<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
<TABLE>
<S> <C> <C>
[_] 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 Proxy Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
PARAVANT COMPUTER SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
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<PAGE>
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(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>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
1615A WEST NASA BOULEVARD
MELBOURNE, FLORIDA 32901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 12, 1998
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Paravant Computer Systems, Inc. (the "Company") will be held at the Melbourne
Beach Hilton Oceanfront Hotel, 3003 U.S. Highway A1A, Indialantic, Florida
32903, on March 12, 1998 at 10:00 A.M. (local time) for the following purposes:
1. to elect five (5) directors to hold office until the next Annual
Meeting of Shareholders and until their respective successors are duly elected
and qualified;
2. to approve an amendment to the Company's Incentive Stock Option
Plan;
3. to approve an amendment to the Company's Nonemployee Directors'
Stock Option Plan; and
4. to transact such other business as may properly be brought before
the meeting or any adjournment thereof.
The Board of Directors has fixed January 14, 1998 as the record date
for the determination of the shareholders entitled to notice of and to vote at
such meeting or any adjournments or postponements thereof, and only shareholders
of record at the close of business on that date are entitled to notice of and to
vote at such meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997 IS ENCLOSED HEREWITH.
You are cordially invited to attend the meeting. Whether or not you
plan to attend, you are urged to complete, date and sign the enclosed proxy and
return it promptly. If you receive more than one form of proxy, it is an
indication that your shares are registered in more than one account, and each
such proxy must be completed and returned if you wish to vote all of your shares
eligible to be voted at the meeting.
By Order of the Board of Directors,
William R. Craven
Secretary
Melbourne, Florida
January 28, 1998
YOUR VOTE IS IMPORTANT.
THE ATTACHED PROXY STATEMENT SHOULD BE READ CAREFULLY. SHAREHOLDERS ARE URGED TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE. NO
ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU MAY REVOKE
YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY GIVING WRITTEN NOTICE TO THE
COMPANY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON THOUGH YOU
HAVE PREVIOUSLY SENT IN YOUR PROXY.
<PAGE>
<PAGE>
PARAVANT COMPUTER SYSTEMS, INC.
1615A WEST NASA BOULEVARD
MELBOURNE, FLORIDA 32901
P R O X Y S T A T E M E N T
FOR ANNUAL MEETING OF SHAREHOLDERS
MARCH 12, 1998
This Proxy Statement is being furnished to shareholders by the Board of
Directors of Paravant Computer Systems, Inc. (the "Company" or "PCS"), in
connection with the solicitation of the accompanying proxy (each a "Proxy" and
collectively, "Proxies") for use at the annual meeting to be held at the time
and place shown in the attached Notice of Annual Meeting of Shareholders and at
any adjournments or postponements thereof (the "Annual Meeting"). This Proxy
Statement and the accompanying Proxy together with the Annual Report will first
be sent or given to shareholders on approximately January 29, 1998.
VOTING SECURITIES AND SECURITY OWNERSHIP
RECORD DATE AND VOTING SECURITIES
The record date for the determination of holders of common stock, par
value $0.015 per share, of the Company ("Common Stock") who are entitled to
notice of and to vote at the Annual Meeting is January 14, 1998 (the "Record
Date"). As of the Record Date 8,002,710 shares of Common Stock were outstanding.
Holders of record of Common Stock as of the Record Date will be entitled to one
vote for each share held on each matter to be acted upon. A majority of all
shares of Common Stock issued, outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum.
For purposes of determining the presence of a quorum for transacting business,
abstentions and broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons entitled to vote shares on a particular matter with
respect to which brokers or nominees do not have discretionary power) will be
treated as shares that are present but have not voted.
VOTING OF PROXIES
Shares represented by properly executed Proxies, if returned in time
and not revoked, will be voted in accordance with the directions contained
therein. If no direction is given in the Proxy, the shares represented thereby
will be voted: (i) for the election as directors of the five (5) nominees named
herein; (ii) for approval of the proposed amendment to the Company's Incentive
Stock Option Plan; (iii) for approval of the proposed amendment to the Company's
Nonemployee Directors' Stock Option Plan; and (iv) on any other matter that may
properly be brought before the Annual Meeting in accordance with the judgment of
the person or persons voting such Proxies.
The execution of a Proxy will in no way affect a shareholders's right
to attend the Annual Meeting and to vote in person. Any Proxy executed and
returned by a shareholder may be revoked at any time thereafter if written
notice of revocation is given to the Secretary of the Company prior to the vote
to be taken at the Annual Meeting, or if the shareholder attends the Annual
Meeting and votes by ballot, except as to any matter or matters upon which a
vote shall have been cast pursuant to the authority conferred by such Proxy
prior to such revocation. Any later dated Proxies will revoke Proxies submitted
earlier.
<PAGE>
<PAGE>
SOLICITATION OF PROXIES
The cost of solicitation of the Proxies being solicited on behalf of
the Board of Directors will be borne by the Company. In addition to the use of
the mail, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and regular employees of the Company. The
Company will, upon request, reimburse brokerage houses and persons holding
Common Stock in the names of their nominees for their reasonable expenses in
sending soliciting material to their principals.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of the Record Date, the beneficial
ownership of shares of Common Stock by (i) each person who is known to the
Company to own more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company and each executive officer of the Company listed in the
Summary Compensation Table and (iii) all of the Company's officers and directors
as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) BENEFICIAL OWNERSHIPS(2) OWNED(3)
- ---------------------------------------- ------------------------ --------
<S> <C> <C>
Krishan K. Joshi(4)(5) 2,235,468 27.9%
Richard P. McNeight(5) 1,031,145 12.9%
William R. Craven(5) 511,984 6.4%
Michael F. Maguire(5) 29,000 * %
John P. Singleton(5) 61,500 * %
Lary J. Beaulieu(5) 226,202 2.8%
Kevin J. Bartczak(5) 35,000 *%
All officers and directors as a group (7 persons) (4)(5) 3,684,451 46.0%
- ------------------------------
</TABLE>
* Less than 1%
(1) The address of each such person is c/o Paravant Computer Systems,
Inc., 1615A West Nasa Blvd., Melbourne, Florida 32901.
(2) A person is deemed the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy
Statement upon the exercise of options or warrants. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by any other
person) and which are exercisable within 60 days from the date of this
Proxy Statement have been exercised. Unless otherwise noted, the
Company believes that all persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned by them.
(3) Based on 8,002,710 shares of Common Stock outstanding on the Record
Date, January 14, 1998, and with respect to each holder of options or
warrants exercisable within 60 days, the shares represented by such
options or warrants.
(4) Includes 2,191,854 shares of Common Stock held by UES Florida, Inc.
("UES Florida"), a wholly owned subsidiary of UES, Inc. ("UES"). Mr.
Joshi, Chairman and Chief Executive Officer of the Company, is the
Chairman and a director of UES, of which he owns 58% of the shares of
its common stock and which, as a result, he controls. With respect to
the 2,191,854 shares held by UES Florida, 445,848 of such shares are
subject to an option granted by UES Florida to Mr. Joshi. Both UES and
UES Florida have offices at 4402 Dayton-Xenia Road, Dayton, OH 45432.
(5) Includes options obtained from UES Florida covering 148,617 shares for
Mr. McNeight, 297,231 shares for Mr. Craven and 445,848 shares for Mr.
