<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))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
[LOGO]
IFR SYSTEMS, INC.
NOTICE OF ANNUAL MEETING
NOVEMBER 5, 1998
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, 233 South Westlink Drive, Wichita, Kansas, on Thursday, November 5, 1998
at 10:00 A.M. (C.S.T.) for the following purposes:
1. To elect two (2) directors for a term of three years and until their
successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
for the current fiscal year ending June 30, 1999; and
3. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on September 7, 1998
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 28, 1998
<PAGE>
IFR SYSTEMS, INC.
1998 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Shareholders of record on September 7, 1998 are entitled to vote at the
Annual Meeting of IFR Systems, Inc., a Delaware corporation ("IFR" or the
"Company"), to be held at 10:00 a.m. (C.S.T.) on Thursday, November 5, 1998. 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 by written notice to the Secretary of the Company, by submitting another
proxy that is later dated, or by voting in person at the meeting, and the
signing of a 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. There are no dissenters' rights of appraisal or
similar rights of dissenters with respect to any matter to be acted upon at the
meeting.
As stated in the attached Notice, the matters to be considered at the
meeting are (i) the election of two directors for a term of three years and
until their successors are duly elected and qualified; (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 Company for the 1998 Annual Meeting and any
adjournments thereof. The expense of the solicitation of the proxies for this
meeting will be borne by the Company. The solicitation will be made through the
use of the mail and by personal solicitation through regular employees of the
company who will not be additionally compensated therefor.
The mailing address of the principal executive offices of the company 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 28, 1998.
REQUIRED VOTES
A majority of the votes that could be cast in the election or on a proposal
by shareholders who are either present in person or represented by proxy at the
meeting is required to elect the nominees for director and to approve each
proposal. Each shareholder is entitled to one vote upon each motion submitted at
the meeting for each share outstanding of record in his name at the close of
business on September 7, 1998. The total number of votes that could be cast at
the meeting is the number of votes actually cast plus the number of abstentions.
Abstentions are counted as "shares present" at the meeting for purposes of
determining whether a quorum exists and have the effect of a vote "against" any
matter as to which they are specified. Proxies submitted by brokers that do not
indicate a vote for some or all of the proposals because they do not have
discretionary voting authority and have not received instructions as to how to
vote on those proposals (so-called "broker nonvotes") are considered "shares
present" at the meeting only for quorum purposes but will not be considered as
having been voted "for" or "against" such proposals and will not affect the
outcome of the vote.
1
<PAGE>
OUTSTANDING SHARES & PRINCIPAL SHAREHOLDERS
On September 7, 1998, the Company had issued and outstanding 8,206,015
shares of common stock, $.01 par value per share ("Common Stock"), not including
1,060,235 treasury shares. Based on copies of reports filed with the Securities
and Exchange Commission which have been received by the Company, the following
table sets forth, as of September 7, 1998, the only persons known to be
beneficial owners of more than 5% of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
- ----------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Fenimore Asset Management, Inc......................................... 1,209,856 14.7%
118 North Grand Street
Cobleskill, NY 12043
State of Wisconsin..................................................... 1,063,000 13.0%
Investment Board
P.O. Box 7842
Madison, WI 53707
Dimensional Fund Advisors, Inc......................................... 494,936 6.1%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Wanger Asset Management, L.P........................................... 450,000 5.5%
227 W. Monroe Street
Suite 3000
Chicago, IL 60606
</TABLE>
2
<PAGE>
The following table contains information concerning beneficial ownership of
IFR Systems, Inc. Common Stock as of September 7, 1998, by each Director or
nominee for Director, by each Executive Officer named in the Summary
Compensation Table on Page 7 and by all Directors and Executive Officers as a
group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNED(1) SHARES
- ------------------------------------------------------------------------ ------------------- -------------
<S> <C> <C>
Wilton W. Cogswell, III ................................................ 20,125(2) (*)
DIRECTOR
Donald L. Graf ......................................................... 12,600(3) (*)
DIRECTOR
John V. Grose .......................................................... 10,500 (*)
DIRECTOR
Alfred H. Hunt, III .................................................... 268,674 (4) 3.3 %
DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Oscar L. Tang .......................................................... 146,456 (5) 1.8 %
DIRECTOR
Ralph R. Whitney, Jr. .................................................. 42,618 (*)
DIRECTOR
Friedel E. Arnold ...................................................... 62,475 (*)
GENERAL MANAGER IFR AMERICAS, INC.
