<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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
DECRANE AIRCRAFT HOLDINGS, 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>
[LOGO]
DECRANE AIRCRAFT HOLDINGS, INC.
2361 ROSECRANS AVENUE, SUITE 180
EL SEGUNDO, CALIFORNIA 90245
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1998
(APPROXIMATE MAILING DATE: JUNE 2, 1998)
------------------------
To the Stockholders of Decrane Aircraft Holdings, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of DECRANE AIRCRAFT HOLDINGS, INC., a Delaware corporation (the
"Company"), will be held at the Manhattan Beach Marriott, 1400 Parkview Avenue,
Manhattan Beach, California 90266, on June 17, 1998 at 9:00 a.m Pacific Daylight
Time, for the following purposes:
1. To elect two Class I directors to the Board of Directors to serve for a
term of three years or until their respective successors are duly elected
and qualified; and
2. To transact such other business as may properly come before the Meeting
or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed the close of business on May 11, 1998 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Meeting and any adjournment(s) thereof.
The Company's Annual Report for the year 1997 is enclosed for your
convenience.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS
PREVIOUSLY RETURNED A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
Robert A. Rankin
SECRETARY
El Segundo, California
June 2, 1998
1
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[LOGO]
DECRANE AIRCRAFT HOLDINGS, INC.
2361 ROSECRANS AVENUE, SUITE 180
EL SEGUNDO, CALIFORNIA 90245
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 17, 1998
------------------------
SOLICITATION OF PROXY, REVOCABILITY, AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of DeCrane Aircraft Holdings, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held at the
Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach, California
90266, on June 17, 1998 at 9:00 a.m. Pacific Daylight Time (the "Annual
Meeting"), or any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The mailing of this
Proxy Statement and accompanying form of proxy (the "Proxy") are first being
mailed to stockholders on or about June 2, 1998.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on May 11, 1998 (the "Record
Date") are entitled to vote at the Annual Meeting. At the Record Date, 7,524,740
shares of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"), and no shares of Preferred Stock, were issued and outstanding. Since no
shares of Preferred Stock are outstanding, no shares of Preferred Stock are
entitled to vote at the Annual Meeting. Stockholders of record holding at least
a majority of the outstanding shares of Common Stock, present at the Annual
Meeting in person or by proxy, shall constitute a quorum for the transaction of
business at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its exercise by notice in writing to the Secretary
of the Company prior to the Meeting, or by attending the Meeting and voting in
person. Unless the proxy is revoked, the shares represented thereby will be
voted as specified at the Meeting or any adjournment thereof.
SOLICITATION
This Proxy Statement is being mailed on or about June 2, 1998 in connection
with the solicitation of proxies by the Board of Directors of the Company. The
entire cost of soliciting proxies will be borne by the Company. Original
solicitation of proxies by mail may be supplemented, if deemed desirable or
necessary,
2
<PAGE>
by either telephone, telegram, facsimile or personal solicitation by the
directors, officers or regular employees of the Company without additional
compensation for any such services.
VOTE OF PROXIES
Each outstanding share of Common Stock shall be entitled to one (1) vote on
each matter submitted to a vote of the stockholders at the Annual Meeting. A
quorum represented by a majority of the issued and outstanding shares of Common
Stock of record present in person or by proxy is necessary to conduct the Annual
Meeting. Assuming a quorum is present, a plurality of votes cast by the shares
entitled to vote in the election of directors will be required to elect each
director. In all other matters, assuming a quorum is present, a majority of
votes cast by the shares present in person or by proxy and entitled to vote on
the subject matter shall decide such matter, except when a different vote is
required by express provision of the Delaware General Corporation Law, the
Company's Certificate of Incorporation, or the Company's Bylaws. In accordance
with Delaware Law, abstentions will be treated as present for the purposes of
voting. All Proxies, properly executed and returned, will be voted at the Annual
Meeting as directed by the stockholder. Please vote by marking the appropriate
boxes on the enclosed Proxy. If the Proxy is signed and returned without
directions, the shares will be voted "FOR" the election of all directors as
nominated. If other matters properly come before the Annual Meeting, the shares
will be voted in accordance with the best judgment of the persons named as
proxies on the Proxy. Any share not voted "FOR" a particular director as a
result of a direction to withhold authority will not be counted in the
director's favor.
DEADLINES FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders of the Company intended to be presented at the
Company's 1999 annual meeting of stockholders must be received by the Secretary
of the Company at the Company's principal executive offices by February 15, 1999
in order to be included in the Proxy Statement and form of proxy relating to the
1999 annual meeting of stockholders. The Company currently anticipates that the
1999 annual meeting of stockholders will be held on or about May 15, 1999.
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
The matters to be brought before the Annual Meeting include: (1) to elect
two class I directors to the Board of Directors to serve for a term of three
years or until their respective successors are duly elected and qualified; and
(2) to transact such other business as may properly come before the Annual
Meeting or any adjournment(s) or postponement(s) thereof.
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ITEM 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors currently consists of six directors,
including R. Jack DeCrane, its Chairman; R.G. MacDonald, its Vice Chairman;
James R. Bergman, Director; Paul H. Cascio, Director; Jonathan A. Sweemer,
Director; and Mitchell I. Quain, Director.
The Company's Board is divided into three classes. Directors of each class
will be elected at the annual meeting of stockholders of the Company held in the
year in which the term of such class expires and will serve thereafter for three
years. R. G. MacDonald and Mitchell I. Quain serve as class I directors for a
term expiring as of the Annual Meeting in 1998 to which this Proxy Statement
relates. Messrs. Cascio and Bergman serve as class II directors for a term
expiring as of the annual meeting in 1999. Messrs. DeCrane and Sweemer serve as
class III directors for a term expiring as of the annual meeting in 2000.
Accordingly, the only directors subject to expiring terms as of the 1998 Annual
Meeting are Messrs. MacDonald and Quain.
The nominees are as follows:
R.G. MacDonald
Mitchell I. Quain
Each of the nominees is currently serving as a director of the Company.
