SOLICITATION OF PROXIES
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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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
.......................................................................
Applied Signal Technology, Inc.
Applied Signal Technology, Inc.
Brian M. Offi
Vice President-Finance, CFO
400 West California Avenue
Sunnyvale, CA 94086
.......................................................................
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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APPLIED SIGNAL TECHNOLOGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 9, 2000
The 2000 Annual Meeting of Shareholders of Applied Signal
Technology, Inc. (the "Company") will be held at the Sheraton Hotel,
located at 1100 N. Mathilda Avenue, Sunnyvale, California, on March 9,
2000 at 4:00 p.m., local time, for the following purposes:
1. To elect three (3) Class II directors to hold office
until the 2002 Annual Meeting of Shareholders or
until their respective successors are elected and
qualified.
2. To vote on a proposal to ratify the appointment of
Ernst & Young LLP as the independent auditors for the
Company for the fiscal year ending October 31, 2000.
3. To transact such other business as may properly come
before the meeting, or any adjournment thereof.
Shareholders of record at the close of business on January 18,
2000 are entitled to notice of, and to vote at, this meeting and any
continuation or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary L. Yancey
----------------------------------
Gary L. Yancey, President
Sunnyvale, California
January 28, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED
TO SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN
ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
APPLIED SIGNAL TECHNOLOGY, INC.
400 West California Avenue
Sunnyvale, California 94086
(408) 749-1888
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of Applied Signal Technology, Inc., a
California corporation (the "Company"), of Proxies for use at the Annual Meeting
of Shareholders to be held on March 9, 2000, or any adjournment thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting. This Proxy
Statement and accompanying Proxy are first being sent to shareholders,
on approximately, February 8, 2000. The cost of the solicitation
of Proxies will be borne by the Company. The Board may use the services of
the Company's directors, officers and others to solicit Proxies, personally or
by telephone. The Board may also arrange with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the stock held of record by such persons and the Company
may reimburse them for their reasonable out-of-pocket expenses incurred in so
doing. The Annual Report to Shareholders for the fiscal year ended October 31,
1999, including financial statements mailed to shareholders concurrently with
the mailing of this Proxy Statement.
VOTING RIGHTS
The voting securities of the Company entitled to vote at the Annual
Meeting consist of shares of Common Stock. Only shareholders of record at the
close of business on January 18, 2000 are entitled to notice of and to vote at
the annual meeting. On that date, there were 8,388,441 shares of the Company's
Common Stock issued and outstanding. Each share of Common Stock is
entitled to one vote. The Company's Bylaws provide that a majority of
all of the shares of the stock entitled to vote, whether present in person or
by proxy, shall constitute a quorum for the transaction of business at the
meeting. If an executed Proxy is submitted without any instruction for the
voting of such Proxy, the Proxy will be voted in favor of the proposals
described.
All shares represented by valid Proxies received prior to the Annual
Meeting will be voted and, where a shareholder specifies by means of the Proxy a
choice with respect to any matter to be acted upon, the shares will be voted in
accordance with the specifications so made. A shareholder who signs and
returns a Proxy will have the power to revoke it at any time before it is
voted. A Proxy may be revoked by filing with the Secretary of
the Company a written revocation or duly executed Proxy bearing a later
date, or by appearing at the Annual Meeting and electing to vote in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of January 3, 2000 by (i)
each person who is known by the Company to own beneficially more than 5 percent
of the outstanding Common Stock of the Company, (ii) each of the Company's
directors and director-nominees, (iii) the Chief Executive Officer and the other
executive officers of the Company whose total salary and bonus for the year
