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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NO.: 0-16182
AXSYS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-1962029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
910 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
(Address of principal executive offices) (Zip Code)
(201) 871-1500
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $.01 per share
$1.20 Cumulative Exchangeable Redeemable Preferred Stock,
par value $.01 per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K /X/.
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on April 19, 1999, $36,368,784.
Common Stock outstanding at April 19, 1999: 4,007,135 shares.
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AXSYS TECHNOLOGIES, INC.
FORM 10-K/A NO. 1
Axsys Technologies, Inc. a Delaware corporation (the "Registrant" or
"Company") hereby amends its Form 10-K, dated March 25, 1999 (the "Form 10-K"),
for the fiscal year ended December 31, 1998.
The Form 10-K is hereby amended to add Part III thereto as follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age and principal occupation of each nominee, the nominee's
length of service as a director of the Company, the names of the other public
companies of which the nominee is a director and certain other biographical
information are set forth below.
Stephen W. Bershad, 57
Stephen W. Bershad has been Chairman of the Board and Chief Executive
Officer of the Company since he joined the Company in December 1986. Prior to
joining the Company, he was a Managing Director of Lehman Brothers, Inc. and its
predecessor firms, where he held a series of senior management positions in
merchant banking and mergers and acquisitions. Mr. Bershad is a director of
Emcor Group, Inc., an electrical and mechanical construction and facilities
services company.
ANTHONY J. FIORELLI, JR., 69
Anthony J. Fiorelli has been a director of the Company since February
1988. He has been a private investor since January 1, 1997. From December 1985
until June 1997, Mr. Fiorelli was President of Strategic Management Consulting
Services, Inc., a management consulting firm. Prior to that time, Mr. Fiorelli
was President and Chief Executive Officer of General Defense Corporation, a
diversified engineering and manufacturing company. Mr. Fiorelli also serves as a
director of the United States Merchant Marine Academy Foundation.
ELIOT M. FRIED, 66
Eliot M. Fried has been a director of the Company since 1994. He is a
Managing Director of Lehman Brothers, Inc. where he has been employed for 21
years and is a member of its Investment Committee and Investment Banking
Commitment Committee. Mr. Fried is a director of Bridgeport Machines, Inc., L-3
Communications Corporation, a communications equipment company, and Walter
Industries, Inc., a conglomerate of basic industries.
RICHARD V. HOWITT, 55
Richard V. Howitt has been a director of the Company since June 1997,
following the Company's acquisition of Teletrac, Inc. ("Teletrac"). Mr. Howitt
is a co-founder of Teletrac and has been President of Teletrac for 19 years.
Prior to his full-time employment at Teletrac, he was a member of the technical
staff and Section Head of Optical Metrology at Santa Barbara Research Center.
There are no family relationships among any of the directors and
executive officers of the Company.
The Board of Directors met six times during 1998. The Audit Committee,
the Compensation Committee and the Stock Incentive Plan Committee are the
standing committees of the Board. The Audit Committee reviews internal and
external audit procedures of the Company. Messrs. Fiorelli and Fried are members
of the Audit Committee. The Audit Committee met once in 1998. The Compensation
Committee oversees compensation policies of the Company. Its members are Messrs.
Fiorelli and Fried. The Compensation Committee met once in 1998. The Stock
Incentive Plan Committee administers the Stock Incentive Plan. Messrs. Fiorelli
and Fried are members of the Stock Incentive Plan Committee. The Stock Incentive
Plan Committee met once in 1998. At a meeting held on October 20, 1998, the
Board of Directors formed a Special Committee (the "Special Committee"),
consisting of Anthony J. Fiorelli, Jr. and Eliot M. Fried, to evaluate a
proposal (the "Proposal") that the Company received from Stephen W. Bershad, the
Chairman and Chief Executive Officer of the Company, for the acquisition by Mr.
Bershad of all of the outstanding shares of Common Stock of the Company. The
Special Committee met four times in 1998. The Special Committee was dissolved by
the Board of Directors on January 13, 1999 following the withdrawal of Mr.
Bershad's proposal.
