SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material under Rule 14a-12
BLONDER TONGUE LABORATORIES, 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)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:____________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1. Amount Previously Paid:
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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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BLONDER TONGUE LABORATORIES, INC.
ONE JAKE BROWN ROAD
OLD BRIDGE, NEW JERSEY 08857
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 8, 2003
To Our Stockholders:
The 2003 Annual Meeting of Stockholders of Blonder Tongue
Laboratories, Inc. (the "Company") will be held at the Hyatt Regency New
Brunswick, 2 Albany Street, New Brunswick, New Jersey 08901, on May 8, 2003,
beginning at 10:00 a.m., local time, for the following purposes:
1. To elect three Directors constituting Class II of the Board of
Directors to serve until the 2006 Annual Meeting of Stockholders or
until their successors have been elected and qualified;
2. To consider and vote upon an amendment of the Company's Amended and
Restated 1996 Director Option Plan to increase the aggregate number of
shares which may be issued pursuant to options granted thereunder from
100,000 to 200,000;
3. To ratify the appointment of BDO Seidman, LLP, certified public
accountants, as the Company's independent auditors for the year ending
December 31, 2003; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof. In their discretion, the Proxies
are authorized to vote upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
A proxy, if properly executed and received in time for the voting,
will be voted in the manner directed therein. If no direction is made, such
proxy will be voted FOR all proposals therein.
The Board of Directors has fixed the close of business on March 21,
2003, as the record date for determining stockholders entitled to notice of the
meeting and to vote at such meeting or any adjournments thereof, and only
stockholders of record at the close of business on March 21, 2003, are entitled
to notice of and to vote at such meeting or any adjournments thereof.
Your attention is directed to the attached Proxy Statement for further
information regarding each proposal to be made.
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
Robert J. Palle, Jr., Executive Vice
President, Chief Operating Officer and
Secretary
April 8, 2003
PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING AND DESIRE TO
VOTE IN PERSON AT THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU UPON WRITTEN
NOTICE TO THE SECRETARY OF THE COMPANY REVOKING YOUR PROXY.
BLONDER TONGUE LABORATORIES, INC.
ONE JAKE BROWN ROAD
OLD BRIDGE, NEW JERSEY 08857
PROXY STATEMENT FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 8, 2003
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Blonder Tongue Laboratories,
Inc., a Delaware corporation (the "Company"), to be voted at the 2003 Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held at the
Hyatt Regency New Brunswick, 2 Albany Street, New Brunswick, New Jersey 08901 on
May 8, 2003, at 10:00 a.m., local time, and at any adjournment or adjournments
thereof.
All proxies delivered pursuant to this solicitation are revocable at
any time before they are exercised by written notice to the Secretary of the
Company, or by delivering a later dated proxy. Attendance at the Annual Meeting
will not, without delivery of the written notice described in the immediately
preceding sentence, constitute revocation of a proxy. The mailing address of the
principal executive offices of the Company is One Jake Brown Road, Old Bridge,
New Jersey 08857. The Company's telephone number is (732) 679-4000. This Proxy
Statement and the enclosed form of proxy will be mailed to each stockholder on
or about April 8, 2003, together with the Annual Report on Form 10-K for the
year ended December 31, 2002.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the 2006
Annual Meeting of Stockholders, in voting by proxy, stockholders may vote in
favor of all nominees or withhold their votes as to all nominees or withhold
their votes as to specific nominees. With respect to the other proposals to be
voted upon, stockholders may vote in favor of a proposal, against a proposal or
may abstain from voting. Stockholders should specify their choices on the
enclosed form of proxy. If no specific instructions are given with respect to
the matters to be acted upon, the shares represented by a signed proxy will be
voted FOR the election of all nominees, FOR the proposal to amend the Amended
and Restated 1996 Director Option Plan by increasing the number of shares of
Common Stock available for grants thereunder, and FOR the proposal to ratify the
appointment of BDO Seidman, LLP as independent auditors for the fiscal year
ending December 31, 2003. Directors will be elected by a plurality of the votes
cast by the holders of the shares of Common Stock voting in person or by proxy
at the Annual Meeting. Thus, abstentions will have no effect on the vote for
election of Directors. Approval of any other matters to come before the Annual
Meeting will require the affirmative vote of the holders of a majority of the
shares of Common Stock of the Company present in person or by proxy at the
Annual Meeting. Broker non-votes occur when a broker or other nominee holding
shares for a beneficial owner does not vote on a proposal because the beneficial
owner has not provided voting instructions and the broker does not have
discretionary authority to vote shares on the matter. Broker non-votes are not
considered to be shares "entitled to vote" (other than for quorum purposes),
will not be included in vote totals and will have no effect on the outcome of
any matters to be voted upon at the Annual Meeting.
Management is not aware at the date hereof of any matter to be
presented at the Annual Meeting other than the election of Directors and the
other proposals described in the attached Notice of Annual Meeting of
Stockholders. If any other matter is properly presented, the persons named in
the proxy will vote thereon according to their best judgement.
The expense of soliciting proxies for the Annual Meeting, including
the cost of preparing, assembling and mailing the notice, proxy and Proxy
Statement, will be paid by the Company. The solicitation will be made by use of
the mails, through brokers and banking institutions, and by officers and regular
employees of the Company. Proxies may be solicited by personal interview, mail,
telephone or facsimile transmission.
Only owners of record of the common stock, $.001 par value per share,
of the Company ("Common Stock") at the close of business on March 21, 2003 (the
"Record Date"), are entitled to notice of and to
vote at the Annual Meeting or any adjournments or postponements thereof. Each
owner of record on the Record Date is entitled to one vote for each share of
Common Stock of the Company so held. There is no cumulative voting. On the
Record Date, there were 7,525,229 shares of Common Stock issued, outstanding and
entitled to vote.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that
the Board shall consist of between five and eleven members, as determined from
time to time by the Board, divided into three classes as nearly equal in number
as possible. The size of the Board has currently been set at eight. The term of
the current Class I Directors expires at the 2005 Annual Meeting, the term of
the current Class II Directors expires at the 2003 Annual Meeting and the term
of the current Class III Directors expires at the 2004 Annual Meeting. The
successors to each class of Directors whose terms expire at an Annual Meeting
will be elected to hold office for a term expiring at the Annual Meeting of
Stockholders held in the third year following the year of their election.
The Directors whose terms will expire at the 2003 Annual Meeting of
Stockholders are Robert J. Palle, Jr., Gary P. Scharmett and James H. Williams,
all of whom have been nominated by the Board to stand for reelection as
Directors at the 2003 Annual Meeting of Stockholders, to hold office until the
2006 Annual Meeting of Stockholders and until their successors are elected and
qualified. Messrs. Palle, Scharmett and Williams have consented to serve for the
new terms, if elected.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR Robert J.
Palle, Jr., Gary P. Scharmett and James H. Williams as Class II Directors to
hold office until the 2006 Annual Meeting of Stockholders and until their
successors are elected and qualified. Proxies received by the Board of Directors
will be so voted unless stockholders specify in their proxy a contrary choice.