ended October 31, 1999 exceeded $100,000, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER OF GROUP BENEFICIALLY COMMON STOCK
AND NATURE OF BENEFICIAL OWNERSHIP(1) OWNED OUTSTANDING
- -------- ---------------- ------------
<S> <C> <C>
Dimensional Fund ADV 605,200 7.3 **
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Dalton, Greiner, Hartman, Maher & Co 544,300 6.5 **
565 Fifth Avenue, Suite 2101
New York, NY 10017
John R. Treichler 505,601 (4) 6.1
David D. Elliman 496,656 (2) 6.0
18 East 74th Street
New York, NY 10021
Gary L. Yancey 442,241 (5) 5.3
James F. Collins 415,551 (3) 5.0
Capital Technology 307,600 3.6
McMulllen Creek Office Center
P.O. Box 472428
Charlotte, NC 28247-2428
Richard P. Gooch 81,053 (13) *
Kenway Wong 60,771 (8) *
Albert Ovadia 42,417 (12) *
Bani M. Scribner, Jr. 40,189 (6) *
Kenneth Snow 36,733 (7) *
Brian M. Offi 33,451 (9) *
Stuart G. Whittelsey, Jr. 5,401 (10) *
John P. Devine 1,400 (11) *
All directors and executive officers 2,160,903 (14) 26.0
as a group (11 persons)
</TABLE>
- -----------
* Less than 1%
** Form 13F Reporting
(1) Except as indicated in the footnotes to this table, the persons named
in the table possess sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them, subject
to joint tenancy, tenancy-in-common or community property laws, where
applicable. Unless otherwise indicated, the business address of each of
the beneficial owners is 400 W. California Avenue, Sunnyvale, CA 94086.
(2) Includes 161,378 shares held by Underhill Charitable Lead Trust
of which the reporting person is a trustee and a beneficiary, and
the reporting person disclaims beneficial ownership of his shares
in excess of his beneficiary's interest in the trust; 118,544
shares held by Trust u/w Isabel S. Rockefeller of which the
reporting person is a trustee, and a member of the reporting
person's immediate family is beneficiary, and the reporting
person disclaims beneficial ownership of shares in excess of the
reporting person's interest in the trust; 100,000 shares held by
Rama Investment Partnership of which the reporting person is a
general partner, and the reporting person disclaims beneficial
ownership of shares in excess of the reporting person's interest;
41,666 shares held by Trust u/d Avery Rockefeller of which the
reporting person is a trustee, and a member of the reporting
person's immediate family is a beneficiary, and the reporting
person disclaims beneficial ownership of shares in excess of the
reporting person's interest in the trust; 16,111 shares held
directly as a result of transfers to the reporting person of
securities previously reported as indirectly owned by Rockefeller
Charitable Lead Trust and the A.M. Rockefeller Trust; 14,147
shares held by the Rockefeller Charitable Lead Trust of which the
reporting person is a trustee and beneficial ownership of shares
of the reporting person's interest in the trust; 14,013 shares
held A.M. Rockefeller Trust of which the reporting person is a
trustee and a beneficiary, and the reporting person disclaims
beneficial ownership of shares in excess of the reporting
person's interest in the trust (the change reflects a transfer to
the reporting person); 7,275 shares held by PARock, Inc. of which
the reporting person is a shareholder, and the reporting person
disclaims beneficial ownership of shares in excess of his
ownership in the corporation; 7,275 shares held by Overhills
Partnership, Inc. of which the reporting person is a partner, and
the reporting person disclaims beneficial ownership of shares in
excess of his partnership interest; 5,335 shares held by Estate
of Anna M. Rockefeller of which the reporting person is an
executor and beneficiary, and the reporting person disclaims
beneficial ownership of share in excess of his interest in the
estate; 3,101 shares held by Estate of Gladys Underhill of which
the reporting person is an executor and a beneficiary, and
reporting person disclaims beneficial ownership of shares in
excess of his interest in the estate; 2,425 shares held by the
Underhill Foundation of which the reporting person is a trustee,
and the reporting person disclaims beneficial ownership of such
shares; 2,425 shares held by Wild Wings Foundation of which the
reporting person is a trustee and the reporting person disclaims
beneficial ownership of such shares; 2,425 shares held by Trust
u/w Avery Rockefeller of which the reporting person is a trustee
and a beneficiary, and reporting person disclaims beneficial
ownership is excess of the reporting person's interest in the
trust; and 36 shares held by PARock Limited Partnership of which
the reporting person is a general partner. Includes 400 share
subject to options that are exercisable within 60 days of January
3, 2000.
