TESSCO Technologies Incorporated
11126 McCormick Road
Hunt Valley, Maryland USA 21031
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
August 14, 1998
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To the Shareholders of TESSCO Technologies Incorporated:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") of TESSCO Technologies Incorporated, a
Delaware corporation (the "Company"), will be held at the Company's corporate
headquarters, 11126 McCormick Road, Hunt Valley, Maryland USA, on August 14,
1998 at 10:00 a.m., local time, for the following purposes:
1. To elect two directors for a three year term ending in
2001.
2. To ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants.
3. To act upon any other matter which may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of
business on June 18, 1998 as the record date for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. A list of
shareholders as of the record date will be available for inspection by
shareholders at the Company's corporate headquarters during business hours for a
period of ten days prior to the Annual Meeting.
Your attention is directed to the attached Proxy Statement and
to the enclosed Annual Report of the Company for the fiscal year ended March 29,
1998.
By Order of the Board of Directors,
/s/ Janet W. Barnhill
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Janet W. Barnhill
Secretary
Hunt Valley, Maryland
July 1, 1998
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|EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE |
|ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND|
|THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. |
| ----------------------------------------------------------------------------|
<PAGE>
TESSCO Technologies Incorporated
11126 McCormick Road
Hunt Valley, Maryland USA 21031
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is being furnished to shareholders of
TESSCO Technologies Incorporated, a Delaware corporation (the "Company"), in
connection with the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Shareholders (the "Annual Meeting") to
be held at the Company's corporate headquarters, 11126 McCormick Road, Hunt
Valley, Maryland, on August 14, 1998 at 10:00 a.m., local time, and at any
adjournments thereof.
Solicitation
The solicitation is being made primarily by the use of the
mail, but directors, officers and employees may also engage in the solicitation
of proxies by telephone. The cost of soliciting proxies will be borne by the
Company, and no compensation will be paid by the Company in connection with the
solicitation of proxies, except that the Company may reimburse brokers,
custodians, nominees and other record holders for their reasonable out-of-pocket
expenses in forwarding proxy material to beneficial owners.
This Proxy Statement and the accompanying form of proxy are
being sent to shareholders on or about July 1, 1998.
Revocation of Proxies
A proxy may be revoked at any time prior to its exercise by
the filing of a written notice of revocation with the Secretary of the Company,
by delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
shareholder whose shares are not registered in your own name, you will need
additional documentation from your record holder to vote personally at the
Annual Meeting.
<PAGE>
Voting Rights and Outstanding Shares
The Board of Directors of the Company has fixed the close of
business on June 18, 1998 as the record date (the "Record Date") for determining
the shareholders of the Company entitled to notice of and to vote at the Annual
Meeting. On the Record Date, the Company had outstanding 4,417,214 shares of
common stock, $0.01 par value per share (the "Common Stock"). Each share of
Common Stock entitles the holder thereof to one vote on each matter to be voted
upon at the Annual Meeting. There is no cumulative voting for the election of
directors.
The presence, in person or by proxy, of at least a majority of
the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event there are not sufficient
votes for a quorum or to approve any proposal at the Annual Meeting, the Annual
Meeting may be adjourned in order to permit the further solicitation of proxies.
All outstanding shares of the Company's Common Stock
represented by properly executed and unrevoked proxies received in the
accompanying form in time for the Annual Meeting will be voted. A shareholder
may, with respect to the election of directors (i) vote for the election of the
named director nominees, (ii) withhold authority to vote for all such director
nominees, or (iii) vote for the election of all such director nominees other
than any nominee with respect to whom the shareholder withholds authority to
vote by striking a line through such nominee's name on the proxy. A shareholder
may, with respect to each other matter specified in the notice of meeting (i)
vote "FOR" the matter, (ii) vote "AGAINST" the matter, or (iii) "ABSTAIN" from
voting on the matter. Shares will be voted as instructed in the accompanying
proxy on each matter submitted to shareholders. If no instructions are given,
the shares will be voted FOR the election of the named director nominees and FOR
the ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants.