Joshi. Includes options granted under the Company's Incentive Stock
Option Plan, as amended (the "Incentive Plan"), covering 193,334
shares for Mr. McNeight, 53,334 shares for Mr. Craven, 40,000 shares
for Mr. Beaulieu and 35,000 shares for Mr. Bartczak, options for
188,050 shares of Common Stock granted to Mr. McNeight and 5,032
shares of Common Stock granted to each of Mr. Craven and Mr. Beaulieu
under a nonqualified stock option plan which plan has been terminated,
options granted under the Nonemployee Directors' Stock Option Plan
(the "Directors' Plan") covering 15,000 shares for Mr. Maguire and
7,500 shares for Mr. Singleton, other nonqualified special stock
options covering 8,000 shares for each of Messrs. Maguire and
Singleton granted on November 20, 1997, all of which options are
currently exercisable and warrants held by Mr. Singleton which are
presently exercisable for 25,000 shares. Excludes options granted
under the Incentive Plan covering
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<PAGE>
84,666 shares for Mr. McNeight, 59,666 shares for Mr. Craven, 38,000
shares for Mr. Beaulieu, 25,000 shares for Mr. Bartczak and 30,000
shares for other officers and directors, all of which options are not
exercisable within 60 days of the date of this Proxy Statement.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect the five (5)
directors to hold office until the next annual meeting of shareholders and until
their respective successors are duly elected and qualified. The Board of
Directors has designated the five individuals whose names are set forth below as
nominees for election as directors. Unless otherwise specified, Proxies will be
voted in favor of such nominees. The Board of Directors believes that each such
nominee will be available to serve as a director. If any of such nominees should
become unavailable for election at the Annual Meeting it is intended that votes
will be cast pursuant to the Proxies for such substitute nominees as the Board
of Directors may designate unless the Board of Directors reduces the number of
directors.
NOMINEES FOR ELECTION AS DIRECTORS
The following persons, all of whom are presently serving as directors,
have been designated by the Board of Directors as nominees for election as
directors at the Annual Meeting. Each of such persons was elected to the Board
of Directors by the shareholders except Mr. Singleton who was appointed as a
director by the Board of Directors on November 20, 1997. The name of each
nominee and the year in which he began his service as a director is set forth
below.
<TABLE>
<CAPTION>
NAME OF NOMINEE DIRECTOR SINCE
--------------- --------------
<S> <C>
Krishan K. Joshi 1989
Richard P. McNeight 1994
William R. Craven 1994
Michael F. Maguire 1995
John P. Singleton 1997
</TABLE>
Additional information concerning the nominees is set forth under
"Directors and Executive Officers" in a following section of this Proxy
Statement.
APPROVAL BY SHAREHOLDERS
The directors are to be elected by the affirmative vote of the holders
of a plurality of the shares of Common Stock entitled to vote and present in
person or represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINEES
IDENTIFIED ABOVE AS DIRECTORS OF THE COMPANY.
DIRECTORS AND EXECUTIVE OFFICERS
The following information identifies and provides the indicated
information with respect to each of the directors and executive officers of the
Company.
-3-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRESENT POSITION(S) PRINCIPAL OCCUPATION OR DIRECTOR
NAME AGE WITH THE COMPANY EMPLOYMENT, IF DIFFERENT
- ---- --- ------------------- -----------------------------------
<S> <C> <C> <C>
Krishan K. Joshi 60 Chairman, Chief Executive Chairman and President of
Officer and Director(1)(2) UES, Inc. (technology
development company)
Richard P. McNeight 47 President, Chief Operating
Officer and Director(3)
William R. Craven 49 Vice President of
Marketing, Director and
Secretary
Michael F. Maguire 71 Director(3)(4) President, Maguire
Investment Management, Inc.
John P. Singleton 61 Director President, Singleton and
Associates
Lary J. Beaulieu 50 Vice President of Engineering
Kevin J. Bartczak 44 Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
- ------------------------------
</TABLE>
(1) Member of Compensation Committee
(2) Trustee for Profit Sharing Plan
(3) Member of Audit committee
(4) Member of Stock Option committee
Krishan K Joshi. From 1976 to date, Mr. Joshi has served as founder,
chairman and president of UES, a technology development company. Following the
acquisition of a controlling interest in the Company by UES in December of 1989,
he became Chairman, Chief Executive Officer and President of the Company.
However, in April 1994, he resigned as President of the Company and continues to
serve as Chairman and Chief Executive Officer. Mr. Joshi spends less than 20% of
his time on Company affairs. He has also been Chairman of Astro Industries,
Inc., a manufacturer and distributor of aerospace wire and cable products, since
August 1980. He holds a Bachelor of Science degree in Mathematics and Physics
from Punjab University in India; a Bachelors degree in Aeronautical and
Astronautical Engineering from Ohio State University and Master of Science
degree in Engineering from the University of Dayton, Ohio; and has engaged in
Doctoral studies in Mechanical Engineering at the University of Cincinnati.
Richard P. McNeight. From 1984 until June 1994, Mr. McNeight served as
a Vice President and General Manager of the Company. He was appointed President
of the Company in June 1994. From 1982 to 1984, he was employed by Siemen's
Corporation as a senior member of its systems engineering staff. From 1972 to
1982, he worked for ITT's North Telecommunications Division in several positions
as a software engineering director and manager and engineer. Mr. McNeight holds
a Bachelors degree in Applied Science/Engineering from the University of
Wisconsin and a Masters degree in Computer Information/Control Engineering from
the University of Michigan.
William R. Craven. Mr. Craven joined the Company in September 1991 as a
Vice President in charge of Marketing and has served in that capacity
continually to the present. From 1990 to 1991, he was employed as a Vice
President of Marketing for Telxon Corp., a manufacturer of hand-held computers
and software systems. From 1982 to 1990, he served as a Vice President of Mead
Corp., a manufacturer of paper products and provider of electronic services, in
a variety of positions, including marketing, product development and joint
ventures. For three years during that period, he acted as President of Seiko
Mead Company, a Japanese-American joint venture established to manufacture color
computer printers and copiers. He was employed as a Director of Marketing by
Gentech Industries, a manufacturer of packaging materials and systems, from 1979
to 1982. He also served as Sales and Product Managers for Champion
International, a manufacturer of paper products, from 1971 until 1979. Mr.
Craven holds a Bachelor of Science degree in Physics and Mathematics from
Birmingham Southern College.
-4-
<PAGE>
<PAGE>
Michael F. Maguire. Since 1986, Mr. Maguire has been employed as
President of Maguire Investment Management, Inc., a consulting firm founded by
him. From 1973 through 1986, he was an officer of Harris Corp., a computer
manufacturer, attaining the position of senior vice president. From 1962 to
1973, Mr. Maguire served in various capacities with Perken Elmer, a manufacturer
of analytical instruments and life-science systems, including as an engineering
manager, vice president, general manager and group vice president. From 1950 to
1962, he held various engineering design and management positions with General
Electric, Pratt & Whitney, and Sperry Rand companies. He previously served as a
director of Harris Computer Systems Corp., Concurrent Computer Systems Corp.,
Cyberguard Corp. and Opto Mechanik, Inc. ("OMI"), a manufacturer of
electro-optical fire control and assemblies for weapons systems and currently
serves as Chairman of the Board of Health First, a not-for-profit integrated
health delivery system, located in Melbourne, Florida, and as a director of
Health First Health Plan, an HMO. In 1950, Mr. Maguire received a Bachelor of
Science degree in electrical engineering from Rensselear Polytechnic Institute
and in 1955 a Masters of Science degree from the University of Connecticut.
John P. Singleton. Since 1996, Mr. Singleton has been employed as
President of Singleton and Associates, a computer technology and consulting firm
founded by him. From 1992 to 1996, he was Vice President and General Manager of
Business Development for IBM/Integrated Systems Solution Corporation. From 1982
to 1992, Mr. Singleton was an officer of Security Pacific Corporation, the fifth
largest bank in the United States, attaining the position of Vice Chairman and
Chief Operating Officer of the corporation and member of the Office of the
Chairman. From 1976 to 1982, he was the Executive Vice President of Data
Processing and Bank Operations for the Maryland National Bank. From 1973 to
1976, Mr. Singleton held the position of President and Chief Executive Officer,
MISAC for Great Western Finance Corporation, Information Systems Subsidiary.
From 1971 to 1973, he was the Senior Vice President of Data Processing and Bank
Operations for Security National Bank. From 1969 to 1971, Mr. Singleton was the
Chief Operating Officer of the Data Processing Division for the Federal Reserve
Board. He is currently a director and chairman of the board's executive
committee for IFS, International, an integrated banking solutions company. Mr.
