<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
LOWRANCE ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
^--Enter Company Name Here--^
- --------------------------------------------------------------------------------
(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)(4) 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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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(4) Date Filed:
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Notes:
<PAGE>
LOWRANCE ELECTRONICS, INC.
12000 East Skelly Drive
Tulsa, Oklahoma 74128-2486
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 8, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Lowrance
Electronics, Inc., a Delaware corporation (the "Company"), will be held in the
Bravo Room on the Main Lobby Floor of the Adam's Mark Hotel, 100 East Second
Street, Tulsa, Oklahoma, on Tuesday, December 8, 1998, at 10:00 a.m., local
time, to consider and vote upon the following matters described in the
accompanying Proxy Statement:
(1) To elect two Class III Directors for a three-year term expiring in
December 2001 and until their successors have been duly elected and
qualified;
(2) To ratify the selection of Arthur Andersen LLP as independent public
accountants for the Company for its fiscal year 1999; and
(3) To transact such other and further business as may be brought before
the Annual Meeting or any adjournment or adjournments thereof.
Only Stockholders of record at the close of business on October 30, 1998,
are entitled to vote at the meeting or any adjournment or adjournments thereof.
Stockholders who do not expect to attend the meeting in person are urged to
mark, date, sign, and mail the enclosed Proxy in the enclosed return envelope
for which no postage is needed if mailed in the United States.
By Order of the Board of Directors
Robert F. Biolchini
Secretary
Tulsa, Oklahoma
November 19, 1998
IF YOU CANNOT BE PRESENT IN PERSON, PLEASE MARK, DATE,
AND SIGN THE ENCLOSED PROXY AND MAIL IT AT
YOUR EARLIEST CONVENIENCE
<PAGE>
LOWRANCE ELECTRONICS, INC.
12000 East Skelly Drive
Tulsa, Oklahoma 74128-2486
PROXY STATEMENT
Annual Meeting of Stockholders
December 8, 1998
The enclosed form of Proxy is solicited by the Board of Directors of
Lowrance Electronics, Inc., (the "Company") for use at the Annual Meeting of
Stockholders to be held in the Bravo Room on the Main Lobby Floor of the Adam's
Mark Hotel, 100 East Second Street, Tulsa, Oklahoma, on Tuesday, December 8,
1998, at 10:00 a.m., local time.
This Proxy Statement and the Proxy are mailed to Stockholders on or about
November 20, 1998, and are furnished in connection with the solicitation of
Proxies by the Board of Directors of the Company. This Proxy solicitation is by
mail and at the expense of the Company. It may be that further solicitation of
Proxies will be made by telephone or oral communication. All such further
solicitation will be at the expense of the Company and may be conducted by
employees of the Company who will not receive additional compensation for such
solicitation.
VOTING
Shares represented by Proxies received by the Board of Directors will be
voted at the Annual Meeting in accordance with the specifications made thereon
by the Stockholders, unless authority to do so is withheld. If no specification
is made, the Proxy will be voted in favor of the proposals referred to therein
and herein.
Any Stockholder giving a Proxy has the power to revoke it at any time
before it is voted, and revocation may be by letter, notice in writing, or
telegram addressed to Robert F. Biolchini, Secretary of Lowrance Electronics,
Inc., 12000 East Skelly Drive, Tulsa, Oklahoma, 74128-2486. Each Proxy, unless
previously revoked, will be voted at the meeting.
Only Stockholders of record at the close of business on October 30, 1998,
will be entitled to vote at the Annual Meeting. On October 30, 1998, there were
outstanding 3,768,796 shares of Common Stock, par value $0.10 per share, all of
which will be entitled to vote at the Annual Meeting. Each Share of Common
Stock is entitled to one vote, with no right of cumulative voting. The Company
has no other voting securities outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting shall constitute a
quorum for the transaction of business. A quorum being present, all proposals
to be voted on at the Annual Meeting will be decided by a majority vote of the
shares present, in person or by proxy, certified to by inspectors of election,
unless the proposal relates to matters on which more than a majority vote is
required under the Company's Certificate of Incorporation, its Bylaws, or the
laws of the State of Delaware, under whose laws the Company is Incorporated.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 30, 1998, the number and
percentages of outstanding shares of the Common Stock beneficially owned by all
persons known by the Company to own more than 5% of the Company's Common Stock,
by each director and nominee for director of the Company, and by all officers
and directors of the Company as a group:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership of Shares
------------------- --------------------- -----------
<S> <C> <C>
Darrell J. Lowrance (1) 1,907,423 (2) 50.6%
12000 East Skelly Drive
Tulsa, OK 74128-2486
Willard P. Britton (1) 14,653 *
1571 Breakwater Terrace Direct
Hollywood, FL 33019
Ronald G. Weber (1) 71,745 (3) 1.9%
12000 East Skelly Drive
Tulsa, OK 74128-2486
Robert F. Biolchini (1) 95,661 2.5%
3300 First Place Tower Direct
15 East 5th Street
Tulsa, OK 74103
Peter F. Foley, III (1) 54,183 1.4%
Boone Bait Company Direct
440 Plumosa Avenue
Casselberry, FL 32707
Alpo F. Crane (1) 3,580 *
2633 Richardson Drive, Apt. 3-C Direct
Charlotte, NC 28211
Estate of James L. Knight 466,300 12.4%
c/o Northern Trust Bank of Direct
Florida, N.A.