A proxy submitted by a shareholder may indicate that all or a
portion of the shares represented by such proxy are not being voted by such
shareholder with respect to a particular matter. This could occur, for example,
when a broker is not permitted to vote Common Stock held in street name on
certain matters in the absence of instructions from the beneficial owner of the
Common Stock. The shares subject to any such proxy which are not being voted
with respect to a particular matter (the "non-voted shares") will be considered
shares not present and entitled to vote on such matter, although such shares may
be considered present and entitled to vote for other purposes and will count for
purposes of determining the presence of a quorum.
The affirmative vote of a plurality of the shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
on the election of directors is required to elect directors. Accordingly, if a
quorum is present at the Annual Meeting, the two persons receiving the greatest
number of votes will be elected to serve as directors. Therefore, withholding
authority to vote for a director(s) and non-voted shares with respect to the
election of directors will not affect the outcome of the election of directors.
Under Delaware law, abstentions are generally considered as shares entitled to
vote and thus have the same effect as a vote against such matter. Non-voted
shares with respect to a matter will not be considered as entitled to vote on
such matter and thus will not affect the determination of whether such matter is
approved.
<PAGE>
The Board of Directors knows of no additional matters that
will be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournment
thereof. Proxies solicited hereby will be tabulated by inspectors of election
designated by the Board, who will not be employees or directors of the Company
or any of its affiliates.
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. Election of Directors
The Company's Bylaws provide that the Board of Directors is
divided into three classes, each class consisting, as nearly as possible, of
one-third of the total number of directors, and with each class having a
three-year term. Each year the directors in one class are elected to serve for a
term of three years. The Board of Directors is presently comprised of six
members. One class of directors, consisting of Jerome C. Eppler and Dennis J.
Shaughnessy, has a term of office expiring at the Annual Meeting or until their
successors are elected and qualified. Messrs. Eppler and Shaughnessy have each
been nominated for a three-year term expiring at the Annual Meeting of
Shareholders in 2001 or until their successors are elected and qualified.
The persons named in the enclosed proxy intend to vote
properly executed and returned proxies FOR the election of all nominees proposed
by the Board of Directors unless authority to vote is withheld. In the event
that any nominee is unable or unwilling to serve, the persons named in the proxy
will vote for such substitute nominee or nominees as they, in their discretion,
shall determine. The Board of Directors has no reason to believe that any
nominee named herein will be unable or unwilling to serve.
Set forth below is information concerning the nominees for
election and those directors whose term continues beyond the date of the Annual
Meeting.
Nominees for Director for a Three-Year Term Expiring at the 2001 Annual Meeting.
Jerome C. Eppler, age 74, has been a director of the Company
since 1985. He is the owner of Eppler & Company, a private financial advisor.
Since 1995, Mr. Eppler has also been a principal of Olympic Capital Partners, an
investment banking firm.
Dennis J. Shaughnessy, age 51, has been a director of the
Company since 1989. He has served as Managing Director of Grotech Capital Group,
Inc. since 1989. From 1985 to 1989, Mr. Shaughnessy served as President and
Chief Executive Officer of CRI International, Inc., an oil services company. Mr.
Shaughnessy also currently serves on the Boards of Forensic Technologies
Incorporated, Secure Computing Corporation, U.S. Vision, Inc. and Polk Audio,
Inc.
<PAGE>
Directors Continuing in Office.
Directors whose term will expire at the 1999 Annual Meeting:
Robert B. Barnhill, Jr., age 54, has served as President and
Chief Executive Officer of the Company since 1975, as a director since 1967, and
as Chairman of the Board since November 1993. He is the husband of Janet W.
Barnhill, Secretary of the Company. Mr. Barnhill is a director of Polk Audio,
Inc. and Provident Bankshares Corporation.
Benn R. Konsynski, Ph.D., age 47, has been a director of the
Company since November 1993. He has been the George S. Craft Professor of
Business Administration for Decision and Information Analysis at the Goizueta
Business School of Emory University since April 1992. From 1987 to April 1992,
Dr. Konsynski was a professor at the School of Business of Harvard University.
He has been a consultant to the Company since 1989.
