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REFLECTONE, INC.
4908 Tampa West Boulevard
Tampa, Florida 33634
(813) 885-7481
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 1996
The Annual Meeting of Shareholders of REFLECTONE, INC. (the "Company")
will be held at 4908 Tampa West Boulevard, Tampa, Florida on June 3, 1996, at
1:00 p.m. local time, for the following purposes:
(1) To elect eight members of the Board of Directors of the
Company to hold office until the next Annual Meeting of
Shareholders and thereafter until their successors are
elected and have qualified; and
(2) To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Holders of common stock of the Company at the close of business on
April 9, 1996 are the only shareholders entitled to notice of and to vote
at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors
Richard W. Welshhans
Secretary
Tampa, Florida
April 17, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS, YOU ARE REQUESTED TO COMPLETE AND SIGN THE ENCLOSED
FORM OF PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO ATTEND THE
MEETING AND DECIDE THAT YOU WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY.
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REFLECTONE, INC.
4908 Tampa West Boulevard
Tampa, Florida 33634
(813) 885-7481
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 1996
GENERAL INFORMATION
Shareholders' Meeting
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Reflectone, Inc. (the "Company") of proxies to be
used at the Annual Meeting of Shareholders to be held at 1:00 p.m. local time
on June 3, 1996, at 4908 Tampa West Boulevard, Tampa, Florida. This Proxy
Statement was first mailed to shareholders on approximately April 17, 1996.
Matters to be Acted Upon
The following matters will be acted upon at the Annual Meeting:
(1) The election of eight members of the Board of Directors of
the Company, to hold office until the next Annual Meeting of
Shareholders and thereafter until their successors are
elected and have qualified; and
(2) Such other business as may properly come before the Meeting
or any adjournment thereof.
PROXIES AND VOTING
The Board of Directors solicits all holders of the Company's common
stock, par value $.10 per share (the "common stock"), to vote by marking,
signing, dating and returning their proxies. Submitting a signed proxy will not
affect a shareholder's right to attend the Meeting and vote in person. A proxy
may be revoked at any time before it is exercised by giving written notice of
such revocation to the Secretary of the Company at 4908 Tampa West Boulevard,
Tampa, Florida 33634. If a shareholder wishes to give a proxy to someone other
than the Company's designees, he or she may cross out the names appearing on
the enclosed proxy card, insert the name of such other person, sign and give
the card to that person for use at the Meeting.
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Each holder of common stock of record at the close of business on April
9, 1996, is entitled to one vote for each share of common stock then held. At
the close of business on that date, there were outstanding and entitled to vote
2,816,785 shares of common stock.
A majority of the outstanding shares of common stock entitled to vote at
the meeting is a quorum. If a quorum is present in person or by proxy,
directors will be elected by the affirmative vote of a majority of the shares
represented at the meeting.
When the enclosed proxy is properly signed and returned, the shares which
it represents will be voted at the Meeting in accordance with the instructions
noted thereon. In the absence of such instructions, the shares represented by
a signed proxy will be voted in favor of the seven nominees for election to the
Board of Directors. Votes will be counted manually, and abstentions and broker
non-votes will not be counted. The Board of Directors does not know of any
other business to be brought before the Meeting, but it is intended that as to
such other business, if any, shares represented by a signed proxy will be voted
in accordance with the judgment of the person or persons acting thereunder.
<PAGE> 4
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INFORMATION ABOUT THE BOARD OF DIRECTORS
From January 1, 1995 through August 3, 1995, the Board of Directors of
the Company consisted of Edward W. Bettke, Robert L. Kirk, Robert F. Schoultz,
Dale R. States, Richard G. Snyder, Stella F. Thayer, and J.W.N. Yeomans. On
August 3, 1995, the Board of Directors accepted the resignations of Robert L.
Kirk and J.W.N. Yeomans and appointed David R. Fish and Syd Gillibrand to fill
the vacancies created by such resignations.
Committees of the Board
The responsibilities of certain committees of the Board of Directors are
summarized below. The Board of Directors does not have a nominating committee
or other committee serving a similar function. Action taken by any Committee
of the Board is reported to the Board of Directors, usually at its next
meeting.
Audit Committee The Audit Committee reviews the independence,
qualifications and activities of the Company's independent certified public
accountants and the activities of the Company's accounting staff. The Audit
Committee recommends to the Board the appointment of the independent certified
public accountants and reviews and approves the Company's consolidated year-end
financial statements together with other financial reports and related matters.
The Audit Committee is also responsible for the review of transactions between
the Company and other entities in which a Company officer or director has a
material interest and has formed a subcommittee consisting of Mrs. Thayer, and
Messrs. Bettke and States that reviews all transactions with the Company's
majority shareholder, British Aerospace Holdings, Inc. and its parent
corporation, British Aerospace Plc. and its affiliated companies (collectively
referred to as "British Aerospace"). From January 1, 1995 until August 3, 1995,
the Audit Committee was comprised of Ms. Thayer and Messrs. Bettke (Chairman),
States, and Yeomans. On August 3, 1995, Mr. Fish was appointed to the Audit
Committee to fill the vacancy created by the resignation of Mr. Yeomans. During
the year ended December 31, 1995, the Audit Committee met five times.