DIRECTORS AND EXECUTIVE OFFICERS
NOMINEE AND CONTINUING DIRECTORS
The following table sets forth the names and certain information about
each of the nominees for election as a Director of the Company and the
continuing Directors of the Company:
Director
Name Age Since
---- --- -----
Nominees for a three-year term expiring in
2006 (Class II Directors):
Robert J. Palle, Jr..................................57 1993
Gary P. Scharmett....................................47 1997
James H. Williams....................................71 1988
Directors not standing for election this year whose
terms expire in 2005 (Class I Directors):
John E. Dwight.......................................67 1995
Robert E. Heaton(1) (2) .............................73 1988
James A. Luksch......................................72 1988
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(1) Since May, 1998, a member of the Compensation Committee of the Board of
Directors.
(2) Since June, 2000, a member of the Audit Committee of the Board of Directors.
2
Directors not standing for election this year whose
terms expire in 2004 (Class III Directors):
Robert B. Mayer(1)(2)................................71 1995
James F. Williams(1)(3)..............................45 1993
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(1) Since December, 1995, a member of the Audit Committee of the Board of
Directors.
(2) Since December, 1995, a member of the Compensation Committee of the Board of
Directors.
(3) Since September, 1997, a member of the Compensation Committee of the Board
of Directors.
Set forth below is a brief summary of the recent business experience
and background of each nominee, continuing Director and executive officer:
JOHN E. DWIGHT became a Director of the Company on December 14, 1995,
immediately after the completion of the Company's initial public offering of
Common Stock. He was a Senior Vice President of the Company from September, 1997
through December, 2000. Mr. Dwight currently serves as Assistant to the
President of the Company. From 1992 until September, 1997, Mr. Dwight served as
President of Film Microelectronics, Inc., a designer and manufacturer of
microelectronic products.
ROBERT E. HEATON became a Director of the Company in March, 1998. He
also presently serves on the Board of Directors of Calstrip Steel Corp. and the
Board of Directors and Audit Committee of Bayou Steel Corp. From April, 1993
through April, 1995, Mr. Heaton served as Vice Chairman of the Stainless Steel
Group of Lukens, Inc. From April, 1981, through April, 1993, Mr. Heaton was
President and Chief Executive Officer of Washington Steel Corporation until it
was acquired by Lukens, Inc. Mr. Heaton is a past Chairman of the Specialty
Steel Industry of North America.
JAMES A. LUKSCH has been the President and Chief Executive Officer and
a Director of the Company since November, 1988. He became Chairman of the Board
in November, 1994.
ROBERT B. MAYER became a Director of the Company on December 14, 1995,
immediately after the completion of the Company's initial public offering of
Common Stock. From 1966 to 1991, he served in various executive positions,
including Director and Regional President of Norstar Bank, N.A. (formerly known
as Liberty National Bank & Trust Co.), a member of Fleet Financial Group. Mr.
Mayer has from time to time served as a part-time instructor at State University
of New York at Buffalo and is currently a Director and Chairman of People, Inc.
and a member of the Loan Committee, Erie County Regional Industrial Development
Corporation.
ROBERT J. PALLE, JR. has been the Executive Vice President, Chief
Operating Officer and Secretary of the Company since April, 1989. He became a
Director of the Company in September, 1993 and served as Interim Treasurer from
March through April 2001.
GARY P. SCHARMETT became a Director of the Company in December, 1997.
Since January, 1989, Mr. Scharmett has been a partner in the law firm of
Stradley, Ronon, Stevens & Young, LLP, the Company's outside counsel, and also
presently serves on the Board of Directors of that firm.
JAMES F. WILLIAMS became a Director of the Company in September, 1993.
He has also served as the President and a Director of Ontario Consolidated
Leasing, Inc., a heavy equipment leasing company, since March, 1997. Since
April, 1996, Mr. Williams has also been the Chairman of the Board and Chief
Executive Officer of Integrated Waste Services, Inc. Mr. Williams is the nephew
of Mr. James H. Williams.
JAMES H. WILLIAMS has been a Director of the Company since November,
1988, and served as Chairman of the Board from the Company's inception until
November, 1994. He presently serves as a consultant to the Company under a
written agreement.
3
OTHER EXECUTIVE OFFICERS
ERIC S. SKOLNIK, 38, has served as Chief Financial Officer, Treasurer
and Assistant Secretary of the Company since May, 2001. He served as Interim
Chief Financial Officer of the Company from January, 2001 through April, 2001.
He was hired by the Company in May, 2000, as Corporate Controller. From 1994
until May, 2000, Mr. Skolnik worked as a certified public accountant with BDO
Seidman, LLP, the Company's independent auditors.
NORMAN A. WESTCOTT, 62, has served as Senior Vice President -
Operational Services of the Company since October, 1999 and was a Vice President
of the Company from July, 1994 until October, 1999. He is responsible for
material purchasing and production.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the year ended December 31, 2002, there were 12 meetings of the
Company's Board of Directors and each Director attended (either in person or via
teleconference) at least 75% of the meetings held. The Board of Directors has
two standing committees: the Compensation Committee and the Audit Committee.
Compensation Committee. The Compensation Committee is currently
comprised of Robert B. Mayer, Robert E. Heaton and James F. Williams, all of
whom are non-employee Directors. The Compensation Committee is responsible to
determine compensation for the Company's executive officers and to administer
the Company's stock option plans, except for the Amended and Restated 1996
Director Option Plan. This committee held 6 meetings during 2002, all of which
were attended (either in person or via teleconference) by each committee member.
Audit Committee. The Audit Committee is currently comprised of James
F. Williams, Robert B. Mayer and Robert E. Heaton, all of whom are non-employee
Directors. The Audit Committee is responsible to select, retain or terminate the
engagement of independent public accountants, review the plans and results of
the audit engagement with the independent public accountants, discuss with the
independent public accountants all accounting policies and practices to be used
and alternative treatments of financial information discussed with management,
evaluate and approve non-audit services provided by the independent public
accountants, review the independence of the independent public accountants,
assure the regular rotation of the audit partners, consider the range of audit
and non-audit fees, review all financial and earnings information released to
any party, review with the appropriate parties the certifications required for
the quarterly reports on Form 10-Q and annual reports on Form 10-K, and review
the adequacy of the Company's internal accounting controls. This committee held
4 meetings during 2002, all of which were attended (either in person or via
teleconference) by each committee member.
The members of the Audit Committee are independent, as defined in the
American Stock Exchange listing standards. The Board of Directors adopted a
written charter for the Audit Committee in June, 2000 which was amended by the
Board of Directors in March, 2003. The Audit Committee reviews and reassesses
the charter for adequacy on an annual basis. A copy of the Audit Committee's
current charter, as amended, is attached to this Proxy Statement as Exhibit A.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has:
o reviewed and discussed the audited financial statements for the
fiscal year ended December 31, 2002 with the Company's
management;
o discussed with the Company's independent auditors the matters
required to be discussed by Statement on Accounting Standards No.