700 Brickell Avenue
Miami, FL 33131-2881
Kennedy Capital Management, Inc. 287,600 7.6%
10829 Olive Blvd.
St. Louis, MO 63141
All directors and 2,169,095 (4) 57.6%
officers as a group
(including those listed
above, nine persons
total)
</TABLE>
* One-half of one percent or less
(1) Director or nominee for director.
(2) Includes 180,500 shares held indirectly in an individual retirement
account with Mr. Lowrance having the sole voting and investment power,
143,908 shares held of record by the Trustees of the Lowrance Savings
Plan and Trust for Mr. Lowrance, who is entitled to vote such shares
and 3,725 owned indirectly by an immediate family member.
<PAGE>
(3) Includes 33,000 shares held of record by the Trustees of the Lowrance
Savings Plan and Trust for Mr. Weber, who is entitled to vote such
shares.
(4) All voting securities owned by officers and directors are owned
directly except for 365,033 shares.
Darrell J. Lowrance and James L. Knight (deceased) entered into a
Shareholders' Agreement dated December 22, 1978, which provides that, except for
sales in a public offering, neither party may sell his Common Stock without
offering the Company the right of first refusal at the same price offered by a
third party, payable in eight equal annual payments, including annual interest
at 8%. If the Company does not exercise the right of first refusal and purchase
the Common Stock, then the other individual party has the right to purchase such
stock at the same price and under the same payment terms. On October 8, 1986, a
First Amendment to the Shareholders' Agreement was entered into between Messrs.
Knight and Lowrance which allowed them, after the initial public offering of the
Company's stock in 1986 to sell their Common Stock in the public market pursuant
to Rule 144 and permits charitable donations of their Common Stock within
certain limits as to the total number of shares which may be donated to one
charitable institution without first offering such stock to the Company or the
other party. The right of first refusal terminates only when either (a) Mr.
Lowrance's stock ownership in the Company is less than 15% of the Company's
outstanding stock, or (b) Mr. Knight's stock ownership in the Company is less
than 10% of the Company's outstanding stock, exclusive of any stock donated by
either of them to a charitable institution. Additionally, Messrs. Lowrance and
Knight entered into an Agreement on October 8, 1986, with the Company whereby
they agreed not to sell any of their shares of Common Stock privately, except as
permitted under the First Amendment to Shareholders' Agreement.
As of October 30, 1998, 724,788 shares of Common Stock were sold in the
public market by the Estate of James L. Knight pursuant to Rule 144 since May of
1992 when the Estate first elected to sell stock owned by the Estate as
permitted by the Agreement and First Amendment to Shareholders' Agreement and as
allowed under Rule 144. Additionally, in May 1993, 68,966 shares of common
stock were sold by the Estate of James L. Knight to the Company and retired and
34,483 shares were sold by the Estate of James L. Knight directly to Mr.
Lowrance. Except for the sales made by the Estate of James L. Knight pursuant
to Rule 144 and the sales made by the Estate of James L. Knight to the Company
and Mr. Lowrance, neither Mr. Knight nor Mr. Lowrance has sold nor made a gift
of any stock in the Company pursuant to the aforementioned Agreement and First
Amendment to Shareholders' Agreement.
ELECTION OF DIRECTORS
The directors of the Company are divided into three classes, designated as
Class I, Class II, and Class III. Each class consists of one-third of the
directors constituting the whole Board. The directors, upon being elected, all
serve three-year terms, and the term of each member of the same class expires at
the same time. At each Annual Meeting of Stockholders, directors to replace
those whose terms expire at such Annual Meeting are elected for a three-year
term.