Singleton is also a director for Tech-Metrics, Inc. and a board member for the
California Angels American League Baseball Team. Mr. Singleton holds a Bachelor
of Science degree in Business Management from Arizona State University. Mr.
Singleton was appointed to the Board of Directors of the Company on November 20,
1997.
Lary J. Beaulieu. Since 1988, Mr. Beaulieu has been employed
continually by the Company in several capacities, including Director of
Engineering, Chief Engineer and Vice President of Engineering. From 1982 to
1988, he served as Manager of Inspection and Service Products, Engineering
Manager and New Product Design Manager for Schlumberger Technologies, a
manufacturer of service/inspection products. He worked in several engineering
positions from 1972 through 1981 for ITT's North Telecommunications Division. He
holds Bachelor and Masters of Science degrees in electrical engineering from
Tufts University.
Kevin J. Bartczak. Mr. Bartczak joined the Company as an officer in
February 1995. From 1993 to 1995, he served as Chief Financial Officer,
Secretary and Director of OMI. On October 14, 1994, OMI filed for protection
under Chapter 11 of the U.S. Bankruptcy Code and was subsequently liquidated.
Mr. Bartczak was employed from 1987 to 1993 as a division controller of Harsco
Corporation, a manufacturer of heavy equipment and land combat systems. From
1984 to 1987, he was also employed as a division controller of General Defense
Corporation, a manufacturer and developer of ammunition, radar guidance and
weapon systems. Mr. Bartczak served from 1981 to 1984 as a division controller
and manager of corporate accounting of Elkem Metal Company, a producer of metal
alloys. From 1979 to 1981, he functioned as senior accountant for the Cyclops
Corporation, a producer of specialty steel, industrial and residential building
products and consumer electronics. As a certified public accountant, he worked
as an audit supervisor for Arthur Young & Co. from 1975 to 1979. He holds a
Bachelor of Science degree in Business Management from Indiana University of
Pennsylvania. Mr. Bartczak serves as Vice President, Treasurer and Chief
Financial Officer and Assistant Secretary of the Company.
During fiscal 1997 the Board of Directors consisted of Messrs. Joshi,
McNeight, Craven and Maguire, who continue to serve as directors, and James E.
Clifford, who resigned as a director on December 30, 1997. Mr. Clifford had
served as a director of the Company since 1995.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during fiscal
1997 and acted by written consent on one occasion. All directors attended 75% or
more of the total number of meetings of the Board and of the committees of which
they were members.
The Audit Committee, the Stock Option Committee and the Compensation
Committee are the only standing committees of the Board. There is no formal
nominating committee; the Board of Directors performs this function.
The Audit Committee, which was composed of Mr. McNeight, its Chairman,
and Messrs. Clifford and Maguire during fiscal 1997, consults with the auditors
of the Company and such other persons as the members deem appropriate, reviews
the preparations for and scope
-5-
<PAGE>
<PAGE>
of the audit of the Company's annual financial statements, makes recommendations
as to the engagement and fees of the independent auditors, and performs such
other duties relating to the financial statements of the Company as the Board of
Directors may assign from time to time. The Audit Committee held one meeting
during fiscal 1997.
The Stock Option Committee, which was composed of Mr. Maguire, its
Chairman, and Mr. Clifford during fiscal 1997, has all of the powers of the
Board of Directors, including the authority to issue stock or other securities
of the Company, in respect of any matters relating to the administration of the
Company's stock option plans (other than the grant of options under the
Nonemployee Directors' Stock Option Plan). The Stock Option Committee held one
meeting during 1997.
The Compensation Committee, which was composed of Mr. Joshi, its
Chairman, and Mr. Clifford during fiscal 1997, reviews with the Board of
Directors on a periodic basis existing and proposed compensation plans, programs
and arrangements for executive officers and other employees. All recommendations
regarding compensation arrangements for Mr. Joshi were made solely by Mr.
Clifford. The Compensation Committee held two meetings during fiscal 1997.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company was paid $500 for
each meeting of the Board of Directors, as well as for each meeting of any
committee of the Board of Directors not held on a day during which a meeting of
the Board of Directors was held, attended by such director during fiscal 1997.
The Company also reimbursed each such director for all reasonable expenses
incurred by him in attending meetings. In addition, nonemployee directors of the
Company are eligible to participate in the Nonemployee Directors' Stock Option
Plan, pursuant to which each nonemployee director is automatically granted (i)
upon becoming a director of the Company, an option to purchase 7,500 shares of
Common Stock and (ii) each year, on the day of the Company's annual meeting of
shareholders, an option to purchase 7,500 shares of Common Stock subject to such
shares being available for options under the Plan.
At the Board of Directors' meeting on November 20, 1997, it was decided
that the directors compensation should be increased so that going forward each
director who is not an employee of the Company will be paid $1,000 for each
meeting of the Board of Directors, and $500 for each meeting of any committee of
the Board of Directors not held on a day during which a meeting of the Board of
Directors is held. At the November Board meeting non-plan options (options not
granted under the Nonemployee Directors Plan but on substantially the same
terms) for the purchase of 8,000 shares at $4.25 per share were granted to
Messrs. Clifford, Maguire and Singleton.
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
In order to attract and retain the services of members of the Board of
Directors who are not employees of the Company (or a subsidiary) ("Nonemployee
Directors") and to provide them with increased motivation and incentive to exert
their best efforts on behalf of the Company by enlarging their personal stake in
the Company, the Company has adopted the Nonemployee Directors' Stock Option
Plan (the "Directors' Plan"), pursuant to which stock options covering an
aggregate of 45,000 shares of the Company's Common Stock may be granted to
Nonemployee Directors. The options granted under the Directors' Plan are
"nonqualified options" (i.e., options that do not qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code").
Pursuant to the Directors' Plan grants of options for the purchase of
7,500 shares of Common Stock are automatically made to Nonemployee Directors,
subject such shares being available for options under the Plan. In accordance
with the terms of the Directors' Plan options for the purchase of 7,500 shares
at $1.67 per share were granted to each of Messrs. Clifford and Maguire in May,
1996 and options for the purchase of 7,500 shares at $6.00 per share were
granted to each of Messrs. Clifford and Maguire in February, 1997. Thereafter,
an option for the purchase of 7,500 shares at the then current fair market value
of the Common Stock is granted to each other Nonemployee Director upon such
Nonemployee Director's initial election or appointment as a Nonemployee Director
and at the annual meeting of the Board of Directors immediately following the
annual meeting of shareholders, subject, in each case, to such shares being
available for options under the Directors' Plan. If an insufficient number of
shares remain available for the grant of such options under the Directors' Plan
the remaining shares which are available will be granted for such remaining
shares prorated among the Nonemployee Directors. Mr. Singleton was granted an
option for 7,500 shares at $4.25 per share under the Directors' Plan upon his
appointment to the Board on November 20, 1998. If elected as directors at the
Annual Meeting, Messrs. Maguire and Singleton will receive options under the
Directors' Plan at the meeting of the Board immediately following the Annual
Meeting. There is currently an aggregate of only 7,500 shares available for the
granting of options under the Directors' Plan. A proposal to amend the
Directors' Plan to increase the number of shares available under the Plan will
be acted upon at the Annual Meeting. See "Proposal 3: Amendment to Nonemployee
Directors' Stock Option Plan" elsewhere in this Proxy Statement.