2
All meetings of the Board and of the Committees, were attended by all
directors or Committee members, as applicable. The compensation of directors is
fixed by the Board of Directors. Directors who are not employees of the Company
receive meeting fees of $2,500 for each Board meeting attended and $1,000 for
each committee meeting attended other than in connection with a Board meeting.
Directors who are employees of the Company or any subsidiary do not receive fees
or other compensation for their services as directors. All directors are
reimbursed for travel and other expenses incurred in the performance of their
duties. Each of the members of the Special Committee was paid a fee of $25,000
in 1998 for service on the Special Committee.
Non-employee directors may be granted additional options from time to
time for their services as directors. On May 5, 1998, each of Messrs. Fried and
Fiorelli was granted options to purchase 2,000 shares of Common Stock at an
exercise price of $25.75 per share with an expiration date of May 5, 2008, which
options vest at the rate of 20% per year commencing on the first anniversary of
the date of grant.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation
during the years ended December 31, 1996, 1997 and 1998 for services in all
capacities awarded to, earned by or paid to the Company's Chief Executive
Officer and the other executive officers of the Company (collectively, the
"Named Executives"):
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
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NUMBER OF
SECURITIES
UNDERLYNG ALL OTHER
NAME AND PRINCIPAL BONUS OPTIONS COMPENSATION
POSITION YEAR SALARY ($) ($) (1) (# OF SHARES) (2) ($) (3)
- ------------------------------- ------ ---------- -------- ----------------- ------------
Stephen W. Bershad............. 1998 300,000 -- 7,500 19,716
Chairman of the 1997 300,000 161,500 10,400 5,814
Board and Chief 1996 262,500 157,500 -- 7,576
Executive Officer
David L. Concannon (4)......... 1998 100,962 -- 5,000 3,793
Vice President,
General Counsel and
Secretary
Raymond F. Kunzmann (5)........ 1998 155,000 -- 4,000 14,775
Vice President--Finance 1997 146,922 84,196 32,000 10,383
and Chief Financial 1996 141,385 85,000 -- 10,603
Officer
Kenneth F. Stern (6)........... 1998 150,000 -- 4,000 11,479
Vice President 1997 138,173 79,777 32,000 9,560
Precision Systems Group 1996 130,269 52,500 -- 10,439
Sales and Marketing
- --------
(1) Reflects payments under the Company's Annual Incentive Plan.
(2) Reflects awards under the Axsys Technologies, Inc. Amended and Restated
Long-Term Stock Incentive Plan (the "Stock Incentive Plan").
(3) Reflects: (i) matching contributions under the Company's 401(k) Plan which
in 1998 totaled $4,800 for Mr. Bershad, $4,800 for Mr. Kunzmann, $4,800 for
Mr. Stern and no payment for Mr. Concannon; (ii) payments under the
Company's executive health insurance plan which in 1998 totaled $13,176 for
Mr. Bershad, $2,778 for Mr. Concannon, $8,235 for Mr. Kunzmann and $4,939
for Mr. Stern; and (iii) payments of premiums for term life insurance
maintained on behalf of the Named Executives which in 1998 totaled $1,740
for Mr. Bershad, $1,015 for Mr. Concannon, $1,740 for Mr. Kunzmann and
$1,740 for Mr. Stern. The Company's executive health insurance plan, which
covers only officers, provides for the reimbursement of deductible and
coinsurance amounts and certain medical expenses not covered under the
Company's basic medical plans.
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(4) David L. Concannon, 34, joined the Company in June 1998 as Vice President,
General Counsel and Secretary. Prior to joining the Company, Mr. Concannon
was an associate with the law firms of Fried, Frank, Harris, Shriver &
Jacobson, New York, New York, from November 1995 to June 1998, and Stinson,
Mag & Fizzell, Kansas City, Missouri, from January 1994 to October 1995.
His annual base salary is $175,000.
(5) Raymond F. Kunzmann, 42, joined the Company in June 1994 and currently
serves as Vice President-Finance and Chief Financial Officer. Prior to
joining the Company, from January 1994 until May 1994, he was Group
Controller at Mannesmann Capital Corporation, a diversified manufacturing
company.