Certain information regarding each nominee is set forth hereinbelow.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES TO THE
BOARD OF DIRECTORS. A PLURALITY OF THE VOTES CAST BY THE SHARES ENTITLED TO VOTE
AT THE ANNUAL MEETING WILL BE REQUIRED TO ELECT EACH DIRECTOR.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the directors and
executive officers of the Company as of May 15, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- ---------------------------------------------------------
<S> <C> <C>
R. Jack DeCrane............................... 51 Chairman of the Board and Chief Executive Officer
R. G. MacDonald............................... 67 Vice Chairman of the Board
Charles H. Becker............................. 51 President and Chief Operating Officer
Robert A. Rankin.............................. 45 Chief Financial Officer, Secretary and Treasurer
Roger L. Keller............................... 53 Group Vice President of Systems
James R. Bergman (a).......................... 55 Director
Paul H. Cascio (b)............................ 36 Director
Mitchell I. Quain............................. 46 Director
Jonathan A. Sweemer (a)(b).................... 42 Director
</TABLE>
- ------------------------
(a) Member of the Compensation Committee.
(b) Member of the Audit Committee.
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The Company is currently evaluating other independent non-management
director candidates and anticipates that the Company's independent,
non-management directors will continue to represent a majority on each of the
Company's Audit Committee and Compensation Committee.
The Company's Board is divided into three classes. Directors of each class
will be elected at the annual meeting of stockholders of the Company held in the
year in which the term of such class expires and will serve thereafter for three
years. Messrs. MacDonald and Quain serve as class I directors for a term
expiring as of the Annual Meeting in 1998. Messrs. Cascio and Bergman serve as
class II directors for a term expiring as of the Annual Meeting in 1999. Messrs.
DeCrane and Sweemer serve as class III directors for a term expiring as of the
Annual Meeting in 2000.
R. JACK DECRANE is the founder of the Company and has been Chairman of the
Board of Directors of the Company since it was founded in December 1989. Mr.
DeCrane served as President of the Company, which office then included the
duties of chief executive officer, until April 1993 when he was elected to the
newly-created office of Chief Executive Officer. Prior to founding the Company,
Mr. DeCrane held various positions at the aerospace division of B.F. Goodrich.
Mr. DeCrane was a Group Vice President at the aerospace division of B.F.
Goodrich with management responsibility for three business units from 1986 to
1989. Mr. DeCrane is his own appointee to the Board under the terms of an
agreement between the Company and certain of its shareholders and lenders.
R. G. MACDONALD has been Vice Chairman of the Company since December 1996.
Mr. MacDonald has been a member of the Board since December 1994, and was
President of the Company from April 1993 until December 1996. The office of
President of the Company included the duties of chief operating officer. Mr.
MacDonald was a consultant to the Company from February 1993 to April 1993.
Prior to joining the Company, he served as President and Chief Executive Officer
of MDB Systems, Inc., a manufacturer of ruggedized computer disk systems, from
1990 to 1993.
CHARLES H. BECKER has been President and Chief Operating Officer of the
Company since April of 1998. Mr. Becker previously served as Group Vice
President of Components of the Company from December 1996 to April of 1998, and
President of Tri-Star Electronics International, Inc. ("Tri-Star") from December
1994 to April of 1998. Prior to joining the Company, Mr. Becker was President of
the Interconnect Systems Division of Microdot, Inc. from 1984 to 1994.
ROBERT A. RANKIN has been Chief Financial Officer, Secretary and Treasurer
of the Company since November 1993. Mr. Rankin joined the Company in 1992 as
Senior Vice President of Tri-Star, which office then included the duties of
chief financial officer of the Company. Prior to joining the Company, he was
Vice President of Finance for the Chandler Evans Control Systems subsidiary of
Coltec Industries, Inc., an aerospace company, from 1990 to 1992. He was
employed by the aerospace division of B.F. Goodrich from 1977 to 1989 in various
capacities, the most recent of which was as Controller of the aircraft wheel and
brake business unit of B.F. Goodrich.
ROGER L. KELLER has been Group Vice President of Systems of the Company
since December 1996. Mr. Keller has also served as President of Hollingsead
International, Inc. ("Hollingsead") since December 1995, and was employed by the
Company as Vice President of Engineering, Sales and Program Management from May
1994 through November 1995. Prior to joining the Company, he was Vice President
of Engineering for Active Noise and Vibration Technologies, Inc. from 1992 to
1994, and Vice President of Sales, Marketing and Program Management for the
Airtransport Services division of Honeywell from 1986 to 1992.
JAMES R. BERGMAN has been a member of the Board since October 1991. He is a
founder and, since 1974, has been a general partner of DSV Partners IV ("DSV"),
DSV Partners III and DSV Associates. Mr. Bergman is DSV's appointee to the Board
under the terms of an agreement between the Company and certain of its
shareholders and lenders. See "Certain Relationships and Related Transactions--
Shareholders Agreement." In August 1996, Mr. Bergman became a general partner of
Brantley Venture
5
<PAGE>
Partners III, L.P. (an affiliate of Brantley Venture Partners II, L.P.). He is
also a director of Maxim Integrated Products, Inc. and Quad Systems Corporation.
PAUL H. CASCIO has been a member of the Board since September 1996. He is a
general partner of Brantley Venture Partners II, L.P. (herein, "Brantley"). Mr.
Cascio also serves as Vice President and Secretary of Brantley Capital
Corporation. Mr. Cascio is Brantley's appointee to the Board under the terms of
an agreement between the Company and certain of its shareholders and lenders.
See "Certain Relationships and Related Transactions--Shareholders Agreement."
From December 1987 through May 1996, when he became a general partner of
Brantley, Mr. Cascio was a Managing Director and head of the Industrial
Manufacturing and Services Group in the corporate finance department at Dean
Witter Reynolds Inc.
MITCHELL I. QUAIN has been a member of the Board since May 1997. He is an
Executive Vice President of and has been a member of the board of Furman Selz
LLC since May 1997. From June 1975 to May 1997, he was a Managing Director of
and held other positions with Schroder & Co. Inc. Mr. Quain has more than 20
years of financial and operating experience. Certain stock options have been
granted to Mr. Quain, pursuant to a Board resolution providing for such options
for non-management directors who do not serve pursuant to the terms of the
Shareholder Agreement. See "Certain Relationships and Related
Transactions--Independent Director."
JONATHAN A. SWEEMER has been a member of the Board since February 1996. He
has been a member of Nassau Capital L.L.C., the general partner of Nassau
Capital Partners, L.P. (herein, collectively with NAS Partners I, L.L.C.,
"Nassau") since January 1995. From May 1992 to December 1994, Mr. Sweemer was a
Vice President for Princeton University Investment Co. Mr. Sweemer is Nassau's
appointee to the Board under the terms of an agreement between the Company and
certain of its shareholders and lenders. See "Certain Relationships and Related
Transactions--Shareholders Agreement."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established two permanent committees: the Audit
Committee and the Compensation Committee.