61, as the same was in effect on the date of the Company's
financial statements;
o received the written disclosures and the letter from the
Company's independent auditors required by Independence Standards
Board Standard No. 1 (Independence Discussions
4
with Audit Committees), as the same was in effect on the date of
the Company's financial statements; and
o discussed with the Company's independent auditors their
independence from the Company and its management.
Based on the review and discussions referred to in the items above,
the Audit Committee recommended to the Board of Directors that the audited
financial statements for the fiscal year ended December 31, 2002 be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
THE AUDIT COMMITTEE
James F. Williams, Chairman
Robert B. Mayer
Robert E. Heaton
DIRECTORS' COMPENSATION
During calendar year 2002, each non-employee Director of the Company
(other than James H. Williams) received an annual retainer of $15,000, payable
quarterly, a fee of $1,000 for each Board meeting attended in person ($500 if
attendance was telephonic) and a fee of $600 for each committee meeting attended
in person ($300 if attendance was telephonic or if attending on the same date as
a Board meeting). Each Director was also reimbursed for certain travel, lodging
and related expenses incurred in connection with attendance at Board and
committee meetings. During calendar year 2002, Messrs. Luksch, Palle and Dwight
did not receive any separate compensation for serving on the Board of Directors
or any committees thereof.
Effective January 1, 2000, the Company enacted a new policy requiring
each of the Company's Directors to maintain an investment in the Company's
Common Stock during his or her entire tenure as a Director equal to at least
$25,000, calculated by taking the greater of (i) the amount paid for such stock
by the Director and (ii) the highest fair market value of such stock.
Non-employee directors of the Company are encouraged to purchase Company Common
Stock equal to or exceeding one year's annual retainer during any three-year
period until they meet this requirement.
In May, 1998, the stockholders of the Company approved the adoption of
the Company's Amended and Restated 1996 Director Option Plan (the "1996 Plan").
Under the 1996 Plan, Directors who are not currently employed by the Company or
any subsidiary of the Company and who have not been so employed within the past
six months are eligible to receive options from time to time to purchase a
number of shares of Common Stock as determined by the Board. Proposal No. 2 of
this Proxy Statement, beginning on page 13, includes a summary description of
the 1996 Plan.
On February 7, 2002, each of the Company's non-employee Directors
other than James H. Williams was granted an option under the 1996 Plan to
purchase 5,000 shares of Common Stock at an exercise price of $3.40 per share.
The options vested on the first anniversary of the date of grant.
The Company is party to a consulting and non-competition agreement
with James H. Williams for the purpose of obtaining advice and counseling from
Mr. Williams concerning strategic planning and financial and business matters.
Under this agreement, as amended, Mr. Williams is obligated to make himself
available to the Company for up to 25 hours per month, in addition to time spent
attending to his duties as a member of the Board of Directors of the Company.
Mr. Williams is currently paid $168,525 per year for his services under this
agreement, subject to adjustment on a basis consistent with adjustments to
compensation to the Company's senior management. The agreement provides a cap of
$200,000 on payments to be made thereunder during any calendar year. The initial
term of this agreement expires on December 31, 2004 and automatically renews
thereafter for successive one year terms (subject to termination at the end of
any renewal term on at least 90 days' notice). Payments to Mr. Williams under
this consulting agreement are in lieu of any other payments in connection with
his services as a Director or committee member, other than the reimbursement of
certain travel, lodging and related expenses incurred in connection with
attendance at Board and committee meetings.
5
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 ten
percent of the Common Stock, to file with the Securities and Exchange Commission
(the "Commission") and the American Stock Exchange, initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, Directors and greater than ten percent stockholders
(collectively, "Reporting Persons") are additionally required to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations of the
Reporting Persons that no other reports were required with respect to fiscal
2002, all Section 16(a) filing requirements applicable to the Reporting Persons
were complied with on a timely basis in fiscal 2002.
6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of February 28, 2003 by
(i) each person who is known by the Company to beneficially own more than five
percent of the Company's Common Stock, (ii) each of the Company's Directors,
including nominee Directors, (iii) each of the executive officers named in the
Summary Compensation Table and (iv) all executive officers and Directors as a
group. Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
PERCENT OF CLASS
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIALLY
BENEFICIAL OWNER(1)(2) BENEFICIAL OWNERSHIP (1) OWNED
---------------------- ------------------------ -----
James A. Luksch................................ 1,597,392 (3) 21.22%
Robert J. Palle, Jr............................ 1,191,433 (4) 15.82%
Norman A. Westcott............................. 76,839 (5) 1.01%
Daniel J. Altiere.............................. 70,839 (6) *
Eric S. Skolnik................................ 15,916 (7) *
John E. Dwight................................. 84,283 (8) 1.11%
James H. Williams.............................. 1,528,854 (9) 20.31%
James F. Williams.............................. 91,173 (9) 1.21%
Gary P. Scharmett.............................. 38,300 (10) *
Robert B. Mayer................................ 27,000 (11) *
Robert E. Heaton............................... 25,000 (12) *
All Directors and executive
officers as a group (11 persons)............. 4,694,856 59.88%
----------------
* Less than 1%
(1)Beneficial ownership as of February 28, 2003 for each individual includes
shares subject to options held by such persons (but not held by any other
person) which are exercisable within 60 days after such date. Beneficial
ownership is determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to securities.
This table contains information furnished to the Company by the respective
stockholders or contained in filings made with the Commission.
(2) The address for each beneficial owner is c/o Blonder Tongue Laboratories,
Inc., One Jake Brown Road, Old Bridge, NJ 08857.
(3) Includes 10,927 shares of Common Stock owned of record by two trusts of
which Mr. Luksch is the trustee, 9 shares of Common Stock owned of record by
an estate of which Mr. Luksch is the executor and 200,000 shares of Common
Stock held of record by Mr. Luksch's spouse, as to which Mr. Luksch
expressly disclaims beneficial ownership.
(4) Includes 200,000 shares owned of record by a limited liability company of
which Mr. Palle and his wife are the sole members.
(5) Includes 65,033 shares of Common Stock underlying options granted by the
Company.
(6) Includes 70,839 shares of Common Stock underlying options granted by the
Company.
(7) Includes 15,666 shares of Common Stock underlying options granted by the
Company.
(8) Includes 58,283 shares of Common Stock underlying options granted by the
Company.
(9) James H. Williams has granted to James F. Williams the option to purchase
52,173 shares of Company Common Stock which he owns. These shares are
included in the beneficial ownership of both Directors. Beneficial ownership
for James F. Williams also includes 24,000 shares of Common Stock underlying
options granted by the Company.
(10)Includes 32,000 shares of Common Stock underlying options granted by the
Company.
(11)Includes 24,000 shares of Common Stock underlying options granted by the
Company, 500 shares of Common Stock held of record by Mr. Mayer's adult son,
as to which Mr. Mayer expressly disclaims beneficial ownership and 200
shares of Common Stock held of record by Mr. Mayer's spouse.
(12)Includes 22,000 shares of Common Stock underlying options granted by the
Company.