(6) Kenneth F. Stern, 38, joined the Company in October 1994 and currently
serves as Vice President Precision Systems Group Sales and Marketing. Prior
to joining the Company, from December 1992 to October 1994, he was a
management consultant specializing in strategic planning and corporate
development for technology companies at Monitor Company and prior to
December 1992 at Lorne Weil Inc.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the
options granted pursuant to the Stock Incentive Plan during the year ended
December 31, 1998, to the Named Executives Officers. No options were exercised
in that period by such executive officers.
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED GRANT DATE
UNDERLYING TO EMPLOYEES PRESENT
OPTIONS THROUGH EXERCISE PRICE EXPIRATION VALUE
NAME GRANTED DECEMBER 31, 1998 ($/SHARE) DATE ($) (1)
- --------------------------- ---------- ----------------- -------------- ---------- ----------
Stephen W. Bershad 7,500 (2) 9.8 28.26 2/28/03 90,100
David L. Concannon 5,000 (3) 6.5 18.75 6/25/08 50,548
Raymond F. Kunzmann 4,000 (3) 5.2 25.69 2/28/08 55,400
Kenneth F. Stern 4,000 (3) 5.2 25.69 2/28/08 55,400
- --------
(1) The estimated grant date present value used was estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: expected volatility of 50%; risk-free interest rate of 5.8%;
expected life of 6 years (5 years as to Mr. Bershad's options) and no
dividend yield. The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, the Black-Scholes
model requires the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's stock-based awards
to employees have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing model does not necessarily provide a reliable single measure of
the fair value of awards pursant to the Company's Stock Incentive Plan.
(2) These options are exercisable to the extent of 20% thereof on the first
anniversary of the date of grant, an additional 20% on each of the two
subsequent anniversaries of the date of grant and as to the remaining 40%
on the fourth anniversary of the date of grant. Vesting of such options
will be accelerated in the event of certain changes in control of the
Company.
(3) These options vest at the rate of 20% per year commencing on the first
anniversary of the date of grant. Vesting of such options will be
accelerated in the event of certain changes in control of the Company.
4
1998 FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the value
of unexercised stock options granted pursuant to the Stock Incentive Plan as of
December 31, 1998, held by the Named Executive Officers; no options were
exercised by such Named Executive Officers during the year ended December 31,
1998:
FISCAL YEAR-END OPTION VALUES
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NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR-END (#) YEAR-END ($) (1)
---------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------- ----------- -------------
Stephen W. Bershad 10,880 11,220 12,600 --
David L. Concannon -- 5,000 -- --
Raymond F. Kunzmann 7,800 32,200 4,000 --
Kenneth F. Stern 5,800 32,200 2,000 --
- --------
(1) Includes only those options whose exercise prices are lower than $14.00
per share, the closing price for the Common Stock on the Nasdaq Stock
Market on December 31, 1998.
TERMINATED PENSION PLAN
The Company had a defined benefit pension plan which was terminated on
July 31, 1989. The estimated annual benefit payable upon retirement to Mr.
Bershad, the only executive officer participating in such plan, is $22,121,
assuming retirement at age 65.
CERTAIN TRANSACTIONS
On May 30, 1997, the Company, Teletrac and Mr. Howitt and the other
then shareholders of Teletrac (collectively, the "Sellers") entered into a Stock
Purchase Agreement pursuant to which the Sellers sold 177,937 Teletrac shares to
the Company for a purchase price of approximately $7.7 million and the issuance
of 153,000 shares of Common Stock, 53,000 of which were issued at closing. The
Company was granted the right to acquire the remaining 29,880 shares of
Teletrac's capital stock retained by the Sellers in exchange for 100,000 shares
of Common Stock issuable pursuant to the Stockholder Agreement described below.
Mr. Howitt, who was elected director of the Company following the closing of the
transaction, sold 82,053 Teletrac shares to the Company and retained 5,229
shares. The 53,000 shares of Common Stock issued at closing are subject to
registration rights.