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<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation in each of the last three fiscal years of the person who served as
the Company's Chief Executive Officer during the fiscal year ended September 30,
1997, and three other executive officers, the only executive officers whose
salary and bonus compensation exceeded $100,000 during the fiscal year ended
September 30, 1997 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
OTHER
ANNUAL RESTRICTED SECURITIES
COMPEN- STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL SATION AWARD(S) (OPTIONS- PAYOUTS(1) COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) ($) SARS(#) ($) ($)
- -------------------- ------- -------- --------- --- ---- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Krishan K. Joshi(2) 1997 52,000 -0- -0- -0- -0- -0- -0-
Chairman and Chief 1996 52,000 -0- -0- -0- -0- -0- -0-
Executive Officer 1995 45,200 -0- -0- -0- -0- -0- -0-
Richard P. McNeight 1997 160,008 40,000 -0- -0- 40,000 4,117 -0-
President and 1996 133,473 18,000 -0- -0- 90,000 1,665 -0-
Chief Operating 1995 124,241 -0- -0- -0- 120,000 1,357 -0-
Officer
William R. Craven 1997 130,307 30,000 -0- -0- 25,000 2,764 -0-
Vice President of 1996 118,038 14,000 -0- -0- 45,000 1,369 -0-
Marketing 1995 106,616 -0- -0- -0- 15,000 1,357 -0-
Lary J. Beaulieu 1997 103,577 15,000 -0- -0- 15,000 3,082 -0-
Vice President of 1996 97,490 10,000 -0- -0- 30,000 1,205 -0-
Engineering 1995 98,560 -0- -0- -0- 15,000 1,070 -0-
Kevin J. Bartczak 1997 100,170 20,000 -0- -0- 15,000 3,072 -0-
Vice President, 1996 87,913 14,000 -0- -0- 15,000 180 -0-
Treasurer and Chief 1995 46,770 -0- -0- -0- 30,000 -0- -0-
Financial Officer
- ------------------------------
</TABLE>
(1) Represents Company matching funds for 401(k) Profit Sharing Plan.
(2) Reflects compensation for Mr. Joshi's part-time work for the Company.
OPTION/SAR GRANTS DURING FISCAL YEAR 1997
The following table provides information related to options granted to
the Named Executive Officers during the fiscal year ended September 30, 1997. No
stock appreciation rights were issued by the Company during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(1) DATE
- ---- ------------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Krishan K. Joshi,
Chairman and Chief Executive Officer --- --- --- ---
Richard P. McNeight,
President and Chief Operating Officer(2) 40,000 19.2% 5.125 11/29/06
William R. Craven,
Vice President of Marketing(2) 25,000 12.0% 5.125 11/29/06
Lary J. Beaulieu,
Vice President of Engineering(2) 15,000 7.2% 5.125 11/29/06
Kevin J. Bartczak
Vice President, Treasurer and Chief Financial
Officer 15,000 7.2% 5.125 11/29/06
- ------------------------------------
</TABLE>
-7-
<PAGE>
<PAGE>
(1) The right to exercise the options is vested over a three-year period
from the date of grant in November 1996, with one-third of the options
subject to grant to become vested (and consequently exercisable) on
each of the first three anniversaries of the date of grant.
(2) Excludes options granted in November 1997 under the Company's Incentive
Plan for 150,000 shares at an exercise price of $4.675 per share to Mr.
Joshi and for 28,000 shares, 28,000 shares and 18,000 shares of Common
Stock granted in November 1997 to Messrs. McNeight, Craven, Beaulieu
and Bartczak, respectively, at an exercise price of $4.25 per share.
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL YEAR 1997 AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information related to options exercised
by the Named Executive Officers during the fiscal year ended September 30, 1997
and the number and value of options and stock appreciation rights held at fiscal
year end which are currently exercisable. No options or stock appreciation
rights were exercised during the fiscal year ended September 30,1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE OPTIONS/SARS AT FY-END AT FY-END($)(1)
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Krishan K. Joshi,
Chairman and Chief Executive
Officer -- -- 445,848 -0- $1,939,885 $ -0-
Richard P. McNeight,
President and Chief Operating
Offier -- -- 530,001 56,666 1,979,257 74,324
William R. Craven,
Vice President of Marketing -- -- 355,597 31,666 1,461,220 37,089
Lary J. Beaulieu,
Vice President of Engineeing -- -- 45,032 20,000 138,381 25,420
Kevin J. Bartczak,
Vice President, Treasurer and
Chief Financial Officer -- -- 35,000 25,000 107,330 53,665
- ------------------------------
</TABLE>
(1) The values of Unexercised-in-the-Money Options/SARs represents the
aggregate amount of the excess of $4.50, the closing sales price for a
share of Common Stock (as adjusted to give effect to the Stock Split)
on September 30, 1997, over the relevant exercise price of all
"in-the-money" options held on such date. Excludes options for 28,000
shares, 28,000 shares and 18,000 shares of Common Stock granted in
November 1997 to Messrs. McNeight, Craven and Beaulieu, respectively,
under the Company's Incentive Plan at an exercise price of $4.25 per
share.
INCENTIVE STOCK OPTION PLAN
Under the Company's Incentive Stock Option Plan, as amended (the
"Incentive Plan"), options to purchase a maximum of 1,455,000 shares of its
Common Stock may be granted to officers, directors and other key employees of
the Company. Options granted under the Incentive Plan are intended to qualify as
incentive stock options as defined in the Internal Revenue Code.
The Incentive Plan is administered by the Board of Directors and the
Stock Option Committee, which determines which persons are to receive options,
the number of options granted and the exercise prices thereof. In the event, an
optionee voluntarily terminates his employment with the Company, the optionee
generally has the right to exercise his accrued options within five days prior
to such termination. If an optionee's employment is involuntarily terminated,
other than because of death, he has the right to exercise his accrued option
within thirty days of such termination. Upon death, the optionee's estate or
heirs have one year to exercise said optionee's accrued options. The maximum
term of any option is generally ten years, and the option price per share may
not be less than the fair market value of the Company's shares at the date the
option is granted. However, options granted to persons owning more than 10% of
the Company's voting shares may not have a term in excess of five years, and the
option price per share may not be less than 110% of fair market value. The
Company may redeem any accrued but unexercised option held by an optionee by
paying him the difference between the option exercise price and the then fair
market value.
If the aggregate fair market value of the shares of Common Stock
(determined at the time the option is granted) with respect to which incentive
stock options are exercisable for the first time by such optionee during any
calendar year (under all such plans) exceeds $100,000, then only the first
$100,000 of such shares so purchased will be treated as incentive options and
any excess over $100,000 so
-8-
<PAGE>
<PAGE>
purchased shall be treated as options which are not incentive stock options.
This rule shall be applied by considering options in the order or sequence in
which they are granted. Options must be granted within ten years from the
effective date of the Incentive Plan.
Options granted under the Incentive Plan are not transferable other
than by will or by the laws of descent and distribution. Options granted under
the Incentive Plan are protected by antidilution provisions increasing the
number of shares issuable thereunder and reducing the exercise price of such
option, under certain conditions. The Incentive Plan will terminate on December
22, 2004 or on such earlier date as the Board of Directors may determine. Any
option outstanding at the termination date will remain outstanding until it
expires or is exercised in full, whichever occurs first. As of January 14, 1998,
options to acquire an aggregate of 1,227,965 shares of the Company's Common
Stock at exercise prices ranging from $0.72 per share to $5.13 per share had
been granted under the Incentive Plan to key employees and directors (including
options to purchase 150,000 shares of Common Stock at an exercise price of
$4.675 per share granted to Mr. Joshi; options to purchase 120,000 shares of
Common Stock at an exercise price of $0.79 per share, 90,000 shares of Common
Stock at an exercise price of $1.47 per share, and 40,000 shares of Common Stock
at an exercise price of $5.13 per share and 28,000 shares at an exercise price
of $4.25 per share, granted to Mr. McNeight; options to purchase 15,000 shares
of Common Stock at an exercise price of $0.72 per share, 45,000 shares of Common
Stock at an exercise price of $1.33 per share, 25,000 shares of Common Stock at
an exercise price of $5.13 per share and 28,000 shares at an exercise price of
$4.25 per share, granted to Mr. Craven; and options to purchase 15,000 shares of
Common Stock at an exercise price of $0.72 per share, 30,000 shares of Common
Stock at an exercise price of $1.33 per share, 15,000 shares of Common Stock at
an exercise price of $5.13 per share and 18,000 shares at an exercise price of
$4.25 per share, granted to Mr. Beaulieu). In the case of options granted under
the Incentive Plan to employees, such options vest and are exercisable at a rate
no greater than 33 1/3% each continuous year in which the employee is employed
on a full time basis by the Company. A proposal to amend the Incentive Plan to
increase the number of shares available under the Plan will be acted upon at the
Annual Meeting. See "Proposal 2: Amendment to Incentive Stock Option Plan"
elsewhere in this Proxy Statement.