(3) Includes 2,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(4) Includes 2,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(5) Includes 2,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(6) Includes 22,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(7) Includes 7,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(8) Includes 13,440 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(9) Includes 2,240 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(10) Includes 400 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(11) Includes 400 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(12) Includes 11,033 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(13) Includes 22,500 shares subject to an option that is exercisable within
60 days of January 3, 2000.
(14) Includes 86,613 shares subject to an option that is exercisable within
60 days of January 3, 2000.
PROPOSAL ONE
NOMINATION AND ELECTION OF DIRECTORS
The Company's Articles of Incorporation, as amended, provide for a
classified Board of Directors consisting of two classes of directors. At the
1999 Annual Meeting of Shareholders, three Class I Directors were elected to
terms expiring in 2001. Three Class II Directors were elected in 1997
to terms expiring at this year's Annual Meeting. The Board has designated
three current Directors as nominees for election at this meeting as Class II
Directors (James F. Collins, John R. Treichler, Stuart G. Whittelsey, Jr.).
Directors elected at this meeting will serve until the 2002 Annual Meeting
of Shareholders and until their respective successors are duly elected and
qualified.
Management knows of no reason why any nominee should be unable or
unwilling to serve. However, if any nominee(s) should for any reason be unable
or unwilling to serve, the proxies will be voted for such substitute nominees
as the Board may designate.
If a quorum is present and voting, the nominees receiving the highest
number of votes will be elected as directors. Abstentions and shares held by
brokers that are present, but not voted because the brokers were prohibited from
exercising discretionary authority, i.e., "broker non-votes," will be counted
as present for purposes of determining if a quorum is present.
Set forth below is certain information with respect to age and
background for each of the Company's directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITIONS WITH THE COMPANY AGE SINCE
- -------------------------- -------------------------------------- ----- --------
<S> <C> <C> <C>
Class I directors, whose terms will expire at the 2001 Annual Meeting of
Shareholders:
John P. Devine Director 62 1995
David D. Elliman Director 49 1991
Gary L. Yancey President and Chairman of the Board 54 1984
Class II directors, who are nominees for election at this annual meeting:
James F. Collins Laboratory Manager and Director 57 1984
John R. Treichler Senior Scientist and Director 52 1984
Stuart G. Whittelsey, Jr. Director 70 1990
</TABLE>
John P. Devine has been a director of the Company since May,
1995. Mr. Devine served as Deputy Director, National Security Agency (NSA), for
Technology and Systems from 1992 to 1995 and as Deputy Director, NSA for
Research and Engineering from 1990 to 1992. From 1989 to 1990 he served as NSA
Chief of Staff. Mr. Devine has been a consultant to the defense industry since
his retirement from the NSA.
David D. Elliman is a founding principal of the Elmrock Group
of companies. The group is comprised of Elmrock Capital, Inc.;
Elmrock Partners and Stillrock Management, Inc.; and a number of
specialty-finance affiliates. Elmrock Capital, Inc. is a merchant
banking company which specializes in asset securitization and
structured financial transactions. It arranges equity capital for
leveraged asset purchases. Elmrock Partners owns and controls a
portfolio of conduit companies which acquire an securitize corporate
receivables an other high quality assets. Stillrock Management,
Inc. is an SEC-registered investment advisor. Stillrock manages
client portfolios of publicly traded securities in equity
investments. Mr. Elliman is the Chief Investment Officer of the
Elmrock Group of companies and is responsible for the asset
portfolios of these companies and their clients. Before the
formation of the Elmrock Group in 1981, Mr. Elliman served in the
Investmetn Management Group of Citicorp as a portfolio manager and
research analyst. Mr. Elliman is an Overseer of the School of Arts
and Sciences at the University of Pennsylvania.
Gary L. Yancey, a co-founder of the Company, has served the
Company as President and Chairman of the Board since the Company's incorporation
in January 1984. Prior to co-founding the Company, he was employed for ten years
by ARGOSystems Inc., a manufacturer of electronic reconnaissance systems, most
recently serving as Director of the Strategic Systems Division, and for seven
years as an engineer with GTE Sylvania Inc., a defense electronics company.