On May 30, 1997, the Company, on the one hand, and Mr. Howitt and
certain other Teletrac shareholders (collectively, the "Minority Shareholders"),
on the other hand, entered into a stockholder agreement (the "Stockholder
Agreement") relating to the 29,880 Teletrac shares retained by the Minority
Shareholders. Pursuant to the Stockholder Agreement, the Minority Shareholders
have the option, exercisable on written notice to the Company, to elect to sell
any remaining Teletrac shares to the Company in exchange for an aggregate of
100,000 shares of the Company's Common Stock (3.3467 shares of the Company's
Common Stock for each Teletrac share) for a period of three years from the date
of the Stockholder Agreement. In addition, pursuant to the terms of the
Stockholder Agreement, the Company has the option, exercisable on written notice
to each Minority Shareholder, to elect to purchase each Minority Shareholder's
Teletrac shares, in exchange for an aggregate of 100,000 shares of the Company's
Common Stock (3.3467 shares of the Company's Common Stock for each Teletrac
share) at any time after three years from the date of the Stockholder Agreement
or, on a prior date, upon certain other circumstances. Such shares of Common
Stock, when issued, will be entitled to certain registration rights. Mr.
Howitt's retained shares are exchangeable for 17,500 shares of Common Stock.
Under the Stockholder Agreement, the Company was appointed as proxy to vote the
Teletrac shares retained by the Minority Shareholders for the term of the
agreement expiring on May 30, 2007.
5
In connection with the purchase of Teletrac, Teletrac entered into an
employment agreement with Mr. Howitt dated May 30, 1997 (the "Employment
Agreement") and Mr. Howitt also executed a Non-Competition Agreement (the
"Non-Competition Agreement") in favor of the Company under which he has agreed
not to compete with or solicit customers or employees from the Company for a
period of six years expiring in June 2003.
Pursuant to the terms of the Employment Agreement, Mr. Howitt is
entitled to receive an annual salary of $225,000 and a bonus in accordance with
the terms of the Teletrac Management Incentive Compensation Plan (the "Teletrac
Plan"), as determined by the committee administering the Plan. Mr. Howitt's
employment is for a period of three years expiring June 1, 2000. Under the terms
of the Employment Agreement, Teletrac may terminate Mr. Howitt's employment upon
Mr. Howitt's death or "disability" or for "cause," and Mr. Howitt may terminate
his employment with Teletrac at any time without Teletrac's consent or for "good
reason" (as such terms are defined in the Employment Agreement). If the
Employment Agreement is terminated by Teletrac for death, "disability" or
"cause" or by Mr. Howitt without "good reason," Teletrac is obligated to pay Mr.
Howitt (or his estate) all amounts earned but not paid to such termination date
and certain other benefits accrued to such termination date pursuant to
Teletrac's benefit plans. If the Employment Agreement is terminated by the
Company other than for death, "disability" or "cause" or by Mr. Howitt with
"good reason," Mr. Howitt will be entitled to receive all amounts earned and not
paid to such date, the salary payable after such date for the balance of the
term of the Employment Agreement, 40% of any amounts payable after such
termination date pursuant to the Teletrac Plan and certain medical, dental and
insurance benefits during the balance of the term of the Employment Agreement.
Throughout his employment, Mr. Howitt is bound by a covenant not to compete with
Teletrac and not to disclose "confidential information" (as defined in the
Employment Agreement).
