<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
IFR Systems, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
------------------------------------------------------------------------
<PAGE>
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
[Logo]
IFR SYSTEMS, INC.
NOTICE OF ANNUAL MEETING -- NOVEMBER 10, 1995
TO THE SHAREHOLDERS OF IFR SYSTEMS, INC.:
You are hereby notified that the Annual Meeting of Shareholders of IFR
Systems, Inc., a Delaware corporation, will be held at the Rolling Hills
Country Club, Wichita, Kansas, on Friday, November 10, 1995 at 10:00 A.M.
(C.S.T.) for the following purposes:
1. To elect two (2) directors for a term of three years.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
for the current fiscal year ending June 30, 1996.
3. To transact such other business as may properly come before the
meeting.
The shareholders of record at the close of business on September 11, 1995
are entitled to notice of and to vote at the meeting. PLEASE MARK, SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. If you attend the meeting, you may, if you so desire, withdraw your
proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles J. Woodin
Charles J. Woodin
Secretary
Wichita, Kansas
September 25, 1995
1
<PAGE>
IFR SYSTEMS, INC.
1995 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
All shareholders of record on September 11, 1995 are entitled to vote at
the Annual Meeting to be held on Friday, the 10th day of November, 1995. All
shareholders unable to attend such meeting who wish to vote their stock upon the
business to be transacted at such meeting are requested to mark, sign and date
the accompanying form of proxy and return it in the addressed, postage-paid
envelope that is enclosed. The proxy may be revoked at any time before it is
voted, and the signing of such proxy will not affect a shareholder's right to
vote in person if present at the meeting. All proxies returned and not so
revoked will be voted in accordance with their terms.
As stated in the Notice, the matters to be considered at the meeting are
(i) the election of two directors for a term of three years, (ii) the
ratification of the appointment of independent auditors, and (iii) the
transaction of such other business as may properly come before the meeting.
The solicitation of the accompanying form of proxy is made on behalf of the
Board of Directors of the Corporation. The expense of the solicitation of the
proxies for this meeting will be borne by the Corporation. The solicitation will
be made through the use of the mails and by personal solicitation through
regular employees of the Corporation who will not be additionally compensated
therefor.
The mailing address of the principal executive offices of the Corporation
is IFR Systems, Inc., 10200 West York Street, Wichita, Kansas 67215. This Proxy
Statement and the enclosed form of proxy were first sent or given to the
shareholders on approximately September 25, 1995.
OUTSTANDING SHARES & PRINCIPAL SHAREHOLDERS
On September 11, 1995, the Corporation had issued and outstanding 5,491,219
shares of common stock, $.01 par value per share, not including 686,281 treasury
shares. Each shareholder is entitled to one vote upon any proposal
submitted to the meeting for each share standing of record in his name on
September 11, 1995. Based on copies of reports filed with the Securities and
Exchange Commission which have been received by the Corporation, the following
table sets forth, as of September 11, 1995, the only persons known to be
beneficial owners of more than 5% of the Corporation's outstanding common
stock:
<TABLE>
<CAPTION>
NAME & ADDRESS OF NUMBER OF SHARES PERCENT OF TOTAL
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Fenimore Asset Management, Inc. 360,350 6.6 %
118 North Grand Street
Cobleskill, NY 12043
Common Stock Dimensional Fund Advisors, Inc. 321,325 5.9 %
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Common Stock State of Wisconsin 470,600 8.6 %
Investment Board
P.O. Box 7842
Madison, WI 53707
</TABLE>
3
<PAGE>
The following table contains information concerning beneficial ownership
of IFR Systems, Inc. Common Stock as of September 11, 1995, for each Director
or nominee for Director, for each Executive Officer named in the Summary
Compensation Table on Page 7, and for all Directors and Executive Officers as
a group:
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF TOTAL
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES OUTSTANDING (1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oscar L. Tang 89,000 (2) 1.6%
DIRECTOR
John V. Grose 3,000 (3) (*)
DIRECTOR
Wilton W. Cogswell, III 10,950 (4) (5) (*)
DIRECTOR
Paul E. Reinken 16,250 (3)(9) (*)
DIRECTOR
Donald L. Graf 6,400 (4) (7) (*)
DIRECTOR
Ralph R. Whitney, Jr. 26,412 (4) (*)
DIRECTOR
Alfred H. Hunt, III 202,379 (6) 3.7%
DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Eugene R. White, Jr. 57,800 (10) 1.1%
PRESIDENT, PHOTON KINETICS, INC.