Jeffrey A. Bloomer ..................................................... 32,125 (*)
TREASURER AND CHIEF FINANCIAL OFFICER
Iain M. Robertson ...................................................... 24,375 (*)
MANAGING DIRECTOR IFR LTD.
Directors and Executive Officers as a Group (10 persons)................ 625,613 7.6 %
</TABLE>
- ------------------------
(*) Denotes less than 1%.
(1) Includes shares that could be acquired within 60 days after September 7,
1998 upon the exercise of options granted pursuant to company stock option
plans as follows: Mr. Cogswell, 12,000; Mr. Graf, 12,000; Mr. Grose, 6,000;
Mr. Hunt, 142,500; Mr. Tang, 3,000; Mr. Whitney, 12,000; Mr. Arnold, 60,375;
Mr. Bloomer, 23,625; Mr. Robertson, 24,375; all directors and executive
officers as a group, 291,375 shares.
(2) Includes 800 shares owned by a trust of which Mr. Cogswell is trustee. Mr.
Cogswell disclaims beneficial ownership of such shares.
(3) Includes 150 shares owned by a trust of which Mr. Graf is trustee.
(4) Includes 3,084 shares owned by Mr. Hunt's children. Mr. Hunt disclaims
beneficial ownership of the shares owned by his children.
(5) Includes 60,000 shares held by Mr. Tang as trustee in various trusts for
members of Mr. Tang's family and 73,500 shares held by The Tang Fund of
which Mr. Tang is president and a director. Excludes 247,500 shares held in
trust for the benefit of Mr. Tang and 35,044 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
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
At the Annual Meeting, two directors will be elected by majority of the
votes which could be cast in the elections. 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
2001 and until their successors have been elected and qualified. The other
directors listed below will 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 Company. There
will not be cumulative voting for the election of any 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 BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF
BOTH NOMINEES.
The following table sets forth the name, age, business background, and
tenure as a director of the Company 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 indicated in the beneficial
ownership table on page 3.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
PERIOD SERVED AS DIRECTOR DURING PAST FIVE YEARS
- ------------------------------- --------------------------------------------------------------------------------
<S> <C>
NOMINEES FOR ELECTION FOR A TERM WHICH WILL EXPIRE IN 2001:
Donald L. Graf, 61 Mr. Graf is the Corporate Vice President and Chief Financial Officer of A. Duda
DIRECTOR SINCE 1985 & Sons, Inc., a privately held nationwide agribusiness and development company
with principal offices in Oviedo, Florida. From March 1996 to July 1997, Mr.
Graf was a private investor and consultant. Prior to then, Mr. Graf was the
Senior Vice President and Chief Financial Officer of Osborn Laboratories, Inc.
Ralph R. Whitney, Jr., 63 Mr. Whitney is a principal of Hammond, Kennedy, Whitney & Company, Inc., a
DIRECTOR SINCE 1985 private investment firm with offices at 230 Park Avenue, New York, New York. Mr.
Whitney also serves as a director of Adage, Inc.; Baldwin Technology Company,
Inc.; Excel Industries, Inc.; Control Devices, Inc. and Selas Corporation of
America.
DIRECTORS WHOSE TERMS EXPIRE IN 1999:
John V. Grose, 68 Mr. Grose is a director and past President of Navair, Inc., which sells,
DIRECTOR SINCE 1992 services and installs avionics in military and commercial aircraft. Navair also
distributes electronic test and measurement equipment. Navair's headquarters are
in Mississauga, Ontario, Canada. Mr. Grose remains active in the distribution
area of the business.
Oscar L. Tang, 60 Since September 1993, Mr. Tang has been a director of Nvest, L.P. Prior to then,
DIRECTOR SINCE 1993 Mr. Tang was the President and Chief Executive Officer and co-founder of Reich &
Tang, L.P., predecessor of Nvest, L.P.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
PERIOD SERVED AS DIRECTOR DURING PAST FIVE YEARS
- ------------------------------- --------------------------------------------------------------------------------
<S> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2000:
Wilton W. Cogswell, III, 60 Mr. Cogswell is engaged in the practice of the law as a sole practitioner in
DIRECTOR SINCE 1989 Colorado Springs, Colorado.