The Audit Committee members are Paul H. Cascio and Jonathan A. Sweemer. The
Audit Committee, among other things, makes recommendations to the Board of
Directors regarding the selection of independent certified public accountants to
audit annually the books and records of the Company, reviews the activities and
the reports of the independent certified public accountants, reports the results
of such review to the Board of Directors and considers the adequacy of the
Company's internal controls and internal auditing methods and procedures.
The Compensation Committee members are James R. Bergman and Jonathan A.
Sweemer. The Compensation Committee, among other things, makes recommendations
to the Board of Directors regarding the salaries, bonuses and other compensation
to be paid to the Company's officers. See "Compensation of Directors and
Executive Officers--Report of Compensation Committee" and "Security Ownership of
Certain Beneficial Owners and Management--Compensation Committee Interlocks and
Insider Participation" below.
MEETINGS
During the year ended December 31, 1997, the Board of Directors held five
meetings. All of the then-current members of the Board of Directors attended the
meetings. The Compensation Committee held two meetings, and the Audit Committee
held two meetings.
6
<PAGE>
COMPENSATION OF DIRECTORS
In June, 1997 the Board adopted a policy of compensating any non-management
directors who do not serve pursuant to the terms of the Shareholders Agreement
in an amount equal to $6,000 per year plus $1,500 for each quarterly Board
meeting attended. (See "Certain Relationships and Related
Transactions--Shareholders Agreement.") At present, Mitchell I. Quain is the
only director who qualifies for such compensation. The other directors of the
Company do not receive annual fees or fees for attending meetings of the Board
of Directors or committees thereof. However, all directors are reimbursed for
out-of-pocket expenses. In June 1997, the Board also extended the DeCrane
Aircraft Holdings, Inc. 1993 Share Incentive Plan to such independent
non-management directors, and issued 6,000 Options to Mr. Quain under the terms
of the 1993 Share Incentive Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following chart provides the information available to the Company as to
the beneficial ownership of Common Stock based upon disclosed ownership as of
March 15, 1998, adjusted to give effect to the application of the proceeds of
the secondary offering of Common Stock conducted by the Company on April 2,
1998, and including the shares sold pursuant to the supplemental overallotment
option on April 29, 1998 (collectively, the "Offering"), by: (i) each director
and Named Executive Officer; (ii) directors and executive officers of the
Company as a group; and (iii) each person known to the Company to be the
beneficial owner of 5% or more of Common Stock. Beneficial ownership is
determined in accordance with the rules promulgated by the Commission and
includes, among other things, shares of Common Stock which are issuable upon the
exercise of stock options which are immediately exercisable or will become
exercisable within 60 days of the date of measurement (May 15, 1998). However,
such options are counted only for the person holding them, not as a part of the
total shares outstanding upon which the percentage of ownership is computed for
other holders.
<TABLE>
<CAPTION>
OWNERSHIP OF COMMON STOCK PRIOR OWNERSHIP OF COMMON STOCK AFTER
TO OFFERING OFFERING
------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
BENEFICIAL OWNER SHARES OWNERSHIP SHARES OWNERSHIP
- ---------------------------------------------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Nassau Capital Partners L.P ........................ 874,633(1) 16.4% 874,633(1) 11.6%
22 Chambers Street
Princeton, New Jersey 08542
Jonathan A. Sweemer ................................ 874,633(2) 16.4% 874,633(2) 11.6%
22 Chambers Street
Princeton, New Jersey 08542
Brantley Venture Partners II, L.P .................. 490,928 9.2% 490,928 6.5%
20600 Chagrin Blvd., Suite 1150
Cleveland, Ohio 44122
Paul H. Cascio ..................................... 490,928(3) 9.2% 490,928(3) 6.5%
20600 Chagrin Blvd., Suite 1150
Cleveland, OH 44122
Wellington Management Co., LLP ..................... 485,000(4) 9.1% 685,000(4) 9.1%
75 State Street
Boston, Massachusetts 02109
Electra Investment Trust P.L.C ..................... 471,639 8.9% 471,639 6.3%
65 Kings Way
London, England WC2B6QT
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF COMMON STOCK PRIOR OWNERSHIP OF COMMON STOCK AFTER
TO OFFERING OFFERING
------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
BENEFICIAL OWNER SHARES OWNERSHIP SHARES OWNERSHIP
- ---------------------------------------------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Mellon Bank Corporation ............................ 436,600(5) 8.2% 436,600(5) 5.8%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Artisan Partners Limited Partnership ............... 391,200 7.4% 448,000 6.0%
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Artisan Investment Corporation ..................... 391,200(6) 7.4% 448,000(6) 6.0%
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Andrew A. Ziegler .................................. 391,200(6) 7.4% 448,000(6) 6.0%
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Carlene Murphy Ziegler ............................. 391,200(6) 7.4% 448,000(6) 6.0%
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
The Dreyfus Corporation ............................ 373,100(5) 7.0% 373,100(5) 5.0%
c/o Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
The TCW Group, Inc. ................................ 304,100 5.7% 304,100 4.0%
865 South Figueroa Street
Los Angeles, California 90017
Robert Day ......................................... 304,100(7) 5.7% 304,100(7) 4.0%
200 Park Avenue, Suite 200
New York, New York 10166
Dreyfus Investment Advisors, Inc. .................. 273,100(8) 5.1% 273,100(8) 3.6%
c/o Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Mellon Bank N.A. ................................... 273,100(8) 5.1% 273,100(8) 3.6%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
DSV Partners IV .................................... 493,439(9) 9.3% 133,227 1.8%
1920 Main St., Suite 820
Irvine, California 92614
James R. Bergman ................................... 493,439(10) 9.3% 133,227(10) 1.8%
1920 Main St., Suite 820
Irvine, California 92614
R. Jack DeCrane .................................... 147,119(11) 2.7% 111,783(11) 1.5%
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF COMMON STOCK PRIOR OWNERSHIP OF COMMON STOCK AFTER
TO OFFERING OFFERING
------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
BENEFICIAL OWNER SHARES OWNERSHIP SHARES OWNERSHIP
- ---------------------------------------------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
R. G. MacDonald .................................... 65,221(12) 1.2% 65,221(12) *
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
Robert A. Rankin ................................... 20,702(13) * 16,448(13) *
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
Charles H. Becker .................................. 19,851(14) * 14,180(14) *
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
Roger L. Keller .................................... 13,047(15) * 13,047(15) *
12442 Knott Avenue
Garden Grove, California 92841
Mitchell I. Quain .................................. 12,000(16) * 12,000(16) *
230 Park Avenue
New York, New York 10169
All directors and executive officers as a group 2,136,940(17) 38.8% 1,731,467(17) 22.5%
(nine persons)....................................