James F. Collins, a co-founder of the Company, has been a
director of and employed by the Company since its incorporation in 1984. He has
served in the position of Laboratory Manager with the Company since 1984. Prior
to co-founding the Company, Mr. Collins worked at ARGOSystems Inc., a
manufacturer of electronic reconnaissance systems, for fourteen years, most
recently serving in the Strategic Systems Division. Prior to working at
ARGOSystems, Inc., Mr. Collins served for three years as an officer in the
United States Navy.
John R. Treichler, a co-founder of the Company, has been a
director of and employed by the Company since it incorporation in 1984.
He has served in the position of Senior Scientist since 1984 and as
Chief Technology Officer since 1999. Prior to co-founding the Company,
he worked at ARGOSystems Inc. for seven years, most recently serving as
a senior scientist in the Strategic Systems Division; and at Stanford
University for three years in the Information Systems Laboratory. Prior to
working at Stanford university, Dr. Treichler served for four years as an
offier in the United States Navy.
Stuart G. Whittelsey, Jr. has been a director of the Company
since 1990. Since April 1994 he has been a principal of his own consulting
firm, Whittelsey Associates, which is engaged in corporate financial
management. From July 1993 through April 1994, he was Chief Executive Officer
of Lytton Garden Inc., a residence for HUD qualified seniors combined with a
skilled nursing facility in Palo Alto, California. Prior to that, he was
Chief Financial Officer for several high-technology firms, including
Informix, Inc.; Acurex Corp.; Stanford Telecommunications, Inc.; and
Wattkins-Johnson Company.
MEETINGS OF THE BOARD OF DIRECTORS
During fiscal 1999, the Board held four meetings. During that
period, the Audit Committee of the Board held one meeting and the Compensation
Committee held one meeting. The Company does not have a nominating committee of
the Board. No director serving on the Board in fiscal 1999 attended less than
75% of such meetings of the Board and the committees on which he serves.
The members of the Audit Committee during the Company's 1999
fiscal year were Stuart G. Whittelsey, Jr., John P. Devine, and David D.
Elliman. The functions of the Audit Committee include reviewing and approving
the results of the annual audit.
The members of the Compensation Committee during fiscal 1999
were Stuart G. Whittelsey, Jr., John P. Devine, and David D. Elliman. The
function of the Compensation Committee is to set and administer the total
compensation program for the executive officers of the Company.
PROPOSAL TWO
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to serve as
independent auditors to audit the financial statements of the Company for fiscal
2000. Ernst & Young LLP has acted in such capacity since its appointment for
fiscal 1985. Representatives of Ernst & Young LLP who will be present at the
Annual Meeting, will be given the opportunity to make a statement if the
representatives desire and will be available to respond to appropriate
questions.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL. In the event
that ratification by the shareholders of the appointment of Ernst & Young LLP as
the Company's independent auditors is not obtained, the Board will reconsider
such appointment.
The affirmative vote of a majority of the votes cast at the
Annual Meeting of Shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum, but will not be counted as having been voted on the
proposal.