<PAGE> 5
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Compensation Committee. The Compensation Committee reviews and makes
recommendations concerning executive officer salaries, termination
arrangements, bonus programs and other executive officer benefits. In addition,
the Committee is responsible for the administration of the Company's 1994 Stock
Option Plan, 1990 Stock Option Plan and 1982 Incentive Stock Option Plan,
including the determination of the persons to whom options under the plans
will be granted, and the number and terms of those options. From January 1,
1995 until August 3, 1995, the Compensation Committee was comprised of Ms.
Thayer and Messrs. Kirk (Chairman), Schoultz, and Yeomans. On August 3, 1995,
the Board agreed to reconstitute the Compensation Committee to include all
Board members other than Mr. Snyder and Ms. Thayer was appointed Chairman.
Accordingly, effective August 3, 1995, the Compensation Committee was
comprised of Ms. Thayer (Chairman) and Messrs. Bettke, Fish, Gillibrand,
Schoultz, and States. During the year ended December 31, 1995, the Compensation
Committee met three times.
Government Security Committee. The Government Security Committee ensures
that the Company complies with its Special Security Agreement with the U.S.
Department of Defense through the maintenance of adequate policies and
practices (i) to safeguard classified information and export-controlled
technical data in the possession of the Company and (ii) to perform under
classified contracts or programs for U.S. Government Agencies. This committee,
which is comprised of Mrs. Thayer and Messrs. States (Chairman), Bettke,
Schoultz and Snyder, met four times during the year ended December 31, 1995.
Director Compensation
Each director, other than the Chairman of the Board, British Aerospace
affiliated directors and any director who is an executive officer of the
Company, receives an annual retainer of $4,000, plus $1,000 per day of Board
and/or committee meetings attended, and also receives reimbursement of
out-of-pocket expenses. The Chairman of the Board receives an annual retainer
of $5,000, plus $1,250 per day of Board and/or committee meetings attended and
also receives reimbursement of out-of-pocket expenses.
Meetings of Board of Directors
During the year ended December 31, 1995, 12 special or regularly
scheduled meetings of the Board of Directors were held. Each director then in
office attended at least 75% of the total of all meetings of the Board held
during the period for which he/she was a director and of all meetings of the
Board committees on which he or she served.
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ELECTION OF DIRECTORS
Effective March 22, 1996, the Company's bylaws were amended to increase
the size of the Company's Board of Directors from seven to eight directors. The
eighth director will be elected at the June 3, 1996 shareholders meeting.
Unless otherwise directed, it is the intention of the persons named in the
enclosed form of proxy to vote executed proxies in favor of the election of the
seven persons named below. Each such person will serve until the next Annual
Meeting of Shareholders and thereafter until his or her successor is elected
and has qualified. Should any nominee become unavailable for election, an event
which is not anticipated, the persons named in the proxy will have the right to
use their discretion to vote for a substitute or substitutes or to vote only
for the remaining nominees. British Aerospace has informed the Company of its
intention to vote for the election of each of the eight nominees named below.
See "Voting Securities and Principal Holders Thereof."
Nominees for Director
Information relating to business experience, age and beneficial ownership
of Company securities of each nominee for director is set forth below. All
stock ownership information is as of April 9, 1996, and unless otherwise noted,
all shares are owned directly, with sole voting and investment powers.
Edward W. Bettke has served as a director of the Company since 1981 and
is the Chairman of the Audit Committee and a member of the Compensation and
Government Security Committees. Mr. Bettke is the former Vice President-Finance
and Treasurer of Wyman-Gordon Company, having resigned that position in
1987, in contemplation of his retirement in 1988. Mr. Bettke was also a
director of Wyman-Gordon Company until 1988. Wyman-Gordon Company is engaged
principally in the engineering, production and marketing of technically
advanced forgings. Mr. Bettke had been associated with Wyman-Gordon since
1954. Mr. Bettke was also a director of Quabaug Corporation and regional
director of Shawmut Bank, N.A. until 1995. Mr. Bettke is 68 years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
1,978 shares of common stock *
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David R. Fish has served as a director of the Company since August 3,
1995 and is a member of the Audit and Compensation Committees. Mr. Fish joined
British Aerospace in 1967 and served in a number of senior positions before
appointment to his current position of Finance Director of the Systems and
Services Division of British Aerospace Defence Ltd., a wholly-owned subsidiary
of British Aerospace Plc. Mr. Fish is 49 years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
0 shares of common stock *
Sydney Gillibrand has served as a director of the Company since August 3,
1995 and is a member of the Compensation Committee. Mr. Gillibrand was first
employed by British Aerospace in 1950 and held a number of senior positions in
production, engineering and international affairs throughout his employment. He
was elected to the Board of British Aerospace plc in 1987 and most recently,
Mr. Gillibrand was Vice Chairman of the Board of Directors of British Aerospace
Plc., a position he retired from in June 1995. Mr. Gillibrand is a non-executive
director of AMEC Plc, LUCAS Industries Plc and ICL Plc. Mr. Gillibrand is 61
years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
0 shares of common stock *
Paul L. Harris Currently, Mr. Harris is Senior Vice President and General
Manager of British Aerospace Holdings, Inc., the U.S. subsidiary of British
Aerospace Plc. He is responsible for managing the British Aerospace Holdings,
Inc.'s investments in North America. From 1989-1992 Mr. Harris served as
Finance Director of the Commercial Aircraft Division of British Aerospace, Plc.
in London. Prior to his appointment in the United Kingdom, Mr. Harris was
Senior Vice President-Finance and Treasurer of British Aerospace, Inc. Mr.