Directors whose term will expire at the 2000 Annual Meeting:
Martin L. Grass, age 44, has been a director of the Company
since November 1993. He has served as Chairman and Chief Executive Officer of
Rite Aid Corporation, one of the nation's largest drug store chains, since March
1995. From 1989 through 1995 Mr. Grass served as President and Chief Operating
Officer of Rite Aid, and he has been a director of Rite Aid since 1982. Mr.
Grass has also served as Vice Chairman, Executive Vice President and Treasurer
of Super Rite Corporation, a food wholesaler and supermarket operator from 1989
through 1995. Mr. Grass is a director of Mercantile Bankshares Corporation.
Morton F. Zifferer, Jr., age 50, has been a director of the
Company since November 1993. He has served as Chairman, President and Chief
Executive Officer of New Standard Corporation, a metal products manufacturer,
since 1983.
Board Committees and Meetings
The Board of Directors has an Audit Committee consisting of
Messrs. Eppler, Konsynski and Zifferer, and a Compensation Committee consisting
of Messrs. Grass, Shaughnessy and Zifferer. The Board of Directors does not have
a nominating committee.
The Audit Committee is primarily concerned with the
effectiveness of the audits of the Company by the Company's independent public
accountants. Its duties include recommending the selection of independent
accountants, reviewing the scope of audits conducted by them, as well as the
results of their audits, and reviewing the organization and scope of the
Company's internal system of accounting and financial controls. The Audit
Committee met three times during fiscal 1998.
<PAGE>
The Compensation Committee is responsible for the overall
administration of the Company's compensation policies and practices, including
the recommendation of compensation for officers and employees of the Company and
for matters relating to compensation plans and arrangements. In addition, the
Compensation Committee approves awards under and administers the Company's
Employee Incentive Stock Option Plan and 1994 Stock and Incentive Plan. The
Compensation Committee met three times during fiscal 1998.
The Board of Directors met four times during fiscal 1998.
Except for Mr. Shaughnessy, who was unable to attend two meetings of the Board
during fiscal 1998, no director has attended fewer than 75% of the total number
of meetings of the Board and of the Committees of which he was a member during
fiscal 1998.
Director Compensation
At its meeting held July 15, 1997, the Board of Directors
agreed that, in lieu of fees for attendance at Board and committee meetings
during the period ending with the 1998 Annual Meeting, each director who is not
an employee of the Company would be granted an option to purchase 500 shares of
the Company's Common Stock at the then-current market price of $25 per share.
These options are exercisable at any time up until July 14, 2002. In past years
directors who are not employees of the Company have received a fee of $1,000 for
each Board or committee meeting attended and a fee of $500 for participating in
each telephonic meeting.
PROPOSAL 2. Ratification of Independent Public Accountants
The Board of Directors has selected the firm of Arthur
Andersen LLP to serve as independent public accountants for the fiscal year
ending March 28, 1999, subject to the ratification of such appointment by the
shareholders. Representatives of Arthur Andersen LLP are expected to be present
at the Annual Meeting. They will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
Unless marked to the contrary, the shares represented by the
enclosed proxy, if properly executed and returned, will be voted FOR the
ratification of the appointment of Arthur Andersen LLP as the independent public
accountants of the Company for the fiscal year ending March 28, 1999.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the
ownership of Common Stock of the Company as of June 18, 1998 by (i) all
shareholders known by the Company to beneficially own more than five percent of
the Common Stock, (ii) each of the directors and nominees for director, and
(iii) all directors and executive officers as a group.
Amount and
Name of Nature of Beneficial Percent
Beneficial Owner Ownership (1) of Class
- ---------------- -------------------- --------
Directors and
Nominees for Director:
Robert B. Barnhill, Jr. (2) . . . . . . . 1,087,792 23.6
Jerome C. Eppler (3)(4) . . . . . . . . . 20,500 *
Martin L. Grass (4). . . . . . . . . . . 30,500 *
Benn R. Konsynski, Ph.D. (4). . . . . . . 30,500 *
Dennis J. Shaughnessy (4) . . . . . . . . 24,075 *
Morton F. Zifferer, Jr. (4). . . . . . . 30,500 *
All directors and executive
officers as a group (10 persons) (5). . . 1,287,603 27.7
Principal Shareholders:
GeoCapital, L.L.C. (6). . . . . . . . . 430,000 9.7
Nicholas Company, Inc. (7). . . . . . . . 389,460 8.8
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* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise noted, each person exercises sole (or shares with a
spouse or other immediate family member) voting and dispositive power
as to the shares reported. Persons are deemed to beneficially own
shares which they have the right to acquire beneficial ownership of
within 60 days. Shares subject to options exercisable with 60 days are
deemed outstanding for computing the percentage of the outstanding
shares held by the person holding such options, but not for computing
the percentage of shares held by any other person.