Alfred H. Hunt, III, 62 Mr. Hunt is the President and Chief Executive Officer and Vice Chairman of the
DIRECTOR SINCE 1971 Board of the Company.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended June 30, 1998, the Board of Directors met seven
times. The Board of Directors has a Compensation Committee, an Audit Committee,
and a Shareholder Relations Committee. There is no standing nominating
committee. All Board members attended more than 75 percent of the aggregate
number of Board meetings and meetings of committees on which each served during
the fiscal year ended June 30, 1998. The Compensation Committee is comprised of
Messrs. Cogswell, Graf, Tang and Whitney.
The Compensation Committee reviews and approves all compensation plans,
benefit programs and perquisites for executives and other employees. See
"Compensation Committee Report on Executive Compensation" for a more complete
description of the functions of the Compensation Committee. The Compensation
Committee met three times during the last fiscal year.
The purposes and functions of the Company's Audit Committee are to meet with
the auditors; 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. Graf, Grose, and Whitney. The
Audit Committee met three times during the last fiscal year.
The Shareholder Relations Committee is composed of Messrs. Cogswell, Hunt,
Grose and Tang and is responsible for establishing and monitoring the Company's
Investor Relations Policy. The Shareholder Relations Committee evaluates the
Company's effectiveness in the communication with the shareholders and the
general financial community. The Investor Relations Policy is designed to assist
the designated spokespersons in disseminating information to shareholders and
other interested parties concerning developments at the Company including
quarterly financial results, new product announcements, and other developments
considered relevant to the valuation of the Company's publicly-traded
securities. The Shareholder Relations Committee met two times during the last
fiscal year.
COMPENSATION OF DIRECTORS
Directors of the Company, other than persons compensated as executive
officers of the Company, received an annual retainer for the year ended June 30,
1998, of $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 Company to travel out of town for
attendance at a Board meeting or a committee meeting, the director is reimbursed
for reasonable travel expenses.
5
<PAGE>
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 Company ("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 Company. 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 the purchase of 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 1,500 shares of the Company's common stock on the
third business day after the annual meeting of the shareholders of the Company
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 90,000
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 from 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 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 Company 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 is entitled to
receive an annual 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 in quarterly installments, for the same
number of years as the Outside Director served as a director of the Company up
to a maximum of ten years. In order to receive such retirement benefits, the
Outside Director must have reached age 65 and ceased serving as a director of
the Company. 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 and are deductible by the Company in the
year paid. Retirement benefits payable under the Outside Director Plan are an
unfunded general obligation of the Company.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation for the
Company's Chief Executive Officer and the most highly compensated executive
officers whose salary and bonus exceeded $100,000 (named executives), as well as
the total compensation paid to each such individual for the Company's two
previous fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION ALL OTHER
NAME AND SALARY BONUS OTHER ANNUAL AWARDS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(1) STOCK OPTIONS(#) ($)(2)
- ----------------------------------- --------- --------- --------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred H. Hunt, III ............... 1998 $ 275,000 $ 160,000 $ 48,341 57,500 $ 8,388
PRESIDENT AND CHIEF EXECUTIVE 1997 $ 265,000 $ 120,711 $ 46,080 45,000 $ 13,900
OFFICER 1996 $ 250,000 $ 72,320 $ 44,812 0 $ 15,970
Jeffrey A. Bloomer ................ 1998 $ 140,000 $ 115,000 $ 4,319 62,500 $ 10,775
TREASURER AND CHIEF FINANCIAL 1997 $ 120,000 $ 47,373 $ 4,319 22,500 $ 10,811
OFFICER 1996 $ 90,000 $ 15,136 $ 0 0 $ 8,551
Iain M. Robertson ................. 1998 $ 184,000 $ 155,000 $ 19,324 67,500 $ 0
MANAGING DIRECTOR IFR LTD. 1997 $ 165,000 $ 71,478 $ 15,900 0 $ 0
1996 $ 155,000 $ 10,000 $ 9,300 52,500 $ 0
Friedel E. Arnold ................. 1998 $ 185,000 $ 10,000 $ 12,496 0 $ 10,117
GENERAL MANAGER IFR AMERICAS, 1997 $ 185,000 $ 70,941 $ 12,719 22,500 $ 12,510
INC. 1996 $ 175,000 $ 55,650 $ 8,400 0 $ 13,983
</TABLE>
- ------------------------
(1) Includes life insurance premiums for Mr. Hunt in the amounts of $26,800 for
the years 1998, 1997 and 1996.
