<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 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:
-----------------------------------------------------------------------
(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.:
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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
AUGUST 26, 1999
To the Shareholders of IFR Systems, Inc.:
You are hereby notified that the Annual Meeting of Shareholders of IFR
Systems, Inc., a Delaware corporation (the "Company"), will be held at the
Rolling Hills Country Club, 233 South Westlink Drive, Wichita, Kansas, on
Thursday, August 26, 1999 at 10:00 A.M. Central Daylight Savings Time for the
following purposes:
1. To approve an amendment to Paragraph (a) of Article II of the Company's
Amended and Restated Certificate of Incorporation to increase the number
of the Company's Directors from seven to eight;
2. To elect three directors (two if the proposed amendment to the Company's
Certificate of Incorporation is not approved) for a term of three years
and until their successors are duly elected and qualified;
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the current fiscal year ending March 31, 2000;
4 To approve and adopt an Amended and Restated Outside Director
Compensation, Stock Option, and Retirement Plan, a copy of which is
attached as Exhibit A to the attached Proxy Statement, to replace the
existing plan; and
5. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on June 28, 1999 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
July 15, 1999
<PAGE>
IFR SYSTEMS, INC.
1999 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Shareholders of record at the close of business on June 28, 1999 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., Central Daylight
Saving Time, on Thursday, August 26, 1999 at the Rolling Hills Country Club, 233
South Westlink Drive, Wichita, Kansas. 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) amending ARTICLE II(a) of the Company's Amended and Restated
Certificate of Incorporation to increase the number of directors from seven to
eight; (ii) the election of three directors for a term of three years and until
their successors are duly elected and qualified; (iii) the ratification of the
appointment of independent auditors; (iv) approving and adopting a new Outside
Directors Compensation, Stock Option, and Retirement Plan (the "Outside Director
Plan"); and (v) the transaction of such other business as may properly come
before the meeting.
The solicitation of the accompanying proxy is made on behalf of the Board of
Directors of the Company for the 1999 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 July 15, 1999.
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 and
entitled to vote at the meeting is required to elect the nominees for director,
to ratify the appointment of auditors and to approve the Outside Director Plan.
The affirmative vote of the holders of at least 85% of the shares entitled to
vote at the meeting is required to approve the proposed amendment to the
Company's Certificate of Incorporation. Each shareholder is entitled to one vote
upon each proposal submitted at the meeting for each share outstanding of record
in his name at the close of business on June 28, 1999. 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
1
<PAGE>
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.
OUTSTANDING SHARES & PRINCIPAL SHAREHOLDERS
On June 28, 1999, the Company had issued and outstanding 8,226,265 shares of
common stock, $.01 par value per share ("Common Stock"), not including 1,039,985
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 June 28, 1999, 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>
State of Wisconsin..................................................... 1,483,000 18.0%
Investment Board
P.O. Box 7842
Madison, WI 53707
Fenimore Asset Management, Inc......................................... 1,041,006 12.7%
118 North Grand Street
Cobleskill, NY 12043
Dimensional Fund Advisors, Inc......................................... 618,036 7.5%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
</TABLE>
2
<PAGE>
The following table contains information concerning beneficial ownership of
IFR Systems, Inc. Common Stock as of June 28, 1999, by each Director or nominee
for Director, by each Executive Officer named in the Summary Compensation Table
on Page 9 and by all Directors and Executive Officers as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNED(1) SHARES
- -------------------------------------------------- ------------ -----
<S> <C> <C>
David A. Blaskowsky .............................. 17,926 (*)
GENERAL MANAGER OTM DIVISION
Jeffrey A. Bloomer ............................... 54,250 (*)
EXECUTIVE VICE PRESIDENT, TREASURER AND CHIEF
FINANCIAL OFFICER
Wilton W. Cogswell, III .......................... 21,625(2) (*)
DIRECTOR
Donald L. Graf ................................... 14,100(3) (*)
DIRECTOR
John V. Grose .................................... 12,000 (*)
DIRECTOR
Alfred H. Hunt, III .............................. 308,822(4) 3.8%
DIRECTOR, CHAIRMAN AND CHIEF TECHNOLOGY OFFICER
Iain M. Robertson ................................ 51,748 (*)
DIRECTOR, PRESIDENT AND CHIEF OPERATING OFFICER
Oscar L. Tang .................................... 147,956(5) 1.8%
DIRECTOR
Ralph R. Whitney, Jr. ............................ 44,118 (*)
DIRECTOR
Directors and Executive Officers as a Group (10 673,210 8.2%
persons)........................................
</TABLE>
- ------------------------------
(*) Denotes less than 1%.
(1) Includes shares that could be acquired within 60 days after June 28, 1999
upon the exercise of options granted pursuant to company stock option plans
as follows: Mr. Cogswell, 13,500; Mr. Graf, 13,500; Mr. Grose, 7,500; Mr.