(2) Includes 150,000 shares held by Mr. Barnhill's spouse and children;
192,400 shares subject to currently exercisable stock options; and
10,000 shares held by a private charitable foundation of which Mr.
Barnhill and his spouse are the sole directors. Mr. Barnhill disclaims
beneficial ownership over the shares held by the foundation.
Mr. Barnhill's address is 11126 McCormick Road, Hunt Valley,
Maryland 21031.
<PAGE>
(3) Includes 20,000 shares held by a trust under which Mr. Eppler is sole
beneficiary.
(4) Includes 500 shares subject to a currently exercisable stock option.
(5) Includes 229,255 shares subject to currently exercisable stock options.
(6) Derived from a Schedule 13G filed by GeoCapital L.L.C. ("GeoCapital")
on February 23, 1998, as amended. GeoCapital's address is 767 Fifth
Avenue, New York, N.Y. 10153.
(7) Derived from a Schedule 13G filed by Albert O. Nicholas and Nicholas
Company, Inc. ("Nicholas") on January 22, 1998, and a subsequently
filed Form 13F. Nicholas' address is 700 North Water Street, Milwaukee,
Wisconsin 53202.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table summarizes the compensation awarded or paid to, or
earned by the Company's Chief Executive Officer during fiscal 1998, 1997 and
1996 and the other executive officers for whom such reporting is required during
fiscal 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- --------------
Fiscal Options All Other
Name and Principal Position Year Salary ($) Bonus ($) (1) (# of Shares) Compensation ($)
- --------------------------- ----------- ---------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Robert B. Barnhill Jr., 1998 240,000 -- 40,000 30,868(2)
Chairman of the Board, 1997 240,000 13,272 40,000 32,474(2)
President and Chief 1996 240,000 -- 18,000 31,932(2)
Executive Officer
Gerald T. Garland, 1998 175,000 -- 7,000 561(3)
Treasurer and Chief 1997 175,000 9,155 3,000 2,332(3)
Financial Officer 1996 146,731 -- 5,000 1,761(3)
Richard A. Guipe, 1998 170,000 -- -- 22,955(4)
Director - Base Site 1997 147,739 -- 20,000 --
Infrastructure Products
Business Unit
Randolph S.Wilgis, 1998 62,477 56,819 10,000 531(3)
Director - 1997 50,000 71,920 5,000 1,438(3)
Subscriber Accessory 1996 50,000 53,383 2,000 1,241(3)
Products Business Unit
Pierce B. Dunn, 1998 126,443 -- -- 351(3)
Group Leader - 1997 150,763 2,239 -- 721(3)
European Operations 1996 81,731 -- 75,000 --
Bruce Quackenbush 1998 171,962 -- -- 275(3)
Group Leader - 1997 120,308 -- 20,000 --
Corporate Development
</TABLE>
(1) Represents bonuses paid pursuant to the Company's Value Share Program.
<PAGE>
(2) Includes (i) premiums in the amount of $12,500 for a life insurance policy;
(ii) premiums in the amount of $17,995 for a split-dollar life insurance
policy arrangement with the Company; and (iii) $1,437, $1,979 and 373
allocated to Mr. Barnhill's Retirement Savings Plan account in fiscal 1996,
1997, and 1998, respectively. Does not include a contribution by the
Company of $40,995 for each of 1996 and 1997 and $47,377 for 1998 to a
supplemental executive retirement plan for Mr. Barnhill. See "Employment
Agreement."
(3) Represents amounts allocated to the Retirement Savings Plan accounts of
Messrs. Garland, Wilgis, Dunn and Quackenbush.
(4) Represents relocation expenses of $22,406 and $549 allocated to the
Retirement Savings Plan.