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 5,473 shares held by NAS Partners I L.L.C., an affiliate of Nassau
Capital Partners, L.P.
(2) Represents shares held by Nassau Capital Partners, L.P. and NAS Partners I
L.L.C., affiliates of Mr. Sweemer.
(3) Represents shares held by Brantley of which Mr. Cascio is a general partner
of the general partner.
(4) Includes shares held by clients of Wellington, which in its capacity as
investment adviser may be deemed to control such shares.
(5) Includes 273,100 shares beneficially owned jointly among Mellon Bank
Corporation, Mellon Bank N.A., The Dreyfus Corporation and Dreyfus
Investment Advisors, Inc.
(6) Represents shares held by Artisan Partners Limited Partnership and
beneficially owned jointly with Artisan Investment Corporation, A. A.
Ziegler and C.M. Ziegler.
(7) Represents shares held by The TCW Group of which Mr. Day may be a
controlling person.
(8) Represents shares beneficially owned jointly among Mellon Bank Corporation,
Mellon Bank, N.A., The Dreyfus Corporation and Dreyfus Investment Advisers,
Inc.
(9) Includes shares beneficially owned by, and to be distributed to, certain
partners of DSV.
(10) Represents shares held by DSV of which Mr. Bergman is a general partner.
(11) Includes 80,819 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
(12) Includes 56,714 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
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<PAGE>
(13) Includes 16,448 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
(14) Includes 14,180 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
(15) Includes 13,047 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
(16) Includes 2,000 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
(17) Includes 183,208 shares which may be acquired upon the exercise of stock
options which are exercisable or will be exercisable prior to 60 days from
May 15, 1998.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
REPORT OF COMPENSATION COMMITTEE
Pursuant to regulations promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), this report shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission ("SEC")
nor shall it be incorporated by reference into any filing under the Securities
Act of 1933 (the "Securities Act") or the Exchange Act.
The Compensation Committee acts as Administrator of the Share Incentive
Plan, in making awards of options in Common Stock of the Company (herein,
"Options") to certain parties including senior executives and key employees. See
"Compensation of Directors and Executive Officers--Share Incentive Plan."
Four of the awards to key employees approved by the Committee in 1996 were
implemented in January 1997, for an aggregate of Options for 12,762 shares. The
Compensation Committee approved the recommendations of senior management with
respect to the awards of those Options to the employees, which were based on a
combination of the extent to which (i) each individual's operating unit met or
exceeded its financial performance targets primarily measured by earnings before
taxes, interest and certain other charges ("EBITDA") and (ii) his or her
individual performance goals for the year were achieved. The awards made in
January of 1997 reflected achievement of 100% or greater of the relevant unit
performance goals for the previous year, and either favorable or highly
favorable determinations regarding the individual's achievement of individual
operating objectives. Two of the four persons receiving option awards in January
1997 had not previously received awards under the Share Incentive Plan.
In June 1997, the Compensation Committee met to extend the Share Incentive
Plan for employees to independent non-management directors of the Company who
are not appointed to the Board pursuant to the Shareholders Agreement, and
approved the issuance of 6,000 Options to Mitchell I. Quain, the only director
presently qualifying for such plan. See "Certain Relationships and Related
Transactions-- Independent Director."
In December 1997, the Compensation Committee met to make awards of Options
to 22 senior executives and key employees of the Company and its subsidiaries
under the Share Incentive Plan. The Committee approved the award of Options for
an aggregate of 157,662 shares, including Options for an aggregate of 94,000
shares to Messrs. DeCrane, MacDonald, Becker, Rankin and Keller. In evaluating
Mr. DeCrane's performance, the Compensation Committee looked primarily to (i)
the extent to which the Company exceeded its earnings goals for 1997 to date,
(ii) the performance and integration of the Company's recent acquisitions, (iii)
the continued acquisition program of the Company and (iv) the development of the
Company's management team. The Compensation Committee approved the
recommendations of senior management with respect to the awards of options to
other executives and employees, which were based on a combination of the extent
to which (i) each individual's operating unit
10
<PAGE>
met or exceeded its financial performance targets, primarily measured by EBITDA,
and (ii) his or her individual performance goals for the year were achieved. The
awards made in December of 1997 reflected achievement of between 101% and 144%
of each of the relevant unit performance goals for the previous year, except for
Hollingsead, and, for the most part, either favorable or highly favorable
determinations regarding the individuals' achievement of individual operating
objectives. At Hollingsead, the financial goals were not achieved, but modest
incentives were awarded in recognition of key strategic milestones that were
achieved. Nine of the 22 persons receiving Option awards in December 1997 had
not previously received awards under the Share Incentive Plan, bringing the
total number of persons receiving Option awards to 33.
The employment agreements between the Company and three of its senior
executive officers, Messrs. DeCrane, MacDonald and Becker, specify certain cash
incentive payments on an annual basis deemed earned pro rata throughout the
year, as a sliding percentage of the officer's base salary, depending on the
extent to which the Company (or, in the case of Mr. Becker who until recently
served as President of Tri-Star, Tri-Star) approaches, meets or exceeds its
financial performance targets, measured principally by pre-tax earnings. See
"Compensation of Directors and Executive Officers--Employment Agreements and
Compensation Arrangements." The bonuses paid during 1997 to each such officer,
based on the applicable contractual formulas, reflected achievement of in excess
of 110% of the relevant performance goals for the previous year.
Incentive awards to other key employees, including Mr. Rankin and Mr.