7
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth certain summary information concerning
compensation paid or accrued for services rendered to the Company in all
capacities for the year ended December 31, 2002 and two prior fiscal years with
respect to the Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company who served as executive officers
during 2002 and whose salary plus bonus during 2002 exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
------------------ ---- ---------- -------- ----------- ------------------
James A. Luksch........................ 2002 341,000 0 --- 11,416
President and Chief Executive 2001 341,000 (2) 0 --- 8,856
Officer 2000 325,000 0 --- 7,611
Robert J. Palle, Jr.................... 2002 266,000 0 --- 17,135
Executive Vice President, Chief 2001 266,000 (3) 0 --- 12,358
Operating Officer and Secretary 2000 253,000 0 --- 3,483
Daniel J. Altiere .................... 2002 115,000 0 25,000 3,977
Senior Vice President(4) 2001 162,081 0 12,000 5,159
2000 154,056 0 10,000 4,868
Norman A. Westcott..................... 2002 130,000 0 25,000 5,630
Senior Vice President - Operational 2001 129,331 0 12,000 5,015
Services 2000 124,427 0 10,000 4,996
Eric S. Skolnik........................ 2002 110,000 0 25,000 3,749
Vice President, Chief Financial 2001 104,146 0 8,000 3,345
Officer and Treasurer 2000 54,135 (5) 0 3,000 32
----------
(1) Represents reimbursement of life insurance premiums, matching contributions
paid by the Company under its 401(k) plan and costs of preparations of
individual tax returns. Amounts paid in 2002 for life insurance were $1,391,
$1,085, $449, $469 and $530; matching contributions under the Company's
401(k) plan were $5,500, $5,500, $3,300, $3,508 and $3,900; and amounts paid
for preparation of tax returns were $4,525, $10,550, $0, $0 and $1,200 for
Messrs. Luksch, Palle, Skolnik, Altiere and Westcott, respectively. Amounts
paid in 2001 for life insurance were $1,236, $258, $54, $396 and $396;
matching contributions under the Company's 401(k) plan were $5,250, $5,250,
$3,300, $4,763 and $3,519; and amounts paid for preparation of tax returns
were $2,370, $12,850, $0, $0, and $1,100 for Messrs. Luksch, Palle, Skolnik,
Altiere, and Westcott, respectively. Amounts paid in 2000 for life insurance
were $1,136, $258, $54, $396, $396; matching contributions under the
Company's 401(k) plan were $5,250, $2,100, $0, $4,472 and $3,500; and
amounts paid for preparation of tax returns were $1,125, $1,125, $0, $0, and
$1,000 for Messrs. Luksch, Palle, Skolnik, Altiere and Westcott,
respectively.
(2) Mr. Luksch's accrued annual salary for the period ending December 31, 2001
was $341,000, however, due to timing issues the actual cash paid for the
period ending December 31, 2001 was $325,000. The unpaid balance was paid to
Mr. Luksch during 2002.
(3) Mr. Palle's accrued annual salary for the period ending December 31, 2001
was $266,000, however, due to timing issues the actual cash paid for the
period ending December 31, 2001 was $253,000. The unpaid balance was paid to
Mr. Palle during 2002.
(4) Mr. Altiere resigned as a Senior Vice President of the Company in July,
2002, but is still employed by the Company in a non-executive position.
(5) Represents compensation paid to Mr. Skolnik from the commencement of his
employment at the Company in May 2000 through December 31, 2000.
8
STOCK OPTIONS
The following table provides information with respect to the named executive
officers concerning options granted to them during fiscal year 2002.
OPTION GRANTS IN 2002
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SHARES OPTIONS EXERCISE ANNUAL RATES FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (#) IN 2002(%) ($/SH.) DATE 5% 10%
---- ----------- ---------- ------- ---- -- ---
James A. Luksch......... --- --- --- --- --- ---
Robert J. Palle, Jr..... --- --- --- --- --- ---
Daniel J. Altiere....... 25,000(1) 8.26 3.43 3/26/12 53,928 136,663
Norman A. Westcott...... 25,000(1) 8.26 3.43 3/26/12 53,928 136,663
Eric S. Skolnik......... 25,000(1) 8.26 3.43 3/26/12 53,928 136,663
----------
(1) One-third of the options granted vest on March 26th in each of 2003, 2004
and 2005.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the named
executive officers concerning the exercise of options during fiscal year 2002
and unexercised options held as of December 31, 2002.
AGGREGATED OPTION EXERCISES IN 2002
AND OPTION VALUES AS OF DECEMBER 31, 2002
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS AT MONEY OPTIONS AT
ON EXERCISE(#) REALIZED($) DECEMBER 31, 2002(#) DECEMBER 31, 2002($)(1)
-------------- ----------- ---------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
James A. Luksch......... --- --- --- --- --- ---
Robert J. Palle, Jr..... --- --- --- --- --- ---
Daniel J. Altiere....... --- --- 58,506 36,333 --- ---
Norman A. Westcott...... --- --- 52,700 36,333 --- ---
Eric S. Skolnik......... --- --- 4,667 31,333 --- ---
----------
(1) These columns represent the difference on December 31, 2002 between the
closing market price of the Company's Common Stock and the option exercise
price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently
consists of James F. Williams, Robert B. Mayer and Robert E. Heaton. No member
of the Compensation Committee was an officer or employee of the Company during
fiscal year 2002. None of the executive officers of the Company has served on
the board of directors, the compensation committee or any other board committee
performing equivalent functions of any other entity, any of whose officers
served either on the Board of Directors or the Compensation Committee of the
Company.
EMPLOYMENT CONTRACTS
In August, 1995, Mr. Altiere and the Company entered into an
employment agreement which provided that Mr. Altiere was entitled to receive his
base salary for one year following termination of his employment by the Company
without cause. Upon his disability, Mr. Altiere was also entitled to receive his
base annual salary for one year. In July, 2002, Mr. Altiere requested and was
granted a reduction in his work schedule. At the same time, Mr. Altiere resigned
from his position as a Senior Vice President of the Company and accepted a
non-executive position with the Company. His employment agreement was amended to
reflect such changes.
9
EQUITY COMPENSATION PLANS
The following table provides certain summary information as of
December 31, 2002, concerning compensation plans (including individual
compensation arrangements) of the Company under which shares of the Company's
Common Stock may be issued.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS(#) WARRANTS AND RIGHTS($) THE FIRST COLUMN)(#)
------------- ---------------------- ---------------------- --------------------
Equity Compensation Plans Approved 1,212,611 $5.23 68,328(1)
By Securities Holders
Equity Compensation Plans Not 160,000(2) $13.79 0
Approved By Securities Holders
Total 1,372,611 $6.23 68,328
(1) Includes 25,000 shares of the Company's Common Stock available for issuance
as restricted stock under the 1995 Long Term Incentive Plan (the "1995
Plan").
(2) The equity compensation plans not approved by the security holders are as
follows:
(a) On March 26, 1998 the Company issued a warrant to purchase 150,000
shares of the Company's Common Stock to Scientific-Atlantic, Inc. ("SAI"),
as part of the purchase price paid by the Company for the purchase of
certain assets and technology rights of the interdiction business of SAI.