Hunt, 181,248; Mr. Tang, 4,500; Mr. Whitney, 13,500; Mr. Bloomer, 42,250;
Mr. Blaskowsky 17,926; Mr.Robertson, 48,748; all directors and executive
officers as a group, 342,672 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 300 shares owned by a trust of which Mr. Graf is trustee.
(4) Includes 10,284 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
AMENDING PARAGRAPH (a) OF ARTICLE II OF THE AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF DIRECTORS
On April 20, 1999, the Company's Board of Directors adopted, subject to
shareholder approval, an amendment to Paragraph (a) of ARTICLE II of the
Company's Amended and Restated Certificate of Incorporation, increasing the
number of directors from seven to eight. The full text of Paragraph (a) of
ARTICLE II as proposed to be amended is as follows:
(a) NUMBER, ELECTION AND TERMS. Except as otherwise fixed by or pursuant to
the provisions of Article I hereof relating to the rights of holders of
any class or series of stock having a preference over the common stock as
to dividends or upon liquidation to elect additional directors under
specified circumstances, there shall be eight members of the Board of
Directors of the Corporation. The Directors, other than those who may be
elected by the holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
shall be divided or classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, with the terms of the current seven directorships and the newly
created eighth directorship to serve for a term expiring at the annual
meeting of shareholders as set out below. Each Director shall hold office
until his or her successor is elected and qualified. At each annual
meeting of the shareholders of the Corporation, the successors of the
class of Directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election. The election
of Directors need not be by written ballot. The names and terms of the
current Directors and the term of the newly created directorship are as
follows:
(i) terms will expire in 1999:
John V. Grose
Oscar L. Tang
(ii) terms will expire in 2000:
Wilton W. Cogswell, III
Alfred H. Hunt, III
Iain M. Robertson
(iii) terms will expire in 2001:
Donald L. Graf
Ralph R. Whitney, Jr.
(iv) term will expire in 2002:
Newly created directorship
Notwithstanding the foregoing, and except as otherwise required by
law, whenever the holders of any one or more series of preferred
stock shall have the right, voting separately as a class, to elect
one or more Directors of the Corporation, the terms of the
Director or Directors elected by such holders shall expire at the
next succeeding annual meeting of shareholders.
4
<PAGE>
In adopting the proposed amendment and declaring its advisability to the
shareholders, the Board considered the advantages of having an additional
director. In particular, in view of the decision made at the same meeting of the
Board to promote Jeffrey A. Bloomer to Executive Vice President in the
anticipation of his becoming the Company's Chief Executive Officer within the
next eighteen months, the Board determined that it was desirable to elect Mr.
Bloomer to the Board of Directors so he may become familiar with the operations
and decisions of the Board and contribute to its decision making.
The affirmative vote of the holders of at least 85% of the shares of Common
Stock entitled to vote is required to approve the proposed amendment to
Paragraph (a) of ARTICLE II.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE PROPOSED
AMENDMENT TO PARAGRAPH (a) OF ARTICLE II OF THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL II
ELECTION OF DIRECTORS
At the Annual Meeting, it is anticipated that three directors will be
elected by majority of the votes which could be cast in the elections. John V.
Grose and Oscar L. Tang, both of whom are members of the present Board, have
been nominated for re-election as Directors to hold office until the annual
meeting of shareholders in 2002 and until their successors have been elected and
qualified. In addition, Jeffrey A. Bloomer, the Company's Executive Vice
President has been nominated to fill the three-year term ending in 2002 that
will be created if Proposal I is approved. Mr. Bloomer's term would commence
upon the filing of an appropriate certificate reflecting the adoption of the
amendment with the Secretary of State of Delaware and would expire at the same
time as the terms of the other two directors being elected at the Annual
Meeting. If Proposal I is not approved, Mr. Bloomer will not be elected a
Director. 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 John V. Grose, Oscar L. Tang, and, if Proposal I is approved, Mr. Bloomer
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 ALL THREE NOMINEES.
5
<PAGE>
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 2002:
John V. Grose, 69 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. , an
DIRECTOR SINCE 1995 investment firm located in New York. Prior to then, Mr. Tang was the President
and Chief Executive Officer and co-founder of Reich & Tang, L.P., predecessor of
Nvest, L.P.
Jeffrey A. Bloomer, 42 Mr. Bloomer has been the Executive Vice President of the Company since April 20,
1999 and its Treasurer and Chief Financial Officer since November 1995. He
served as the Company's Director of Finance from August 1994 through November
1995. Prior to joining the Company, he was general manager of Pawnee Industries,
Inc., a plastics manufacturing company.
DIRECTORS WHOSE TERMS 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 real estate
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., a medical testing laboratory located in Overland Park,
Kansas.
Ralph R. Whitney, Jr., 64 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 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 was named Chairman of the Board and Chief Technology Officer of the
DIRECTOR SINCE 1971 Company in April 1999. Prior to April 1999, Mr. Hunt served as the President,
Chief Executive Officer, and Vice Chairman of the Board.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
PERIOD SERVED AS DIRECTOR DURING PAST FIVE YEARS
- ------------------------------- --------------------------------------------------------------------------------
<S> <C>
Iain M. Robertson 57 Mr. Robertson was named the President and Chief Operating Officer and elected as
DIRECTOR SINCE 1999 the seventh member of the Board of the Company in April 1999. Since 1998, Mr.