Harris is currently President of the National Aviation Club and serves on the
Board of Directors of the Washington Airports Task Force. Mr. Harris is 50 year
old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
0 shares of common stock *
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Robert F. Schoultz has served as a director of the Company since 1990 and
is a member of the Compensation and Government Security Committees. Since
1987, Mr. Schoultz has served as President of Rosco, Inc., a consulting firm
providing design, procurement strategy and marketing guidance to firms within
the aerospace industry. Prior to that time, Mr. Schoultz enjoyed a
distinguished career in the United States Navy, from which he retired with the
rank of Vice Admiral after serving as the U.S. Commander Eastern Atlantic, and
Deputy Commander in Chief, U.S. Naval Forces, Europe. Mr. Schoultz is 71 years
old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
0 shares of common stock *
Richard G. Snyder was elected to the Board of Directors and appointed as
President and Chief Executive Officer of the Company in February 1990. He also
serves on the Government Security Committee. In September 1994, Mr. Snyder was
elected to the Board of Directors of Cleaners Hangers Co., a wire hanger and
products company. From 1985 through January 1990, Mr. Snyder served as
President of the Link Tactical Simulation Division of CAE Industries, Ltd., a
major producer of commercial and military simulation and training devices. Mr.
Snyder is 63 years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
104,750 shares of common stock(1) 3.7%
Dale R. States has served as a director of the Company since 1989 and as
a member of the Audit and Compensation Committees and the Chairman of the
Government Security Committee. In January 1995, Mr. States was appointed
President of Air 4000, Inc. During 1994 and 1995, Mr. States was a director and
served in the position of Chief Technical Officer of Astraea Aviation Services,
d/b/a Dalfort Aviation, an aircraft maintenance and modification company.
During 1992 and 1993, Mr. States was self-employed as a consultant to the
aerospace industry. From 1988 to 1992, Mr. States served as President of
Astraea Airline Services. Previously, Mr. States served as Executive Vice
President and General Manager of Dalfort Corporation, which at that time was
the parent company of Braniff, Inc., a major scheduled airline, and President
of Dalfort Aviation Services, a leading independent aircraft maintenance, fixed
base and training organization. Mr. States is 68 years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
0 shares of common stock *
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Stella F. Thayer has served as Chairman of the Board of the Company since
June 1992 and is the Chairman of the Compensation Committee and a member of
the Audit and Government Security Committees. Mrs. Thayer is a shareholder of
the law firm of Macfarlane, Ausley, Ferguson and McMullen. She also serves as
Vice Chairman of the Hillsborough County Aviation Authority. Mrs. Thayer also
serves on the Board of Directors of Lykes Energy, Inc. and Tampa Bay Downs,
Inc. Mrs. Thayer is 55 years old.
Shares Beneficially Owned Percent
as of April 9, 1996 of Class
8,750 shares of common stock(2) *
________________
* Less than one percent.
(1) Includes 52,250 shares of common stock issuable to Mr. Snyder upon the
exercise of certain options exercisable at April 9, 1996 or within 60
days, 10,000 shares owned by him, and 2,500 shares held by his children,
as to which Mr. Snyder disclaims beneficial ownership.
(2) Includes 2,500 shares currently owned by Mrs. Thayer and 6,250 shares
owned by members of her immediate family, as to which Mrs. Thayer
disclaims beneficial ownership.
As of April 9, 1996, all executive officers and directors of the Company
as a group, a total of 14 persons, owned beneficially 281,350 shares of common
stock or approximately 10.0% of the common stock outstanding. Included in such
beneficial ownership is an aggregate of 86,500 shares of common stock which
certain of the Company's directors and executive officers have the right to
acquire by exercise of stock options immediately or within 60 days.
During 1995, the executive officers and directors of the Company filed
with the Securities and Exchange Commission (the "SEC") on a timely basis all
required reports relating to transactions involving equity securities of the
Company beneficially owned by them. The Company has relied on written
representation of its executive officers and directors and copies of the
reports they have filed with the SEC in providing this information.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on April 9, 1996, there were outstanding and
entitled to vote 2,816,785 shares of common stock. Each share of common stock
outstanding on that date is entitled to one vote on each matter to come before
the Annual Meeting.
The following table sets forth information as of April 9, 1996,
concerning the common stock of the Company owned by each person who owns of
record or is known by the Company to own beneficially more than 5% of such
stock, based upon information furnished by such persons:
Common Stock
Name and Address Beneficial Percent
Ownership of Class
British Aerospace, Plc.