Employment Agreement
In March 1994, the Company entered into an employment agreement with
Mr. Barnhill pursuant to which the Company continued his employment as Chairman
of the Board, President and Chief Executive Officer. Pursuant to the employment
agreement, Mr. Barnhill receives a minimum annual base salary of $240,000, and
is entitled to bonuses in accordance with the Company's incentive compensation
plan. The employment agreement has an initial term of three years, and unless
the Board of Directors notifies Mr. Barnhill otherwise prior to the end of any
calendar year, the term of the agreement automatically renews daily for the
succeeding three-year period.
The employment agreement also provides for the establishment of a
supplemental executive retirement plan, which will provide Mr. Barnhill with a
$75,000 annual pension benefit payable on Mr. Barnhill's retirement, termination
of employment for reasons other than cause (as defined in the employment
agreement) or attainment of age 62. The employment agreement also provides for
(i) a $2,000,000 split-dollar life insurance policy on Mr. Barnhill and his
spouse, who serves as the Company's Secretary, and (ii) a long-term disability
policy providing Mr. Barnhill with a benefit equal to not less than 70% of his
annual base salary.
The employment agreement provides that in the event of the
termination of Mr. Barnhill's employment for certain reasons, including death,
disability or a termination resulting from a change in control of the Company
(as defined in the employment agreement), Mr. Barnhill would be paid, when and
as due, the total salary payable to him for the next three years, plus bonuses
to which he would have been entitled had he remained in the employ of the
Company during the three-year period. In addition, Mr. Barnhill would be
entitled to receive the employee benefits he would have received during such
three-year period, or an after-tax payment in an amount equal to the value of
such benefits.
In addition, in January 1996 the Company adopted a stock compensation
program under the 1994 Plan for the Chief Executive Officer, pursuant to which
Mr. Barnhill will receive a grant of options to purchase 10,000 shares of Common
Stock each quarter, all of which will be subject to a performance-based vesting
schedule based upon the market value of the Company's Common Stock meeting or
exceeding certain predetermined cumulative appreciation measures. The options
awarded to Mr. Barnhill become fully exercisable after five years, provided that
Mr. Barnhill is still employed by the Company. Awards under this program are
also subject to the other terms and conditions typically contained in the 1994
Plan. See "Compensation Committee Report on Executive Compensation."
<PAGE>
Retirement Savings Plan
The Company maintains the Retirement Savings Plan, a
profit-sharing plan qualified under Section 401(k) of the Internal Revenue Code
(the "Plan"), that covers substantially all employees. Under the Plan,
participants are permitted to make salary reduction contributions equal to a
percentage of annual salary with matching contributions made by the Company on a
discretionary basis. The Company may make additional discretionary
profit-sharing contributions. The Company's contributions to the plan during
fiscal 1998 totaled $66,700.
Stock Based Compensation Plans
In addition to the 1994 Plan, the Company maintains the
Employee Incentive Stock Option Plan, as amended (the "1984 Plan"), which
provides for the grant of options to purchase up to an aggregate of 973,750
shares of Common Stock. As of June 18, 1998, options to purchase 709,145 shares
were outstanding at exercise prices ranging from $3.67 to $36.50. There are no
shares available for grant under the 1984 Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed
Annual Rate of
Stock Price
Appreciation
Individual Grants for Term(1)
------------------------------------------------------------ -----------
Number of
Securities Percent of
Underlying Total Options Exercise
Options Granted to or Base
Granted Employees Price Expiration
Name (#) in Fiscal 1998 ($/Share) Date 5% 10%
- ---- --------- -------------- --------- ------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert B. Barnhill, Jr. 10,000(2) 5.1% $20.00 May 30, 2007 125,779 318,748
10,000(2) 5.1% $29.75 July 31, 2007 187,096 474,138
10,000(2) 5.1% $21.50 October 31, 2007 135,212 342,655
10,000(2) 5.1% $22.25 January 31, 2008 139,929 354,608
Gerald T. Garland 7,000(2) 3.6% $18.50 April 15, 2007 81,442 206,390
Richard A. Guipe -- -- --
Randolph S. Wilgis 10,000(2) 5.1% $18.50 April 15, 2007 116,346 294,842
Pierce B. Dunn -- -- -- --
Bruce Quackenbush -- -- -- --
</TABLE>
- --------------------------------------
<PAGE>
(1) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock on the date of grant equals the exercise price
shown for each particular option grant and appreciates at the annual rate
shown (compounded annually) from the date of grant until the end of the
term of the option. These amounts are reported net of the option exercise
price, but before any taxes associated with exercise or subsequent sale
of the underlying stock. The actual value, if any, an option holder may
realize will be a function of the extent to which the stock price exceeds
the exercise price on the date the option is exercised and also will
depend on the option holder's continued employment through the vesting
period. The actual value to be realized by the option holder may be
greater or less than the values estimated in this table.