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information for each of the
Company's last three fiscal years concerning the compensation of the chief
executive officer of the Company and the other executive officers of the Company
whose total salary and bonus for service in all capacities to the Company for
the fiscal year ended October 31, 1999 exceeded $100,000 during such fiscal
year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------- ------------
Securities
Other Underlying
Fiscal Salary Bonus Annual Options
Name and Principal Position Year ($) ($) Compensation(1) (#)
- ----------------------------- --------- --------- --------- --------------------------
<S> <C> <C> <C> <C> <C>
Gary L. Yancey 1999 $402,463 $17,371 $19,775 0
President and Chief Executive 1998 371,534 25,442 17,395 5,600
Officer 1997 334,720 12,051 15,592 0
Bani M. Scribner, Jr. 1999 260,649 10,204 11,313 6,500
Executive Vice President, 1998 233,645 14,970 9,523 5,600
General Manager - 1997 204,382 4,020 7,229 20,000
Technical Operations Group
Richard P. Gooch 1999 212,152 8,726 8,348 5,000
Vice President - Personal
Communications Systems Division
Brian M. Offi 1999 245,730 9,913 10,867 6,500
Vice President Finance and 1998 227,347 15,100 9,523 5,600
Chief Financial Officer 1997 205,578 5,192 8,122 0
Albert Ovadia 1999 208,857 8,496 7,947 5,000
Vice President - Multichannel
Systems Division
Kenneth Snow 1999 240,406 9,761 10,586 6,500
Vice President-Operations 1998 223,395 15,097 9,523 5,600
1997 205,572 5,141 8,071 0
Kenway Wong 1999 231,967 9,305 9,823 6,500
Vice President-Communication 1998 209,730 13,613 7,902 5,600
Systems Division (**) 1997 179,015 4,591 6,903 0
1 Company funded Applied Signal Technology 401K Retirement Plan contribution.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR - 1999
<TABLE>
<CAPTION>
Potential realizab
value at assumed
annual rates of
stock price
apperciation for
Individual Grants option term (1)
----------------- ------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise or
Options to Employees Base Price
Name Granted (#) in Riscal Year ($/Sh) (2) Expiration Date 5%($) 10%($)
- ---------------- ------------ --------------- ----------- -------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Bani M Scribner, 6,500 2.4% $12.13 05/13/07 (3) $37,645 $90,166
Jr.
Richard P. Gooch 5,000 1.8% 12.13 11/19/06 (3) 28,958 69,359
Brian Offi 6,500 2.4% 12.13 05/13/07 (3) 34,645 90,166
Albert Ovadia 5,000 1.8% 12.13 11/19/06 (3) 28,958 69,359
Ken Snow 6,500 2.4% 12.13 05/13/07 (3) 37,645 90,166
Ken Wong 6,500 2.4% 12.13 05/13/07 (3) 37,645 90,166
</TABLE>
(1) These gains are based on assumed rates of stock appreciation of five percent
and ten percent, compounded annually from the date the options were granted
to the date of their expiration. Actual gains, if any, on stock option
exercises will depend on future performance of the common stock, the option
holder's continued employemnt through the option period, and the date
which the options are exercised. The gains shown are net of the option
price, and do not include deductions for taxes or other expenses that may
be associated with the exercise.
(2) All options were granted at market value on date of grant.
(3) Option grant pursuant to the Company's 1991 Stock Option Plan. Options
fully vest at the end of 2 years with an option life of 8 years while
optionee remains an employee of the Company.
OPTION EXERCISES AND FISCAL 1999 YEAR-END VALUES
OPTION EXERCISES
AND FISCAL 1999 YEAR-END VALUES
<TABLE>
<CAPTION> Option Exercises in Fiscal 1999 and FY-End Option Value
-------------------------------------------------
Number of Securities Value of Unexercised
Underlying Options at In-the-Money Options at
October 31, 1999 October 31, 1998 (1)
------------------------------- -------------------------------
Shares Value Exercisable Unexercisable Exercisable Unexercisable
Acquired on Realized ($) (1) (#) (#) ($) ($)
Name Exercise (#)
- ------------------------------------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gary L. Yancey 0 0 1,120 4,480 0 0
Bani M. Scribner, Jr. 0 0 41,120 10,980 192,400 0
Richard P. Gooch 0 0 22,500 10,000 145,305 0
Brian M. Offi 0 $0 22,500 10,000 0 0
Albert Ovadia 0 0 6,033 10,000 31,775 0
Kenneth Snow 0 0 6,120 10,980 34,420 0
Kenway Wong 0 0 12,320 10,980 68,027 0
</TABLE>
----------
(1) The values in this column are based on the last reported sale
price of the common stock on the respective dates of exercise
as reported by the Nasdaq National Market, less the
respective option exercise prices.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not compensated by the
Company for services provided as a director. Each of the Company's directors who
are not employees was paid $19,200 in annual retainer fees during fiscal 1999.