In accordance with the recommendation of the Compensation and Nominating
Committee, two individuals, Darrell J. Lowrance and Peter F. Foley III, who are
currently directors of the Company, have been nominated by the Board of
Directors for re-election as Class III directors at the Annual Meeting for a
three-year term expiring in December 2001. Robert F. Biolchini and Alpo F.
Crane, the Class II directors, and Willard P. Britton and Ronald G. Weber, the
Class I directors, will continue to serve as directors pursuant to their prior
elections.
The persons designated by the Board of Directors as proxies in the
accompanying Proxy intend to vote, unless otherwise instructed in such Proxy,
for the election of Messrs. Lowrance and Foley. Should either Mr. Lowrance or
Mr. Foley become unable for any reason to stand for election as a director of
the Company, it is the intention of the persons named in the Proxy to vote for
the election of such other person as the Compensation and Nominating Committee
may recommend and the Board of Directors may nominate to replace Mr. Lowrance or
Mr. Foley, or, if none, the Compensation and Nominating Committee will recommend
that the size of the Board of Directors be reduced. The Company knows of no
reason why Messrs. Lowrance and Foley will be unavailable or unable to serve.
<PAGE>
STANDING FOR ELECTION
Class III Director Nominees
(Term expires December 2001)
DARRELL J. LOWRANCE. Mr. Lowrance, age 60, a founder of the Company, has
been with the Company since its formation in 1957. He currently serves as
President and Chief Executive Officer and a Director of the Company, positions
he has held since 1964. During 1983 and 1984, Mr. Lowrance served as President
of the American Fishing Tackle Manufacturer's Association (AFTMA). In July
1988, Mr. Lowrance returned to the Board of Directors of AFTMA, a position he
previously held from 1978 through 1986. Additionally, in April 1989, Mr.
Lowrance was elected as a director of the National Association of Marine
Products and Services.
PETER F. FOLEY, III. Mr. Foley, age 62, has served as a director since
October 1991 and has been President of Boone Bait Company, a company engaged in
the manufacture of saltwater fishing lures, since 1978. For more than 10 years,
Mr. Foley has served on numerous boards related to the marine industry,
including the American Fishing Tackle Manufacturer's Association (AFTMA).
Further, he has been awarded government grants, as an industry expert in
international marketing of fishing tackle products, to study and report on key
opportunities for the industry.
CONTINUING IN OFFICE
Class II Directors
(Term Expires December 2000)
ROBERT F. BIOLCHINI. Mr. Biolchini, age 59, has served as a Director of
the Company and its Secretary since December 1985. Mr. Biolchini is a director
and Chairman of the Board of Valley National Bank and his principal occupation
since 1968 has been the practice of law as a partner in the law firm of Stuart,
Biolchini, Turner & Givray, counsel for the Company.
ALPO F. CRANE. Mr. Crane, age 57, has been a Director of the Company since
December 1985 and presently is involved in private investments. Mr. Crane
retired as the Director of International Sales for the In-Sink-Erator Division
of Emerson Electric Company, a corporation engaged in the manufacture of a broad
range of electrical-electronic products and systems, in 1993, a position he held
since September 1989. Prior thereto, Mr. Crane was the President and Treasurer
of Almar International, Ltd., a corporation engaged in international trade
consulting.
Class I Directors
(Term Expires December 1999)
WILLARD P. BRITTON. Mr. Britton, age 75, has been a director of the
Company since December 1985. Mr. Britton is a retired Vice President and
Controller of Knight-Ridder, Inc., a corporation engaged primarily in
communications.
RONALD G. WEBER. Mr. Weber, age 54, has served the Company as its
Executive Vice President of Technology and Engineering since December 1993 and
prior thereto served as Senior Vice President of Engineering since 1980. Mr.
Weber has also been a director since October 1992. Mr. Weber joined the Company
in 1976, and prior to serving in his current position, he held several technical
positions with the Company.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Company's Board of Directors met eight times during the fiscal year
ended July 31, 1998. The Board of Directors has an Audit Committee and a
Compensation and Nominating Committee.