(2) These options, which were issued under the 1994 Plan, will become
exercisable according to a performance-based vesting schedule on or after
the second anniversary of date of grant only if the Common Stock has
achieved certain predetermined cumulative increases in market value.
Notwithstanding, each option will become exercisable five years after the
date of grant, as long as the recipient is still associated with the
Company.
There were no options exercised during fiscal 1998 by the Named
Executive Officers.
Compensation Committee Report on Executive Compensation
The Board of Directors has delegated to the Compensation Committee
responsibility for developing and administering programs for compensating the
Company's executive officers. The entire Board also approves the Committee's
compensation recommendations with respect to salaries and bonuses of executive
officers. The Committee, which consists of Messrs. Grass, Shaughnessy and
Zifferer, who are not officers or employees of the Company, believes that the
Company's success is attributable in large part to the management and leadership
efforts of its executive officers. The Company's management team has substantial
experience in the distribution industry in general and the wireless
communications industry in particular. Mr. Barnhill, the Chairman of the Board,
President and Chief Executive Officer of the Company, has been instrumental in
the Company's business success and in the success of the Company's initial
public offering in September 1994. The Company and the Compensation Committee
intend to maintain compensation policies, plans and programs that will attract
and retain executive officers who can enhance shareholder value. Generally
speaking, the Compensation Committee seeks to use the same policies and
guidelines in determining the compensation to be paid to its executive officers
as it employs for the Company's other employees, its consultants and other key
contributors to the Company's success.
The Company seeks to design a compensation package that will achieve
the following principal objectives:
0 provide the Company's executives with total compensation that is
sufficiently competitive to attract and retain high quality
people. In general, this involves establishing an individual's
base salary in light of that individual's responsibilities,
experience, personal performance and contribution to the Company's
overall performance. The base salary and performance-based
incentives are designed to establish an individual's total
compensation at a level that competes favorably with the overall
pay levels of companies comparable in size and with similar
business operations to the Company (such companies are referred to
as "comparable companies"), and to reward outstanding performance.
<PAGE>
0 link a significant portion of annual compensation to
performance-based incentives. This is done primarily pursuant to
the Company's Value Share Program and the grant of stock options
with performance-based vesting and exercise features. All stock
options granted during fiscal 1998 condition vesting during the
first five years on the achievement of certain predetermined
cumulative increases in the market value of the Common Stock. The
Board of Directors, upon the recommendation of the Committee, has
determined to continue such performance-based and market-driven
practices in the future in order for an option to vest in whole or
in part during the first eight years after grant. All options will
vest after five years and will remain exercisable until
expiration, which is ten years after the grant date, provided that
the individual remains employed by, or associated with, the
Company.
0 provide long-term incentives that are consistent with the
Company's strategic goals and the creation of shareholder value.
This is done through the grant of stock options.
0 structure the compensation program to be viewed favorably by the
Company's shareholders, employees, the financial community, and
the general public.
The Internal Revenue Code places limits on the amount of
non-performance-based compensation paid to executive officers that may be
deducted by the Company for federal income tax purposes. The Company intends to
structure compensation programs to minimize the portion of any executive
compensation that is not deductible for federal income tax purposes.