Keller, were made pursuant to the terms and criteria set forth in the 1996
Incentive Plan, which provides for cash incentive payments on an annual basis
deemed earned pro rata throughout the year, as a sliding percentage of the key
employee's base salary, depending in part (50%) on the extent to which the key
employee's operating unit approaches, meets or exceeds its financial performance
targets, measured principally by EBITDA, and in part (50%) based on the key
employee's achievement of his or her individual performance goals., in the
discretion of the Chief Executive Officer or the President of the relevant
operating subsidiary. See "Compensation of Directors and Executive
Officers--1996 Incentive Plan." In December 1997, the Compensation Committee
approved the recommendations of senior management to make cash incentive awards
to [several] key officers and employees, which reflected achievement of in
excess of 101% of the relevant financial goals for the previous year for each
unit except for Hollingsead, targets, measured principally by EBITDA, and a
favorable determination regarding the discretionary component of the awards and
senior management's evaluation of the completion by such officers and key
employees of their respective individual operating objectives.
See also "Compensation of Directors and Executive Officers--Compensation
Committee Interlocks and Insider Participation" for certain information
regarding certain transactions among the Company and members of the Compensation
Committee.
Respectfully submitted,
James R. Bergman
Jonathan A. Sweemer
11
<PAGE>
SUMMARY COMPENSATION TABLE
The following table describes all annual compensation awarded to, earned by
or paid to the Company's Chief Executive Officer and the four-most highly
compensated executive officers other than the Chief Executive Officer
(collectively the "Named Executive Officers") for the years ended December 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
OTHER
ANNUAL COMPENSATION ANNUAL
------------------------ COMPEN-
YEAR SALARY BONUS SATION(1)
---- -------- -------- ---------
<S> <C> <C> <C> <C>
R. Jack DeCrane................................ 1997 $244,744 $220,000 --
Chief Executive Officer 1996 206,600 146,000 7,813
and Chairman of the Board 1995 180,000 55,000 --
R.G. MacDonald................................. 1997 184,859 102,000 10,536
Vice Chairman of 1996 177,437 82,000 13,200
the Board(4) 1995 173,607 35,000 8,292
Charles H. Becker.............................. 1997 174,492 102,000 6,168
President and Chief 1996 148,750 65,000 9,103
Operating Officer(5) 1995 137,515 16,000 1,610
Robert A. Rankin............................... 1997 149,309 103,000 7,158
Chief Financial 1996 139,375 65,000 12,838
Officer and Secretary 1995 135,000 20,000 6,628
Roger L. Keller................................ 1997 163,866 30,000 1,682
Group Vice President of 1996 150,000 -- 2,083
Systems and President of 1995 121,250 7,500 --
Hollingsead International(6)
<CAPTION>
LONG TERM COMPENSATION
----------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/ LTIP COMPEN-
AWARDS SAR(2) PAYOUT SATION(3)
---------- ---------- ------ ---------
<S> <C> <C> <C> <C>
R. Jack DeCrane................................ 50,000 $29,411
Chief Executive Officer 34,028 --
and Chairman of the Board -- --
R.G. MacDonald................................. 4,000 --
Vice Chairman of -- --
the Board(4) -- --
Charles H. Becker.............................. 15,000 18,000
President and Chief 19,850 30,586
Operating Officer(5) 14,179 --
Robert A. Rankin............................... 15,000 --
Chief Financial 19,850 --
Officer and Secretary -- 80,357
Roger L. Keller................................ 10,000 --
Group Vice President of 19,850 --
Systems and President of 14,179 17,405
Hollingsead International(6)
</TABLE>
- ------------------------------
(1) Amounts paid by the Company for premiums on health, life and long-term
disability insurance and automobile leases provided by the Company for the
benefit of the Named Executive Officer.
(2) Number of shares of Common Stock issuable upon exercise of options granted
during the last fiscal year.
(3) Relocation costs.
(4) Mr. MacDonald served as President of the Company through December 1996. Mr.
MacDonald became Vice Chairman of the Board in December 1996.
(5) Mr. Becker served as President of Tri-Star and Group Vice President of
Components for the Company through April 1998. Mr. Becker became President
and Chief Operating Officer in April 1998.
(6) Mr. Keller became Group Vice President of Systems in December 1996. Mr.
Keller previously served (and continues to serve) as President of
Hollingsead International, Inc.
12
<PAGE>
STOCK OPTION/SARS GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options granted to
the Named Executive Officers during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SECURITIES RATES OF STOCK PRICE
UNDERLYING % OF EXERCISE OR APPRECIATION(1)
OPTIONS/ OPTIONS/SAR BASE PRICE EXPIRATION ------------------------
NAME SAR GRANTED GRANTED PER SHARE DATE 5% 10%
- --------------------------------- ------------- ------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Jack DeCrane.................. 50,000 30.6% $ 16.75 2007 $ 526,699 $ 1,334,759
R.G. MacDonald................... 4,000 2.4% 16.75 2007 42,136 106,781
Charles H. Becker................ 15,000 9.2% 16.75 2007 158,010 400,428
Robert A. Rankin................. 15,000 9.2% 16.75 2007 158,010 400,428
Roger L. Keller.................. 10,000 6.1% 16.75 2007 105,340 266,952
</TABLE>
- ------------------------
(1) The potential realizable value assumes a rate of annual compound stock price
appreciation of 5% and 10% from the date the option was granted over the
full option term. These assumed annual compound rates of stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future prices of the Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth information about the stock options exercised
by the Named Executive Officers of the Company during the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SAR SAR AT FY-END(1)
SHARES ACQUIRED VALUE ----------------------- -----------------------
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------- --------------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
R. Jack DeCrane............................ -- -- $ 80,819/95,370 $ 1,329,172/655,294
R.G. MacDonald............................. -- -- 45,372/15,342 747,324/187,814
Charles H. Becker.......................... -- -- 14,180/34,849 229,559/287,686
Robert A. Rankin........................... -- -- 16,448/32,581 269,315/247,930
Roger L. Keller............................ -- -- 13,047/30,982 210,897/305,098
</TABLE>
- ------------------------
(1) Based on the common stock share price of $16.75 per share as of December 31,
1997, the measuring date.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
R. Jack DeCrane and the Company have entered into an employment agreement
pursuant to which Mr. DeCrane is to serve as Chief Executive Officer for a term
of four years, effective September 1, 1994. The agreement requires Mr. DeCrane
to devote his full business time to the Company and contains a covenant not to
compete with the Company for a period of 12 months following termination of the
agreement. The 1994 agreement provides for various benefits including: (i) an
initial annual salary of $180,000, which is subject to annual review and
increase, but not decrease; (ii) an annual bonus ranging from 30% to 70% of Mr.