401(k) PROFIT SHARING PLAN
The Company's 401(k) Profit Sharing Plan (the "PSP") is qualified under
Sections 401(a) and 401(k) of the Code. The effective date of the PSP is January
1, 1990. This plan is administered under a Trust and two of the Company's
directors are currently serving as its trustees. All employees of the Company
who are 21 years or older, including its executive officers, are eligible to
participate in this plan after three months of employment.
Under the PSP, participating employees have the right to elect that
their contributions to this plan be made from deductions from the compensation
owed to them by the Company in an amount up to 15% of their compensation per
annum, not to exceed $9,500 in each of 1996 and 1997. In addition, the Company,
in its discretion, may make contributions to this plan of up to 1% of the
participant's annual compensation. Participating employees are entitled to full
distribution of their share of the Company's contribution under this plan upon
their death or total disability or when they reach retirement age (i.e., 65
years of age). If a participating employee's employment is terminated earlier,
such employee's share of the Company's contributions will depend upon the
employee's number of years of employment with the Company. All employees are
entitled to receive 50% and 100%, respectively, of the Company's contributions
upon completion of 1 and 2 years of employment, respectively.
All participating employees have the right to receive 100% of their own
contributions to the PSP upon any termination of employment. Apart from the
Company's and employees' contributions, they may receive investment earnings
relating to the funds in their account under this plan.
DESCRIPTION OF EMPLOYMENT AGREEMENTS, SEVERANCE ARRANGEMENTS AND CHANGE
OF CONTROL ARRANGEMENTS
In September 1997 the Company entered into new employment agreements
with its executive officers, Messrs. McNeight, Craven, Bartczak and Beaulieu
providing for annual salaries at their then existing rates, $157,300, $133,100,
$100,000 and $100,011, respectively. The agreement with Mr. McNeight will
terminate on December 31, 1999 and the agreements with each of the other
executive officers will terminate on December 31, 1998. The agreement with Mr.
McNeight and the agreements with each of the other executive officer provide for
disability payments for twelve (12) months and six (6) months, respectively.
Each of the agreements provides for severance pay of full compensation, for two
(2) years in the case of Mr. McNeight and for one (1) in the case of each of the
other executive officers, in the event of termination of employment by the
Company without cause. Each of the agreements also provides for immediate
vesting of granted but unvested stock options and other benefits to the extent
permitted under the Internal Revenue Code in the event of termination of
employment by the Company without cause, due to disability, or in the case of a
change of control (defined to include a sale, merger of combination wherein the
resulting entity controls 33% or more of the voting stock and there is more than
a 50% change in the composition of the Board). Each of the agreements also
includes a covenant not to compete which precludes engaging in the design,
manufacture or sale of rugged
-9-
<PAGE>
<PAGE>
computers within the United States after the term of employment for a period of
two (2) years in the case of Mr. McNeight and a period of one (1) year in the
case of each of the other executive officers; provided, however, in the case Mr.
McNeight, if his termination is by the Company without cause or due to a change
of control his noncompetition covenant shall become null and void, except that
it shall remain in effect so long as the Company is required under the agreement
to pay severance to him and is making such payments. Each of the new agreements
contemplates that the term of employment thereunder and certain other terms
thereof will be reviewed at the first Board meeting in each fiscal year for the
succeeding calendar year.
On November 20, 1997, the first Board meeting of the fiscal year to be
ended September 30, 1998, the Board approved a one (1) year extension of the
term of employment and a salary increase of 10% under each of the new employment
agreements referred to above.
CERTAIN TRANSACTIONS
Under the Company's $4,000,000 line of credit with National City Bank
in Dayton, Ohio, Krishan K. Joshi, the Company's Chairman, and UES, a company
controlled by Mr. Joshi which presently indirectly owns approximately 27.5% of
the Company's outstanding Common Stock, each guaranteed all amounts outstanding
under such line of credit. Similar guarantees involving Mr. Joshi and UES were
required for earlier loan arrangements between the Company and such bank. Upon
completion of the IPO, such guarantees were terminated. Mr. Joshi and UES may
be deemed to have benefitted from the elimination of such guarantees.
Beaver Creek Enterprises, an Ohio partnership among certain UES
employees, including Mr. Joshi, owns a three bedroom residential condominium in
Melbourne, Florida, consisting of approximately 1,450 square feet. The
partnership rents this apartment to the Company at $1,000 per month ($750 per
month until July 1, 1996), that includes its apportioned real estate taxes,
pursuant to a month to month lease arrangement. For the fiscal years ended
September 30, 1997 and 1996, the Company paid such partnership $12,000 and
$9,750, respectively, for the use of such condominium. This apartment is used to
house the Company's executives, including Messrs. Craven and Joshi, when they
are visiting the Company's headquarters, as well as select customers.
In December 1991, Messrs. McNeight, Craven and Joshi were granted
options covering 148,617 shares, 297,231 shares and 445,848 shares,
respectively, of the Company's Common Stock held by UES Florida, a subsidiary of
UES and an affiliate of the Company, each at an adjusted exercise price of $.15
per share. In November 1993, Mr. McNeight was granted options to purchase 5,032
shares of the Company's Common Stock at an adjusted exercise price of $0.24 per
share under a non-qualified stock option plan previously maintained by the
Company, which has since been terminated, and, in November 1994, Mr. McNeight
was granted options under such plan to purchase 183,018 shares of the Company's
Common Stock at an adjusted exercise price of $.72 per share. The exercise
prices of the foregoing options granted in 1991, 1993 and 1994 approximated the
estimated market value of the shares of Common Stock on the date of grant.
In March 1996, UES Florida and Messrs. McNeight and Craven and another
shareholder sold an aggregate of 925,743 shares of Common Stock to private
investors at a purchase price of $1.33 per share ("March 1996 Stock Purchase").
(Of the shares sold, UES Florida and Messrs. McNeight and Craven sold 745,743,
90,000, and 30,000 shares, respectively.) In connection with these transactions,
UES Florida, Messrs. McNeight and Craven and such other shareholder loaned to
the Company in April 1996, for working capital purposes, the sums of $646,294,
$78,000, $26,000 and $52,000, respectively, or an aggregate of $802,294 of the
proceeds realized from such sales, at an interest rate of 6% per annum. Such
amounts, plus accrued interest thereon, was repaid following the consummation of
the IPO with a portion of the IPO proceeds. At or following the time of the
March 1996 Stock Purchase, the private investors purchased an additional 155,322
shares from two other stockholders of the Company. In order to induce the
investors to purchase shares of Common Stock of the Company and thereby provide
UES Florida, Messrs. McNeight and Craven and the other shareholder lender with
funds which they loaned to the Company, the Company granted to the investors
certain "piggyback" registration rights to have their Common Stock registered
under the Securities Act of 1933, as amended. Accordingly, all 1,081,065 shares
of Common Stock acquired by the private investors were included in the
registration statement relating to the IPO.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires officers and directors of the Company and holders of
more than 10% of the Common Stock (collectively, "Reporting Persons") to file
reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission within certain time periods and to furnish
the Company with copies of all such reports. Based solely on its review of the
copies of such reports furnished to the Company by such Reporting Persons or on
written representations that no reports on Form 5 were required, the Company
believes that all filings required to be made by the Reporting Persons were made
on a timely basis during the fiscal year ended September 30, 1997.