Robertson was General Manager of IFR's Electronic Test and Measurement Division.
Prior to 1998, Mr. Robertson was the General Manager of the Company's Optical
Test and Measurement Division. Prior to joining the Company, he was a consultant
and Chief Executive of York Ltd.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended March 31, 1999, the Board of Directors met six
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 March 31, 1999.
The Compensation Committee is comprised of Messrs. Tang (Chairman),
Cogswell, Graf, 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 two 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 (Chairman), Grose, and
Whitney. The Audit Committee met two times during the last fiscal year.
The Shareholder Relations Committee is composed of Messrs. Cogswell
(Chairman), 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
Each Director of the Company, other than persons compensated as executive
officers of the Company, received a retainer for the nine-month fiscal year
ended March 31, 1999, of $12,000 pursuant to the present policy to pay each
Director an annual base retainer 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
7
<PAGE>
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.
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 "1989 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 1989 Outside Director Plan is administered by the
Compensation Committee. Subject to the provisions of the 1989 Outside Director
Plan, the Committee is authorized to interpret such provisions and to make any
determinations necessary or advisable for the administration of the 1989 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 1989 Outside
Director Plan.
The 1989 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 1989 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 1989 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 1989 Outside Director Plan may not exceed 90,000
shares, subject to adjustments for stock splits and stock dividends. Options
granted under the 1989 Outside Director Plan may be exercised at any time after
twelve months from the date of grant. Each of the options granted under the 1989
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 1989 Outside Director Plan shall be equal to 100% of the
fair market value on the date of grant. No future options can be granted to
Directors under the terms of the 1989 Outside Director Plan. Proposal IV,
described herein, provides for the future granting of options to Outside
Directors.
Under the 1989 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 1989
8
<PAGE>
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. Proposal IV, described herein, amends and provides
for the future termination of retirement benefits for Outside Directors.
For a description of proposed amendments to the 1989 Outside Director Plan,
see "Proposal IV."
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 $100,000 in fiscal 1999, for the
nine-month fiscal year ended March 31, 1999, as well as the total compensation
paid to each such individual for the Company's two previous fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION ALL OTHER
NAME AND SALARY BONUS OTHER ANNUAL AWARDS SECURITIES COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(1) UNDERLYING OPTIONS(#) ($)(2)
- ------------------------------ --------- --------- --------- ----------------- ----------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred H. Hunt, III........... 1999 228,750 -- 45,056 -- 4,333
CHAIRMAN AND CHIEF 1998 275,000 160,000 48,341 57,500 8,388
TECHNOLOGY OFFICER 1997 265,000 120,711 46,080 45,000 13,900
Iain M. Robertson............. 1999 168,000 -- 15,080 -- --
PRESIDENT AND CHIEF 1998 184,000 155,000 19,324 67,500 --
OPERATING OFFICER 1997 165,000 71,478 15,900 -- --
Friedel E. Arnold(3).......... 1999 138,750 -- 9,980 -- 2,775
GENERAL MANAGER 1998 185,000 10,000 12,496 -- 10,117
IFR AMERICAS, INC. 1997 185,000 70,941 12,719 22,500 12,510
Jeffrey A. Bloomer............ 1999 123,750 -- 3,239 -- 3,149
EXECUTIVE VP, TREASURER AND 1998 140,000 115,000 4,319 62,500 10,775
CHIEF FINANCIAL OFFICER 1997 120,000 47,373 4,319 22,500 10,811
David A. Blaskowsky........... 1999 87,557 -- 6,577 -- 2,105
GENERAL MANAGER 1998 93,740 25,000 -- 21,750 9,212
OTM DIVISION 1997 85,962 21,414 -- -- 6,877
</TABLE>
- ------------------------------
(1) Includes life insurance premiums for Mr. Hunt in the amounts of $26,800 for
the years 1999, 1998 and 1997.
(2) Includes the Company's contributions on behalf of each of the named
executives under the IFR Systems, Inc. Employees Profit Sharing Plan and
under the IFR Systems, Inc. Savings and Investment (401k) Plan.
(3) Mr. Arnold retired from the Company on May 7, 1999.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted during fiscal 1999 to the chief executive
officer or the next four most highly compensated executives of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes options exercised during fiscal 1999 and
presents the value of unexercised options held by the named executives at fiscal
year end:
AGGREGATED OPTIONS/SAR EXERCISES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS ON MARCH 31, THE-MONEY OPTIONS ON
SHARES 1999(#) MARCH 31, 1999($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Alfred H. Hunt, III...... -- -- 150,000/102,500 41,585/--
Iain M. Robertson........ -- -- 59,250/59,250 --/--
Friedel E. Arnold(2)..... -- -- 21,750/72,250 --/--
Jeffrey A. Bloomer....... -- -- 22,500/82,500 --/--
David A. Blaskowsky...... -- -- 12,489/20,063 780/--
</TABLE>
- ------------------------
(1) Calculated on the basis of fair market value of the Common Stock on March
31, 1999 ($4.9375) less the option price.