Farnborough Aerospace Centre
Farnborough, Hampshire GU14 6YU
England
1,375,000(1) 48.8% (2)
British Aerospace Holdings, Inc.
22070 Broderick Drive
Sterling, Virginia 20166
Hollybank Investments, LP
One Post Office Square (23rd Floor)
Boston, Massachusetts 02109 208,500(3) 7.4%
_________________________________
(1) British Aerospace Holdings, Inc. ("BAe"), which is a wholly owned
subsidiary of British Aerospace Plc., owns 1,375,000 shares of common
stock, 50,000 shares of the Company's 8% ($14.08 per share annual
dividend) cumulative convertible preferred stock (the "preferred stock")
and warrants to purchase 78,261 shares of the Company's common stock.
The preferred stock is convertible by BAe into 500,000 shares of common
stock.
(2) If all the shares of preferred stock held by BAe were converted to common
stock and all warrants to purchase common stock were exercised, BAe would
hold 1,953,261 shares of common stock, representing approximately 57.5%
of the then-outstanding shares of common stock. If currently outstanding
options for an aggregate of 283,321 shares were also exercised by third
parties, BAe would hold approximately 53.1% of the then-outstanding
common stock.
(3) Based upon a Schedule 13D dated July 7, 1995, filed by Hollybank
Investments LP.
<PAGE> 11
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COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company (the
"Committee"), comprised solely of non-management directors of the Company, is
responsible for establishing and reviewing each component of the total
compensation of the executive officers of the Company and its subsidiaries.
Executive officer compensation decisions of the Committee are submitted for
approval to the full Board of Directors. The compensation package of each
executive officer of the Company is made up of three principal components:
base salary; annual variable incentive cash compensation; and long-term
incentive compensation in the form of incentive stock options. In establishing
each of the components of the compensation package for an executive officer,
the Committee considers the factors described below but also makes subjective
determinations as to ultimate compensation levels. The Compensation Committee
is currently studying possible alternatives to the Company's current long term
incentive portion of the overall compensation plan for executive officers.
The following is a brief description of the Company's current
compensation system for executive officers.
In establishing and maintaining the compensation system for the executive
officers of the Company, the Committee makes use of a system in which each
executive office of the Company is assigned a Salary Grade range ("Salary
Grade") which, among other things corresponds to the level of responsibility
associated with the office. This Salary Grade system and the Salary Grade for
each executive officer within the Company was developed by the Committee in
1991 with the assistance of an independent compensation consultant and is
reviewed periodically by the Committee. Each executive officer of the Company
is assigned a Salary Grade upon employment by the Company (or in certain cases
upon the adoption of the Salary Grade system in 1991) based upon, among other
things, the individual responsibilities of the position. The Salary Grade of an
executive officer of the Company is subject to review and revision by the
Committee from time to time based upon the experience level of the officer and
any changes in the level of responsibility of the office.
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Base Salary. For the purpose of determining the base salary component of
the Company's executive compensation program, the Committee (with the initial
assistance of an independent compensation consultant) assigned a salary range
for each Salary Grade. The Committee periodically reviews and revises these
salary ranges. In reviewing the applicable salary range for each Salary Grade,
the Committee considers, among other factors, salary ranges of comparable
positions on both a local and a national scale. The base salary for each
executive officer, and any increase or decrease therein, is determined and
re-evaluated by the Committee on an annual basis taking into account the
applicable salary range of the executive officer's designated Salary Grade and
in the case of each executive officer other than the Chief Executive Officer
after consideration of the recommendations of the Chief Executive Officer. In
establishing and revising the base salary of each executive officer within a
Salary Grade, the Committee considers, among other factors, the duties and
responsibilities of the position in relation to what individuals with
comparable responsibilities earn both locally and nationally, the individual's
experience and expertise in the specified disciplines and the individual's
annual performance evaluation.
During 1994 and early 1995, management and the Board of Directors of the
Company were concerned with delays experienced in the award of new programs in
the Company's Training Devices and Systems Management segments. As a part of
the response to the declining backlog and based upon the recommendation of the
management of the Company, the Committee delayed base salary increases in 1995
and continued from 1994 the temporary five percent reduction in base salary of
each executive officer of the Company whose base salary was in excess of
$50,000. Effective April 1, 1995, the temporary five percent reduction in base
salary was terminated and the increases in base salary were granted, based
primarily upon the booking of a significant program in the Company's Training
Device Segment.
Annual Variable Cash Incentive Compensation. With the assistance of an
independent compensation consultant, in 1991, the Company established the
Reflectone, Inc. Variable Incentive Compensation Plan ("VICP Plan"), the stated
goals of which are to:
(1) Provide a direct incentive to executive management to improve
Company performance, thus tying management to Company goals, values
and shareholder interests.
(2) Reward and compensate executives for outstanding individual
performance.
(3) Compensate executives in a manner to maintain Reflectone's
competitive position in the marketplace.