Virgil R. Ewy 61,219 (8) 1.1%
VICE PRESIDENT
Directors and Executive Officers as a Group (11 persons) 707,100 (11) 12.9%
<FN>
(1) (*)Denotes less than 1%.
(2) Includes 40,000 shares held by Mr. Tang as trustee in various trusts for
members of Mr. Tang's family and 49,000 shares held by The Tang Fund of
which Mr. Tang is president and a director. Excludes 165,000 shares held in
trust for the benefit of Mr. Tang and 30,000 shares held by August
Associates, an investment partnership in which Mr. Tang is a limited partner,
because Mr. Tang does not have the power to vote or dispose of the
shares or to direct the voting or disposition of the shares.
(3) Includes 3,000 shares subject to stock options granted under the
Corporation's Outside Director Compensation, Stock Option and Retirement
Plan, 2,000 shares of which are presently exercisable and 1,000 shares of
which may be exercised after November 10, 1995.
(4) Includes 6,000 shares subject to stock options granted under the
Corporation's Outside Director Compensation, Stock Option and Retirement
Plan, 5,000 shares of which are presently exercisable and 1,000 shares of
which may be exercised after November 10, 1995.
(5) Includes 500 shares owned by a trust of which Mr. Cogswell is trustee.
(6) Includes 100,000 shares subject to presently exercisable stock options
granted under the Corporation's Incentive Stock Option Plans, 10,000
shares subject to stock options granted under the Corporation's Nonqualified
Stock Option Plan which are exercisable within sixty (60) days after the
date of this Proxy Statement, and 432 shares owned by Mr. Hunt's minor
children. Mr. Hunt disclaims beneficial ownership of the shares owned by
his children.
(7) Includes 100 shares owned by a trust of which Mr. Graf is trustee.
(8) Includes 23,200 shares subject to presently exercisable stock options
granted under the Corporation's Incentive Stock Option Plans and 2,000
shares subject to stock options granted under the Corporation's Nonqualified
Stock Option Plan which are exercisable within sixty (60) days after the
date of this Proxy Statement.
(9) Includes 10,000 shares owned by Mr. Reinken's children. Mr. Reinken
disclaims beneficial ownership of these shares.
(10) Mr. White resigned as President of Photon Kinetics, Inc., effective
April 30, 1995.
(11) Includes 175,200 shares such Directors and Executive Officers have the
right to acquire under options exercisable presently or within 60 days.
</TABLE>
ELECTION OF DIRECTORS
At the meeting, two directors will be elected by majority vote of those
voting. Donald L. Graf and Ralph R. Whitney, Jr., both of whom are members of
the present Board, have been nominated for election as directors to hold
office until the annual meeting of shareholders in 1998, or until their
successor has been elected. The other directors listed below will
4
<PAGE>
continue in office until expiration of their terms. If the enclosed proxy is
duly executed and received in time for the meeting and if no contrary
specification is made as provided therein, it is the intention of the persons
named therein to vote the shares represented thereby for Donald L. Graf and
Ralph R. Whitney, Jr., for election as directors of the Corporation. There
will not be cumulative voting for the election of a director. If the nominee
is unable to serve, an event which the Board of Directors does not
anticipate, the proxy will be voted for the person designated by the Board
to replace that nominee.
The following table sets forth the name, age, business background, and
tenure as a director of the Corporation of each nominee and director. Except
as otherwise indicated the principal occupations of the persons shown in the
table have not changed during the last five years. Each person shown has sole
voting and investment power with respect to the shares opposite his name
except as otherwise indicated in the notes to the table.
NAME, AGE, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
PERIOD SERVED AS DIRECTOR DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
NOMINEES FOR ELECTION FOR A TERM WHICH WILL EXPIRE IN 1998:
DONALD L. GRAF, Mr. Graf is Senior Vice President and Chief
58, Financial Officer of Osborn Laboratories, Inc.
DIRECTOR SINCE 1985 (a wholly-owned subsidiary of Equifax
Corporation), a medical testing services
company with its Director since 1985 principal
offices in Olathe, Kansas. From September 1988
until January 1992, Mr. Graf was Senior Vice
President-Finance of Kansas City Southern
Industries, Inc.
RALPH R. WHITNEY, JR., Mr. Whitney is a principal of Hammond, Kennedy,
60, Whitney & Company, Inc., a private investment
DIRECTOR SINCE 1985 firm with offices at 230 Park Avenue, New York,
New York. Mr. Whitney also serves as Director
since 1985 a director of Adage, Inc.; Baldwin
Technology Company, Inc.; Excel Industries, Inc.;
Keene Corporation and Selas Corporation of
America.