(2) Mr. Arnold retired from the Company on May 7, 1999.
AGREEMENTS RELATING TO TERMINATION OF EMPLOYMENT
The Company has agreements with Messrs. Hunt, Bloomer, 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, 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
10
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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, 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, 1999, 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.
BASE SALARY
The Committee 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
the Chief Executive Officer, the Compensation Committee considers the
recommendations of the Chief Executive Officer 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 1999, 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 1999 was a graduated
percentage of the Company's operating income. Bonuses for the named executives
were determined in 1999 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. No bonus awards were
made under the plan for fiscal 1999.
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<PAGE>
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. 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.
CHIEF EXECUTIVE OFFICER
In setting fiscal 1999 salary and bonus award levels for Mr. Hunt, the
Committee focused upon the policies described above. Based on a review of
comparable companies, Mr. Hunt's salary was increased to $320,000. No bonus was
paid to him for fiscal year 1999. On April 20, 1999, Mr. Hunt was elected
Chairman of the Board and Chief Technology Officer and relinquished his duties
as President and Chief Executive Officer, and Iain M. Robertson was named
President and Chief Operating Officer of the Company.
COMPENSATION COMMITTEE:
Oscar L. Tang, Chairman Donald L. Graf
Wilton W. Cogswell, III Ralph R. Whitney, Jr.
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<PAGE>
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>
IFR SYSTEMS, NASDAQ COMPOSITE NASDAQ NON-FIN
<S> <C> <C> <C>
Inc (US) (U.S. & Foreign)
3/31/94 $100.00 $100.00 $100.00
3/31/95 $155.88 $111.25 $109.59
3/29/96 $160.29 $151.06 $147.87
3/31/97 $176.47 $167.83 $159.50
3/31/98 $394.08 $252.43 $239.32
3/31/99 $86.34 $342.44 $332.45
</TABLE>
CERTAIN RELATIONSHIPS
Mr. Grose, a Director of the Company, is past President of Navair Inc.,
Mississauga, Ontario. Navair is a distributor of the Company's 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 March 31, 1999,
Navair's purchases from the Company totaled $1,383,000 (less than 1% 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 transactions 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, the Directors
and executive officers of the Company complied with all filing requirements
during the fiscal year ended March 31, 1999.
13
<PAGE>
PROPOSAL III
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 March 31, 2000.
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 or
she 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS.
PROPOSAL IV
APPROVAL OF AMENDED AND RESTATED OUTSIDE DIRECTOR COMPENSATION,
STOCK OPTION, AND RETIREMENT PLAN
The Company's existing Outside Director Compensation, Stock Option, and
Retirement Plan (the "1989 Outside Director Plan"), adopted in 1989 and
described under Proposal II above under the caption "Compensation of Directors",
and which provides among other things for an automatic annual award of stock
options to Directors, does not permit the awarding of options to directors after
the 1998 Annual Meeting of Shareholders. Accordingly, at its April 20, 1999
meeting the Board of Directors approved and adopted, subject to shareholder
approval an Amended and Restated Outside Director Compensation, Stock Option,
and Retirement Plan (the "1999 Outside Director Plan") to replace and supersede
the existing 1989 Outside Director Plan. A copy of the 1999 Outside Director
Plan is attached to this Proxy Statement as Exhibit A. The following
description, which is intended only to be a summary, of the 1999 Outside
Director Plan is qualified in its entirety by reference to the text of Exhibit
A.
REASONS FOR THE PROPOSAL; PURPOSES OF THE PLAN. The Board of Directors
believes that it is important to the success of the Company that the Company
have in place a plan for compensating its directors who are not employees of the
Company. The Board believes that the existing 1989 Outside Director Plan has
been of value to the Company and that the new 1999 Outside Director Plan, which
is to supersede the existing plan, will also be valuable to the Company. The
stated purposes of the 1999 Outside Director Plan are to provide for fair
compensation for directors who are not employees of the Company ("Outside
Directors"), to encourage ownership of the Common Stock by Outside Directors, to
provide an additional incentive for
14
<PAGE>
Outside Directors to continue in the service to the Company, and to promote the
success of the Company's business thereby enhancing shareholder value. It is
anticipated that the plan will assist the Company in attracting and retaining
directors capable of making valuable contributions to the long-term success of
the Company.
ELIGIBILITY. Only Outside Directors are eligible to participate in the 1999
Outside Director Plan. There are currently five Outside Directors of the
Company.
TERM. The 1999 Outside Director Plan, which is essentially the same as the
existing 1989 Outside Director Plan, will become effective upon its approval at
the Annual Meeting. It has no stated date on which it will terminate, but no
options to purchase Common Stock may be granted under the plan after the third
business day following the Company's annual shareholders meeting in 2008.