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The overall philosophy of the VICP Plan is that a specified portion of
each executive's compensation should be at risk subject to both Company and
individual performance, with higher Salary Grades having a higher percentage of
overall compensation at risk. Under the VICP Plan, executive officers of the
Company are paid cash bonuses based upon a pre-determined formula which takes
into account both objective and subjective measurements by the Committee. The
measurements include both individual performance and Company performance
measured against pre-determined performance goals approved by the Board. During
1995, VICP Plan Awards took into consideration the following factors of
Company performance, each of which were weighed equally: (i) bookings of new
business, (ii) income from operations and (iii) the net summation of cash and
borrowings at December 31, 1995. Based upon a review of the Company's
performance during 1995, the Committee established a 1995 performance factor of
1.20 within an overall range of zero to 1.20. Each executive officer of the
Company was then assigned an individual performance factor based upon a review
by the Chief Executive Officer and/or the Board of Directors.
Long-Term Incentive Compensation. The long-term incentive component of
the Company's compensation system consists primarily of the grant of incentive
stock options. To date, stock options have been awarded under the Company's
1994 Stock Option Plan, 1990 Stock Option Plan and 1982 Incentive Stock Option
Plan, all of which have been approved by the shareholders of the Company.
Awards of stock options to date have been at the discretion of the Committee
taking into consideration numerous factors, including the individual's Salary
Grade, salary and performance. The Committee granted stock options for an
aggregate of 56,000 and 41,500 shares of common stock in 1995 and 1996,
respectively, under the Company's 1994 Stock Option Plan.
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Compensation of the Chief Executive Officer. As with all executive
officers of the Company, Mr. Snyder's compensation consists primarily of base
salary, annual variable incentive cash compensation and long-term incentive
compensation in the form of stock options. Mr. Snyder's employment with the
Company is pursuant to a one-year employment agreement. Mr. Snyder's base
compensation was established pursuant to arm's-length negotiations between the
Company and Mr. Snyder in 1990 and is reviewed by both Mr. Snyder and the
Committee annually. Mr. Snyder's base salary of $205,005 was not increased in
1995. During 1994 and until April 1995, Mr. Snyder was subject to the temporary
five percent salary reduction discussed above. Mr. Snyder's VICP award for 1995
was established at $106,600 by the Committee taking into account the overall
performance of the Company, including the booking of substantial new business
during the year, a significant increase in the income from operations of the
Company when compared to the prior year and a significant overall reduction in
the Company's borrowings under it credit facilities, net of cash. Mr. Snyder
was awarded 14,000 stock options in 1995 and 10,000 stock options in 1996 under
the 1994 Stock Option Plan.
Stella F. Thayer, Chairman
Edward W. Bettke
David R. Fish
Sydney Gillibrand
Robert F. Schoultz
Dale R. States
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EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
Compensation of Executive Officers
The following table summarizes the annual compensation and long-term
compensation paid or accrued by the Company during the years indicated to the
Company's chief executive officer and the Company's other four most highly
compensated executive officers (the "Named Executive Officers"). The Company
did not grant any restricted stock awards or stock appreciation rights or make
any long-term incentive plan payments during the years indicated.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
____________________________________________
Name
and Principal Other Annual
Position Year Salary(1) Bonus Compensation(2)
_____________________________________________
<S> <C> <C> <C> <C>
President and
Chief Executive Officer
Richard G. Snyder(4) 1995 $202,047 $106,600 $33,637
1994 195,145 - 33,110
1993 205,005 45,000 10,957
Executive Officers
Anthony S. Brancato 1995 141,433 53,800 -
Executive Vice President, 1994 133,682 - -
Training Services and 1993 140,442 21,908 -
International Military
Marketing
Frank T. Tobin, Sr. 1995 130,988 49,850 -
Vice President, Military 1994 123,823 - -
Products 1993 130,083 21,073 -
Robert D. Webster 1995 131,822 47,050 -
Vice President, 1994 119,401 - -
Operations 1993 120,141 21,625 -
Richard W. Welshhans 1995 117,978 37,600 -
Vice President Finance & 1994 112,255 - -
Chief Financial Officer 1993 117,915 19,810 -
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
_________________________________________
Securities
Underlying All Other
Options Compensation(3) _________________________________________
<C> <C>
14,000 $45,669
16,000 42,370
26,250 21,376
8,500 14,318
8,000 10,263
- 12,348
8,500 12,873
8,000 9,226
- 10,625
8,500 12,146
8,000 8,257
- 9,557
8,000 10,598
8,000 7,443
- 9,080
</TABLE>
_______________________
(1) For a portion of 1994 and 1995 salaries reflect a temporary five percent
reduction as described in "Compensation Committee Report."
(2) Includes memberships and automobile allowance.
(3) Includes Company contributions to the Reflectone, Inc. Savings,
Investment and Employee Benefit Plan, supplemental retirement
arrangements, excess group term life insurance and additional insurance
policies.
(4) The Company has an agreement with Mr. Snyder, dated as of January 18,
1990, which provides for his employment and was recently extended for
another year, at a minimum annual compensation of $180,000. In addition,
the agreement provides for a $10,000 annual non-accountable automobile
allowance, a $500,000 term life insurance policy for the benefit of the
estate or other designated beneficiary of Mr. Snyder, a supplemental
long-term disability policy payable to age 65 such that a total
disability benefit would be at least $175,000 per year, and the
supplemental retirement benefits described at "Other Compensation
Arrangements - Supplemental Retirement Arrangements."