-10-
<PAGE>
<PAGE>
LEGAL PROCEEDINGS
In March 1996, the Company's former counsel, Cascone & Cole, rendered
an invoice to the Company in the amount of approximately $365,000 for legal fees
and expenses to which such counsel claimed to be entitled in connection with its
representation of the Company for both general corporate services and services
relating to the IPO. As the Company had made prior payments to such counsel of
$130,000, the net amount claimed to be due was approximately $235,000. The
Company has contested the invoice and accrued an estimate for the settlement, if
any, of these fees. On March 27, 1996, Cascone & Cole filed an action in the
Supreme Court of the State of New York, County of New York, entitled Cascone &
Cole v. Paravant Computer Systems, Inc., Victor M. Wang, Duke & Company, Inc.,
Dean Petkanas and Eagle Group Incorporated (Index No. 96601634), against the
Company, the underwriter of the Company's IPO (the "Underwriter"), and certain
other defendants alleging, among other things, breach of contract, failure to
pay attorneys' fees, fraud, copyright infringement and defamation by the Company
in connection with the aforementioned services, as well as claiming a finder's
fee with respect to the Underwriter's relationship with the Company. Plaintiff
has filed an amended complaint increasing its claim for legal services from
approximately $365,000 to approximately $415,000, claiming there is a balance
due of $280,882 for legal services. Plaintiff is also seeking punitive damages
of $1 million and costs. The Company has filed an answer denying the allegations
made by plaintiff and has asserted defenses and counterclaims against the
plaintiff seeking, among other things, recovery of amounts paid to plaintiff as
well as punitive damages and court costs.
On September 18, 1996, a former controller of the Company filed an
action in the Circuit Court of the State of Florida, Brevard County, entitled
Christopher R. Exley v. Paravant Computer Systems, Inc., Richard P. McNeight,
William R. Craven, UES of Florida, Inc. and Krishan K Joshi (Case No. 96-15091
CA), against the Company and certain of its officers, directors and principal
stockholders, alleging, among other things, retaliatory personnel actions by the
defendants. Plaintiff alleges that he was improperly terminated in December 1994
because of his refusal to account for certain transactions in a specified
manner. Plaintiff is seeking damages in the amount of approximately $1 million,
plus fees and costs. The company has filed a motion to dismiss the plaintiff's
amended complaint.
The Company will vigorously defend itself in these matters. Management
of the Company believes that the ultimate resolution of these matters will not
have a material adverse effect on the Company.
The Company is not a party to or involved in any other pending legal
proceedings.
PROPOSAL 2: AMENDMENT TO INCENTIVE STOCK OPTION PLAN
The Company's Incentive Stock Option Plan (the "Incentive Plan") was
approved by the Company's Board of Directors and shareholders prior to the
Company's initial public stock offering in 1996. The Board of Directors has
unanimously adopted a resolution approving and recommending to the shareholders
for their approval, an amendment to the Incentive Plan (the "Incentive Plan
Amendment") to increase the total number of shares as to which options may be
granted under the Incentive Plan.
A summary of the principal features of the Incentive Plan is provided
below, but is qualified in its entirety by reference to the full text of the
Incentive Plan. Copies of the Incentive Plan are available upon request directed
to Kevin J. Bartczak, Assistant Secretary at the address of the Company as set
forth on the first page of this Proxy Statement.
THE INCENTIVE PLAN AMENDMENT; SHARES SUBJECT TO THE INCENTIVE PLAN
The Incentive Plan currently provides that options may be granted for
the purchase of up to a maximum of 1,455,000 shares of Common Stock. As of
January 14, 1998, options for an aggregate of only 143,357 shares remained
available to be granted under the Incentive Plan. The Incentive Plan is intended
as an incentive to attract and retain officers, directors and key employees of
the Company and to provide a means by which such persons may acquire or increase
their proprietary interest in the success of the Company. The Board of Directors
believes that the Incentive Plan has been an effective in accomplishing its
intended purpose. In order to further the effectiveness of the Incentive Plan
the Board recommends adoption of the Incentive Plan Amendment which would
increase the total number of shares which may be subject to options granted over
the life of the Plan by 1,500,000 to a maximum of 2,955,000.
Under the terms of the Incentive Plan, the number of shares available
for options and the number of shares subject to any then outstanding option (and
the price of the shares under any such outstanding option) shall be adjusted for
any increase or decrease in the number of issued shares of the Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of such shares effected without receipt of consideration
-11-
<PAGE>
<PAGE>
by the Company. If the Company shall be the surviving corporation in any merger
or consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject to
the option would have been entitled. A dissolution or liquidation of the Company
or a merger or consolidation in which the Company is not the surviving
corporation shall cause each outstanding option to terminate; provided, however,
that each optionee shall, in such event, have the right immediately prior to
such dissolution or liquidation, or merger or consolidation, to exercise such
option, subject to the limitations in such option.
Except for the increase in the maximum number of shares as to which
options maybe granted which is referred to above, none of the present provisions
of the Incentive Plan will be changed by the Incentive Plan Amendment. Approval
of the Incentive Plan Amendment will constitute shareholders' Incentive Plan as
so amended.
ADMINISTRATION
The Incentive Plan is administered by a committee appointed by the
Board of Directors (the "Committee") consisting of two or more members of the
Board of Directors. In accordance with the terms of the Incentive Plan, the
Committee shall, from time to time at its discretion, consult with management of
the Company and make recommendations to the Board of Directors with respect to
the officers, directors and key employees who shall be granted options and the
amount of stock to be optioned to each. The interpretation and construction by
the Committee of any provisions of the Incentive Plan and of any option granted
under it shall be final unless otherwise determined by the Board of Directors.
No member of the Committee shall be eligible to receive an option under the
Incentive Plan while serving as a member of the Committee.
AMENDMENT OF THE INCENTIVE PLAN
The Incentive Plan may be amended at any time, and from time to time,
by the Board of Directors. The Board of Directors may not, however, amend the
Incentive Plan without shareholder approval if such amendment would: (i)
increase the number of shares subject to the Incentive Plan; (ii) change the
designation of the class of employees eligible to receive options; (iii)
decrease the price at which options may be granted; (iv) remove administration
of the Incentive Plan from the Committee; (v) render any member of the Committee
eligible to receive an option under the Incentive Plan which serving thereon; or
(vi) amend the Incentive Plan in any manner that will cause options issued
thereunder to fail to meet the requirements of incentive stock options as
defined in the Internal Revenue Code.
ELIGIBILITY
The persons who shall be eligible to receive options under the
Incentive Plan shall be officers, directors and key employees of the Company the
Board of Directors shall select from time to time from among those nominated by
the Committee. No person who is not an employee of the Company at the time of
the grant may receive an option under the Incentive Plan. No person shall be
eligible to receive an option under the Incentive Plan for a larger number of
shares than is recommended for such optionee by the Committee. The approximate
number of all officers, directors and key employees of the Company which the
Board of Directors believes are eligible to participate in the Incentive Plan is
approximately 85 persons, based upon the number of full-time employees, provided
that the Committee shall have the discretion to include any other employees
whose participation it deems beneficial.
EFFECTIVE DATE AND TERMINATION
The Incentive Plan was adopted by the Board of Directors on November
23, 1994, was approved by the shareholders and became effective on March 2,
1995. In accordance with its terms, the Incentive Plan will remain in effect
until November 22, 2004 unless terminated earlier by the Board of Directors.
Termination of the Incentive Plan will not adversely affect any rights under any
then outstanding option.
TERMS OF OPTIONS
Options granted under the Incentive Plan are intended to qualify as
incentive stock options under the Internal Revenue Code. Options under the
Incentive Plan need not be identical to one another. Options shall be evidenced
by agreements in such form as the Committee shall from time to time approve
which shall comply with the following terms:
(i) Number of Shares. Each option shall state the number of shares
to which it pertains. If the aggregate fair market value of
the shares of stock (determined as of the time of the grant)
with respect to which incentive stock options are exercisable
for the first time by the optionee in any calendar year (under
all plans of the Company) exceeds $100,000
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<PAGE>
<PAGE>
then only the first $100,000 of such shares so purchased will
be treated as exercised under the Incentive Plan, and any
excess over $100,000 so purchased shall be treated as options
which are not incentive stock options.
(ii) Option Price. Each option shall state the option price, which
shall not be less than 100% of the fair market value of the
shares of Common Stock on the date of the granting of the
option; provided, however, that if the option is granted to an
optionee who, at the time of the grant, is the owner (as
determined under the Internal Revenue Code) of stock of the
Company possessing more than 10% of the total voting power of
all classes of stock of the Company (a "more than 10% owner"),
then the option price shall be not less than 110% of the fair
market value of the fair market value of the shares of Common
Stock on the date of the granting of the option.
