
before November 30, 1999 in order to be considered for inclusion in the
Company's Proxy Statement and Proxy for such meeting. Stockholder 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
March 31, 1999
10
<PAGE>
SALIENT 3 COMMUNICATIONS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING APRIL 27, 1999
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 Tuesday, April 27, 1999, 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 [_]. 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
[_] P.H. Snyder [_] D.K. Wilson, Jr.
For Against Abstain
2. Proposal to Ratify the Board's selection [_] [_] [_]
of Arthur Andersen LLP as independent
auditors for 1999.
- ---------------------------- --------------------------- ------------
SIGNATURE OF STOCKHOLDER PLEASE PRINT YOUR NAME ALSO DATE