(2) Includes the Company's contributions on behalf of each of the named
executives under the IFR Systems, Inc. Employees Profit Sharing Plan and
under the IFR Systems, Inc. Savings and Investment (401k) Plan.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during fiscal 1998 to the named executives:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE)(2) DATE(3) 0%($) 5%($)(4) 10%($)(4)
- --------------------------- ----------- --------------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred H. Hunt, III........ 37,500 7.7% $ 14.167 8/14/07 $ 0 $ 334,100 847,000
16,000 3.3% $ 19.750 4/23/08 $ 30,000 $ 198,700 $ 504,000
4,000 0.8% $ 21.625 4/23/08 $ 0 $ 54,400 $ 138,000
Jeffrey A. Bloomer......... 37,500 7.7% $ 14.167 8/14/07 $ 0 $ 334,100 $ 847,000
19,775 4.1% $ 19.750 4/23/08 $ 37,078 $ 245,600 $ 622,000
5,225 1.1% $ 21.625 4/23/08 $ 0 $ 71,100 $ 180,000
Iain M. Robertson.......... 37,500 7.7% $ 14.167 8/14/07 $ 0 $ 334,100 $ 847,000
22,000 4.5% $ 19,750 4/23/08 $ 41,250 $ 273,300 $ 692,000
8,000 1.7% $ 21.625 4/23/08 $ 0 $ 108,800 $ 276,000
</TABLE>
- ------------------------
(1) In fiscal 1998, options to purchase 484,250 shares of the Company's common
stock were granted to 59 individuals.
(2) Options granted with an exercise price of $19.75 were granted below the
market price of $21.625 on 4/23/98 and were issued from the 1992
non-qualified stock option plan.
(3) Options vest annually in four equal installments beginning on the
anniversary date of grant.
(4) The 0%, 5% and 10% rates of appreciation are pursuant to SEC regulations and
are not intended to forecast future appreciation, if any, of IFR's stock. If
IFR's stock has not increased in value above the exercise price at the time
the options must be exercised, then the option grants described in the table
will be valueless.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes options exercised during fiscal 1998 and
presents the value of unexercised options held by the named executives at fiscal
year end:
AGGREGATED OPTIONS/SAR EXERCISES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS ON JUNE 30, IN- THE-MONEY OPTIONS
SHARES 1998(#) ON JUNE 30, 1998($)(2)
ACQUIRED ON VALUE ----------------------- -----------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- --------------- ------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Alfred H. Hunt, III............. 22,500 $ 375,001 131,250/121,250 $ 1,581,697/$712,919
Jeffrey A. Bloomer.............. 13,500 $ 185,500 8,625/85,375 $ 73,509/$335,185
Iain M. Robertson............... 15,000 $ 185,001 15,000/90,000 $ 117,188/$321,878
Friedel E. Arnold............... 16,500 $ 210,688 49,125/69,375 $ 497,921/$528,250
</TABLE>
- ------------------------
(1) Calculated on the basis of fair market value of the Common Stock on the date
of exercise, less the option price
(2) Calculated on the basis of fair market value of the Common Stock on June 30,
1998 ($18.0625), less the option price
8
<PAGE>
AGREEMENTS RELATING TO TERMINATION OF EMPLOYMENT
The Company has agreements with Messrs. Hunt, Bloomer, Arnold and Robertson,
providing for certain payments to them in the event their employment is
terminated for a reason other than serious misconduct, death, normal retirement,
or total and permanent disability within two years after a Change of Control of
the Company (as defined below). The amount of the payments in each case is equal
to 2.95 times the average annual compensation over the previous five years. In
addition, following a covered termination of employment, the Company is
obligated to maintain in effect retirement, disability and medical benefits for
a period of three years, and in the case of Mr. Hunt, to maintain in effect for
his benefit a $1 million life insurance policy through 2002. The Company is also
required to reimburse Messrs. Hunt, Bloomer, Arnold and Robertson the amount of
any federal or state tax incurred as a result of receiving an "excess parachute
payment" (as defined in the Internal Revenue Code) under these agreements. For
purposes of the agreement, a Change in Control of the Company 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 the 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 Company
representing 20% or more of the shares of voting stock of the Company; or (b)
during any period of two consecutive years, individuals who at the beginning of
such period were members of the Company'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 as to any of Messrs. Hunt, Bloomer, Arnold and Robertson
if he is included in the person or group acquiring control of the Company. The
agreements are for a term ending on December 31, 1998, but are 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 ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely of
independent outside directors and is responsible for establishing an executive
compensation policy and plan for the Company. The Compensation Committee reviews
and approves all compensation plans, benefit programs and perquisites for
executives and other certain employees.