The exercise price of the warrant was $14.25 per share and it expired March
26, 2003.
(b) In 1996 the Board of Directors granted a non-plan, non-qualified option
for 10,000 shares of the Company's Common Stock to Gary P. Scharmett at an
original exercise price of $10.25 per share, which was repriced to $6.88 per
share on September 17, 1998. The option expires in 2006. At the time of the
grant, Mr. Scharmett was not a director of the Company.
10
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION POLICIES
GENERAL
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The objective of the Company
in setting executive compensation has been to attract, retain and motivate
qualified executives to manage the Company's business and affairs so as to
foster sales and earnings growth, achieve significant current profits and
maximize stockholder value. Executive compensation in the aggregate is made up
principally of annual base salary, bonus, and awards of stock options under the
Company's 1995 Long Term Incentive Plan.
Generally, annual salary adjustments and bonuses for executive
officers other than Messrs. Luksch and Palle have been established by Mr. Luksch
with the concurrence of the Compensation Committee. The annual salary
adjustments and bonuses for Messrs. Luksch and Palle are determined by the
Compensation Committee, subject to Board approval. An annual performance
evaluation of each executive officer is conducted, upon which a salary
adjustment is determined. The performance evaluation focuses on the executive's
performance during the past year of the responsibilities of his position, the
executive's improvement in areas where any deficiencies may have been noted in
the past, and the executive's achievement of any specific goals and objectives
which may have been established for such executive, including achievement of
budget objectives. The Company's overall profit for the fiscal year and the
executive's individual contribution to that profit are also considered. As is
typical for most corporations, the assessment of individual performance
contributions is in most cases subjective and not conditioned upon the
achievement of any specific, pre-determined performance targets.
In February, 1997, the Compensation Committee implemented the
Executive Officer Bonus Plan ("Executive Bonus Plan"). The Compensation
Committee believes that a combination of base salary, cash bonus awards under
the Executive Bonus Plan and the award of stock options and/or restricted stock
awards will support the short-term and long-term strategic objectives of the
Company and will reward individual performance and the value created for
stockholders. Cash bonus awards under the Executive Bonus Plan are paid to
officers during a particular fiscal year based upon and relating to the
financial performance of the Company during the prior fiscal year. During the
first quarter of each fiscal year of the Company, the Compensation Committee
designates which of the Company's executive officers are to participate in the
Executive Bonus Plan for that year. Also during the first quarter, the
Compensation Committee establishes one or more objective performance goals for
each participant, together with a maximum dollar bonus opportunity for the
participant and a formula to determine bonus payments based on the achievement
of the goal(s). In no event may the bonus for any participant exceed 100% of
such participant's base salary.
The performance goals are expressed in terms of (a) one or more
corporate or divisional earnings-based measures (which may be based on net
income, operating income, cash flows, or any combination thereof) and/or (b) one
or more corporate or divisional sales-based measures. Each such goal may be
expressed on an absolute and/or relative basis, may employ comparisons with past
performance of the Company (including one or more divisions) and/or the current
or past performance of other companies, and in the case of earnings-based
measures, may employ comparisons to capital, stockholders' equity and shares
outstanding. Performance goals need not be uniform among participants.
After the Company's financial results for a fiscal year have been
determined, the Compensation Committee certifies the level of performance goal
attainment and the potential bonus payment for each participant. The
Compensation Committee has full authority to reduce the amount that would
otherwise be payable to any participant for a fiscal year.
For 2002, bonuses under the Executive Bonus Plan were only to be
awarded if the Company's diluted earnings per share in 2002 were at least equal
to 120% of its average annual diluted earnings per share for calendar years
1999, 2000 and 2001. This threshold requirement for the payment of bonuses was
not met for fiscal 2002, therefore no bonuses were awarded under the Executive
Bonus Plan. Each of the named executive officers in the Summary Compensation
Table herein was eligible to participate in the Executive Bonus Plan during
2002. If awarded, bonuses earned during the 2002 fiscal year under the Executive
Bonus Plan (included as bonuses earned during 2002 in the Summary Compensation
Table herein but payable in 2003) were to be based on a percentage of
11
each recipient's annual salary for 2002 equal to the percentage increase in the
Company's diluted earnings per share for fiscal 2002 over the average annual
diluted earnings per share for calendar years 1999, 2000 and 2001, multiplied by
a multiplier between 1.0 and 1.5 determined on an individual basis by the
Compensation Committee, subject to a maximum amount equal to 100% of such
recipient's 2002 base annual salary.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Luksch has been President and Chief Executive Officer of the
Company since it commenced operations in 1988. His compensation includes the
same elements and performance measures as the compensation of the Company's
other executive officers.
Mr. Luksch's annual salary, which had been $341,000 since January
2001, was increased to $365,000 effective January 1, 2003. This increase was
based on Mr. Luksch's leadership and efforts over the last two years that
enabled the Company to remain profitable despite a difficult marketplace and his
vision in seeking additional sources of revenue in a down market. The amount of
the new salary was determined following an analysis of the range of compensation
paid to chief executive officers of similar-sized manufacturing companies
located in the Northeastern United States. Mr. Luksch's compensation, as
adjusted, falls within the middle of the range. Mr. Luksch received no bonus and
no stock options during fiscal year 2002. The Committee believes that Mr.
Luksch's overall compensation is fair and reasonable. This assessment is a
subjective determination and is not quantitatively related to the Company's
performance.
THE COMPENSATION COMMITTEE
Robert B. Mayer, Chairman
Robert E. Heaton
James F. Williams
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total return during the period
from December 31, 1997 to December 31, 2002, for the Company's Common Stock, the
AMEX Market Value Index and the Dow Jones Electrical Components & Equipment
Industry Group Index. This graph assumes the investment of $100 in the Company's
Common Stock, the stock in the companies presented in the AMEX Market Value
Index and the stock in the companies comprising the Dow Jones Electrical
Components & Equipment Industry Group Index on January 1, 1998 and the
reinvestment of all dividends.
[Line graph appears here depicting the cumulative total shareholder return of
$100 invested in the Common Stock of the Company as compared to $100 invested in
the AMEX Market Value Index and the Dow Jones Electrical Components & Equipment
Industry Group Index. Line graph begins at December 31, 1997 and plots the
cumulative return at December 31, 1998, 1999, 2000, 2001 and 2002. The plot
points are provided below.]
-------------------------------------------------------------------------------
12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002
-------------------------------------------------------------------------------
BDR 100.00 53.28 40.21 25.13 29.68 12.87
-------------------------------------------------------------------------------
AMEX 100.00 100.64 128.09 131.13 123.81 120.42
-------------------------------------------------------------------------------
DJEI 100.00 110.45 161.07 98.71 69.42 41.15
-------------------------------------------------------------------------------
12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The President's daughter and son-in-law, Emily Nikoo and Nezam Nikoo,
are a director of marketing and senior engineer for the Company, respectively.