DIRECTORS WHOSE TERMS EXPIRE IN 1996:
JOHN V. GROSE Mr. Grose is a director and past President of
65, Navair, Inc., which sells, services and installs
DIRECTOR SINCE 1992 avionics in military and commercial aircraft.
Navair also distributes electronic test and
measurement equipment. Head office is in
Mississauga, Ontario, Canada. Mr. Grose remains
active in the distribution area of the business.
OSCAR L. TANG, Since September 1993, Mr. Tang has been a
57, director of and consultant to New England
DIRECTOR SINCE 1995 Investment Company, L.P. From August 1970 to
September 1993 Mr. Tang was the President and
Director since 1995 Chief Executive Officer and
co-founder of Reich & Tang, L.P., predecessor
of New England Investment Company, L.P.
DIRECTORS WHOSE TERMS EXPIRE IN 1997:
WILTON W. COGSWELL, III, Mr. Cogswell is engaged in the practice of law as
57, a sole practitioner in Colorado Springs, Colorado.
DIRECTOR SINCE 1989
ALFRED H. HUNT, III, Mr. Hunt is the President of the Corporation and
59, since 1985 has been its Chief Executive Officer.
DIRECTOR SINCE 1971 He was elected to the additional position of Vice
Chairman of the Board in January, 1990.
PAUL E. REINKEN, Prior to his retirement in July 1983 Mr. Reinken
76, was Vice President-Personnel and Public
DIRECTOR SINCE 1987 Relations of Indiana Bell Telephone Company, Inc.
5
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended June 30, 1995, the Board of Directors met 5
times. The Board of Directors has a Compensation Committee and an Audit
Committee. All Board members attended more than 75 percent of the aggregate
number of Board meetings and Committee meetings held during the fiscal year
ended June 30, 1995.
The Compensation Committee currently is comprised of Messrs. Cogswell,
Graf, Reinken and Tang. The Compensation Committee recommends compensation
arrangements for the executive officers and directors of the Corporation. The
Compensation Committee met 2 times during the last fiscal year.
The purposes and functions of the Corporation's Audit Committee are to
recommend the engagement or discharge of independent auditors; to review
quarterly financial statements prior to issuance; to review year-end
financial statements prior to issuance; to review the services from time to
time being performed by the independent auditors, including nonaudit services
and the fees charged, or to be charged, for all such services; and to make
appropriate reports and recommendations to the Board of Directors. The
persons who currently are serving on the Audit Committee are Messrs.
Cogswell, Graf, Reinken and Whitney. The Audit Committee met 2 times during
the last fiscal year.
COMPENSATION OF DIRECTORS
Directors of the Corporation, other than persons compensated as
executive officers of the Corporation, receive an annual retainer, payable in
four equal quarterly installments. The amount of the annual retainer for the
year ended June 30, 1995 was $16,000. Each such director also receives
$1,000 for each Board meeting attended and $800 for each committee meeting
attended, and participates in the Outside Director Compensation, Stock
Option, and Retirement Plan described below. If a director is requested by
the Corporation to travel out of town for attendance at a Board meeting or a
committee meeting, the director will be reimbursed for reasonable travel
expenses.
In November 1989, the Board of Directors adopted, and the shareholders
approved, the IFR Systems, Inc. Outside Director Compensation, Stock Option,
and Retirement Plan (the "Outside Director Plan"), pursuant to which
directors who are not employees of the Corporation ("Outside Directors") are
entitled to receive certain cash compensation, stock options, and retirement
benefits, all as described below. The Outside Director Plan is administered
by the Compensation Committee. Subject to the provisions of the Outside
Director Plan, the Committee is authorized to interpret such provisions and
to make any determinations necessary or advisable for the administration of
the Outside Director Plan. The Committee has no discretion with respect to
the selection of directors who will receive options and retirement benefits,
the terms and provisions of the options, or the amount and duration of the
retirement benefits, all of which are established by the provisions of the
Outside Director Plan.
The Outside Director Plan provides for the payment of an annual retainer
and meeting attendance fees to Outside Directors of the Corporation. Such
fees are established annually by the Board of Directors. The Outside Director
Plan also provides that the Board of Directors may from time to time
establish a program for the deferral of such fees and purchase term life,
travel, and accidental death and dismemberment insurance for Outside
Directors. The Board of Directors has no present intention to establish a
deferral program or purchase any such insurance.