(iii) Medium and Time of Payment. The option price shall be payable
in cash, or by check, upon the exercise of the option;
provided, however, the Board of Directors, in its sole
discretion, may accept other forms of payment, including, but
not limited to, other stock of the Company then owned by the
optionee.
(iv) Term and Exercise of Options. Each option shall specify the
dates upon which it can be exercised and the maximum number
of shares that can be purchased on such dates; provided,
however, that no option granted to a more than 10% owner
shall be exercisable more than five (5) years after the date
such option was granted. During the lifetime of the optionee,
the option shall be exercisable only by the optionee and
shall not be assignable or transferable by the optionee, nor
shall any other person acquire any rights therein. In the
event an optionee shall voluntarily terminate his employment
with the Company such optionee shall have the right to
exercise any then exercisable option at any time within five
(5) days prior to the date of such termination. In the event
of involuntary termination of employment for reasons other
than death, any options held by such optionee may be
exercised, to the extent otherwise then currently
exercisable, within thirty (30) days of the date of such
termination. The Board of Directors, in its sole discretion,
may redeem any accrued but unexercised option of an optionee
whose employment has been terminated by paying such optionee
an amount equal to the difference between the option price
and the then fair market price of the Common Stock subject
to such option. If an optionee shall die while in the
employ of the Company and shall not have fully exercised any
option, such option shall be exercisable, to the extent
otherwise then currently exercisable, at any time within one
(1) year after the optionee's death, by the personal
representative of the optionee or by the holder thereof who
has obtained the same under the applicable laws of descent
and distribution.
(v) Adjustment in Number and Price of Shares; Investment Purpose.
The number and price subject to any option shall be
adjusted for any increase or decrease in the number of issued
shares of the Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend
(but only on the Common Stock) or any other increase or
decrease in the number of such shares effected without
receipt of consideration by the Company. In the event the
shares to which an option is applicable are not subject to a
then effective registration statement under the Securities
Act of 1933, as amended, as a condition of the exercise of
the option the Board of Directors must determine that such
registration is not required and the optionee must purchase
the subject shares for investment purposes, and not for
purposes of resale or distribution, and furnish the Company
with an investment letter setting forth such investment
intent.
AMENDMENT OF OPTIONS
Subject to the terms and conditions of the Incentive Plan, the Board of
Directors may modify, extend or renew outstanding options, or accept the
surrender of unexercised options and authorize the granting of new options in
substitution therefor; provided, however, no modification of an option shall,
without the consent of the optionee, alter or impair any rights or obligations
under any option granted under the Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the
Incentive Plan is intended to be a summary of applicable federal income tax law.
State and local tax consequences may differ. Because the federal income tax
rules governing options are complex and subject to frequent change, participants
are advised to consult their tax advisors prior to exercise of options or
dispositions of stock acquired pursuant to an option exercise.
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Options granted under the Incentive Plan are intended to qualify as
incentive stock options under the Internal Revenue Code. In order to qualify as
incentive stock options the options granted under the Incentive Plan must comply
with the requirements of Section 422 of the Internal Revenue Code.
An optionee is not taxed upon the grant or exercise of an incentive
stock option. The difference between the fair market value of the shares on the
exercise date will, however, be an item of adjustment for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon the
exercise of an incentive stock option for at least two (2) years following the
date of the grant of the option and at least one year following the exercise of
the option, the optionee's gain, if any, by a subsequent disposition of such
shares will be treated as long-term capital gain for federal income tax
purposes. The measure of the gain is the difference between the proceeds
received on disposition and the optionee's basis in the shares (which generally
equals the exercise price). If the optionee disposes of shares acquired pursuant
to exercise of an incentive stock option before satisfying the one-and-two year
holding periods described above, the optionee will recognize both ordinary
income and capital gain in the year of disposition. The amount of the ordinary
income will be the lesser of: (i) the amount realized on disposition less the
optionee's adjusted basis in the shares (usually the option exercise price); or
(ii) the difference between the fair market value of the shares on the exercise
date and the option price. The balance of the consideration received on such
disposition will be long-term capital gain if the shares had been held for at
least one year following exercise of the incentive stock option. The Company is
not entitled to an income tax deduction on the grant or the exercise of an
incentive stock option or on the optionee's disposition of the shares after
satisfying the holding period requirement described above. If the holding
periods are not satisfied, the Company will be entitled to an income tax
deduction in the year the optionee disposes of the shares, in an amount equal to
the ordinary income recognized by the optionee.
APPROVAL BY SHAREHOLDERS
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote thereon is required to
approve the Incentive Plan Amendment. Shares of Common Stock that are designated
to "abstain" and shares which are subject to broker non-votes with respect to
approval of the Incentive Plan Amendment will not be considered as votes cast
with respect to approval of the Incentive Plan Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
INCENTIVE PLAN AMENDMENT.
PROPOSAL 3: AMENDMENT TO NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Company's Nonemployee Directors' Stock Option Plan (the "Directors'
Plan") was approved by the Company's Board of Directors and shareholders prior
to the Company's initial public stock offering in 1996. The Board of Directors
has unanimously adopted a resolution approving and recommending to the
shareholders for their approval, an amendment to the Directors' Plan (the
"Directors Plan Amendment").
A summary of the principal features of the Directors' Plan is provided
below, but is qualified in its entirety by reference to the full text of the
Directors' Plan. Copies of the Directors' Plan are available upon request
directed to Kevin J. Bartczak, Assistant Secretary, at the address of the
Company as set forth on the first page of this Proxy Statement.
THE DIRECTORS' PLAN AMENDMENT; SHARES SUBJECT TO THE DIRECTORS' PLAN
The Directors' Plan currently provides that options may be granted for
the purchase of up to 45,000 shares of Common Stock. As of January 14, 1998,
options for an aggregate of only 7,500 shares remained available to be granted
under the Directors' Plan. The Directors' Plan is intended as an incentive to
attract and retain the services of members of the Board of Directors who are not
employees of the Company (or a subsidiary) ("Nonemployee Directors") and to
provide them with increased motivation and incentive to exert their best efforts
on behalf of the Company by enlarging their personal stake in the Company. The
Board of Directors believes that the Directors' Plan has been effective in
accomplishing its intended purpose. In order to further the effectiveness of the
Directors' Plan, the Board recommends adoption of the Directors' Plan Amendment
which would increase the total number of shares which may be subject to options
granted over the life of the Plan by 90,000 to a maximum of 135,000.
In the event of a change in the outstanding shares of Common Stock by
reason of a stock dividend, stock split, recapitalization, merger,
consolidation, reorganization or other change in corporate structure, the number
and/or type of shares subject to options granted or to be granted under the
Directors' Plan shall be adjusted appropriately by the Committee which
administers the Directors' Plan (referred to below) to prevent an unfavorable
effect upon the value of options granted or to be granted under the Plan.
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Except for the increase in the maximum number of shares as to which
options may be granted which is referred to above, none of the present
provisions of the Directors' Plan will be changed by the Directors' Plan
Amendment. Approval of the Directors' Plan Amendment will constitute
shareholders' ratification and approval of the Directors' Plan as so amended.
ADMINISTRATION
The Directors' Plan is administered by a committee appointed by the
Board of Directors (the "Committee") consisting of from two (2) to five (5)
individuals who are members of the Board. A Nonemployee Director may receive
options under the Directors' Plan whether or not such Nonemployee Director also
serves as a member of the Committee. As indicated below, options are granted
automatically under the Directors' Plan and, therefore, the Committee does not
have discretion with respect to the granting of options. If any questions arise
concerning the interpretation of the Directors' Plan or any options issued
thereunder, they shall be determined by the Committee and such determination
shall final.
AMENDMENT OF THE DIRECTORS' PLAN
The Directors' Plan may be amended from time to time by the Committee;
provided, however, that no such amendment shall materially adversely affect or
impair any then outstanding option without the consent of the optionee. The
approval of the shareholders is required in respect of any amendment which would
(i) increase the maximum number of shares subject to the Directors' Plan; or
(ii) change the designation of persons eligible to receive options under the
Directors' Plan.