The Audit Committee is composed of Willard P. Britton, Alpo F. Crane, and
Robert F. Biolchini (Chairman). The Audit Committee held two meetings during
the Company's 1998 fiscal year. All members attended both meetings. The Audit
Committee meets on a scheduled basis with the Company's independent public
accountants and is available to meet at the request of the Company's independent
public accountants. The Audit committee reviews the Company's accounting
policies, internal controls, and other accounting and auditing matters;
considers the qualifications of the Company's independent public accountants;
makes a recommendation
<PAGE>
to the Board as to the engagement of an independent public accountant; and
reviews the letter of engagement and statement of fees relating to the scope of
the annual audit and special audit work which may be recommended or required by
the independent public accountants.
The Compensation and Nominating Committee is composed of Willard P.
Britton, Peter F. Foley, III, and Robert F. Biolchini (Chairman). The
Compensation and Nominating Committee held one meeting during the Company's 1998
fiscal year at which all members attended. The Committee reviews the nature and
amount of compensation of the officers of the Company and recommends changes
with respect thereto, including the Company's Executive Bonus Plan, 1986 Stock
Option Plan, and 1989 Stock Option Plan, and recommends the nominees for
directors. The Committee will consider qualified director candidates submitted
to it by other directors, employees, or stockholders. As a prerequisite to
consideration, each recommendation must be accompanied by biographical material
of the proposed candidate, fully disclosing the candidate's qualifications and
demonstrated sound business judgment, as well as an indication that the proposed
candidate would be willing to serve as a director, if elected. In order for a
candidate recommended by a Stockholder to be considered as a nominee at the
Annual Meeting to be held in 1999, the name of such candidate, together with the
written description of the candidate's qualifications, must be received by the
Secretary of the Company prior to August 13, 1999.
There was no incumbent or nominee for director who failed to attend at
least 75% of the aggregate number of meetings of the Board and Committees upon
which they sit. Each director receives $12,000 per year compensation and an
additional fee of $1,000 for each meeting of the Board of Directors and $750 for
each Committee meeting attended. All directors are reimbursed for certain
reasonable out-of-pocket expenses incurred in attending meetings of the Board of
Directors or Committee meetings.
There are no family relationships between any director or executive officer
of the Company. Alpo F. Crane is the son-in-law of the late James L. Knight,
whose Estate is a principal Stockholder of the Company. Mr. Crane and Willard
P. Britton initially served as directors of the Company at the request of Mr.
Knight and now serve at the request of the Board of Directors.
<PAGE>
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Darrell J. Lowrance 60 President and Chief Executive Officer since 1964.
Ronald G. Weber 54 Executive Vice President of Technology and Engineering since December 1993.
Prior thereto Mr. Weber was the Senior Vice President of Engineering since 1980.
Steven L. Schneider 39 Vice President of Sales and Marketing
since March 1994. Prior thereto, Mr. Schneider was Director of Marketing
and International Sales since September 1992 and was subsequently
promoted to Vice President of Marketing and International Sales in
February 1993.
Terry R. Nimmo 50 Vice President of Manufacturing and
Materials since June 1995. Prior thereto Mr. Nimmo was Vice-President of
Materials/M.I.S. since 1991. Mr. Nimmo joined the Company in April 1982
as its Manager of Information Systems and subsequently was promoted to
Manager of Materials/Management Information Systems.
Mark C. Wilmoth 39 Vice President of Finance and Treasurer
since March 1994. Prior thereto, Mr. Wilmoth was Corporate Controller
and Assistant Secretary since 1988.
</TABLE>
All officers of the Company are elected annually and serve at the pleasure of
the Board of Directors.
<PAGE>
COMPENSATION
The following table sets forth the aggregate cash compensation paid to the
executive officers listed for services rendered in all capacities to the Company
for the fiscal year ended July 31, 1998:
EXECUTIVE OFFICER
- -----------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(1) (2) (3)
NAME OF INDIVIDUAL/ OTHER ANNUAL ALL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OTHER
($) ($) ($) ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Darrell J. Lowrance 1998 382,000 - - 30,300
President and Chief 1997 374,000 - - 26,255
Executive Officer 1996 349,000 81,511 - 24,886
Ronald G. Weber 1998 208,000 - - 30,686
Executive Vice President 1997 204,000 - - 24,347
of Technology and Engineering 1996 193,000 48,884 - 25,681
Steven L. Schneider 1998 163,000 - - 9,313
Vice President of 1997 160,000 - - 9,553
Sales and Marketing 1996 151,000 38,316 - 8,990
Mark C. Wilmoth 1998 145,000 - - 8,596
Vice President of Finance and 1997 140,000 - - 8,898
Treasurer 1996 125,000 31,635 - 8,649
Terry R. Nimmo 1998 145,000 - - 7,505
Vice President of 1997 140,000 - - 7,703
Materials/M.I.S. 1996 123,000 31,244 - 6,682
</TABLE>
(1) The Company's Executive Bonus Plan for fiscal year 1998 provided for a
performance bonus pool measured entirely on the basis of the Company's
pretax, prebonus earnings compared to budgeted pretax, prebonus earnings.