ADMINISTRATION. The 1999 Outside Director Plan is to be administered by the
Compensation Committee which will be authorized to interpret such provisions and
to make any determinations necessary or advisable for the administration of the
1999 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 1999
Outside Director Plan.
COMPENSATION. The 1999 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 1999 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 Board anticipates continuing for the indefinite future its practice of
paying each director an annual base fee or retainer of $16,000 plus $1,000 for
each Board meeting and $800 for each board committee meeting attended. Such
payments to all of the five Outside Directors during the nine-month fiscal year
ended March 31, 1999 were an aggregate of $88,600.
OPTIONS. The 1999 Outside Director Plan provides that each Outside Director
shall be automatically granted an option to purchase 1,500 shares of 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 1999. No options can be
granted after ten years from the date of the Annual Meeting. The total number of
shares which may be issued under the 1999 Outside Director Plan may not exceed
120,000 shares, subject to adjustments for stock splits and stock dividends.
Options that expire or otherwise terminate unexercised are again available for
issuance. Options granted under the 1999 Outside Director Plan may be exercised
at any time after twelve months from the date of grant. Each of the options
granted under the 1999 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, (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,
or (iii) ten years from the date the options was granted. Payment for shares
upon the exercise of each such option may be made in cash, 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), or a
combination of cash and Common Stock. The option price per share is to be equal
to 100% of the fair market value on the date
15
<PAGE>
of grant. Shares of Common Stock issued upon the exercise of such options may
either be newly issued shares or shares of Common Stock held as treasury shares.
On June 28, 1999, the last reported sales price of the Common Stock, as reported
on the NASDAQ National market System, was $4.625 per share. None of the options
granted under the 1989 Outside Director Plan in 1998 had any value as of June
28, 1999.
The granting of options under the 1999 Outside Director Plan will generally
not have any income tax consequences to the Company or the Outside Directors.
When an Outside Director exercises an option granted under the plan, the
difference between the exercise price and any higher fair market value of the
Common Stock on the date of exercise will be ordinary income to the Outside
Director and will generally be allowed as a deduction at that time for federal
income tax purposes. Any gain or loss realized by an Outside Director from the
disposition of Common Stock acquired upon the exercise of such an option will
generally be capital gain or loss to the Outside Director, long-term or
short-term depending on the holding period and will not result in any additional
federal income tax consequences to the Company. The Outside Director's basis in
such Common Stock will be the fair market value of the Common Stock determined
generally at the time of exercise. If the Outside Director pays the exercise
price by surrendering previously acquired shares, the basis of the previously
acquired shares carries over tothe replacement shares and the income recognized
on exercise is added to the basis.
RETIREMENT BENEFITS. Under the 1999 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; provided that no
additional years of service can be earned after the current plan year. 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.
INCOME TAX ASPECTS. 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 1999 Outside Director Plan will be an unfunded general obligation of the
Company.
VOTE REQUIRED FOR APPROVAL. The affirmative vote by the holders of a
majority of the shares of Common Stock present or represented and entitled to
vote at the meeting is required to approve the adoption of the 1999 Outside
Director Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
1999 OUTSIDE DIRECTOR PLAN.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting of
shareholders pursuant to Rule 14a-8 of the Securities and Exchange Commission
must be received by the Company on or before March 17, 2000 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 2000 annual meeting will be considered (other than the election of Director)
untimely if the Company did not have notice of the matter before May 31, 2000.
In addition, the Company's Amended and Restated Certificate
16
<PAGE>
of Incorporation provides that any shareholder wishing to make a nomination for
director must give the Company advance notice as provided in the Amended and
Restated 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 notice by June 1, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
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.
17
<PAGE>
IFR SYSTEMS, INC.
AMENDED AND RESTATED
OUTSIDE DIRECTOR COMPENSATION, STOCK OPTION,
AND RETIREMENT PLAN
ARTICLE I -- DEFINITIONS; PURPOSE
1.1. PURPOSE. The purpose of this Amended and Restated Outside Director
Compensation, Stock Option, and Retirement Plan (the "Plan") is to provide for
the fair compensation of non-employee Directors, to encourage ownership in the
Common Stock of IFR Systems, Inc. (the "Company") by non-employee Directors of
the Company; to provide an additional incentive for such Directors to continue
in service to the Company; and to promote the success of the Company s business,
thereby enhancing shareholder value. It is anticipated that the Plan will assist
the Company in attracting and retaining directors capable of making valuable
contributions to the long-term success of the Company. The retirement benefit
element of the Plan is intended to be administered as an unfunded plan of
deferred compensation for income tax purposes. The Plan amends and restates the
Outside Director Compensation, Stock Option, and Retirement Plan approved on
November 9, 1989 by the Company's Shareholders (the "1989 Plan").