The Outside Director Plan provides that each Outside Director shall be
granted an option to purchase 1,000 shares of the Corporation's common stock
on the third business day after the annual meeting of the shareholders of the
Corporation held in each of the ten years commencing in 1989. The total
number of shares which may be issued under the Outside Director Plan may not
exceed 60,000 shares, subject to adjustments for stock splits and stock
dividends. Options granted under the Outside Director Plan may be exercised
at any time after twelve months after the date of grant. Each of the options
granted under the Outside Director Plan is nontransferable except by will or
pursuant to the laws of descent and distribution, is exercisable during an
optionee's lifetime only by the optionee, and terminates upon the earlier of
(i) nine months after the date the optionee no longer serves as a member of
the Board of Directors or (ii) one year
6
<PAGE>
after the date of the optionee's death, whether or not he is serving on the
Board of Directors at the time of his death. Payment for shares upon the
exercise of each such option may be made in cash or in shares of common stock
of the Corporation already owned by the optionee on the date of exercise
(valued on the basis of fair market value thereof on the date of exercise).
The option price per share under the Outside Director Plan shall be equal to
100% of the fair market value on the date of grant.
Under the Outside Director Plan, each Outside Director may qualify for a
retirement benefit in an amount equal to the annual retainer fee in effect for
the year immediately preceding his retirement or resignation from the Board of
Directors, payable annually, in quarterly installments, for the same number of
years of service since 1989. In order to receive such retirement benefits, the
Outside Director must have reached age 65 and ceased serving as a director of
the Corporation. If an Outside Director dies while serving as a director or
following his retirement or resignation from the Board of Directors, any
retirement benefits that he would have otherwise been entitled to receive shall
be paid to his surviving spouse or personal representative. No retirement
benefits are payable for past service as a director in years prior to the
approval of the Outside Director Plan by the shareholders in 1989. The
retirement benefits are intended to be a non-qualified retirement plan for
purposes of the Internal Revenue Code deductible by the Corporation in the year
paid. Retirement benefits payable under the Outside Director Plan are an
unfunded general obligation of the Corporation.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation for
the Corporation's Chief Executive Officer and the most highly compensated
executive officers whose salary and bonus exceeded $100,000 (named
executives), as well as the total compensation paid to each such individual
for the Corporation's two previous fiscal years:
<TABLE>
<CAPTION>
-----------------------------------
SUMMARY COMPENSATION TABLE Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
Securities
Restricted Underlying LTIP All Other
Name and Salary Bonus Other Annual Stock Options/ Payouts Compensation
Principal Position Year ($) ($) Compensation Awards ($) SARs ($) ($)(2)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alfred H. Hunt, III 1995 $240,000 $0 $ 39,568 (4) $ 0 50,000 0 $13,413
CHIEF EXECUTIVE OFFICER 1994 $215,004 $0 $ 68,337 (4)(5) $ 62,000 0 0 $ 2,150
1993 $215,004 $0 $ 108,818 (4)(6) $136,000 50,000 0 $13,171
Eugene R. White, Jr.(1) 1995 $162,685 $0 $ 7,200 $ 0 0 0 $47,863
President, Photon 1994 $139,615 $0 $ 7,660 $ 62,400 0 0 $ 100
KINETICS, INC. 1993 $130,000 $0 $ 0 $ 46,800 50,000 0 $ 700
Virgil R. Ewy 1995 $110,610 $0 $ 6,041 $ 0 5,000 0 $ 8,654
VICE PRESIDENT 1994 $110,610 $0 $ 16,054 (5) $ 27,312 0 0 $ 2,212
1993 $110,610 $0 $ 32,340 (6) $ 59,883 10,000 0 $ 8,104
<FN>
(1) Mr. White resigned as President of Photon Kinetics, Inc. effective April
30, 1995.
(2) Includes fiscal 1995 company contributions to the IFR Systems, Inc.
Employees Profit Sharing Plan of $8,613 for Mr. Hunt and Mr. White, and
$6,352 for Mr. Ewy, and fiscal 1995 contributions to the Savings (401K)
Plan of $4,800 for Mr. Hunt and $2,302 for Mr. Ewy, respectively.
(3) Includes severance pay for Mr. White totaling $39,250.
(4) Includes life insurance premiums for Mr. Hunt totalling $23,000.
(5) Other annual compensation includes gross up payments for estimated tax
liabilities incurred on the vesting of restricted stock grants on June
30, 1994, such that $31,000 and $13,656 was paid to Mr. Hunt and Mr. Ewy,
respectively.