The Company expects to pay an annual retainer of approximately $19,200 to its
non-employee directors in fiscal 2000. In addition, the Company reimburses
out-of-pocket travel expenses of non-employee directors not residing in the San
Francisco Bary area in accordance with the Company's travel policy.
CHANGE OF CONTROL ARRANGEMENTS
Under the Company's 1991 Stock Option Plan (the "Option Plan"), upon
a change of control of the Company pursuant to a merger or acquisition of the
Company, the acquiring or surviving company must either assume the Company's
obligations under outstanding options or substitute options for its own shares.
For options granted by the Company under the Option Plan prior to January 4,
1992, if the acquiring or surviving company in certain transactins does not
either assume these obligations or substitute these options, the Board must
accelerate the vesting and exercisability of unvested and unexercisable options
to a date prior to the completion of the transaction. Under these terms of
the Option Plan, all accelerated options not exercised prior to the completion
of the transaction will terminate. Of the officers named in the Summary
Compensation Table, Mr. Snow, Mr. Wong and Dr. Gooch hold options granted under
the Option Plan prior to January 4, 1992 to purchase 4,000 shares; 4,700 shares,
and 5,500 shares, respectively.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors set
compensation for the Company's executive officers for fiscal 1999. The
Committee is comprised of the three non-employee directors of the Company,
Messrs. Elliman, Devine and Whittelsey.
The Compensation Committee is responsible for setting and
administering the total compensation program for the executive officers of the
Company. Recommendations for annual salary for the executive officers are made
to the Compensation Committee by the Chief Executive Officer ("CEO") and the
Company's Human Resources Manager.
Salaries are generally set for the executive officers by evaluating
their performance, evaluating their goals, evaluating the importance of each
position to the achievement of the Company's strategic goals, and comparing
compensation for the same positions at similarly sized electronics companies.
The compensation of the Company's executive officers consists of
salaries which are set toward the upper end of the appropriate salary ranges
observed at similarly sized electronics companies and relatively modest bonuses
received under plans in which all employees of the Company participate
(under which bonuses are determined using a common objective formula
based upon the entire Company's profit performance), thereby leading to
total cash compensation (salary and bonus) of the Company's executive
officers within the range of the total cash compensation of similarly situated
counterparts at other electronics companies.
For fiscal 1999 the Committee has decided to grant stock options
for executive compensation. It believs this will more closely align the
compensation of Company executives with Company performance, as well as
with the compensation packages offered executives at other similarly sized
electronics companies. Details of option grants to officers and directors
are disclosed in the table of "Option Grants in Last Fiscal Year - 1999".
With the background of this philosophy, the Compensation Committee
used the following criteria to establish compensation for fiscal 1999 for its
executive officers. First, the Committee considered the current importance of
each position held by an executive officer to the ability of the Company to
achieve its strategic objectives, including not only the importance of the
function of the group managed by the executive officer, but also the group's
management needs, considering its organization and operation.
Second, the Committee received and considered compensation survey data
covering the total cash compensation (salary and bonus) paid by companies in the
electronics industry with similar annual revenues to the Company. Finally,
the Committee reviewed the self-evaluations of each executive officer and the
CEO's annual review of all other executive officers.
With respect to the Company's CEO Gary Yancey , the Committee
evaluated his performance during fiscal year 1999 with respect to the Company's
revenues, Company's profit margin, the size and progress of the Company's
research and development efforts, and the quality of the CEO's management of his
line managers. The Committee unanimously concluded that the CEO had a
successful fiscal year, and approved a percentage increase in the CEO's
salary which was in line with the Company's average salary increase for
the fiscal year and placed the CEO in approximately the 75-80th percentile
in terms of total cash compensation as compared to his peers at similarly
sized electronics companies.
The Company's policy with respect to compensation paid to its
executive officers is to deduct such compensation which qualifies under
Section 162(m) of the Internal Revenue Code, as amended, as an expense.
THE COMPENSATION COMMITTEE
David D. Elliman
John P. Devine
Stuart G. Whittelsey, Jr.