Under the Teletrac Plan, Teletrac may make certain cash bonus awards
("Awards") to employees of Teletrac who are senior officers, members of senior
management or key employees and consultants to Teletrac. Under the Teletrac
Plan, Teletrac must establish incentive compensation pools ("Incentive
Compensation Pools") for each of the fiscal years ending December 31, 1997 and
December 31, 1998 and the thirteen-month period ending January 31, 2000 (each an
"Incentive Period") and, under certain circumstances, additional incentive
compensation pools ("Additional Incentive Compensation Pools") for the same
periods. The Incentive Compensation Pools and the Additional Incentive
Compensation Pools are determined based on a percentage of the excess of "gross
profits" (as defined in the Teletrac Plan) for each Incentive Period over a base
amount. The aggregate amount of the Incentive Compensation Pools and the
Additional Incentive Compensation Pools shall not exceed $3,000,000 and
$1,100,000, respectively. Subject to the next succeeding sentence, Mr. Howitt,
the President of Teletrac and a director of the Company, is entitled to a
percentage of annual payments, not to exceed 43%, from the Incentive
Compensation Pool and the Additional Incentive Compensation Pool, if applicable,
as determined by the committee administering the Teletrac Plan. In addition, in
accordance with the employment agreement between Teletrac and Mr. Howitt, if
such agreement is terminated for certain reasons, Mr. Howitt will be entitled to
receive an Award of 40% of all amounts payable to him under the Plan after such
termination date. The Plan is administered by a committee comprised solely of
Mr. Howitt as long as he is President and a full-time employee of Teletrac and,
in the event Mr. Howitt shall cease to be the President and a full-time employee
of Teletrac, by David Barker as long as he is Vice President-Research and
Development and at least a half-time employee of Teletrac and thereafter by
individuals appointed by the Board of Directors of Teletrac. Subject to certain
exceptions, including adversely affecting a participant's right (without
consent) to receive Awards under the Teletrac Plan, the Board of Directors of
Teletrac may amend the Teletrac Plan from time to time or suspend or terminate
it entirely. In the event Teletrac sells all or substantially all of its assets,
the participants in the Plan are entitled to receive an amount equal to
$4,100,000 less all amounts previously paid as Incentive Compensation Pools and
Additional Incentive Compensation Pools unless certain conditions are satisfied.
Mr. Howitt received Awards under the Teletrac Plan for the year ended December
31, 1998 in the amount of $145,000.
The Company has agreed to reimburse Mr. Bershad for his expenses
incurred in pursuing his Proposal to acquire all of the outstanding shares of
Common Stock of the Company. Mr. Bershad withdrew the Proposal on January 13,
1999 following the receipt by the Company of an unsolicited proposal from a
third party seeking to acquire the Company. In 1998, the Company incurred
approximately $51,000 in expenses related to its agreement to reimburse Mr.
Bershad's expenses.
AGREEMENTS WITH DIRECTORS AND OFFICERS
The Company has entered into indemnification agreements with its
directors and certain officers in order to induce them to continue to serve as
directors and officers of the Company, indemnifying them for any and all
liabilities incurred by them arising out of their service as directors or
officers, other than liabilities arising out of conduct which has been
determined in a final adjudication to constitute bad faith or a knowing
violation of law or receipt by such person of an
6
improper personal benefit. The rights to indemnification under such agreements
are in addition to any rights to indemnification contained in the Company's
Certificate of Incorporation or By-Laws, which provide for indemnification under
certain circumstances. The Company has agreed to pay Messrs. Stern and Kunzmann
up to one year's base compensation and certain other benefits in the event of
termination by the Company other than for cause.
In February of 1999, in connection with its exploration of strategic
alternatives, the Company entered into severance protection agreements with
certain officers and key employees of the Company, including each of the Named
Executives and Mr. Howitt, which provide for certain benefits if their
employment is terminated within two years following a "Change in Control" of the
Company. The purpose of the severance protection agreements is to foster the
continued employment of officers and employees by allowing them to focus
attention on their assigned responsibilities without distraction in the event of
circumstances arising from the possibility of a change in control of the
Company.