(6) Other annual compensation includes gross up payments for estimated tax
liabilities incurred on the vesting of restricted stock grants on June
30, 1993, such that $68,000 and $29,942 was paid to Mr. Hunt and Mr. Ewy,
respectively.
</TABLE>
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning Options/SAR's
granted during fiscal 1995 to the named executives.
<TABLE>
<CAPTION>
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
Number of % of Total Potential Realizable Value at
Securities Options/SARs Assumed Annual Rates of
Underlying Granted to Exercise or Stock Price Appreciation
Options /SAR's Employees in Base Price Date Expiration for Option Term
Name Granted (#) Fiscal Year(2) ($/Share) Exercisable (1) Date 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred H. Hunt, III 10,000 4.2% $11.375 6/19/96 6/19/05 $71,500 $181,000
10,000 4.2% $11.375 6/19/97 6/19/05 $71,500 $181,000
10,000 4.2% $11.375 6/19/98 6/19/05 $71,500 $181,000
10,000 4.2% $11.375 6/19/99 6/19/05 $71,500 $181,000
10,000 4.2% $11.375 6/19/00 6/19/05 $71,500 $181,000
Virgil R. Ewy 1,000 0.4% $11.375 6/19/96 6/19/05 $7,200 $18,000
1,000 0.4% $11.375 6/19/97 6/19/05 $7,200 $18,000
1,000 0.4% $11.375 6/19/98 6/19/05 $7,200 $18,000
1,000 0.4% $11.375 6/19/99 6/19/05 $7,200 $18,000
1,000 0.4% $11.375 6/19/00 6/19/05 $7,200 $18,000
<FN>
(1) The options to Mssrs. Hunt and Ewy were granted at a price equal to
fair market value on the date of grant (June 19).
(2) In fiscal 1995, options to purchase 250,400 shares of the Company's stock
were granted to 19 individuals.
(3) No options were granted to Mr. White during fiscal 1995. Mr. White
resigned as President of Photon Kinetics, Inc. effective April 30,
1995.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table summarizes options exercised during 1995 and
presents the value of unexercised options held by the named executives at
fiscal year end:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options on Options on
June 30, 1995 June 30, 1995
Shares Acquired Value --------------------------------------------------------
Name on Exercise (#) Realized ($) Exercisable / Unexercised Exercisable /Unexercised
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alfred H. Hunt, III 17,775 $35,550 100,000 / 80,000 $510,000 / $165,000
Virgil R. Ewy -- -- 23,200 / 11,000 $75,662 / $31,125
Eugene R. Wright, Jr. (1) 30,000 $112,500 -- -- -- --
<FN>
(1) Mr. White resigned as President of Photon Kinetics, Inc. effective April
30, 1995.
</TABLE>
COMPENSATION PURSUANT TO PLANS
INCENTIVE BONUS PLAN. In March, 1992 the Board of Directors approved an
Incentive Bonus Plan (the "Plan") effective July 1, 1992, pursuant to which
a pool of bonus monies equal to a percentage of the base compensation of
the Plan participants would be established, provided that the Corporation's
income before income taxes and bonuses for the fiscal year exceed specified
performance goals. All salaried and hourly employees are participants in the
Plan, with the exception of the President of the Corporation and the President
of its wholly-owned subsidiary, Photon Kinetics, Inc. ("Photon"). No funds were
earned under the Incentive Bonus Plan during the fiscal year ended June 30,
1995.
8
<PAGE>
In May 1993, the Board of Directors approved an executive management
Incentive Bonus Plan effective July 1, 1993, whereby a bonus equal to a
percentage of base compensation will be paid, provided that the Corporation's
performance meets certain criteria. Executive management of Photon Kinetics
must achieve a specified goal of income before income taxes and bonus for
Photon Kinetics on a stand-alone basis, before bonus is paid. Executive
management of IFR, excluding Mr. Hunt, must achieve a specified goal of
income before income taxes and bonus for IFR on a stand-alone basis.
RESTRICTED STOCK GRANT PLAN. In 1988 the Corporation adopted a
Restricted Stock Grant Plan (the "Stock Grant Plan") pursuant to which shares
of the Corporation's common stock may be granted to officers and other key
employees of the Corporation. The amount and the recipients of grants are
determined by the Compensation Committee. Shares granted under the Stock
Grant Plan are subject to restrictions consisting of (i) a prohibition
against any sale or transfer of the shares (other than resale of the shares
to the Corporation pursuant to the terms of the Stock Grant Plan) and (ii)
the obligation of the participant to resell any shares which are not fully
vested to the Corporation at the price paid for them if the participant
leaves the employment of the Corporation for any reason prior to the
expiration of such period or periods of time after the shares are granted to
him as may be established by the Compensation Committee at the time the grant
is made. The Compensation Committee may impose vesting requirements of up to
ten years on any shares granted to a participant under the Stock Grant Plan,
but it is not required to impose any such restrictions.