DeCrane's annual base salary depending on the level of the Company's achievement
of certain performance goals; and (iii) vested stock options to purchase 77,982
shares of Common Stock at an exercise price of $0.53 per share. Additionally,
Mr. DeCrane is also entitled to life insurance (in an amount at least equal to
$1,000,000), and health care benefits generally provided by the Company to other
senior executives. The agreement also provides for various payments to Mr.
DeCrane or his beneficiaries in the event of his death, disability, or
termination without cause. In the event of his death,
13
<PAGE>
Mr. DeCrane's beneficiaries would be entitled to: (i) a payment equal to Mr.
DeCrane's then current salary for one year plus his remaining bonus through
year-end; and (ii) continuation of certain insurance benefits for one year. Upon
termination due to disability, Mr. DeCrane would be entitled to: (i) receive the
sum of his then current base salary for one year plus his bonus through year
end; and (ii) continuation of certain health benefits for one year. In the event
of a termination without cause by the Company or Mr. DeCrane's resignation due
to a material breach of the agreement by the Company or the Company's request
that he resign or retire, Mr. DeCrane would be entitled to: (i) his then current
base salary for one year and his remaining bonus through the end of the year of
termination plus an amount equal to the amount earned in the immediately
preceding year; (ii) continuation of certain health benefits for a one year
period; and (iii) reimbursement of certain relocation and outplacement expenses.
R. G. MacDonald and the Company entered into a letter agreement, dated June
28, 1993, pursuant to which Mr. MacDonald is to receive for an unspecified term:
(i) an initial annual base salary of $150,000; (ii) an annual bonus ranging from
20% to 50% of his annual base salary depending on the Company's level of
achievement of certain performance goals; and (iii) the Company's standard
benefit package with the addition of an executive term life insurance policy in
the amount of $200,000. Under the agreement, Mr. MacDonald received options to
purchase 56,714 shares of the Company's Common Stock at an exercise price of
$0.53 per share.
Charles H. Becker and Tri-Star entered into a letter agreement, dated
November 28, 1994, pursuant to which Mr. Becker is to receive for an unspecified
term: (i) an initial annual base salary of $140,000; (ii) an annual bonus
ranging from 10% to 40% of his annual base salary depending on Tri-Star's level
of achievement of certain performance goals; and (iii) other benefits available
under the Company's executive benefits program. Under the agreement, Mr. Becker
received options to purchase 14,179 shares of the Company's Common Stock at an
exercise price of $0.53 per share.
SHARE INCENTIVE PLAN
Under the Share Incentive Plan adopted by the Company in 1993 (the "Share
Incentive Plan"), the Company may grant to its eligible employees: (i) options
("Options") to purchase shares of Common Stock; (ii) shares of Common Stock that
vest upon the achievement of specified service or performance conditions within
a specified period of time (the "Restricted Shares"); and (iii) options to
receive payments based on the appreciation of Common Stock ("SARs"). Options,
Restricted Shares and SARs are collectively referred to as "Grants."
Under the Share Incentive Plan, the Company may grant Options that qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Options that do not so
qualify. The Share Incentive Plan is to be administered by a committee selected
by the Company's Board and composed of at least two members of the Board (the
"Administrator"). The current members of the Administrator are Messrs. Bergman
and Sweemer. Restricted Shares may be granted to key employees of the Company at
the sole discretion of the Administrator. SARs may be specifically granted upon
the terms and conditions specified by the Administrator.
Grants are to be made to key employees of the Company designated by the
Administrator at its sole discretion. The Company has reserved 527,156 shares of
Common Stock for issuance under the Share Incentive Plan. The Share Incentive
Plan terminates on February 1, 2003, and thereafter no Grants may be made
thereunder. In June 1997, with the approval of the Administrator, the Company
extended the Share Incentive Plan to Mitchell I. Quain, an independent
non-management director of the Company, and issued 6,000 Options to Mr. Quain
under the terms of the Share Incentive Plan.
The exercise price of any Option may not be less than 100% (or 110% in the
case of an Option granted to a person owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company) of the fair market value of the Common Stock at
the time of the grant of the Option. No Option may be exercised after the
expiration of ten years
14
<PAGE>
from the date of grant of such Option. No Option may be sold, pledged, assigned
or transferred in any manner otherwise than by will or the laws of descent or
distribution. The purchase price of any shares of Common Stock purchased under
an Option must be paid in full at the time of the exercise of an Option in cash,
by check or, if permitted by the Administrator, by shares of Common Stock having
a fair market value on the date of the exercise equal to the purchase price or a
combination thereof.
In the event that a holder of a Grant (a "Grantee") ceases to be employed by
the Company for any reason other than death, retirement or disability or such
employee is terminated without cause, such Grants shall terminate upon the
termination of his employment, unless extended by the Administrator. In the
event of termination of employment due to death, retirement or disability of a
Grantee or in the event such termination is without cause, the Administrator may
allow the Grantee (or his estate) to exercise Options and SARs (to the extent
exercisable on the date of termination of employment) at any time within one
year after the date of such termination of employment. Restricted Shares held by
a Grantee will vest upon the Grantee's death and all restrictions will thereupon
lapse.
1996 INCENTIVE PLAN
In 1996 the Company introduced an incentive plan (the "1996 Incentive Plan")
for its management personnel tied to the Company's and each operating unit's
annual budget as approved each year by the Compensation Committee of the Board.
The 1996 Incentive Plan matrix provides for an annual bonus of up to 70% of the
employee's base salary if the Company or its relevant operating unit achieves
110% of budget. Fifty percent of the bonus is payable solely based on
performance of the Company or the relevant operating unit and the remainder is
payable upon the achievement by the employee of his or her individual objectives
in the discretion of the Chief Executive Officer of the Company or the President
of the relevant operating unit.
401(K) RETIREMENT PLAN
Effective April 1992, the Company adopted the Lincoln National Life
Insurance Company Non-Standardized 401(k) Salary Reduction Plan and Trust
Prototype Plan (the "401(k)"). The 401(k) allows employees as participants to
defer, on a pre-tax basis, a portion of their salary and accumulate tax deferred
earnings, plus interest, as a retirement fund. The Company matched 25% of the
employee contribution for the fourth quarter of 1997 for up to 6% of the
employee's salary. In 1998, the Company intends to increase its matching
percentage to 50% of the employee contribution for up to 6% of the employee's
salary. The full amount vested in a participant's account will be distributed to
a participant following termination of employment, normal retirement or in the
event of disability or death.