For purposes of the severance protection agreements, a Change of
Control means: (a) an acquisition (other than directly from the Company) of any
Common Stock of the Company or other voting securities of the Company entitled
to vote generally for the election of directors by any Person or entity
immediately after which such Person has beneficial ownership of fifty percent or
more of the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities other than an acquisition by
(i) the Company or any subsidiary of the Company, (ii) an employee benefit plan
(or a trust forming a part thereof) maintained by the Company or any subsidiary
of the Company, (iii) any affiliate of the Company, or (iv) any person in
connection with a merger following which (A) the Company's shareholders prior to
the merger own 50% of more of the voting power of the surviving corporation, (B)
at least two-thirds of the directors of the surviving corporation were directors
of the Company and (C) no person or entity other than the Company, any
subsidiary of the Company or person or entity beneficially owning 50% or more of
the Company's Common Stock owns 50% or more of the surviving corporation (a
"Non-Control Transaction"); (b) the individuals who, as of February 11, 1999,
were members of the Board of Directors cease for any reason to constitute at
least a majority of the members of the Board of Directors; or (c) the
consummation of: (i) a merger, consolidation, reorganization or other business
combination with or into the Company or in which securities of the Company are
issued, unless such merger, consolidation, reorganization or other business
combination is a "Non-Control Transaction," (ii) a complete liquidation or
dissolution of the Company; or (d) the sale or other disposition of all or
substantially all of the assets of the Company to any person or entity.
If a Change in Control occurs, and the executive's employment is
terminated by the Company other than for cause, death or disability or by the
executive for good reason within two years thereafter, the executive will be
entitled to receive a maximum lump sum cash payment equal to, in the case of
Messrs. Bershad, Kunzmann and Stern, 2.99 times the executive's "base amount"
(as defined under Section 280G of the Internal Revenue Code of 1986 and
generally consisting of the average annual compensation of the executive by the
Company for the five-year period immediately preceding the date of
determination), in the case of Mr. Concannon, two times the executive's base
amount and, in the case of Mr. Howitt, 1.5 times the executive's base amount
and, at the executive's election, one year of continuation of healthcare
benefits or its cash equivalent. The severance protection agreements of each of
Messrs. Bershad, Concannon, Kunzmann and Stern also provide that the executive
will be entitled to the foregoing severance benefits in the event he terminates
his employment, with or without good reason, at any time during the one-month
period commencing six months following a Change in Control.
Each of the severance protection agreements has a term of two years
from the date of execution and will automatically renew for a one-year period on
each anniversary thereafter, unless either party gives advance notice of
non-renewal. Notwithstanding the foregoing, if there is a "Change in Control,"
the agreements will not terminate prior to the expiration of twenty-four months
after the date of the Change in Control.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, composed of
Messrs. Fiorelli and Fried, has furnished the following report on executive
compensation.
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies which
seek to enhance the profitability of the Company, and thus shareowner value, by
aligning closely the financial interests of the Company's senior managers with
those of its shareowners. In furtherance of these goals, the Company relies to a
large degree on annual bonus and longer-term stock incentive compensation to
attract
7
and retain executive officers and other key employees and to motivate
them to perform to the full extent of their abilities. Both types of incentive
compensation are not guaranteed and are variable and closely tied to corporate,
business unit and individual performance in a manner designed to encourage a
sharp and continuing focus on building profitability and shareowner value. The
annual bonus and stock incentive compensation is more closely tied to the
Company's success in achieving significant financial and other
performance-oriented goals. The Committee considers the total compensation
(earned or potentially available) of each of the executive officers and the
other senior managers in establishing each element of compensation. Eligible
persons must be employed by the Company at the time bonus compensation is
awarded.
In evaluating the performance and setting the incentive compensation of
the Chief Executive Officer, the Committee took note of the Company's failure to
achieve at least a specified minimum percentage of its budgeted net income
before taxes, as well as its failure to achieve budgeted goals with respect to
return on investment and bookings, the Committee determined not to grant any
award to the Chief Executive Officer under the Annual Incentive Compensation
Plan for the fiscal year ended December 31, 1998.
In its review of other senior management incentive compensation for
1998, the Committee took into account management's performance against budget
for net income before taxes, bookings and return on investment, which were
weighted 65%, 20% and 15% respectively.
Based on its evaluation of these factors, the Committee believes that
the senior management of the Company is dedicated to achieving significant
improvements in long-term financial performance and that the compensation
policies the Committee has implemented and administered have contributed to
achieving this management focus.