INCENTIVE STOCK OPTION PLANS. The Corporation has two Incentive Stock
Option Plans which were adopted in 1985 (the "1985 Plan") and 1988 (the "1988
Plan"), respectively. Under the terms of both the 1985 Plan and the 1988
Plan, options may be granted to officers and other key employees who are
regular full-time employees of the Corporation. The amount and
recipients of options are determined by the Compensation Committee.
Generally, no employee may be granted options which first become exercisable
in any calendar year for common stock having an aggregate fair market value
(determined as of the date of grant) in excess of $100,000. Options granted
under both the 1985 Plan and the 1988 Plan are granted at fair market value
and expire not more than ten years from the date of grant.
NONQUALIFIED STOCK OPTION PLAN. The Corporation has a Nonqualified
Stock Option Plan which was adopted in 1992 (the "1992 Plan"). Under the
terms of the 1992 Plan, all employees of the Corporation and its
subsidiaries, including executive officers, are eligible to be granted
options. A total of 500,000 authorized but unissued or treasury shares of
the Corporation's Common Stock were reserved for grant under the 1992 Plan.
A committee appointed by the Board of Directors, consisting of not fewer than
three directors, select the employees whom options are granted, and determine
the number of shares covered by each option, the purchase price, time of
exercise and other terms. None of the Committee members may be officers of
the Corporation or eligible to participate in the 1992 Plan.
AGREEMENT RELATING TO TERMINATION OF EMPLOYMENT. An agreement was entered
into with Mr. Hunt effective March 1, 1989 which provides that the
Corporation shall pay to Mr. Hunt an amount equal to 2.95 times the average
annual compensation earned by Mr. Hunt over the previous five years and
certain other benefits, in the event of a Change in Control of the
Corporation (as defined below) and in the further event, that within two
years following any such Change in Control, Mr. Hunt's employment by the
Corporation is terminated either by the Corporation for a reason other than
serious misconduct, death, normal retirement or total and permanent
disability or by Mr. Hunt for good reason (as such term is defined in the
agreement). In addition, following a Change in Control and termination of
employment, the Corporation shall (i) maintain in force, for the benefit of
Mr. Hunt, retirement, disability and medical insurance benefits for a period
of three years, and until the year 2002, the $1 million life insurance policy
referred to above, and (ii) pay to Mr. Hunt the amount of any federal or
state tax incurred by him as a result of receiving "excess parachute
payments" (as defined in the Internal Revenue Code) under the agreement. For
purposes of the agreement, a Change in Control of the Corporation means any
event of a nature that would be required to be reported to the Securities and
Exchange Commission in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended,
provided that, without limitation, a Change in Control shall be deemed to
have occurred if: (a) any person (within meaning of Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934) or group of persons becomes
the beneficial owner, directly or indirectly, of shares of common stock of
the Corporation representing 20% or more of the shares of voting stock of the
Corporation; or (b) during any period of two consecutive years, individuals
who
9
<PAGE>
at the beginning of such period were members of the Corporation's Board of
Directors cease to constitute a majority of the Board of Directors, unless
the election of each director who was not a director at the beginning of such
period was approved by at least two-thirds of the directors then still in
office. No Change in Control shall be deemed to have occurred if the person
or group acquiring control of the Corporation includes Mr. Hunt. The
agreement is for a term ending on December 31, 1995, but is automatically
renewed, prior to a Change in Control, for successive one-year terms unless
terminated as provided in the agreement; after a Change in Control, the
agreement extends for a further three-year term after its next anniversary
date.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board (the "Committee"), composed of
four nonemployee Directors, is responsible for establishing an executive
compensation policy and plan for the Corporation.
OVERALL POLICY. The Committee's principal objective in setting a
compensation policy is to develop a program designed to attract and retain
executives who are most likely to enhance the profitability of the
Corporation and create value for its shareholders.
To achieve this objective a compensation program was developed which
establishes annual base salaries and provides for bonus awards under certain
conditions. The program also includes incentives, principally tied to
increased value of the common stock of the Corporation.
In its decision making, the Committee makes use of the following principles:
- A pay-for-performance philosophy ensuring that overall compensation
of executives reflects IFR's progress toward attainment of its goals.