DIRECTORS' COMPENSATION
In June 1997 the Board adopted a policy of compensating any non-management
directors who do not serve pursuant to the terms of the Shareholder Agreement
(see "Certain Relationships and Related Transactions--Shareholders Agreement")
in an amount equal to $6,000 per year plus $1,500 for each quarterly Board
meeting attended. At present, Mitchell I. Quain is the only director who
qualifies for such compensation. The other directors of the Company do not
receive annual fees or fees for attending meetings of the Board of Directors or
committees thereof. However, all directors are reimbursed for out-of-pocket
expenses. In June 1997, the Board also extended the Share Incentive Plan to such
independent non-management directors, and issued 6,000 Options to Mr. Quain
under the terms of the Share Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James R. Bergman, a member of the Compensation Committee, is a general
partner of DSV, and DSV's nominee to the Board of Directors under the
Shareholder Agreement described below. See
15
<PAGE>
"Certain Relationships and Related Transactions--Shareholders Agreement". Mr.
Bergman may be considered the beneficial owner of all of part of the Common
Stock held by DSV by virtue of his affiliation with DSV. See "Security Ownership
of Certain Beneficial Owners and Management" and footnote 10 to the accompanying
chart. As a part of the Offering in April, 1998, DSV registered and sold 360,212
shares of Common Stock. See "Certain Relationships and Related
Transactions--Certain Selling Shareholders in Offering."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS AGREEMENT
Pursuant to the Fifth Amended and Restated Shareholders Agreement dated
January 10, 1997 (as amended, the "Shareholders Agreement") among the Company,
Nassau, Brantley, DSV, Electra Investment Trust P.L.C. and Electra Associates,
Inc. (herein, collectively, "Electra"), and certain other parties, and subject
to election by the Company's stockholders, Nassau, Brantley and DSV each have
the right to nominate a representative to serve as a director so long as the
relevant stockholder owns at least 5% of the Common Stock. See "Directors and
Executive Officers." As of May 15, 1998, Nassau and Brantley beneficially own
11.6% and 6.5%, respectively, of the issued and outstanding Common Stock. The
Shareholders Agreement also provides that Mr. DeCrane may nominate a director
for election by the Company's stockholders for so long as he is the Chief
Executive Officer of the Company.
RECAPITALIZATION; WAIVERS AND EXCHANGES OF SECURITIES
Effective immediately prior to the Company's initial public offering (the
"IPO") in April 1997, certain of the Company's then-existing shareholders,
including Nassau, Brantley, DSV and Electra, and holders of warrants for common
stock, agreed to waive a number of rights under the agreements by which such
shareholders and warrant holders acquired such Rights from the Company,
releasing the Company from certain dividend payment requirements, voting
requirements and certain other rights, as well as eliminating certain negative
and affirmative covenants contained therein (collectively, the
"Recapitalization").
The Recapitalization provided for: (i) the conversion of all 6,847,705
shares of issued and outstanding cumulative convertible preferred stock into
1,941,804 shares of Common Stock; (ii) the cashless exercise and conversion of
all 52,784 and 9,355 issued and outstanding of such Preferred Stock warrants and
common stock warrants, respectively, into a total of 16,585 shares of Common
Stock; (iii) the cashless exercise of 508,497 mandatorily redeemable common
stock warrants (the "Redeemable Warrants") into a total of 507,708 shares of
Common Stock; and (iv) the cancellation of 95,368 Redeemable Warrants.
Redeemable Warrants exercisable into 208,968 common shares remained after
the Recapitalization. Of this amount, 138,075 Redeemable Warrants were canceled
upon the consummation of the IPO and repayment of the Company's senior
subordinated debt and convertible notes in accordance with the terms of the
respective warrant agreements. Redeemable Warrants exercisable into 70,893
common shares remained after the Recapitalization and the IPO and application of
the net proceeds therefrom. Concurrent with the consummation of the IPO, the
mandatory redemption feature of these warrants was terminated and, as a result,
the value ascribed thereto was reclassified to stockholders' equity as
additional paid-in capital.
In December 1997, the Company issued an additional 16,918 shares of Common
Stock to Electra and 33,825 shares to Nassau to correct a disputed calculation
regarding the number of shares that should have been issued as part of the
Recapitalization in the conversions described above.
Upon consummation of the IPO and as part of the Recapitalization, R.G.
MacDonald, Charles H. Becker, Robert A. Rankin and John Hinson, an officer of
the Company, exchanged an aggregate of 75,000 shares of preferred stock of the
Company for 21,268 shares of Common Stock.
16
<PAGE>
INDEPENDENT DIRECTOR
In June 1997, the Company extended its Share Incentive Plan for employees to
independent non-management directors of the Company who are not appointed to the
Board pursuant to the Shareholders Agreement, and issued 6,000 Options to
Mitchell I. Quain, the only director presently qualifying for such plan.
CERTAIN SELLING SHAREHOLDERS IN OFFERING
As a part of the Offering in April, 1998, DSV registered and sold 360,212
shares of Common Stock; and R. Jack DeCrane, Charles H. Becker and Robert A.
Rankin registered and sold 35,336, 4,254 and 5,671 shares of Common Stock,
respectively; in each case as selling shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP is the independent public accounting firm which served
as principal accountants for the 1997 fiscal year. Representatives of Price
Waterhouse LLP are expected to be present at the Annual Meeting and available to
respond to appropriate questions from shareholders, and will have the
opportunity to make a statement if they wish. The Company has not yet selected
its principal accountant for the current (1998) fiscal year; the Board is
presently discussing several candidates including Price Waterhouse LLP.
STOCK PERFORMANCE GRAPH
Pursuant to regulations promulgated under the Exchange Act, the following
material shall not be deemed to be "soliciting material" or to be "filed" with
the SEC nor shall it be incorporated by reference into any filing under the
Securities Act or the Exchange Act.