1.2. DEFINITIONS. Unless the context clearly requires a different meaning,
the following words shall have the following meanings when used herein:
(a) "Board" means the Board of Directors of the Company;
(b) "Common Stock" means common stock, $.01 par value, of the Company;
(c) "Company" means IFR Systems, Inc.;
(d) "Director" means a member of the Board who is not or was not otherwise
employed by the Company or any Subsidiary during his or her service on
the Board;
(e) "Plan Year" means the period beginning at the adjournment of any Annual
Meeting of the Company s Shareholders and ending at the adjournment of
the next following Annual Meeting of the Company's Shareholders. The
initial Plan Year shall commence at the adjournment of the Annual Meeting
of the Company's Shareholders at which this Plan is approved by the
Shareholders;
(f) "Retainer" means the annual base fee, as adjusted from time to time,
paid to members of the Board as compensation for their service. Such term
excludes any additional fee paid for attendance at any meeting of the
Board or a Committee thereof.
(g) "Subsidiary" means any corporation or any other entity more than 50% of
which is owned directly or indirectly by the Company.
(h) "Year of Service" means a Plan Year ending on or before the adjournment
of the Annual Meeting of the Company's shareholders in the year 2000
during which a Director serves as a member of the Board throughout the
entirety of such Plan Year and a Year of Service as defined in and earned
pursuant to the 1989 Plan.
A-1
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ARTICLE II -- ANNUAL COMPENSATION
2.1. RETAINER. MEETING FEES. The Board shall, from time to time, establish
an annual Retainer payable to the Directors in cash, Common Stock, or a
combination thereof. In addition, the Board shall establish such meeting fees
for attendance at Board or Committee meetings as the Board shall deem
appropriate.
2.2. DEFERRAL OF ANNUAL RETAINER. The Board may from time to time
establish a program for the deferral of the Retainer and meeting fees on such
terms as the Board deems reasonable and appropriate.
2.3. INSURANCE BENEFITS. The Board may from time to time purchase Term
Life, Travel, or Accidental Death and Dismemberment insurance to insure
Directors injured or killed while traveling on Company business.
ARTICLE III -- DIRECTOR'S STOCK OPTION PLAN
3.1. STOCK SUBJECT TO THE PLAN. The maximum number of shares which may be
issued upon exercise of Options granted under the Plan ("Options") shall be
120,000 shares of Common Stock. Such shares may be either issued shares of
Common Stock which shall have been reacquired by the Company or authorized but
unissued shares of Common Stock as the Board shall from time to time determine.
If any outstanding Option under the Plan for any reason expires or is terminated
without having been exercised in full, the shares allocable to the unexercised
portion of such Option shall again become available for option pursuant to the
Plan.
3.2. PARTICIPATION IN THE PLAN. All non-employee Directors of the Company
are eligible for and shall automatically participate in the Plan.
3.3. ISSUANCE OF OPTIONS. On the third business day following the
Company's Annual Meeting of Shareholders at which this Plan is approved by the
shareholders of the Company and on the third business day following each
succeeding Annual Meeting of Shareholders up to and including the first such
meeting held after March 31, 2008, each Director eligible to receive options
under the Plan shall be granted an option to purchase 1,500 shares of Common
Stock.
3.4. OPTION PRICES. The purchase price of the Common Stock covered by each
Option shall be equal to 100% of the fair market value of the Common Stock at
the close of trading on the last trading day prior to the issuance of any
Option. Such fair market value shall be the closing price as reported on the
NASDAQ National Market System, or if no such closing price is reported, the mean
of the bid and asked price as of the close of trading on such day.
3.5. TERM OF OPTIONS. The term of each Option shall expire at 5:00 P.M.,
Central time on the date which is nine months after the date on which the
Director to whom such Option has been granted is no longer a Director; provided,
however, that if such Director's service as a Director ceases due to death, such
Option shall expire at 5:00 P.M., Central time on the date which is twelve
months after the date of the Director's death. Notwithstanding the foregoing, in
all events an Option shall expire at 5:00 P.M., Central time on the date which
is ten years after the date such Option is granted.
3.6. EXERCISE OF OPTIONS. (a) An Option may be exercised in accordance
with its terms, before the expiration of the term of such Option, at any time or
from time to time after twelve months have elapsed from the granting thereof.
The Board may impose such conditions, restrictions and requirements upon the
exercise of an Option as it deems appropriate so long as such conditions,
restrictions and requirements are
A-2
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not inconsistent with the express provisions of the Plan and do not materially
enhance the benefit conferred upon any Director by the Plan. No fewer than 100
shares of Common Stock may be purchased at any one time unless such lesser
number shall equal the entire remaining unexercised Options under any grant.
(b) The purchase price of the shares purchased upon exercise of an Option
shall be paid either (1) in full in cash at the time of the exercise; (2) with
Common Stock; or (3) any combination of cash and Common Stock. In the event that
an option is exercised in full or in part with Common Stock, such stock shall be
valued at 100% of the fair market value of the Common Stock at the close of
trading on the last trading day prior to the exercise of the Option. Such fair
market value shall be determined as reported on the NASDAQ National Market
System, or if no single closing price is reported, the mean of the bid and asked
price as of the close of trading on such day.
(c) Whenever the Company issues or transfers shares of Common Stock under
the Plan, the Company shall have the right to require the Director to remit to
the Company an amount sufficient to satisfy any federal, state, or local
withholding tax requirements prior to the delivery of any certificate for such
shares.