- Use of stock options and restricted stock grants to balance IFR's
short and long-term goals.
- Target executive compensation levels at rates consistent with those
of comparable companies.
- Encourage stock ownership by executives with the objective of
promoting a common interest with the shareholders in maximizing
stock value.
ANNUAL EXECUTIVE COMPENSATION. The Committee, with input from the Chief
Executive Officer, determines annual salary levels for the executive group.
The Committee also administers stock option and restricted stock awards and
determines the key employees to whom awards are to be granted as well as the
number of options or shares to be awarded.
Base salaries are targeted at the median base salaries of comparable
companies. Factors considered in setting base salaries also include level of
responsibilities and prior experience and achievements. If corporate
financial objectives are attained, the addition of bonus awards permits
executivesto move into the upper quartiles of annual compensation in
relation toexecutive levels of comparable companies. The incentive bonus plan
is explained on page 8 of this Proxy Statement.
The Corporation's restricted stock grant compensation combines elements
of short-term compensation and longer term incentives. Stock grants may be
used to reward executives who have been responsible for successful past
results and to attract skilled management by providing stock for "sign-on"
bonus use. In either case, stock ownership is intended to provide an
additional incentive for executive management based on long-term results and
growth in stock value.
INCENTIVE COMPENSATION. The Corporation's incentive program consists
primarily of stock options and stock ownership incentives provided
byrestricted stock grants as described above. Stock options have never been
granted at less than the then-current market price of the Corporation's
common stock and provide value to the executive only with appreciation in the
stock price. The options granted by the Corporation (under the incentive
plans described at pages 8 and 9) generally are exercisable for a period of
up to ten years and vest based on continued employment over a period of time,
which may vary in the discretion of the Board of Directors but typically has
been five or six years in almost all cases. This combination of features
encourages loyalty, continued employment and identification of key employee's
interests with those of shareholders in longer-term corporate goals.
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<PAGE>
1995 COMPENSATION FOR EXECUTIVES (OTHER THAN THE CHIEF EXECUTIVE OFFICER)
IFR's compensation programs are designed to retain and motivate key
executives. Salaries are also reviewed with comparable companies' in our
industry. Consistent with this policy, certain increases were granted. The
financial objectives for fiscal 1994 were not achieved and no bonuses were
paid. An incentive stock option grant of 50,000 shares was made to Mr.
Arnold, General Manager, IFR Wichita.
1995 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. In setting fiscal
1995 salary and bonus award levels for the Chief Executive Officer, the
Committee reviewed IFR's fiscal 1994 financial performance compared to the
Company's 1994 financial plan. Compensation and performance of comparable
companies were reviewed to assure consistency.
Net income and return on equity did not meet the objectives set in the
financial plan. Balancing the performance factors, the CEO's salary was
increased to equal the mid-point of pay received by peer companies. No bonus
was paid in fiscal 1995. Mr. Hunt received an incentive stock option grant of
50,000 shares from the previously described stock option plans.
COMPENSATION COMMITTEE. Wilton W. Cogswell, Donald L. Graf, Paul E.
Reinken, and Oscar L. Tang
STOCK PERFORMANCE GRAPH
The following graph sets forth the five-year cumulative total return on
the Common Stock of the Corporation as well as the total returns on the
NASDAQ Stock Market (U.S. Companies) and the NASDAQ Non-Financial Stocks:
[GRAPH]
LEGEND
<TABLE>
<CAPTION>
June 30,
Symbol CRSP Total Returns Index for: 06/29/90 06/28/91 06/30/92 06/30/93 06/30/94 06/30/95
- -------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[SQUARE SYMBOL] IFR Systems, Inc. Common Stock 100.0 77.9 54.5 88.3 80.5 122.1
[STAR SYMBOL] Nasdaq Stock Market (U.S. Companies) 100.0 105.9 127.3 160.0 161.6 215.3
[TRIANGLE SYMBOL] Nasdaq Non-Financial Stocks 100.0 104.4 120.1 149.7 146.0 198.1
SIC 0100-5999, 7000-9999 US & Foreign
<FN>
NOTES: A. THE LINES REPRESENT MONTHLY INDEX LEVELS DERIVED FROM COMPOUNDED DAILY
RETURNS THAT INCLUDE ALL DIVIDENTS.
B. THE INDEXES ARE REWEIGHTED DAILY, USING THE MARKET CAPITALIZATION ON THE
PREVIOUS TRADING DAY.
C. IF THE MONTHLY INTERVAL, BASED ON THE FISCAL YEAR-END, IS NOT A
TRADING DAY, THE PRECEDING TRADING DAY IS USED.