OVERALL POLICY
The Company's executive compensation policy is intended (i) to attract and
retain the highest caliber of executives; (ii) to recognize and reward
individuals for their contributions and commitment to growth and profitability
of the Company; and (iii) to link compensation and shareholder value.
Compensation of the Company's executive officers consists of the following
elements: base salary, cash bonus payments under the Incentive Bonus Plan, stock
option awards and restricted stock grants. Each of these elements is discussed
below.
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BASE SALARY
The Committee, with input from the Chief Executive Officer, determines
annual salary levels for the executive group. Factors considered in setting base
salaries include level of responsibilities and prior experience and
achievements. Base salaries may be greater or less than median competitive
levels.
In making changes in base salary for existing executive officers, other than
Mr. Hunt, the Compensation Committee considers the recommendations of Mr. Hunt
based on his personal evaluation of individual performance for the prior year
including attainment of personal objectives and goals, attainment of Company
performance goals, the Company's salary structure and competitive salary data.
CASH BONUS PAYMENTS
The Company's executive officers and other employees are eligible for annual
cash bonuses. At the beginning of each fiscal year, eligible executives are
assigned target bonus levels determined by a formula based on a minimum
threshold of financial objectives for the fiscal year. In fiscal 1998, the
maximum bonus level for the CEO was 50% of his base salary multiplied by the
percentage of target attained and for other eligible executives was 15% to 45%
of base salary multiplied by the percent of target attained. The corporate
performance measure for bonus payments for fiscal 1998 was a graduated
percentage of the Company's operating income. Bonuses for the named executives
were determined in 1998 by a formula agreed upon in advance. Senior executives
at the Division level participated in a senior staff bonus pool over which the
division managers were delegated discretion in making bonus awards based on
individual merit, team participation, and other factors.
During the year, the acquisition of Marconi Instruments Ltd. was completed.
Based on the role and contribution of Messrs. Bloomer and Robertson, a
discretionary bonus of $75,000 was awarded to each.
STOCK OPTIONS
The grant of stock options under the incentive stock option plans or the
nonqualified stock option plan is intended to provide long-term performance
based compensation to officers and key employees of the Company. The quantity
and recipients of options are determined by the Compensation Committee. Options
granted under the 1988 and 1996 Incentive Stock Option Plans are granted at fair
market value. Options granted under the 1992 Nonqualified Stock Option Plans
were granted at the fair market value on the date of grant with the exception of
a grant on April 23, 1998 for 135,000 shares. The option price granted was
$19.75 versus a fair market value on the date of grant of $21.625. All options
granted under the 1988, 1992, and 1996 plans expire not more than ten years from
the date of grant.
RESTRICTED STOCK GRANTS
The Company's restricted stock grant compensation combines elements of
short-term compensation and long term incentives. Stock grants may be used to
reward executives who have been responsible for successful past results and may
also be used 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.
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CHIEF EXECUTIVE OFFICER
In setting fiscal 1998 salary and bonus award levels for Mr. Hunt, the
Committee focused upon the policies described above. Mr. Hunt earned a bonus
under the Incentive Bonus Plan equal to 26% of his base salary for fiscal 1998
of $275,000. This was a result of the Company meeting its operating income plan
and the Compensation Committee's assessment of Mr. Hunt's role in that success
and his performance towards achieving the Company's long-term goals. Mr. Hunt's
current base salary is $320,000. His prior base salary increase as President and
Chief Executive Officer was on July 1, 1997. Mr. Hunt's base salary is
considered to be at approximately the median base compensation level paid to
chief executive officers of corporations of similar size and complexity to the
Company. During the year, the acquisition of Marconi Instruments Ltd. was
completed. Based on his role and contribution to the success of this transaction
the Compensation Committee awarded Mr. Hunt a discretionary bonus of $90,000.