(d) The holder of an Option shall not have any of the rights of a
Shareholder with respect to the shares covered by his Option until and to the
extent that the Option shall have been duly exercised.
3.7. NONTRANSFERABILITY OF OPTIONS. An Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and an Option
may be exercised during the lifetime of the Director only by the Director. No
Option or interest therein may be transferred, assigned, pledged, or
hypothecated by the Optionee during his lifetime, by operation of law or
otherwise, or be made subject to execution, attachment, or similar process.
3.8. TERMINATION OF SERVICE. All rights of a Director in an Option, to the
extent it has not been exercised, shall terminate upon the death of the Director
(except as hereinafter provided) or nine months after the termination of such
Director's service as a Director for any other reason. An Option shall not be
affected by any temporary change of duties or position of the Director or any
temporary leave of absence granted to such Director by the Board. In the event
of the death of the holder of an Option prior to termination of service as a
Director, the unexercised portion of such Option may be exercised at any time
during the remaining term of such Option (12 months after the date of death) by
his executor, administrator, personal representative, or other person who has
acquired the right to exercise the Option by bequest or inheritance. The
provisions of this paragraph 3.8 are to be construed in conformity with the
express provisions of paragraphs 3.5, 3.6, and 3.7.
3.9 OPTIONS GRANTED UNDER 1989 PLAN. Unexercised options heretofore
granted pursuant to the 1989 Plan shall remain in full force and effect in
accordance with their terms and shall not be affected by the Plan, provided,
however, that such 1989 Options shall be subject to the provisions of paragraphs
3.6, 3.7, 3.8, and Article V.
ARTICLE IV -- RETIREMENT BENEFITS
4.1. ELIGIBILITY. To receive retirement benefits under the Plan, a
Director must: (1) be at least sixty-five (65) years of age; (2) no longer serve
as a Director; and (3) not be employed in any capacity by the Company or a
Subsidiary. If each of the foregoing requirements is satisfied, the Director's
entitlement to retirement benefits shall commence during the Plan Year
immediately following the Plan Year during
A-3
<PAGE>
which such requirements are satisfied. A Director shall be entitled to receive
retirement benefits for the lesser of ten years or the number of Years of
Service accumulated by such Director.
4.2. BENEFITS. During the period in which a former Director is entitled to
benefits under the Plan, such former Director shall receive annually from the
Company an amount equal to the Retainer paid by the Company during the Plan Year
ending in the year 2000. Such benefits shall be paid by the Company at the time
and in the manner that Retainers are paid to the then current members of the
Board.
4.3. DEATH OF DIRECTOR. If a Director dies while serving on the Board or
during the period in which he or she is entitled to retirement benefits, the
retirement benefits to which the Director would otherwise be entitled shall be
paid to such Director's surviving spouse, or, if no surviving spouse, then to
the Director's personal representative. Benefits paid under this subparagraph
shall be payable in a lump sum equal to the net present value of the retirement
benefits remaining to be paid, computed under an annual compounding assumption
with a discount factor equal to 8%.
4.4. INCAPACITY OF DIRECTOR. If any Director to whom retirement benefits
are payable under the Plan is legally incompetent, the Company is authorized to
cause the payments becoming due to such Director to be made to another for such
Director's benefit without responsibility of the Company or the Board to see to
the application of such payments. Payments made pursuant to this authority shall
constitute a complete discharge of the Company's responsibilities and
obligations to the Director.
4.5. ASSIGNMENT AND ALIENATION OF BENEFITS. No retirement benefits under
this Plan shall be subject to anticipation, alienation, sale, assignment,
transfer, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, transfer, pledge, encumber, or charge the same shall be
void. No rights or benefits hereunder shall in any manner be liable for or be
subject to the debts, contracts, liabilities, engagements, or torts of the
person entitled to such benefits and, to the extent permitted by law, the rights
of any Director shall not be subject in any manner to attachment or other legal
process for the debts of such Director.
4.6. APPLICABILITY TO DIRECTORS NOW RETIRED. The Plan shall not apply to
or affect the retirement benefits being paid to and enjoyed by any Director on
the Effective Date and such benefits for any Director now retired shall be
determined and governed by the 1989 Plan.
4.7. YEARS OF SERVICE UNDER 1989 PLAN. Each Year of Service accrued and
earned by a Director under the 1989 Plan shall be a Year of Service under the
Plan. No Years of Service shall be earned after the Plan Year ending in the year
2000.
ARTICLE V -- ADMINISTRATION
5.1. TERMINATION AND AMENDMENT OF THE PLAN. (a) No Option shall be granted
under the Plan after ten years from the date the Plan is approved by the
Shareholders. The Board may at any time prior to or after that date suspend or
terminate the Plan. Any termination or suspension of the Plan effected pursuant
to this paragraph 5.1 may be made by the Board without further action on the
part of the shareholders of the Company; PROVIDED, that no such termination or
suspension shall impair, without the consent of the Option holder, any Option
theretofore granted under the Plan or adversely deprive him of any Common Stock
acquired under the Plan. Any Option outstanding at the time of termination of
the Plan shall remain in effect subject to the provisions of this Plan until the
Option shall have been exercised or shall have expired. No such termination
shall affect any entitlement to retirement benefits that would otherwise accrue
to a Director on account of any then completed Years of Service.