During each fiscal year, the Stock Incentive Plan Committee considers
the desirability of recommending that the Board of Directors grant senior
executives, including executive officers, awards under the Stock Incentive Plan,
which provides the flexibility to grant longer-term incentives in a variety of
forms, including performance units, stock options, stock appreciation rights and
restricted stock. At December 31, 1998, options covering 248,400 shares of
Common Stock had been awarded under the Stock Incentive Plan. In respect of
1998, the Stock Incentive Plan Committee determined to recommend the grant of
additional awards under the Stock Incentive Plan to Mr. Bershad in the amount of
5,000 options, to Mr. Concannon in the amount of 3,000 options, Mr. Kunzmann in
the amount of 3,000 options and to Mr. Stern in the amount of 3,000 options. In
addition, Mr. Concannon was granted options to purchase 5,000 shares in
connection with his commencement of employment with the Company. Each of these
grants was approved by the Stock Incentive Plan Committee and ratified and
approved by the full Board of Directors.
By: Compensation Committee:
Anthony J. Fiorelli, Jr.
Eliot M. Fried
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the Compensation Committee and Stock Incentive Plan Committee
is composed of Messrs. Fiorelli and Fried. There are no Compensation Committee
interlocks between the Company and any other entities involving the Company's
executive officers and directors who serve as executive officers of such
entities.
STOCK PRICE PERFORMANCE GRAPH
The information in the foregoing report and the following graph shall
not be incorporated by reference (by any general statement incorporating this
amendment by reference or otherwise) into any prior or future filing under the
Securities Exchange Act of 1934 (the "Exchange Act") or the Securities Act of
1933, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The following graph shows the value of a $100 investment in Common
Stock from December 31, 1993 through December 31, 1998, as of the dates
indicated, compared with the value of a similar investment in the Nasdaq Stock
Market Index, the Nasdaq Non-Financial Stock Index and the S&P High Technology
Composite Index at such times. The Nasdaq Stock Market Index is a broad market
index comprising all domestic shares traded on the Nasdaq National Market and
the Nasdaq Small-Cap Market. The Nasdaq Non-Financial Stock Index is an index
comprising all non-financial common shares traded on the Nasdaq National Market
and the Nasdaq Small-Cap Market. The S&P High Technology Composite Index is an
index comprising common shares of companies in the aerospace/defense,
communications equipment,
8
electronics and office equipment and supplies industries. The Nasdaq Stock
Market Index, the Nasdaq Non-Financial Stock Index and the S&P High Technology
Composite Index are calculated on a total return basis to include the
reinvestment of dividends.
- ---------------------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
Axsys Technologies, Inc.
Common Stock $100 $100 $160 $360 $590 $448
- ---------------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Index $100 $ 98 $138 $170 $209 $293
- ---------------------------------------------------------------------------------------------------------------------------
Nasdaq Non-Financial Index $100 $ 96 $134 $163 $191 $280
- ---------------------------------------------------------------------------------------------------------------------------
S&P High Technology
Composite Index $100 $115 $165 $232 $292 $503
- ---------------------------------------------------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10% of
a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") and the Nasdaq Stock Market
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and stockholders
owning more than 10% are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on the information furnished to the Company, all applicable Section 16(a)
filing requirements were complied with during the year ended December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company by each of the Company's
directors, each of the executive officers of the Company named in the Summary
Compensation Table below (the "Named Executive Officers"), and all of the
directors and executive officers of the Company as a group as of April 19, 1999.
SHARES BENEFICIALLY OWNED
DIRECTLY OR INDIRECTLY (1)
--------------------------------
NAME NUMBER PERCENT (2)
- ------------------------------------------------------- ---------- -----------
Stephen W. Bershad (3)................................. 1,261,791 30.6
David L. Concannon (4)................................. -- *
Raymond F. Kunzmann (4) (5)............................ 9,200 *
Kenneth F. Stern (6)................................... 13,200 *
Richard V. Howitt (7).................................. 41,560 1.0
Anthony J. Fiorelli, Jr. (8)........................... 16,785 *
Eliot M. Fried (9)..................................... 2,900 *
All officers and directors as a group (7 persons)...... 1,345,436 32.5
- --------
* Less than 1%.