The Committee annually reviews each executive officer's compensation,
including the compensation levels of the Company's Chairman, President and Chief
Executive Officer. When reviewing compensation, the Committee considers
individual and corporate performance, levels of responsibility, prior
experience, breadth of knowledge and competitive pay practices with respect to
salary. The Company's Chief Executive Officer's base compensation level is
determined pursuant to an employment agreement between the Company and the Chief
Executive Officer, effective as of April 1994. Under the employment agreement,
the Chief Executive Officer's base salary was set at $240,000 for fiscal 1996,
1997 and 1998, which the Committee believes to be slightly less than base
salaries paid by comparable companies to their chief executive officers.
Salaries for the other Named Executive Officers are established based on the
principles discussed with respect to the Chief Executive Officer.
The bonuses paid to the Named Executive Officers, including the Chief
Executive Officer, are determined pursuant to the Company's Value Share Program.
This program is designed to provide rewards based upon the improvement in the
Company's earnings and other measures. The Value Share Program provides for
specific budgets and goals in several performance areas. A portion of the
bonuses is withheld each quarter and are reduced or eliminated in the event that
future performance does not meet certain budget or goal parameters.
<PAGE>
The Company adopted a stock compensation program for the Chief
Executive Officer under the Company's 1994 Stock and Incentive Plan. This
program provides for quarterly grants of options to purchase 10,000 shares of
Common Stock to Mr. Barnhill beginning on February 29, 1996. The options are
granted pursuant to the 1994 Plan at an exercise price equal to at least the
fair market value of the Common Stock on the date of grant and are subject to
the other terms and conditions typically contained in the 1994 Plan. Each option
will become vested and exercisable only if the market price of the Common Stock
achieves certain predetermined cumulative increases in value, commencing two
years from the date of grant. The Committee believes that this program is in the
best interests of the Company because it combines the attributes of a
traditional stock option plan with those of a long-term incentive plan. The
program provides such incentives by conditioning vesting within the first eight
years after an option is granted on attainment of significant stock price
appreciation.
In addition to salary and Value Share awards, under the stock
compensation program, Mr. Barnhill received, in fiscal 1998, awards of options
for 40,000 shares at exercise prices ranging from $20.00 to $29.75 per share.
These option prices equaled or exceeded the fair market value of a share of
Common Stock on the date of each grant. Any vesting of these options occurs over
time and, during the first eight years after the date of the grant, is
conditioned upon the achievement of certain predetermined cumulative increases
in the market value of the Common Stock. Each option, however, becomes fully
exercisable without regard to market value after eight years, as long as Mr.
Barnhill remains associated with the Company.
During fiscal 1998, the Committee also granted options to purchase
32,000 shares of Common Stock to other executive officers, all of which
contained performance-based vesting provisions. The awards made to the other
executive officers also were granted to provide further incentives to increase
shareholder value and were deemed by the Committee to be appropriate in light of
the officers' expected contributions to the Company's performance. The Committee
has noted that revenues have increased by an average of 21% annually from fiscal
1993 to fiscal 1998, with net income increasing by 38% annually to $3.4.million
from fiscal 1993 to fiscal 1998. The Committee intends to continue to recommend
stock-based compensation awards as a significant part of the Company's overall
compensation program.
Compensation Committee
Dennis J. Shaughnessy Martin L. Grass Morton F. Zifferer, Jr.
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The chart set forth below shows the value of an investment of $100 on
September 28, 1994 in each of the Company's Common Stock, the Russell 2000 index
and a peer group index for the period September 28, 1994 to March 31, 1998. All
values assume reinvestment of the pre-tax value of dividends.
Comparison of Cumulative Total Return
Value of Investment of $100 on September 28, 1994
(GRAPHIC OMITTED)
TESSCO Russell 2000 Peers
------ ------------ -----
9/28/94 100.0000 100.0000 100.0000
12/31/94 136.4583 98.4119 128.2152
3/31/95 145.8333 102.5039 132.4521
6/30/95 151.0417 111.4898 143.9621
9/30/95 216.6667 122.0047 160.4993
12/31/95 237.5000 123.4237 146.8785
3/31/96 239.5833 130.0197 153.0265
6/30/96 304.1667 136.2461 156.6725
9/30/96 347.9167 136.1596 165.0019
12/31/96 306.2500 142.5354 210.8660
3/31/97 154.1667 137.1659 180.5304
6/30/97 180.2083 155.8058 252.7529
9/30/97 231.2500 178.3884 336.1135
12/31/97 150.0000 171.7846 212.9982
3/31/98 144.7917 188.9465 257.1236
The peer group consists of the following companies engaged in retail
and/or wholesale product distribution: Fastenal Co., Cellstar Corporation,
Brightpoint, Inc., Andrew Corporation, Viking Office Products, Inc. and Micro
Warehouse, Inc. All of these companies were publicly traded as of March 29,
1998.