ELIGIBILITY
The class of persons eligible to receive options under the Directors'
Plan shall be limited to Nonemployee Directors. The Company anticipates that as
of the Annual Meeting, the number of Nonemployee Directors that will be eligible
to participate in the Directors' Plan will be two (2).
AUTOMATIC GRANTS OF OPTIONS
Under the terms of the Directors' Plan, options for 7,500 shares (as
adjusted for the 3 for 1 stock split on July 25, 1996) were automatically
granted to each of the two (2) then Nonemployee Directors in May, 1996 as of the
effective date of the Company's registration statement for its initial public
offering. Thereafter, automatic grants of options are required under the
Directors' Plan as follows:
(i) an option for 7,500 shares is granted to each Nonemployee
Director, other than a Nonemployee Directors who received an
option in May, 1996, upon such Nonemployee Director's initial
election or appointment as a Nonemployee Director; and
(ii) an additional option for 7,500 shares is granted to each
Nonemployee at each annual meeting of the Board of Directors
immediately following the annual meeting of shareholders in
each year, commencing in 1997, during the term of the
Directors' Plan. If the number of shares remaining available
for the grant of options under the Directors' Plan on any such
date is insufficient to grant each then Nonemployee Director
an option for 7,500 shares, each such Nonemployee Director
will receive an option to purchase the number of shares
determined by dividing the total number of shares remaining
available by the number of then Nonemployee Directors and, if
necessary, rounding the number of shares subject to the option
being granted down to the nearest whole number.
EFFECTIVE DATE AND TERMINATION
The Directors' Plan was adopted on March 2, 1995 and except as to the
extent necessary to govern outstanding options, the Directors' Plan shall
terminate on, and no additional options shall be granted after March 1, 2005
unless sooner terminated by the Committee. No such termination by the Committee
shall materially adversely affect or impair any then outstanding option without
the consent of the optionee.
TERMS OF OPTIONS
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Options granted under the Directors' Plan are "nonqualified options"
(i.e., options that do not qualify as incentive stock options under the Internal
Revenue Code). As set forth above, options are granted automatically under the
Directors' Plan, subject to the availability of share under the Plan. Options
shall be evidenced by agreements which shall include the following terms:
(i) Number of Shares. Each option shall state the number of
shares to which it pertains.
(ii) Option Price. Each option shall state the option price, which
shall be 100% of the fair market value of the shares of
Common Stock on the date of the granting of the option.
(iii) Medium and Time of Payment. The option price shall be paid
upon the exercise of the option (x) in full by cash or by
check, (y) by delivery of shares of Common Stock then owned by
the optionee at the then fair market value of such shares, or
(z) by a combination of (x) and (y).
(iv) Term and Exercise. Each option shall be for a term
commencing on the date of the grant and, unless sooner
terminated as hereinafter set forth, shall expire ten
years after the date of the grant. In the event an optionee
shall cease to be a director of the Company for any reason
other than death or disability, the option shall terminate on
the earlier to occur of (y) the later of ninety (90) days
after the date of termination of service or ninety (90) days
after such optionee's last purchase or sale of shares of
Common Stock or (z) the expiration date of the option. If the
optionee shall die or become disabled within the meaning of
the Internal Revenue Code while still serving as a director
or prior to the termination of the option in accordance with
the preceding sentence, the option shall terminate on the
first anniversary of the participant's death or disability,
as the case may be. In the event of an optionee's death, the
option may be exercised by the personal representative of the
optionee or by the holder thereof who has obtained the same
under the applicable laws of descent and distribution.
(v) Adjustment in Number and Price of Shares; Investment Purpose.
The number and/or type of shares subject to any option
granted under the Directors' Plan shall be adjusted
appropriately by the Committee to prevent an unfavorable
effect upon the value of option in the event of a change in
the outstanding shares of Common Stock by reason of a stock
dividend, stock split, recapitalization, merger,
consolidation, reorganization or other change in corporate
structure. In the event the shares to which an option is
applicable are not subject to a then effective registration
statement under the Securities Act of 1933, as amended, as a
condition of the exercise of the option the Board of
Directors must determine that such registration is not
required and the optionee must purchase the subject shares
for investment purposes, and not for purposes of resale or
distribution, and furnish the Company with an investment
letter setting forth such investment intent.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the
Directors' Plan is intended to be a summary of applicable federal income tax
law. State and local tax consequences may differ. Because the federal income tax
rules governing options are complex and subject to frequent change, participants
are advised to consult their tax advisors prior to exercise of options or
dispositions of stock acquired pursuant to an option exercise.
Options granted under the Directors' Plan are nonqualified options and,
therefore, are not subject to the tax treatment outlined elsewhere in this Proxy
Statement as applicable to incentive stock options.
An optionee is not taxed on the grant of a nonqualified option. Upon
exercise, however, the participant recognizes ordinary income equal to the
difference between the option price and the fair market value of the shares on
the date of the exercise. The Company is entitled to an income tax deduction in
the year of exercise in the amount recognized by the optionee of the ordinary
income. Any gain on subsequent disposition of the shares is long-term capital
gain if the shares are held for at least one year following the exercise. The
Company does not receive an income tax deduction for this gain.
APPROVAL BY SHAREHOLDERS
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote thereon is required to
approve the Directors' Plan Amendment. Shares of Common Stock that are
designated to "abstain" and shares which are subject to broker non-votes with
respect to approval of the Directors' Plan Amendment will not be considered as
votes cast with respect to approval of the Directors' Plan Amendment.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
DIRECTORS' PLAN AMENDMENT.
INFORMATION CONCERNING INDEPENDENT AUDITORS
The Company has selected the firm of KPMG Peat Marwick LLP to serve as
the independent auditors for the Company for the current fiscal year ending
September 30, 1998. That firm served as the Company's independent auditors for
its fiscal year ended September 30, 1997. Representatives of KPMG Peat Marwick
LLP are expected to attend the Annual Meeting and will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual
meeting of shareholders, to be held in 1999, must be received by the Company at
1615A West Nasa Boulevard, Melbourne, Florida 32901, Attention: Secretary by
September 30, 1998 to be included in the proxy statement and form of proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors is aware of no other matters that are to be
presented to shareholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year ended
September 30, 1997 accompanies this Proxy Statement. Additional copies may be
obtained by writing to Kevin J. Bartczak, Chief Financial Officer, at 1615A West
Nasa Boulevard, Melbourne, Florida 32901.
By Order of the Board of Directors,
William R. Craven
Secretary
Dated: Melbourne, Florida
January 28, 1998
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APPENDIX I
PROXY PARAVANT COMPUTER SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF PARAVANT COMPUTER SYSTEMS, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS--MARCH 12, 1998
The undersigned hereby appoints Richard P. McNeight, William R. Craven and
Kevin J. Bartczak, and each of them, as Proxies, each with full power of
substitution and resubstitution, to represent and to vote, as designated below,
all shares of Common Stock of Paravant Computer Systems, Inc. (the "Company")
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of the Company to be held at the Melbourne Beach
Hilton Oceanfront Hotel, 3003 U.S. Highway A1A, Indialantic, Florida 32903 at
10:00 A.M. (local time) on March 12, 1998, and at any adjournment or
postponement thereof.
1. Election of Directors
[ ]FOR all nominees listed below [ ]WITHHOLD APPROVAL to vote for all nominees
(except as marked to the contrary below) listed below
Krishan K. Joshi, Richard P. McNeight, William R. Craven, Michael F.
Maguire and John P. Singleton.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
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2. Approval of an amendment to the Company's Incentive Stock Option Plan:
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. Approval of an amendment to the Company's Nonemployee Directors' Stock
Option Plan:
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment or
postponement thereof.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES SET FORTH IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES SET FORTH IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
TO BE VALID, THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
Please sign exactly as name
appears at left. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give your full
title as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Date:
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Signature
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Signature
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