COMPARISON OF SHAREHOLDER RETURN
Set forth below is a line graph comparing the annual
percentage change in the cumulative total return on the Company's Common Stock
with the cumulative total return of the Standard & Poor's 400 Mid-Cap Index
("S&P 400") and the Standard & Poor's Aerospace and Defense Index ("S&P
Aerospace and Defense") for the five-year period commencing on October 31, 1994,
and ending on October 31, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM OCTOBER 31, 1994
THROUGH October 31, 1999(1)
APPLIED SIGNAL TECHNOLOGY, INC., S&P 400, S&P AEROSPACE AND DEFENSE
[CHART 1]
PLOT POINTS
<TABLE>
<CAPTION>
Applied S&P
Signal S&P 400 Aerospace
Date Technology Mid-Cap and Defense
- ---------------- ------------- ------------ ------------
<S> <C> <C> <C>
31 Oct. 1994 $100.00 $100.00 $100.00
31 Oct. 1995 $144.64 $118.92 $118.75
31 Oct. 1996 $193.90 $137.30 $82.61
31 Oct. 1997 $204.75 $179.54 $301.56
31 Oct. 1998 $207.93 $189.26 $282.75
31 Oct. 1999 $168.79 $226.41 $248.30
</TABLE>
- - ------------
(1) Assumes that $100.00 was invested on October 31, 1994, in the Company's
Common Stock and each index and that all dividends were reinvested.
Shareholder returns over the indicated period should not be considered
indicative of future shareholder returns.
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next
annual meeting of shareholders of the Company (i) must be received by the
Company at its offices at 400 West California Avenue, Sunnyvale, California
94086 no later than October 5, 2000 and (ii) must satisfy the conditions
established by the Securities and Exchange Commission for shareholder proposals
to be included in the Company's Proxy Statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which
the Board intends to present or knows that others will present at the Annual
Meeting is as set forth above. If any other matter or matters are properly
brought before the Annual Meeting, or any adjournment thereof, it is the
intention of the persons named in the accompanying form of Proxy to vote the
Proxy on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary L. Yancey
----------------------------------
Gary L. Yancey, President
Dated: January 28, 2000
APPLIED SIGNAL TECHNOLOGY, INC.
Proxy for Annual Meeting of Shareholders
Solicited by the Board of Directors
The undersigned hereby appoints Gary L. Yancey and Brian M. Offi, and
each of them, with full power of substitution to represent the undersigned and
to vote all of the shares of stock in Applied Signal Technology, Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of said Company to be held at the Sheaton Hotel,
1100 N. Mathilda Avenue, Santa Clara, California on Thursday,
March 9, 2000 at 4:00 p.m. local time, and at any adjournment thereof
(1) as hereinafter specified upon the proposals listed below and as more
particularly described in the Company's Proxy Statement, receipt of which is
hereby acknowledged and (2) in their discretion upon such other matters
as may properly come before the meeting.
A vote FOR the following proposals is recommended by the Board of
Directors:
1. Election of Class II directors listed below.
Nominees: James F. Collins, John R. Treichler, Stuart G. Whittelsey, Jr.
[ ] FOR [ ] WITHHELD
[ ] ______________________________________________________
INSTRUCTION: To withhold authority to vote for any nominee,
mark the above box and list the name(s) of the nominee(s) in
the space provided.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the Company for the fiscal year ending
October 31, 1999.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
The shares represented hereby shall be voted as specified. If no
specification is made, such shares shall be voted FOR proposals 1, 2 and 3.
Dated _______________________, 2000
(Be sure to date Proxy)
_________________________________
Signature(s)
Sign exactly as your name(s) appears on your stock certificate. If
shares of stock stand on record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the above Proxy. If shares of stock are held of record
by a corporation, the Proxy should be executed by the President or Vice
President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. Executors or administrators or other fiduciaries
who execute the above Proxy for a deceased stockholder should give their full
title. Please date the Proxy.
Even if you are planning to attend the meeting in person, you are
urged to sign and mail the Proxy in the return envelope so that your stock
may be represented at the meeting.