<PAGE> 17
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The following table sets forth information concerning options granted
during the year ended December 31, 1995, under the Company's 1994 Stock Option
Plan to the Named Executive Officers. The Company did not grant any stock
appreciation rights during the year.
<TABLE>
Option Grants in Last Year
<CAPTION>
Individual Grant
_____________________________________________________
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or
Granted Employees Base Price Expiration
# in 1995 ($/Share) Date
_____________________________________________________
<S> <C> <C> <C> <C>
Richard G. Snyder 14,000 25.0% $9.75 Feb. 2, 2004
Anthony S. Brancato 8,500 15.2 9.75 Feb. 2, 2004
Frank T. Tobin, Sr. 8,500 15.2 9.75 Feb. 2, 2004
Robert D. Webster 8,500 15.2 9.75 Feb. 2, 2004
Richard W. Welshhans 8,000 14.3 9.75 Feb. 2, 2004
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates
of Stock Price Appreciation
for Option Term (1)
_________________________
5%($) 10%($)
_________________________
<C> <C>
$ 97,000 $253,000
58,900 153,600
58,900 153,600
58,900 153,600 55,400 144,500
</TABLE>
________________________
(1) The dollar amounts under these columns are the result of calculations at
the hypothetical 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the
Company's common stock price. The option term is 10 years.
<PAGE> 18
<PAGE>
The following table provides certain information concerning aggregate
stock option exercises in 1995 and stock option values as of December 31, 1995,
for unexercised stock options held by each of the Named Executive Officers. No
stock appreciation rights are outstanding.
<TABLE>
<CAPTION>
Aggregated Option Exercises Last Fiscal Year and
Year-end Option Values
Shares
Acquired on Number of Unexercised
Exercise Value Options at
Name (#) Realized Year End (#)
______________________________________________________________________________
Exercisable Unexercisable
<S> <C> <C> <C> <C>
Richard G. Snyder 22,836 $226,305 88,750 30,000
Anthony S. Brancato - - 19,875 16,500
Frank T. Tobin, Sr. 9,875 69,915 5,000 16,500
Robert D. Webster 8,250 68,475 8,125 16,500
Richard W. Welshhans 7,000 52,290 4,375 16,000
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised
In-The-Money Options
at Year-End(1)
Exercisable Unexercisable
_________________________
<C> <C>
$815,688 $150,000
160,906 81,000
35,250 81,000
59,906 81,000
30,844 79,000
</TABLE>
____________________
(1) Based upon the closing sale price of $13.75 per share of common stock on
December 31, 1995, as reported in the Nasdaq National Market.
<PAGE> 19
<PAGE>
COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in this Proxy
Statement, the SEC requires a five-year comparison of stock performance for the
Company with stock performance of a broad equity index such as the Dow Jones
Industrial Average and either a published index or a Company-constructed peer
group index.
The following graph compares the cumulative total stockholder return on
the common stock of the Company for the last five calendar years, with the
cumulative total return on the Dow Jones Industrial Average and the Dow Jones
Aerospace and Defense Sector for the same period. (Assuming the investment of
$100 in the Company's common stock, the Dow Jones Industrial Average and the
Dow Jones Aerospace and Defense Sector on December 31, 1990):
<TABLE>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Reflectone, Inc. 100.00 132.61 143.48 251.37 230.99 373.65
Dow Jones Aerospace
& Defense Sector 100.00 124.42 129.73 167.64 188.54 327.85
Dow Jones Industrial
Average 100.00 124.33 133.44 156.05 163.91 224.47
</TABLE>
The average annual compound growth rate for the Company's stock over the
last five year period was 30.16% compared to 26.8% for the Aerospace and
Defense Sector, and 17.6% for the Dow Jones Industrial Average.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make nor endorse any predictions as to future stock
performance.
<PAGE> 20
<PAGE>
Other Compensation Arrangements
I. Variable Incentive Compensation Plan
The Company maintains a Variable Incentive Compensation Plan pursuant to
which senior personnel, including each of the Named Executive Officers, are
entitled to receive cash bonuses. Under the current plan, the amount of the
bonuses can not exceed 60% of base salary in the case of the President, and 38%
in the case of other executive officers. The amount of the bonus is based on a
pre-determined formula which takes into account both objective and subjective
measurements by the Compensation Committee. The measurements include both
individual performance and Company performance measured against pre-determined
performance goals approved by the Board. During 1995, VICP Plan Awards took
into consideration the following factors of Company performance, each of which
were weighed equally: (i) bookings of new business, (ii) income from
operations and (iii) the net summation of cash and borrowings at December 31,
1995. Bonus amounts earned under the Plan for the year ended December 31, 1995
are provided in the Summary Compensation Table.