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(b) The Board may at any time modify or amend the Plan provided that no such
modification without the approval of shareholders shall:
(i) increase the maximum number of shares as to which Options may be
granted under paragraphs 3.1 or 3.3 of the Plan to each Director or in the
aggregate;
(ii) permit the granting of Options under this Plan at an option price
less than 100% of the fair market value of the shares optioned at the time
the Option is granted;
(iii) permit exercise of an Option unless full payment for the shares as
to which the Option is exercised is made at the time of purchase;
(iv) extend the maximum period during which Options may be exercised;
(v) permit the cancellation of an Option and subsequent reissuance of a
new Option to the same Director in substitution for the canceled Option at
the then existing market value; or
(vi) amend the formula to increase the retirement benefits payable to a
current or former Director.
5.2. ADMINISTRATION OF PLAN. (a) The Plan shall be administered under the
general direction and control of the Board, but is intended to be self-operative
to the maximum extent consistent with prudent business practice. The Board may
from time to time interpret and construe the terms and conditions of the Plan.
Under no circumstances shall any individual or group of individuals exercise
discretion with respect to designating the recipient of an Option, the number of
shares of Common Stock that are subject to an Option, the date of grant for an
Option or the exercise price for an Option.
(b) No member of the Board shall be liable for any action or determination
made in good faith by the Board with respect to the Plan or any Option,
including, without limitation, adjustments pursuant to paragraph 5.5. In making
determinations under the Plan, the Board may obtain and may rely upon the advice
of independent counsel and accountants and other advisors to the Company. No
member of the Board or officer of the Company shall be liable for any such
action or determination taken or made in good faith with respect to the Plan or
any Option.
5.3. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective upon its
approval by the Shareholders of the Company at a meeting held within twelve
months after the date of its adoption by the Board (the "Effective Date"). The
Plan shall terminate if it is not so approved by the Shareholders.
5.4. GOVERNMENT AND OTHER REGULATIONS. Each Option granted under the Plan
shall be subject to the requirement that if at any time the Board shall
determine, in its discretion, that the listing, registration or qualification of
the Common Stock subject to such Option upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue or purchase of shares thereunder,
no such Option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board.
5.5. MERGER; CHANGES IN CAPITALIZATION. (a) If the Company shall be the
surviving or resulting corporation in any merger or consolidation, each then
outstanding Option granted hereunder shall pertain to and apply to the same
number and type of shares of stock which a holder of the same number of shares
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of Common Stock subject to such Option was entitled to receive by reason of such
merger or consolidation.
(b) Notwithstanding any other provisions of this Plan, in the event of any
change in the outstanding Common Stock of the Company by reason of a stock
dividend, stock split, merger, consolidation, split-up, combination or exchange
of shares, reorganization, liquidation, or the like, the aggregate number and
class of shares of Common Stock available under the Plan and the number and
class of shares subject to each outstanding Option and the option prices shall
be appropriately adjusted by the Board, whose determination shall be conclusive.
5.6. EXPENSES OF ADMINISTRATION. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the Company.
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<PAGE>
IFR SYSTEMS, INC.
PROXY
Annual Meeting of Shareholders - August 26, 1999
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, each with full power of
substitution, to vote on behalf of 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 August
26, 1999, at 10:00 a.m. (C.D.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>
The Board of Directors recommends a vote "FOR" each of the following:
1. Approval and adoption of the proposed amendment to Paragraph (a) of
Article II of the Company's Amended and Restated Certificate of
Incorporation as described in the Notice of Annual Meeting and
accompanying Proxy Statement.
For Against Abstain
[ ] [ ] [ ]
2. Election of Directors
Nominees: John V. Grose, Oscar L. Tang, and Jeffrey A. Bloomer
For All (except Nominee(s)
For All Withhold All written below)
[ ] [ ] [ ]
___________________________
3. Ratification of the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year ending March 31, 2000.
For Against Abstain
[ ] [ ] [ ]
4. Approval and adoption of an Amended and Restated Outside Director
Compensation, Stock Option, and Retirement Plan as described in the
Notice of Annual Meeting and accompanying Proxy Statement.
For Against Abstain
[ ] [ ] [ ]
IN THE ABSENCE OF CONTRARY INSTRUCTION, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES FOR ELECTION FOR DIRECTORS AND FOR EACH OF THE OTHER
3 PROPOSALS.
The undersigned acknowledges receipt with this proxy of a copy of the Notice
of Annual Meeting, the Proxy Statement dated July 15, 1999, and the Company's
1999 Annual Report. The undersigned hereby revokes any proxy or proxies
heretofore given.
Dated: _______________, 1999 Signature(s) ________________________________
<PAGE>
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.