D. THE INDEX LEVEL FOR ALL SERIES WAS SET TO $100.0 ON 06/29/90.
</TABLE>
11
<PAGE>
CERTAIN RELATIONSHIPS
Mr. Grose, a director of the Corporation, is also a director and past
President of Navair Inc., Mississauga, Ontario. Navair is the exclusive
distributor of IFR products in Canada, which accounted for more than 25% of
Navair's sales during its most recent fiscal year. During the Corporation's
fiscal year ended June 30, 1995, Navair's purchases from the Corporation
totaled $1,860,192 (less than 4% of the Corporation's gross revenues). This
relationship is expected to continue during the current fiscal year. Mr.
Grose inadvertently filed his Form 5 for the last fiscal year 9 days late.
Such form covered one transaction, an option granted to purchase 1,000 shares
of the Corporation's common stock under the Outside Director Plan.
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee recommended and the Board of Directors of the
Corporation appointed Ernst & Young LLP as independent auditors to examine
the financial statements of the Corporation for the current fiscal year
ending June 30, 1996. Although there is no requirement that such appointment
be submitted to a vote of the shareholders, the Board of Directors believes
that the shareholders should be afforded the opportunity to ratify the
appointment. If the shareholders do not ratify the appointment, the Board of
Directors, in its discretion and without further vote of the shareholders,
will select another firm to serve as independent auditors for the current
fiscal year.
Ernst & Young LLP has served as independent auditors for the Corporation
continuously since 1971 and is considered by the directors to be well
qualified. The Board of Directors therefore recommends a vote FOR
ratification of the appointment of Ernst & Young LLP and if the enclosed
proxy is duly executed and received in time for the meeting and if no
contrary specification is made as provided therein, it is the intention of
the persons named therein to vote the shares represented thereby for
ratification of such appointment. The affirmative vote of the majority of the
shares represented at the meeting is required for ratification of the
appointment.
A representative of Ernst & Young LLP is expected to be present at the
shareholder meeting and will have the opportunity to make a statement if he
desires to do so. Ernst & Young LLP has indicated that it presently does not
intend to make a statement but that its representative will be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
May 28, 1996, is the date by which shareholder proposals intended to be
presented at the 1996 annual meeting of shareholders must be received by the
Corporation to be considered for inclusion in the proxy materials relating to
that meeting.
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the "Notice
of Annual Meeting". The Board of Directors has not been informed of any
matters other than those stated in the Notice that are to be presented at the
meeting. If any other business is brought before the meeting, the persons
named in the proxy will vote according to the recommendations of the Board of
Directors of the Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles J. Woodin
SECRETARY
IMPORTANT:
Please immediately mark, sign, date and return your Proxy in the enclosed
stamped, addressed envelope. If you attend the meeting, and if you so desire,
you may withdraw your Proxy and vote in person. THANK YOU FOR ACTING PROMPTLY.
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[LOGO]
PROXY
ANNUAL MEETING OF SHAREHOLDERS - NOVEMBER 10, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Alfred H. Hunt, III, and
Charles J. Woodin, and each of them, proxies with full power of substitution
to vote for the undersigned all shares of common stock of IFR Systems, Inc.
which the undersigned would be entitled to vote if personally present at the
annual meeting of shareholders to be held on November 10, 1995, at 10:00 a.m.
(C.S.T.), and any adjournment thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may properly
come before the meeting or any adjournment thereof. Said proxies are directed
to vote or to refrain from voting as checked below upon the following
matters, and otherwise in their discretion:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING:
1. Election of Directors Nominees: Donald L. Graf and Ralph R.
Whitney, Jr.
/ / FOR all nominees listed above
(except authority is withheld to vote for the following
named nominee, (if any)).
_______________________________________________________________________________
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
2. Ratification of the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year ending June 30, 1996.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" NOMINEES IN ITEM 1 AND "FOR" ITEM 2.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Annual Meeting, the Proxy Statement dated September 25, 1995, and the
Corporation's 1995 Annual Report. The undersigned hereby revoke any proxy or
proxies heretofore given.
DATE: ___________________________________, 1995.
Number of Shares:
Signature of Shareholder or Shareholders
______________________________________________________________
______________________________________________________________
______________________________________________________________
IMPORTANT: Please date this Proxy and sign exactly as your name or names appear
hereon. If stock is held jointly, signature should include both names.
Executors, administrators, trustees, guardians and others signing in a
representative capacity, please give full titles.