II. Retirement Plans
The Company maintains the Reflectone, Inc. Savings, Investment and
Employee Benefit Plan (the "Plan") which covers all eligible employees of the
Company and certain employees of its subsidiary, Reflectone Training Systems,
Inc. The Plan provides for the Company to make contributions, the amount of
which are at the discretion of the Board of Directors, which may not exceed
applicable federal income tax limitations. Participants may also make
voluntary contributions. Each employee who has completed at least six months of
continuous employment and 1,000 hours of service is eligible to participate.
Directors who are not also full-time employees of the Company are not eligible
to participate in the Plan. Allocations are made to each participant employed
on the last day of each plan year based on years of service and annual
compensation, excluding discretionary bonuses, and are subject to graduated
vesting during the first seven years of employment. The Plan also provides for
contributory profit sharing contributions in an amount equal to 50% of the
employee's participation to a maximum of 3% of eligible wages, subject to
applicable federal income tax limitations. The employee's interest in the
Company's matching contribution is subject to graduated vesting during the
first five years of employment.
The Company's contributions to the accounts of the Named Executive
Officers, during the year ended December 31, 1995, under the Plan are included
in the Summary Compensation Table.
III. Supplemental Retirement Arrangements
The Company currently has an agreement with Mr. Snyder to provide
retirement benefits substantially equal to those that would have been provided
by his previous employer. Pursuant to the agreement, the Company maintains a
trust for the benefit of Mr. Snyder and a designated beneficiary, and
contributes amounts to fund the agreement not later than 90 days subsequent to
each year-end. During 1995, the Company accrued $7,680 and funded $16,987 of
previously accrued amounts with respect to this arrangement.
<PAGE> 21<PAGE>
Employee Stock Purchase Plan
Employees of the Company (including officers and those directors who are
also employees) and its subsidiary are currently eligible to participate in the
Reflectone, Inc. Employee Stock Purchase Plan ("ESPP"). Each eligible employee
may purchase shares through payroll deductions at a maximum rate of 10%. The
purchase price is 90% of the closing price on the designated dates of purchase.
None of the Named Executive Officers participated in the ESPP.
Transactions with British Aerospace
From time to time, the Company enters into various transactions with
British Aerospace. British Aerospace Holdings, Inc. ("BAeHI") a wholly owned
subsidiary of British Aerospace Plc. ("BAe") is the Company's principal
shareholder, see "Voting Securities and Principal Holders Thereof". All
contracts and agreements with British Aerospace are reviewed and approved by a
subcommittee comprising all members of the Audit Committee other than Mr. Fish.
The Company's management, and the members of the Board responsible for
reviewing the various transactions, believe that each transaction has been or
is on terms no less favorable to the Company than if unaffiliated parties had
been involved.
Acquisition. On June 21, 1993, the Company purchased from BAe all of the
issued and outstanding shares of common stock of British Aerospace Simulation,
Ltd. which had been a wholly owned subsidiary of BAe. The acquired entity has
been renamed Reflectone UK Limited ("RUKL"). RUKL, with its facilities in
Filton, England, designs, develops and manufactures, through sophisticated
electronic computer simulation, tactical air defense trainers, electronic
warfare training systems and visual air traffic control simulators. RUKL's
products are complementary to other products produced in the Company's Training
Devices Segment and are marketed worldwide to government and commercial
customers.
RTC - Dulles Management Agreement. Prior to January 1, 1996, the
Company's management agreement with British Aerospace to manage its flight
training center near Washington D.C.'s Dulles International Airport required
the Company to pay a facility fee based, in part, on the achievement of
specified levels of revenues at the training center. For the years ended
December 31, 1995, 1994 and 1993, the Company paid facility fees in the amount
of approximately $2.2 million, $1.7 million and $1.2 million, respectively,
which included fees approximating $1,385,000, $966,000 and $650,000,
respectively, based on revenues. In addition, during 1995, 1994 and 1993 the
Company recognized approximately $2.9 million, $1.5 million and $1.4 million,
respectively, in revenues at the Dulles Training Center from the sale of
training services to British Aerospace. Effective on January 1, 1996, under the
terms of a revised management agreement, the Company will receive a fixed fee
of $500,000 annually and will be reimbursed by British Aerospace for the
Company's out-of-pocket costs associated with the Dulles Center.
<PAGE> 22
<PAGE>
Simulation Equipment. The Company enters into contracts or reaches
agreements for the sale of military and commercial simulation equipment with
various entities within British Aerospace. The aggregate amount of such
contracts received subsequent to 1987, and their associated backlog at December
31, 1995, approximated $117.9 million and $24.9 million, respectively. During
the year ended December 31, 1995, new program awards were received from British
Aerospace approximating $40.9 million. Revenues derived from such contracts
during the year approximated $23.1 million and the related cost of sales
approximated $18.4 million. On all British Aerospace simulation device
programs through December 31, 1995, revenues have aggregated $93.0 million and
the cost of sales have aggregated $75.9 million.
Insurance Coverage. The Company has an arrangement with British
Aerospace whereby the majority of the Company's commercial insurance coverages
are provided as an additional named insured under policies and programs
providing like coverages to British Aerospace. Some of the coverage is
underwritten by BAe Insurance, Ltd., a captive insurer wholly owned by BAe. In
future renewals the Company expects to continue to obtain its insurance
coverage in conjunction with British Aerospace under similar arrangements. For
coverage provided during the year ended December 31, 1995, the Company has made
premium payments totaling approximately $642,000.