COMPENSATION COMMITTEE:
Oscar L. Tang, Chairman Donald L. Graf
Wilton W. Cogswell, III Ralph R. Whitney, Jr.
STOCK PERFORMANCE GRAPH
The following graph sets forth the five-year cumulative total return
(assuming a $100 investment and dividend reinvestment) on the Common Stock of
the Company as well as the total returns on the NASDAQ Stock Market and for
NASDAQ Non-Financial Stocks:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ NON-FINANCIAL
<S> <C> <C> <C>
Stocks (U.S. &
IFR Systems, Inc. Market (U.S. Companies) Foreign)
6/30/93 $100.00 $100.00 $100.00
6/30/94 $91.17 $100.96 $97.54
6/30/95 $138.24 $134.77 $134.02
6/30/96 $144.12 $173.03 $170.17
6/28/97 $220.59 $210.38 $200.01
6/30/98 $319.39 $277.69 $262.37
</TABLE>
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CERTAIN RELATIONSHIPS
Mr. Grose, a director of the Company, is also a director and past President
of Navair Inc., Mississauga, Ontario. Navair is a distributor of IFR products in
Canada, which accounted for more than 25% of Navair's sales during its most
recent fiscal year. During the Company's fiscal year ended June 30, 1998,
Navair's purchases from the Company totaled $2,031,000 (less than 2% of the
Company's gross revenues). This relationship is expected to continue during the
current fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as
amended, directors and executive officers of the Company are required to file
reports with the Securities and Exchange Commission indicating their holdings of
and transaction in the Company's equity securities. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, insiders of the
Company complied with all filing requirements during the fiscal year ended June
30, 1998.
PROPOSAL II
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee recommended and the Board of Directors of the Company
appointed Ernst & Young LLP as independent auditors to examine the financial
statements of the Company for the current fiscal year ending June 30, 1999.
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 Company
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 FOR 1999 ANNUAL MEETING
June 1, 1999 is the date by which shareholder proposals intended to be
presented at the 1999 annual meeting of shareholders pursuant to Rule 14a-8 of
the Securities and Exchange Commission must be received by the Company to be
considered for inclusion in the proxy materials relating to that meeting.
Pursuant to the Company's Bylaws, all other shareholder proposals intended to be
submitted at the 1998 annual meeting will be considered (other than the election
of Director) untimely if the Company did not
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have notice of the matter before September 7, 1999. In addition, the Company's
Certificate of Incorporation provides that any shareholder wishing to make a
nomination for director must give the Company advance notice as provided in the
Certificate of Incorporation. To be timely, such notice must be given not less
than 21 days before an annual meeting and, if an election is to be held at a
special meeting, not later than the close of business on the seventh day
following the date on which notice of special meeting is first given to
shareholders.
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 Company. Proxies may not be voted in the discretion of the proxy holders as
to any item of business of which the Company had at least 45 days notice before
September 28, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles J. Woodin
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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<PAGE>
PROXY
ANNUAL MEETING OF SHAREHOLDERS--NOVEMBER 5, 1998 IFR SYSTEMS, INC.
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 5, 1998, 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:
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
<PAGE>
IFR SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors recommends a vote "FOR" each of the following:
FOR WITHHOLD
ALL ALL FOR ALL (Except Nominee(s)
written below)
1. Election of Directors--
NOMINEES: Ralph R. Whitney, Jr. / / / / / /
and Donald L. Graf
-----------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the appointment / / / / / /
of Ernst & Young LLP as
independent auditors for the
current fiscal year ending
June 30, 1999.
The undersigned acknowledges receipt with this proxy of a copy of the Notice
of Annual Meeting, the Proxy Statement dated September 28, 1998, and the
Company's 1998 Annual Report. The undersigned hereby revoke any proxy or
proxies heretofore given.
Dated:__________________________, 1998
Signature(s)__________________________________________________________________
______________________________________________________________________________
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.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE.
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