In addition, Ms. Nikoo heads the Company's task force for the promotion of its
interdiction product line. The annual compensation for Ms. Nikoo in 2002 was
$115,500. The annual compensation for Mr. Nikoo in 2002 was $116,500. In 2002,
Ms. Nikoo was granted options under the 1995 Plan to purchase 17,500 shares of
Common Stock at a price of $3.43 per share, vesting over three years at
one-third per year, commencing on March 26, 2003. In 2002, Mr. Nikoo was granted
options under the 1995 Plan to purchase 17,500 shares of Common Stock at a price
of $3.43 per share, vesting over three years at one-third per year, commencing
on March 26, 2003.
One of the Company's directors, Gary P. Scharmett, is a partner at the
law firm of Stradley, Ronon, Stevens & Young, LLP, which serves as the Company's
outside counsel. Mr. Scharmett also presently serves on the Board of Directors
of that firm.
As of March 13, 2003, James A. Luksch, President, Chief Executive
Officer and Director of the Company, was indebted to the Company in the amount
of $200,872, for which no interest has been charged. This indebtedness arose
from a series of cash advances to Mr. Luksch, the latest of which was advanced
in February, 2002. The largest aggregate amount of indebtedness during the 2002
fiscal year was $200,872.
PROPOSAL NO. 2 - AMENDMENT OF AMENDED AND RESTATED
1996 DIRECTOR OPTION PLAN
At the Annual Meeting, stockholders will be presented with a proposal
to increase the number of shares subject to the Company's Amended and Restated
1996 Director Option Plan (the "1996 Plan"), by 100,000 shares. Previously,
stockholders have approved a total of 100,000 shares of Common Stock for
issuance under the 1996 Plan. Options to purchase a total of 92,000 shares of
Common Stock at exercise prices ranging from $2.88 to $7.03 per share have been
granted and remain outstanding under the 1996 Plan as of February 28, 2003. The
full text of the proposed amendment to the 1996 Plan is set forth in Exhibit B
to this Proxy Statement. The foregoing description of such proposed amendment is
qualified in its entirety by reference to the text of Exhibit B hereto.
The Board of Directors has sought to employ the 1996 Plan to advance
the interests of the Company and its stockholders by enabling the Company to
attract and retain the services of experienced and knowledgeable non-employee
directors and to provide an incentive to such directors to promote the long-term
success of the Company and maximize stockholder value. Because options granted
under the 1996 Plan are granted at the fair market value of the Common Stock on
the date of grant, any value which ultimately accrues to optionees from such
options is based entirely on the Company's performance following the date of
grant, as perceived by stockholders who establish the price for the Company's
shares. The proposed amendment increasing the number of shares subject to the
1996 Plan will permit further grants under such plan, thereby allowing the
Company to continue creating incentives for its non-employee directors to
enhance stockholder value. Accordingly, the Board of Directors believes it is in
the best interests of the Company and its stockholders to amend the 1996 Plan as
described above. The additional shares of Common Stock will be used to make
additional grants of stock options from time to time to persons eligible to
receive such options.
SUMMARY DESCRIPTION OF THE 1996 PLAN
The 1996 Plan was adopted by the Board of Directors in December 1997
and approved by the stockholders on May 7, 1998. It provides for grants of
nonqualified stock options to directors who are not currently and have not been
employed by the Company at any time within the last 6 months. There are
currently four non-employee directors that are eligible to participate in the
1996 Plan. The 1996 Plan is administered by the Board of Directors, which has
the ability to determine for each stock option granted, the optionee to receive
the option and the terms of the option, including the number of shares subject
to the option, vesting schedule and exercise period. The exercise price of stock
options granted under the 1996 Plan must be the fair market value of the Common
Stock on the date of grant and no director may be granted options to purchase
more than 5,000 shares of Common Stock in any one calendar year. The options
will be granted to directors at no cost to the directors.
13
Generally, options granted under the 1996 Plan will be exercisable
over the term of the option, as provided by the Board of Directors. No option
granted under the 1996 Plan may have a term of greater than 10 years. Upon any
merger or consolidation, if the Company is not the surviving corporation, all
outstanding options granted shall terminate unless such options are assumed or
other options are substituted therefor by the successor corporation, or the
vesting of such shares is accelerated by the Board of Directors.
The Board of Directors may, without stockholder approval, terminate or
modify the 1996 Plan at any time, including modifications to make certain
administrative changes such as changes imposed by changing tax laws. The Board
of Directors may also, without shareholder approval, modify the exercise price
of any options previously granted under the 1996 Plan. The Board of Directors
may not, without stockholder approval, increase the total number of shares of
Common Stock subject to the 1996 Plan, materially increase the benefits accruing
to persons granted options under the 1996 Plan or continue the 1996 Plan in
effect beyond January 2, 2006, its normal expiration date.
On March 28, 2003, the closing price of the Common Stock on the
American Stock Exchange was $1.35 per share.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 1996 PLAN
The federal income tax consequences of participation in the 1996 Plan
are complex and subject to change. The following discussion is only a summary of
the general rules applicable to the 1996 Plan. All participants have been and
are encouraged to consult their own tax advisors since a taxpayer's particular
situation may be such that some variation of the rules described below will
apply.
Stock options granted under the 1996 Plan do not qualify as "incentive
stock options" and will not qualify for any special tax benefits to the
optionee. An optionee generally will not recognize any taxable income at the
time he or she is granted a nonqualified option. However, upon its exercise, the
optionee will recognize ordinary income for federal tax purposes measured by the
excess of the then fair market value of the shares over the exercise price. The
income realized by the optionee will be subject to income and self-employment
taxes.
The optionee's basis for determination of gain or loss upon the
subsequent disposition of shares acquired upon the exercise of a nonqualified
stock option will be the amount paid for such shares plus any ordinary income
recognized as a result of the exercise of such option. Upon disposition of any
shares acquired pursuant to the exercise of a nonqualified stock option, the
difference between the sale price and the optionee's basis in the shares will be
treated as a capital gain or loss and generally will be characterized as a
long-term capital gain or loss if the shares have been held for more than one
year at their disposition.
In general, there will be no federal income tax deduction allowed to
the Company upon the grant or termination of a nonqualified stock option or a
sale or disposition of the shares acquired upon the exercise of a nonqualified
stock option. However, upon the exercise of a nonqualified stock option, the
Company will be entitled to a deduction for federal income tax purposes equal to
the amount of ordinary income that an optionee is required to recognize as a
result of the exercise, provided that the deduction is not otherwise disallowed
under the Internal Revenue Code of 1986, as amended.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE PROPOSED AMENDMENT OF
THE 1996 PLAN
The Board of Directors of the Company recommends that stockholders
vote FOR the proposal to amend the 1996 Plan to increase the number of shares
available for issuance thereunder from 100,000 shares to 200,000 shares. Proxies
received by the Board of Directors will be so voted unless stockholders specify
in their proxies a contrary choice.