Forward Exchange Contracts. The Company has entered into forward exchange
contracts to purchase British pounds to which British Aerospace is the
counterparty. These agreements were entered into to reduce the Company's
exposure to foreign currency exchange risk associated with payments for major
subcontractor elements and other requirements of the C-130J program with
Lockheed Martin Corporation ("LMC"). At December 31, 1995, the Company had
$15,064,000 of forward exchange contracts outstanding to purchase British
pounds.
Loan Agreements. BAe fully guarantees the Company's revolving credit
facility with Wachovia Bank of Georgia, N.A. The facility provides for maximum
borrowings of $10 million, expires June 28, 1996, and is anticipated to be
renewed annually. In addition, BAe fully guarantees the Company's letter of
credit facility with Lloyds Bank, Plc., New York. Under this facility, the
Company may issue irrevocable standby letters of credit and bank guarantees
aggregating to a maximum of $20 million. The Lloyds' facility matures on
October 31, 1996, and is anticipated to be renewed annually. Also, the Company
maintains two loan facilities (the "working capital facility" and the "C-130J
facility") with BAe Finance, Inc. ("BAe Finance"), a wholly owned subsidiary of
BAeHI. The working capital facility provides for borrowings aggregating up to
$20.0 million and the C-130J facility provides for borrowings aggregating up to
$40.0 million. Draws under the C-130J facility are limited to actual costs
incurred by the Company and RUKL on the C-130J contract with LMC. The BAe
Finance agreements mature on July 21, 1996.
<PAGE> 23
<PAGE>
Pursuant to the terms of an Agreement for Credit Availability dated as of
August 7, 1995, British Aerospace has agreed, subject to its continued
ownership of a majority of the Company, to continue to provide or guarantee the
Company's current credit facilities at their current levels through July 21,
1996. Renewal of the Company's credit facilities beyond July 21, 1996 is, in
large part, dependent upon British Aerospace's willingness to continue to
provide or guarantee these facilities. By means of a letter dated February 27,
1996, British Aerospace has represented to the Company that it intends to
continue to provide or guarantee the Company's credit facilities and to provide
sufficient financing for the C-130J program until payment is received from LMC,
as long as financing is not available to the Company without recourse to
British Aerospace and British Aerospace continues to hold, or has the ability
to hold through the exercise of preferred stock conversion rights and warrants
to purchase common stock, a majority ownership position in the Company. Based
on the foregoing representations of British Aerospace, management anticipates
that the Company's current credit facilities will be renewed annually. The
Company's credit facilities and the Agreement for Credit Availability with
British Aerospace contain certain covenants which, among other things, require:
(i) the Company to be current with respect to the payment of dividends on its
8% Cumulative Convertible Preferred Stock prior to any draw under the British
Aerospace provided facilities, (ii) the Company to pay British Aerospace a
facility fee of 50 basis points per annum on the maximum aggregate availability
($90.0 million) of the credit facilities provided or guaranteed by British
Aerospace, and (iii) the Company to pay British Aerospace a guarantee fee of
3.25% per annum on amounts outstanding under the Company's $10.0 million
revolving line of credit facility with Wachovia Bank of Georgia, N.A. As
required under the Company's current Agreement for Credit Availability, the
Company issued to British Aerospace warrants to purchase 78,261 shares of the
Company's common stock at any time prior to August 7, 2005, at an exercise
price equal to the lesser of (i) $11.50 per share (the price of the common
stock of the Nasdaq National Market on August 7, 1995, the date of the
execution of the Agreement for Credit Availability), or (ii) the per share
market price of the Company's common stock on the date(s) of the exercise of
the warrants. In addition, the Company's Agreement for Credit Availability
requires that the Company obtain the prior approval by British Aerospace for
all material capital investment expenditures as defined in the Agreement for
Credit Availability.
<PAGE> 24
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. acted as the Company's independent public
accountants during the year ended December 31, 1995, and, it is anticipated,
will continue to act as such during the current year.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting of Shareholders to respond to appropriate questions and will
have the opportunity to make a statement if he or she desires to do so.
FORM 10-K ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY ANY
SHAREHOLDER, UPON WRITTEN REQUEST TO THE SECRETARY AT REFLECTONE, INC., 4908
TAMPA WEST BOULEVARD, P.O. BOX 15000, TAMPA, FLORIDA 33684-5000.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Officers,
directors and employees of the Company may solicit proxies in person or by
telephone, telegraph or other means of communication, for which no special
compensation will be paid. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of the Company's common stock and such persons will be
reimbursed for their reasonable expenses.
SHAREHOLDER PROPOSALS
No proposals by non-management shareholders have been presented for
consideration at the Annual Meeting. Any such proposals intended for
presentation at the 1997 Annual Meeting must be received by the Company at its
principal executive offices, attention of the Secretary, no later than December
24, 1996, in order to be included in the proxy material for that Meeting.
Tampa, Florida
April 17, 1996
<PAGE> 25<PAGE>