The graph which follows indicates the cumulative total return on Common
Stock of DeCrane Aircraft Holdings, Inc. since April 16, 1997, the date on which
the Common Stock began trading on the Nasdaq National Market, compared with the
cumulative total return of companies included in the Nasdaq National Market
Composite Index and in the group of eight comparable companies listed below (the
"Comparables"). The Comparables have been selected as the Company's closest
publicly-held peers in the avionics components manufacturing and aftermarket
sales and integration industries. The cumulative total return on the Common
Stock, the Nasdaq National Market Composite Index and each of the Comparables
shown below equals, in each case, the total increase in value since April 16,
1997, assuming reinvestment of all dividends. The Company paid no dividends
during this period. The graph assumes that $100 was invested on April 16, 1997
in the Common Stock, the Nasdaq National Market Composite Index and each of the
Comparables.
<TABLE>
<CAPTION>
AMOUNT INVESTED CUMULATIVE RETURN ON
APRIL 16, 1997 DECEMBER 31, 1997
----------------- --------------------
<S> <C> <C>
DeCrane Aircraft Holdings, Inc......................... $ 100 $ 143.16
Nasdaq Stock Market Index.............................. $ 100 130.50
Average of DeCrane Comparables......................... $ 100 140.14
AAR Corp......................................... $ 100 $ 127.34
Hexcel Corp...................................... $ 100 147.78
Aviation Sales Company........................... $ 100 159.26
Kellstrom Industries, Inc........................ $ 100 181.65
Ducommun Inc. Del................................ $ 100 145.57
BE Aerospace..................................... $ 100 112.04
Kaynar Technologies, Inc......................... $ 100 178.13
Triumph Group.................................... $ 100 132.34
</TABLE>
17
<PAGE>
ITEM 2
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters are properly brought before the Annual Meeting,
it is intended that the persons named in the enclosed form of Proxy will have
discretionary authority to vote on such matters in accordance with their best
judgment acting together or separately.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934:
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
James R. Bergman, a director of the Company, filed a Form 5 under Section
16(a) of the Exchange Act (a "Form 5") dated March 5, 1998, indicating a failure
to timely file a Form 3 under Section 16(a) of the Exchange Act (a "Form 3")
when required under Section 16(a), disclosing his indirect beneficial ownership
of a portion of the 493,439 shares of Common Stock directly owned by DSV (of
which he is a general partner) at the time of the Company's Initial Public
Offering in April, 1997. The foregoing Form 5 was required to have been filed by
February 15, 1998.
Jonathan Sweemer, a director of the Company, filed a Form 5 dated February
25, 1998, indicating a failure to timely file: (i) a Form 3 with respect to
869,160 shares of Common Stock beneficially owned by Nassau at the time of the
Company's Initial Public Offering in April 1997, and (ii) a Form 4 with respect
to the acquisition of 33,526 additional shares of Common Stock issued by the
Company to Nassau to correct a disputed calculation regarding the number of
shares that should have been issued as part of the Company's Recapitalization
(as defined below). Mr. Sweemer disclaims any beneficial interest in any of the
foregoing shares. The foregoing Form 5 was required to have been filed by
February 15, 1998.
Nassau filed a Form 5 dated February 25, 1998, indicating a failure to
timely file: (i) a Form 3 disclosing its beneficial ownership of 869,160 shares
of Common Stock at the time of the Company's Initial Public Offering in April
1997, and (ii) a Form 4 with respect to the acquisition of 33,526 additional
shares of Common Stock issued by the Company to correct a disputed calculation
regarding the number of shares that should have been issued as part of the
Company's Recapitalization (as defined below). The foregoing Form 5 was required
to have been filed by February 15, 1998.
Paul H. Cascio, a director of the Company, filed a Form 5 dated March 9,
1998, indicating a failure to timely file a Form 3, disclosing his indirect
beneficial ownership of the 490,928 shares of Common Stock directly owned by
Brantley (of which he is a general partner of a general partner), at the time of
the IPO. The foregoing Form 5 was required to have been filed by February 15,
1998.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders concerning the operation of the Company
for the year ended December 31, 1997, including financial statements, is
enclosed with this notice and proxy statement.
18
<PAGE>
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission, without
exhibits, may be obtained by stockholders without charge by written request to
Robert A. Rankin, Secretary, DeCrane Aircraft Holdings, Inc., 2361 Rosecrans
Avenue, Suite 180, El Segundo, California 90245. Exhibits will be provided upon
written request and payment of an appropriate processing fee.
By Order of the Board of Directors
R. Jack DeCrane
Chairman of the Board
DATED: JUNE 2, 1998
19
<PAGE>
DECRANE AIRCRAFT HOLDINGS, INC.
EL SEGUNDO, CALIFORNIA 90245
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, JUNE 17, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles Becker and James
Mann, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution, for and in the name, place and stead of the
undersigned to appear at the annual meeting of the shareholders of DeCrane
Aircraft Holdings, Inc., to be held on the 17th day of June, 1998 and at any
postponement or adjournment thereof, and to vote all of the shares of
DeCrane Aircraft Holdings, Inc., which the undersigned is entitled to vote,
with all the powers and authority the undersigned would possess if personally
present. The undersigned hereby directs that this proxy be voted as marked on
the reverse side hereof.
This Proxy will, when properly executed, be voted as directed. If no
directions to the contrary are indicated in the boxes provided, the persons
named herein intend to vote FOR each proposal listed on the reverse side
hereof.
A majority of said attorneys and proxies present and acting at the
meeting in person or by their substitutes (or if only one is present and
acting, then that one) may exercise all the powers conferred hereby.
Discretionary authority is conferred hereby as to all matters not listed on
the reverse side hereof as may properly come before the meeting.
[FRONT SIDE OF PROXY]
<PAGE>
(1) ELECTION OF DIRECTORS: R. G. MacDonald and Mitchell I. Quain
FOR all nominees WITHHOLD AUTHORITY INSTRUCTION: To withhold
above (except as to vote for the nominees authority to vote for
marked to the listed above: any individual nominee,
contrary) write that nominee's
name in the space
below:
/ / / /
-------------------------
(2) To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
Receipt of the Notice of Annual
Meeting of Shareholders and Proxy
Statement for the 1998 Annual Meeting
is hereby acknowledged:
----------------------------------------
Signature
----------------------------------------
Signature
Dated: , 1998
----------------------------
Please sign exactly as your name or
names appear hereon, including any
official position or representative
capacity.
Please mark, date and sign this proxy and return it promptly in the enclosed
postage-paid envelope.
[REVERSE SIDE OF PROXY]