14
PROPOSAL NO. 3 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has selected BDO Seidman, LLP to serve as independent auditors
of the Company for the fiscal year ending December 31, 2003. BDO Seidman, LLP
was the Company's independent auditors for the fiscal year ended December 31,
2002 and is considered by management of the Company to be well qualified. The
Company has been advised by that firm that neither it nor any member thereof has
any financial interest, direct or indirect in the Company or any of its
subsidiaries, in any capacity. One or more representatives of BDO Seidman, LLP
is expected to be present at this year's Annual Meeting of Stockholders with an
opportunity to make a statement if he or she desires to do so and to answer
appropriate questions with respect to that firm's examination of the Company's
financial statements and records for the fiscal year ended December 31, 2002.
Although the submission of the appointment of BDO Seidman, LLP is not
required by the By-Laws of the Company, the Board is submitting it to the
stockholders to ascertain their views. If the stockholders do not ratify the
appointment, the Board will not be bound to seek other independent auditors for
2003, but the selection of other independent auditors will be considered in
future years.
AUDIT AND OTHER FEES PAID TO INDEPENDENT AUDITORS
Audit Fees
For the fiscal year ended December 31, 2002, the aggregate fees billed
by BDO Seidman, LLP for professional services rendered for the audit of the
Company's annual financial statements and the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q filed during
the fiscal year ended December 31, 2002 were approximately $162,000.
Financial Information Systems Design and Implementation Fees
The Company did not engage BDO Seidman, LLP to provide advice and
related services regarding financial information systems design and
implementation during the fiscal year ended December 31, 2002.
All Other Fees
For the fiscal year ended December 31, 2002, the aggregate fees
incurred by the Company to BDO Seidman, LLP for all other services (other than
audit services and financial information systems design and implementation
services) were approximately $129,000. These fees include approximately $101,000
for tax services and approximately $16,000 for audits of the Company's 401(k)
and pension plans.
The audit committee has reviewed the non-audit services currently
provided by the Company's independent auditors and has considered whether the
provision of such services is compatible with maintaining the independence of
such independent auditors.
RECOMMENDATION OF THE BOARD CONCERNING THE RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors of the Company recommends that stockholders
vote FOR the ratification of the appointment of BDO Seidman, LLP as the
Company's independent auditors for the 2003 fiscal year. Proxies received by the
Board of Directors will be so voted unless stockholders specify in their proxies
a contrary choice.
OTHER BUSINESS
Management knows of no other matters that will be presented at the
Annual Meeting of Stockholders. However, if any other matter properly comes
before the meeting, or any adjournment or postponement thereof, it is intended
that proxies in the accompanying form will be voted in accordance with the
judgment of the persons named therein.
15
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be included in the Company's proxy
statement for presentation at the 2004 Annual Meeting of Stockholders pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, must be
received by the Company's Chief Financial Officer at One Jake Brown Road, Old
Bridge, New Jersey 08857 on or before December 8, 2003, to be eligible for
inclusion in such proxy statement.
If notice of a stockholder proposal intended to be presented at the
2004 Annual Meeting of Stockholders is not received by the Company on or before
February 21, 2004 (whether or not the stockholder wishes the proposal to be
included in the proxy statement for such annual meeting), the Company (through
management proxy holders) may exercise discretionary voting authority on such
proposal when and if the proposal is raised at the annual meeting without any
reference to the matter in the proxy statement.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2002 ACCOMPANIES THIS PROXY STATEMENT. THE COMPANY WILL
FURNISH TO EACH PERSON WHOSE PROXY IS BEING SOLICITED, UPON WRITTEN REQUEST, ANY
EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON THE PAYMENT, IN
ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING SUCH EXHIBIT(S).
REQUESTS FOR COPIES OF SUCH EXHIBIT(S) SHOULD BE DIRECTED TO ERIC SKOLNIK, CHIEF
FINANCIAL OFFICER, AT THE COMPANY'S PRINCIPAL ADDRESS AS SHOWN ON THE COVER PAGE
OF THIS PROXY STATEMENT.
By Order of the Board of Directors
James A. Luksch
Chairman of the Board, Chief Executive
Officer and President
Date: April 8, 2003
Old Bridge, New Jersey
16
EXHIBIT A
BLONDER TONGUE LABORATORIES, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Company to any governmental body
or the public; the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established and may establish from time to time; the Company's auditing,
accounting and financial reporting practices generally; and all potential
conflict of interest situations, including those arising from any related-party
transactions. Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to, the
Company's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting practices and internal control system.
o Review and appraise the qualifications and performance of the
Company's independent accountants and internal auditing department.
o Provide an open avenue of communication among the independent
accounts, financial and senior management, the internal auditing
department and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by being
authorized and directed to do the following:
(a) Select, retain or terminate external auditors and, in connection
therewith, annually to receive, evaluate and discuss with the external
auditors a formal written report from them setting forth all
consulting or other relationships with the Company, which shall
include specific representations as to their objectivity and
independence as required by Independence Standards Board Statement No.
1;
(b) To meet with the Company's independent accountants, including private
meetings as necessary, (i) to review the arrangements for and scope of
the annual audit and any special audits; (ii) to discuss any matters
of concern relating to the Company's financial statements, including
any adjustments to such statements recommended by the auditors, or
other results of said audit(s); (iii) to consider the auditors'
comments with respect to the Company's financial policies, procedures
and internal accounting controls and management's responses thereto;
and (iv) to review the form of opinion the independent accountants
propose to render to the Board of Directors and shareholders;
(c) To review as a Committee with management and the independent
accountants the audited financial statements to be included in the
Company's Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, and the matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61;
(d) To review as a Committee, or through the Committee chairman, with the
independent accountants the Company's interim financial results to be
included in the Company's quarterly reports on Form 10-Q to be filed
with the Securities and Exchange Commission and the matters required
to be discussed by SAS No. 61;
(e) To consider the effect upon the Company of any changes in accounting
principles or practices proposed by management or the independent
accountants;
(f) To review the fees charged by the independent accountants for audit
and non-audit services;
A-1
(g) To report its activities to the full Board of Directors on a regular
basis and to make such recommendations with respect to the above and
other matters as the Committee may deem necessary or appropriate;
(h) To act as a liaison between the Company's independent accountants and
the full Board of Directors;
(i) To review, evaluate and approve any non-audit services the independent
auditor may perform for the Company and disclose such approved
non-auditor services in periodic reports to stockholders;
(j) As required by law, the Audit Committee shall assure the regular
rotation of the lead and concurring audit partner, and consider
whether there should be a regular rotation of the auditor itself;
(k) To review and discuss with the independent auditor all necessary
accounting policies and practices to be used, all alternative
treatments of financial information within generally accepted
accounting principles that have been discussed with management and the
risks of using such alternative treatments, and other material written
communications between the independent auditor and management;
(l) To review and discuss the types of presentation and information to be
included in earnings press releases, and any additional financial
information and earning guidance generally provided to analysts and
rating agencies;
(m) To review and discuss the form and content of the certification
documents for the quarterly reports on Form 10-Q and the annual report
on Form 10-K with the general auditor, the independent auditor, the
chief financial officer and the chief executive officer; and
(n) To prepare, review and approve the annual proxy disclosure regarding
the activities and report of the Audit Committee for the year.