This bonus pool was to be divided, based on certain predetermined
percentages, between the Company's President, four Vice Presidents, and
certain other key employees. In order to earn any performance bonus, it
was necessary for pretax, prebonus income to exceed $1,600,000, which the
Company failed to achieve and accordingly no performance bonus was earned
for fiscal 1998. The Executive Bonus Plan for fiscal year 1998 also
provided for discretionary bonuses for executive officers, except the
President, and certain other key employees, granted at the recommendation
of the President on the basis of individual performance not to exceed 15%
of their respective salaries. The President did not recommend any
discretionary bonuses for executive officers or any key employees of the
Company to the Compensation and Nominating Committee of the Board of
Directors for fiscal 1998. The aggregate maximum amount that could have
been payable pursuant to the Company's 1998 Executive Bonus Plan, to
include performance bonuses and discretionary bonuses, was limited to
$1,000,000.
(2) The 1998 remuneration described in other annual compensation includes the
cost to the Company of benefits furnished to the executive officers,
including premiums for life and health insurance, personal use of Company
automobiles, and other personal benefits provided to such individuals that
are extended in connection with the conduct of the Company's business.
During 1998, 1997, and 1996, no executive officers received other
compensation in excess of 10% of such officer's cash compensation.
<PAGE>
(3) Other long-term compensation resulted from contributions to the Lowrance
Savings Plan and Trust Number 1 on behalf of the listed executive officers.
Also included are director's fees of $21,000, $17,000 and $16,500 paid to
Mr. Lowrance and $21,000, $15,000 and $16,500 paid to Mr. Weber in 1998,
1997 and 1996, respectively.
STOCK OPTION PLANS. The Company's 1986 and 1989 Stock Option Plans (the
"Plans") adopted by the Board of Directors and approved by the Stockholders,
reserve 400,000 shares of Common Stock (subject to certain adjustments) for
issuance upon the exercise of incentive stock options (as defined in Section
422A of the Internal Revenue Code), non-qualified stock options, and limited
stock appreciation rights ("limited SAR's") which may be granted to directors,
officers, and key employees (13 persons are eligible to participate as of the
date of this Proxy Statement). The Plans are designed to serve as an incentive
for attracting and retaining qualified and competent employees and directors.
The Compensation and Nominating Committee of the Board of Directors
administers and interprets the Plans and has authority to grant options on such
terms and at such prices as it may determine, but the exercise price of
incentive stock options will not be less than the fair market value of the
Common Stock on the date of grant and no option will be exercisable after the
expiration of ten years from the date of grant. The committee may also grant
limited SAR's in tandem with options. A limited SAR is exercisable only to the
extent that the related option is exercisable and the exercise of any portion of
either the related option or tandem limited SAR will cause a corresponding
reduction in the number of shares remaining subject to the option or the tandem
limited SAR. The Board of Directors has resolved that the exercise price of
non-statutory stock options will be not less than 85% of the fair market value
of the Common Stock on the date of grant.
During fiscal year 1998, no options and no limited SAR's were granted. As
of October 30, 1998, the Company had no non-qualified options issued of the
400,000 authorized in the Plans. The following table sets forth information
concerning option exercises during the year by the Company's chief executive
officer and the other executive officers named in the compensation table:
<TABLE>
<CAPTION>
SHARES ACQUIRED VALUE
EXECUTIVE OFFICER ON EXERCISE (#) REALIZED ($)
----------------- ---------------- ------------
<S> <C> <C>
Darrell J. Lowrance 22,500 shares $51,875
Ronald G. Weber 22,500 shares $51,875
Terry R. Nimmo 12,500 shares $28,375
Mark C. Wilmoth 5,000 shares $10,570
</TABLE>
As of October 30, 1998, options on 80,000 shares under these plans have
been exercised to date and no limited SAR's have been granted.