Premier Industrial Corporation is no longer included in the peer
group because its stock was acquired in 1996 by Premier Farnel and is no longer
publicly traded. Excluding Premier from the peer group in prior years would have
been immaterial in the presentation of the return of the peer group.
<PAGE>
ADDITIONAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and provide the Company with copies of such reports.
The Company has reviewed such reports received by it and written
representations from directors and executive officers. Based solely on such
review, the Company believes that during fiscal year 1998 all filing
requirements were complied with, except that one director (Benn R. Konsynski)
filed five days late a Form 5 reporting the grant in July 1997 of an option to
purchase 500 shares of the Company's stock at the then-current price of $25 per
share.
Shareholder Proposals for the 1999 Annual Meeting
Any shareholder proposal intended for inclusion in the proxy material
for the 1999 Annual Meeting of Shareholders must be received in writing by the
Company, at the address set forth on the first page of this Proxy Statement, on
or before March 15, 1999. Any such proposal will be subject to Exchange Act Rule
14a-8.
Other Matters
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business that will be presented for consideration at
the Annual Meeting. Execution of a proxy, however, confers on the designated
proxy holders discretionary authority to vote the shares in accordance with
their best judgment on such other business, if any, that may properly come
before the Annual Meeting or any adjournments thereof.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON RECEIVING THIS
PROXY STATEMENT, UPON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE FISCAL YEAR ENDED MARCH 29, 1998. WRITTEN REQUESTS FOR A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE DIRECTED TO JANET W.
BARNHILL, SECRETARY, 11126 MCCORMICK ROAD, HUNT VALLEY, MARYLAND 21031.
By Order of the Board of Directors
/s/ Janet W. Barnhill
---------------------------
Janet W. Barnhill
Secretary
July 1, 1998
<PAGE>
TESSCO TECHNOLOGIES INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS, AUGUST 14, 1998
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT B. BARNHILL, JR. and GERALD T. GARLAND,
and each of them, with full power of substitution to each, as proxy, to vote all
shares which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of TESSCO Technologies Incorporated to be held Friday, August 14,
1998 at 10:00 a.m., at the TESSCO Technologies Incorporated Headquarters, 11126
McCormick Road, Hunt Valley, Maryland 21031 and at any adjournments thereof:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT MAY BE REVOKED
AT ANY TIME PRIOR TO ITS EXERCISE BY SENDING WRITTEN NOTICE TO THE SECRETARY OF
THE COMPANY, BY DELIVERING TO THE COMPANY A DULY EXECUTED PROXY BEARING A LATER
DATE OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE PERSON SIGNING IT.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES INDICATED AND FOR THE OTHER PROPOSALS.
Please mark your votes as indicated in this example [X]
1. To elect two (2) directors to a three (3) year term ending in 2001.
Jerome C. Eppler and Dennis J. Shaughnessy
(To withhold authority to vote for an individual nominee, strike
a line through the nominee's name.)
FOR the election of all nominees listed WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
to the right) listed to the right
[ ] [ ]
2. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To act upon any other matter which may properly come before the Annual
Meeting or any adjournment thereof.
Receipt of notice of the meeting and proxy statement is hereby acknowledged, and
the terms of the notice and statement are hereby incorporated by reference into
this proxy. The undersigned hereby revokes all proxies heretofore given for said
meeting or any adjournment or adjournments thereof.
(Please sign exactly as your name appears hereon. Executors, administrators,
guardians, officers signing for corporations, trustees and attorneys should give
full title. For joint owners, both owners should sign.)
Date: ___________________, 1998
__________________________(SEAL)
__________________________(SEAL)
Please sign, date and promptly return this proxy in the enclosed envelope. No
postage is required if mailed in the United States.
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FOLD AND DETACH HERE