II. COMPOSITION
The Audit Committee shall be comprised of three or more Directors as determined
by the Board, each of whom shall be independent and free from any relationship
that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. In determining
independence, the following restrictions shall apply:
(a) EMPLOYEES. A Director who is an employee (including non-employee
executive officers) of the Company or any of its affiliates may not
serve on the Audit Committee until three years following termination
of his or her employment.
(b) BUSINESS RELATIONSHIP. A Director who is a partner in or a controlling
shareholder or executive officer of, any for-profit organization that
has a business relationship with the Company, may serve on the Audit
Committee only if (i) the Company's Board of Directors determines in
its business judgment that the relationship does not interfere with
the Director's exercise of independent judgment and, (ii) in any of
the past three years, the payments made by the Company to or received
by the Company from the organization are less than the greater of (y)
five percent (5%) of the Company's or such organization's consolidated
gross revenues in that year, or (z) $200,000. In making a
determination regarding the independence of a Director pursuant to
this paragraph, the Board of Directors should consider, among other
things, the materiality of the relationship to the Company, to the
Director and, if applicable, to the organization with which the
Director is affiliated. A Director who accepts any compensation from
the Company or any of its affiliates in excess of $60,000 during the
previous fiscal year, other than compensation for Board service,
benefits under the qualified retirement plans, or non-discretionary
compensation may not serve on the Audit Committee.
(c) CROSS COMPENSATION COMMITTEE LINK. A Director who is employed as an
executive of a corporation where any of the Company's executives
serves on that corporation's compensation committee may not serve on
the Audit Committee.
A-2
(d) IMMEDIATE FAMILY. A Director who is an Immediate Family member of an
individual who is an executive officer of the Company or any of its
affiliates may not serve on the Audit Committee until three years
following the termination of such employment relationship.
(e) INDEPENDENCE REQUIREMENT OF AUDIT COMMITTEE MEMBERS. Notwithstanding
the requirements of subparagraphs (b), (c) and (d) hereof, one
Director who is no longer an employee or who is an Immediate Family
member of a former executive officer of the Company or it affiliates,
but is not considered independent pursuant to these provisions may be
appointed, under exceptional and limited circumstances, to the Audit
Committee if the Company's Board of Directors determines in its
business judgment that membership on the Committee by the individual
is required by the best interests of the Company and its shareholders,
and the Company discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and
the reasons for that determination.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full committee
membership.
III. MEETINGS
The Committee shall meet on a regular basis, at least quarterly, and is
empowered to hold special meetings as circumstances require. The Committee shall
meet at least annually with management, the Chief Financial Officer of the
Company and the independent accountants in separate sessions to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. Meetings may be by teleconference.
IV. RESOURCES
The Committee shall have the resources and authority appropriate to discharge
its responsibilities, including the authority to retain special counsel and
other experts or consultants at the expense of the Company.
V. ANNUAL CHARTER REVIEW
The Committee shall review this Charter at least annually and recommend any
changes to the full Board of Directors.
VI. DEFINITIONS
(a) "Immediate Family" includes a person's spouse, parents, children,
siblings, fathers and mothers-in-law, sons and daughters-in-law,
brothers and sisters-in-law, and anyone who resides in such person's
home.
(b) "Affiliate" includes a subsidiary, sibling company, predecessor,
parent company, or former parent company.
(c) "Officer" shall have the meaning specified in Rule 16a-1(f) under the
Securities Exchange Act of 1934, or any successor rule.
A-3
EXHIBIT B
PROPOSED AMENDMENT TO
AMENDED AND RESTATED 1996 DIRECTOR OPTION PLAN
FIRST AMENDMENT TO
BLONDER TONGUE LABORATORIES, INC.
AMENDED AND RESTATED 1996 DIRECTOR OPTION PLAN
The Blonder Tongue Laboratories, Inc. Amended and Restated 1996
Director Option Plan (the "PLAN"), is hereby amended as follows:
1. The first sentence of Section 3.1 of the Plan is hereby amended and
restated in its entirety as follows:
"Subject to adjustment pursuant to the provisions of Section 3.2
hereof, the number of shares of Stock of the Company which may be
issued and sold under the Plan shall not exceed 200,000 shares."
2. Ratification. Except as expressly set forth in this First Amendment to
the Plan, the Plan is hereby ratified and confirmed without
modification.
3. Effective Date. The effective date of this First Amendment to the Plan
shall be February 6, 2003.
B-1
20
BLONDER TONGUE LABORATORIES, INC.
One Jake Brown Road
Old Bridge, NJ 08857
PROXY CARD FOR ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------
MAY 8, 2003
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned hereby appoints James A. Luksch and Robert J. Palle, Jr.,
and either of them (with full power to act alone), as Proxies of the
undersigned, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on this Proxy Card, all
shares of Common Stock of Blonder Tongue Laboratories, Inc. (the "Company") held
of record by the undersigned on the record date of March 21, 2003, at the Annual
Meeting of Stockholders to be held on May 8, 2003 and at any postponements or
adjournments thereof, all as in accordance with the Notice of Annual Meeting of
Stockholders and Proxy Statement furnished with this Proxy.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Annual Meeting of Stockholders
BLONDER TONGUE LABORATORIES, INC.
May 8, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible!
Please detach and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3. PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE [X]
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FOR AGAINST ABSTAIN
1. Election of three Class II 2. Proposal to amend the Amended [ ] [ ] [ ]
Directors to hold office until and Restated 1996 Director
the 2006 Annual Meeting of Option Plan to increase shares
Stockholders or until their issuable pursuant to options
successors have been elected granted thereunder from
and qualified. 100,000 to 200,000 shares.
[ ] FOR ALL NOMINEES NOMINEES 3. Proposal to ratify the [ ] [ ] [ ]
[ ] Robert J. Palle, Jr. appointment of BDO Seidman,
[ ] WITHHOLD AUTHORITY [ ] Gary P. Scharmett LLP as independent auditors
FOR ALL NOMINEES [ ] James H. Williams for the fiscal year ending
December 31, 2003.
[ ] FOR ALL EXCEPT
(See instructions below) In their discretion, the Proxies
are authorized to vote upon such
other matters as may properly come
before the meeting and at any
postponements or adjournments
thereof. If no direction is made on
this Proxy Card, this Proxy will be
voted FOR the election of all
nominees to serve as Class II
Directors and FOR proposals 2 and
3.
INSTRUCTION: To withhold authority to vote for
any individual nominee(s), mark "FOR ALL EXCEPT" PLEASE MARK, SIGN, DATE AND RETURN
and fill in the circle next to each nominee THIS PROXY CARD PROMPTLY USING THE
you wish to withhold, as shown here: [X] ENCLOSED ENVELOPE.
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To change the address on your account, [ ]
please check the box at right and
indicate your new address in the address
space above. Please note that changes to
the registered name(s) on the account
may not be submitted via this method.
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Signature of Stockholder ________________ Date ________ Signature of Stockholder ________________ Date ________
Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly, each holder
should sign. When signing as executor, adminstrator, attorney, trustee or guardian, please give full title as
such. If the signor is a corporation, please sign full corporate name by duly authorized officer giving full
title as such. If signor is a partnership, please sign in partnership name by authorized person.