RETIREMENT PLAN. The Lowrance Savings Plan and Trust (the "Retirement
Plan") requires the Company to contribute to the Retirement Plan up to 6% of
each participant's salary annually. Participants include all employees of the
Company, including executive officers, who have completed one year of employment
with at least 1,000 hours of service. The Company makes a fixed contribution of
3% of each participant's salary. In addition, if an employee makes voluntary
contributions, the Company will make additional contributions equal to 100% of
the first $10 per pay period of the employee's contribution and 50% thereafter,
not to exceed 3% of the employee's salary. Each participant's interest in the
Company's contributions vests fully over a period of seven years. Generally, a
participant's interest in the Company's contributions may be withdrawn only upon
termination or in certain hardship situations. The Trustees and Administrative
Committee of the Retirement Plan are appointed by the Board of Directors.
BOARD COMPENSATION COMMITTEE REPORT. The members of the Compensation and
Nominating Committee are Mr. Robert Biolchini, Mr. Willard Britton, and Mr.
Peter Foley, III. Each member of the Committee is a non-employee director.
In determining the compensation payable to the Company's executive
officers, it is the basic philosophy of the Committee that the total annual
compensation for these individuals should be at a level which is competitive
with the marketplace (which requires compensation to be middle to high) in
companies of similar size for positions of similar scope and responsibility. In
determining the appropriateness of compensation levels, the Committee annually
reviews the Company's compensation policies and nationally recognized
compensation surveys, principally William Mercer Executive Compensation Survey,
which is a comparison of fixed and variable compensation based upon a
corporation's industry and size.
<PAGE>
The key elements of the total annual compensation for executive officers
consists of a base salary and variable compensation in the form of annual bonus'
and stock options. The base salaries are generally set at or near the middle to
high range for the competitive marketplace as indicated in the above referenced
survey for companies within the same industry classification and relative size.
Annual bonus' consists of two components, a performance bonus based entirely on
the basis of the Company's pretax, prebonus earnings and a discretionary bonus
for executive officers, except the President, which is recommenced by the
President on the basis of individual performance.
In fiscal 1998, the Company's performance was significantly below targeted
levels, therefore no performance bonus' were earned and no discretionary bonus'
were recommended by the President or paid. Additionally, base salaries of
executive officers were not increased.
The base salary for the Chief Executive Officer approximates the 75th
percentile for the comparable companies in the above referenced survey. The
committee has set the base pay for the Chief Executive above the market average
due to his tenure with the Company and his irreplaceable knowledge of and
personal contacts and relationships in the industries in which the Company
operates. All of the Chief Executive's incentive pay is based on achieving
targeted pretax, prebonus earnings levels with no discretionary bonus component.
As the Company's performance was significantly below the minimum targeted levels
as set by the Committee, no incentive bonus was paid for fiscal 1998.
Compensation and Nominating Committee:
Robert F. Biolchini, Chairman
Willard P. Britton
Peter F. Foley, III
PERFORMANCE GRAPH. The following performance graph reflects yearly
percentage change in the Company's cumulative total Stockholder return on Common
Stock as compared with the cumulative total return of the NASDAQ (US) and the
NASDAQ Electronic Components Index. All cumulative returns assume reinvestment
of dividends and are calculated on a fiscal year basis on July 31 of each year.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
(ATTACHED)
TABLE TO BE INSERTED HERE
SELECTION OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Arthur Andersen LLP as the independent public accountants for the
Company for its fiscal year 1999, subject to ratification by the Stockholders at
the Annual Meeting.
Arthur Andersen LLP served as independent public accountants for the
Company for its last fiscal year. A representative of Arthur Andersen LLP will
attend the Annual Meeting and have the opportunity to make a statement if the
representative desires to do so and will be available to answer appropriate
questions.
STOCKHOLDER PROPOSALS
The date by which proposals of Stockholders intended to be presented at the
1999 Annual Meeting of Stockholders must be received by the Company for
inclusion in the Company's Proxy Statement and form of Proxy relating to that
meeting is August 13, 1999.
<PAGE>
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors does not intend to bring any other matters before
the Annual Meeting nor does it know of any matters which other persons intend to
bring before the Annual Meeting. However, if any other matters properly come
before the Annual Meeting, the persons named as proxies in the accompanying
Proxy will vote thereon in accordance with their best judgment.
It is important that Proxies be returned promptly. Therefore, Stockholders
who do not expect to attend the Annual Meeting in person are urged to sign the
enclosed Proxy and mail it at their earliest convenience in the enclosed return
envelope for which no postage is needed if mailed in the United States.