(1) Except as set forth in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by such shareholder.
(2) Applicable ownership percentage is based on 4,107,135 shares of Common
Stock, consisting of 4,007,135 shares outstanding on April 19, 1999 and
100,000 shares issuable in connection with the acquisition of Teletrac.
See "Certain Transactions."
(3) Includes 12,980 shares of Common Stock underlying options which are
exercisable as of April 19, 1999 or within 60 days after such date. Mr.
Bershad owns 658,047 shares of Common Stock directly and 590,764 shares of
Common Stock indirectly through SWB Holding Corporation, of which he is the
sole shareholder and Chairman. Mr. Bershad's address is 910 Sylvan Avenue,
Suite 180, Englewood Cliffs, New Jersey 07632. Excludes 3,862 shares
representing his interest in the Axsys Technologies, Inc. 401(k) Retirement
Plan (the "401(k) Plan").
9
(4) David L. Concannon and Raymond F. Kunzmann, who are executive officers of
the Company, are the sole trustees of the 401(k) Plan and may be deemed to
beneficially own shares of Common Stock held by 401(k) Plan. Each of
Messrs. Concannon and Kunzmann disclaims beneficial ownership of such
401(k) Plan shares. See "Principal Stockholders."
(5) Represents 9,200 shares of Common Stock underlying options which are
exercisable as of April 19, 1999, or within 60 days after such date.
Excludes 2,189 shares representing his interest in the 401(k) Plan.
(6) Includes 7,200 shares of Common Stock underlying options which are
exercisable as of April 19, 1999, or within 60 days after such date.
Excludes 1,452 shares representing his interest in the 401(k) Plan.
(7) Represents (i) 22,260 of Common Stock received by Mr. Howitt in the
Teletrac acquisition, (ii) 17,500 shares representing Mr. Howitt's
proportional interest in 100,000 shares issuable to the Teletrac Minority
Shareholders and (iii) 1,800 shares of Common Stock underlying options
which are exercisable as of April 19, 1999, or within 60 days after such
date. See "Certain Transactions."
(8) Includes 2,900 shares of Common Stock underlying options which are
exercisable as of April 19, 1999, or within 60 days after such date.
(9) Represents 2,900 shares of Common Stock underlying options which are
exercisable as of April 19, 1999, or within 60 days after such date.
PRINCIPAL STOCKHOLDERS
The Company knows of no person who, as of April 19, 1999, beneficially
owned more than five percent of the Common Stock outstanding, except for Mr.
Bershad and except as set forth below.
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------------ ------------------ ----------------
Axsys Technologies, Inc. 401(k)
Retirement Plan (1)
Axsys Technologies, Inc.
910 Sylvan Avenue, Suite 180
Englewood Cliffs, NJ 07632...................... 203,986 5.1%
John W. Gildea (2)
Gildea Management Company
115 East Putnam Avenue
Greenwich, CT 06830............................ 378,718 9.5%
- --------
(1) Messrs. Concannon and Kunzmann are the sole trustees of the 401(k) Plan and
may be deemed to beneficially own such shares although each of them
disclaims beneficial ownership thereof.
(2) On February 16, 1999, Mr. Gildea, Network Fund III, Ltd ("Network Fund")
filed a report on Schedule 13G with the Securities and Exchange Commission
reflecting holdings of the Company's Common Stock. The amount shown
includes 353,718 shares of Common Stock beneficially owned by Network Fund
as to which shares Gildea Management Co., a Delaware corporation, has
dispositive power by virtue of an investment advisory agreement. Mr. Gildea
is the Chairman of the Board of Directors, Chief Executive Officer,
President and sole shareholder of Gildea Management Co., and as such may be
deemed the beneficial owner of the shares owned by Gildea Management Co.
Mr. Gildea also owns 25,000 shares of Common Stock in his individual
capacity.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None, other than as set forth in Item 11 above.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 28, 1999 AXSYS TECHNOLOGIES, INC.
(REGISTRANT)
By /s/ STEPHEN W. BERSHAD
-------------------------------------
STEPHEN W. BERSHAD
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER