<PAGE> 1
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
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Microdyne Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] 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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(4) Date filed:
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<PAGE> 2
MICRODYNE CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
The Annual Meeting of Stockholders of Microdyne Corporation will be
held Monday, March 17, 1997, at 10:00 a.m. at the Ritz-Carlton Pentagon City,
1250 South Hayes Street, Arlington, Virginia, for the following purposes:
1. To elect directors for the ensuing year;
2. To act upon such other matters as may properly come before the meeting,
or any adjournment thereof. Holders of common shares of record at the
close of business on February 12, 1997, will be entitled to vote at the
meeting.
By Order of the Board of Directors,
Neal H. Sanders
Vice President and Corporate Secretary
3601 Eisenhower Avenue
Alexandria, Virginia 22304
February 17, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
<PAGE> 3
PROXY STATEMENT
INTRODUCTION
This proxy statement and the accompanying proxy card are being mailed
on or about February 17, 1997, to holders of common shares in connection with
the solicitation of proxies by the Board of Directors for the Annual Meeting of
Stockholders of Microdyne Corporation ("Microdyne" or the "Company") to be held
on March 17, 1997. Proxies are solicited to give all stockholders of record at
the close of business on February 12, 1997, an opportunity to vote on matters
that come before the meeting. This procedure is necessary because stockholders
live in many different locations and many will find it difficult to attend.
Shares can be voted only if the stockholder is present in person or is
represented by proxy.
When your proxy card is returned properly signed, the shares
represented will be voted in accordance with your directions. You can specify
your choices by marking the appropriate boxes on the enclosed proxy card. If
your proxy card is signed and returned without specifying choices, the shares
will be voted as recommended by the Board of Directors. You may revoke your
proxy at any time before it is voted at the meeting by delivering to the
Secretary of the Company a written notice stating that the proxy is revoked, by
executing a proxy bearing a later date or by attending the meeting and voting in
person.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN
AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. If you do attend, you may vote by ballot at the meeting, thereby
canceling any proxy previously given.
Comments from stockholders about the proxy material or about other
aspects of the Company's business are welcome and are very helpful to the
Company's management in assessing stockholder sentiment. Comments should be
addressed in writing to the Vice President and Corporate Secretary of the
Company at 3601 Eisenhower Avenue, Alexandria, Virginia 22304.
On December 29, 1996, there were 12,836,809 shares of common stock
outstanding. Each share of common stock is entitled to one vote on each matter
properly brought before the meeting. Only holders of the Company's common stock
of record at the close of business on February 12, 1997 will be entitled to vote
at the meeting.
Directors will be elected by a plurality of all the votes cast at the
meeting, so long as a majority of the shares outstanding is present.
A stockholder who abstains from a vote by registering an abstention
vote will be deemed present at the meeting for quorum purposes but will not be
deemed to have voted on the particular matter. Similarly, in the event a nominee
holding shares for beneficial owners votes on certain matters pursuant to
discretionary authority or instructions from beneficial owners, but with respect
to one or more other matters does not receive instructions from beneficial
owners and does not exercise discretionary authority (a so-called "non-vote"),
the shares held by the nominee will be deemed present at the meeting for quorum
purposes but will not be deemed to have voted on such other matters.
As of December 29, 1996, Philip T. Cunningham, Chairman of the Board
and Chief Executive Officer of the Company beneficially owns 5,776,887 shares,
or 45.0% of the common stock outstanding on that date.
--------------------
1
<PAGE> 4
THE BOARD OF DIRECTORS
The Board of Directors of the Company consists of two members who are
executive officers of the Company (Mr. Cunningham and Christopher M. Maginniss)
and three non-employee members (Curtis M. Coward, Gregory W. Fazakerley, and H.
Brian Thompson).
During the period commencing October 2, 1995 and ending September 29,
1996 (fiscal 1996), there were six meetings of the Board of Directors of the
Company (including four regular and two special meetings). During such period,
each of the incumbent Directors attended all of the Board meetings held while he
was a Director and Committee meetings held while he served on such Committees.
Messrs. Fazakerley (Chairman), Coward, and Thompson serve as members of
the Audit Committee of the Board of Directors of the Company. The Audit
Committee held one meeting during fiscal 1996. The Audit Committee is
responsible for recommending and selecting the appointment of outside auditors,
reviewing financial reports of the Company and performing such other functions
as directed from time to time by the Board.
Messrs. Thompson (Chairman), Coward, and Fazakerley serve as members of
the Compensation Committee of the Company. The Compensation Committee held one
meeting during fiscal 1996. The Compensation Committee is responsible for
considering compensation of officers of the Company.
The Board of Directors currently does not have a standing nominating
committee or a committee performing similar functions. The Board will, as a
matter of policy, give consideration to nominees recommended by stockholders. A
stockholder who wishes to recommend a future nominee should direct his
recommendation in writing to the Company's Board of Directors.
--------------------
ELECTION OF DIRECTORS
(ITEM 1. ON THE PROXY CARD)
The Board of Directors intends to vote for the election as directors
five individuals, all of whom currently serve as directors: Messrs. Cunningham,
Maginniss, Coward, Fazakerley, and Thompson. If you do not wish your shares to
be voted for particular nominees, please identify the exceptions in the
appropriate space provided on the proxy card.
If at the time of the meeting, one or more of the nominees have become
unavailable to serve, shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by the
Board of Directors or, if none, the size of the Board will be reduced. The Board
of Directors knows of no reason why any of the nominees will be unavailable or
unable to serve.
Directors elected at the meeting will hold office until the next annual
meeting or until their successors have been elected and qualified.
The following table sets forth, for each nominee, the nominee's age,
position held with the Company, and the date such nominee became a director of
the Company. Following the table is a brief description of each nominee's
principal occupation for at least the past five years.
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE DIRECTOR SINCE
---- ------------------------- --- -------- -----
<S> <C> <C> <C>
Philip T. Cunningham Chairman of the Board, President 59 June 1991
and Chief Executive Officer
Christopher M.Maginniss Treasurer, Executive Vice 60 June 1991
President and Director
Curtis M. Coward Director 50 Oct. 1995
Gregory W. Fazakerley Director 48 June 1991
H. Brian Thompson Director 57 June 1991
</TABLE>
Philip T. Cunningham assumed the offices of Chairman of the Board,
President and Chief Executive Officer of the Company in June 1991 upon the
merger of Federal Technology Corporation (FTC) and the Company ("the Merger").
Prior to the Merger, he had served as President and Chairman of the Board of FTC
since its inception in 1984. Mr. Cunningham holds an M.B.A. degree from Harvard
Business School and a B.S. from Holy Cross College.
Christopher M. Maginniss has served as Treasurer and Executive Vice
President since the Merger. He had served as Executive Vice President of FTC
from June 1987 until the Merger. He holds an M.S. degree from the U.S. Naval
Post Graduate School and a B.A. from Colby College.
Curtis M. Coward has been a Partner in the law firm of McGuire, Woods,
Battle & Boothe L.L.P., McLean, Virginia since 1986. He is also special counsel
to the government of the Republic of Kazakstan. Previously, Mr. Coward was
President and Chief Executive Officer of Air Virginia/AVAIR from 1982 to 1986
and was Chairman of the Board of Directors of the Regional Airline Association
in 1985. He is a Director of the Atlantic Council of the United States and
trustee of the U.S. Naval Academy Foundation. Mr. Coward holds a J.D. from the
College of William and Mary and a B.A. from Denison University.
Gregory W. Fazakerley is Chairman and Chief Executive Officer of
Development Resources, Inc., a Washington, D.C.-based real estate development
firm. Mr. Fazakerley is the managing general partner of C/G Investments, a real
estate partnership; member of the Board of Directors of the District of Columbia
Building Industry Association; and a member of the Board of Directors of the
YMCA of the Greater Metropolitan Washington area. Mr. Fazakerley is a graduate
of the American University in Washington, D.C.
H. Brian Thompson is Chairman of the Board and Chief Executive Officer
of LCI International, a world-wide long distance telecommunications company with
corporate headquarters in McLean, Virginia. Previously, Mr. Thompson served as
Executive Vice President at MCI Communications Corporation, was the President of
Subscription Television of America, and spent nine years with McKinsey and
Company, an international management consulting firm. He is a director of
Comcast UK Cable Partners and Golden Books Family Entertainment Inc. Mr.
Thompson is a trustee of Capitol College, a commissioner of the Global
Information Infrastructure Commission, and a member of the Listed Company
Advisory Commitee of the New York Stock Exchange Board of Directors. Mr.
Thompson holds an M.B.A. from Harvard Business School and a B.S. from the
University of Massachusetts.
--------------------
3
<PAGE> 6
EXECUTIVE OFFICERS
The current executive officers of the Company are: Philip T.
Cunningham, Chairman of the Board, President, and Chief Executive Officer;
Christopher M. Maginniss, Executive Vice President and Treasurer; Christian J.
Spitz, Chief Financial Officer and Senior Vice President - Aerospace Telemetry;
David Laposata, Senior Vice President - Networking Products Division; and Neal
H. Sanders, Senior Vice President and Corporate Secretary.
There are no family relationships among any of the executive officers,
directors, or persons nominated to become directors of the Company. The
executive officers are chosen annually at the first meeting of the Board of
Directors following the annual meeting of stockholders and serve for one year
and until their successors are chosen and qualify.
The previous identification of directors sets forth the age and
business experience of, and certain other information regarding, Mr. Cunningham
and Mr. Maginniss.
David G. Laposata, 32, is currently Senior Vice President - Networking
Products Division, a post he assumed in October 1996. He joined FTC in 1987 as a
pricing analyst. From 1990 to 1991 he was Assistant Vice President in the
Company's Systems Integration and Services division. He was appointed Vice
President and Assistant to the President in 1992, and Vice President -
Operations in 1993. He assumed his present position in October 1996. Mr.
Laposata graduated from Indiana University of Pennsylvania in 1986.
Neal H. Sanders, 47, is currently Vice President and Corporate
Secretary. He joined Microdyne in 1992 as Vice President - Corporate
Communications. Mr. Sanders was appointed Secretary in November 1994. Prior to
joining the Company, he was Director of Investor Relations for Occidental
Petroleum from 1990 to 1991, and Director of Corporate Communications for Bolt
Beranek and Newman, Inc. from 1982 to 1990. Mr. Sanders received his B.S. from
the University of Florida in 1971.
Christian J. Spitz, 44, has served as Vice President of Aerospace
Telemetry since 1993, and as Chief Financial Officer since April 1996.
Previously, he was Vice President of Finance at Development Resources, Inc. from
1986 to 1993. Mr. Spitz holds a B.A. from the University of Dayton and is a
Certified Public Accountant.
--------------------
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 29, 1996, the number of
shares and percentage of the Company's common stock owned by all persons known
by the Company to own beneficially more than 5% of the Company's common stock,
by each director, by each executive officer named in the Summary Compensation
Table, and by all directors and executive officers as a group. This information
has been obtained in part from such persons and in part from the Company's
records. Each person has sole voting and investment power with respect to the
shares indicated except for shares which may be acquired upon exercise of
options and as otherwise noted.
<TABLE>
<CAPTION>
COMMON SHARES
-------------
NAME OWNED(1) % OF CLASS
------------- -------- ----------
<S> <C> <C>
Philip T. Cunningham 5,776,887 (2) 45.0%
Christopher M. Maginniss 179,368 1.4%
Curtis M. Coward 20,000 *
Gregory W. Fazakerley 36,333 (3) *
H. Brian Thompson 42,333 (4) *
David G. Laposata 52,314 *
Christian J. Spitz 17,305 *
Neal H. Sanders 14,566 *
All Directors and Executive
Officers as a Group (8 persons) 6,139,106 47.8%
State of Wisconsin 970,000 (5) 7.6%
Investment Board
P.O. Box 7842
Madison, WI 53707
-----------------
* Less than 1%.
</TABLE>
(1) Includes shares that would be issued pursuant to the exercise of stock
options that are able to be exercised within 60 days, as follows: Mr. Maginniss,
179,368 shares; Mr. Coward, 20,000 shares; Mr. Fazakerley, 33,333 shares; Mr.
Thompson, 33,333 shares; Mr. Laposata, 51,314 shares; Mr. Spitz, 16,667 shares;
and Mr. Sanders, 13,366.
(2) Includes 1,000,000 shares held in a trust of which Mr. Cunningham is
trustee.
(3) Includes 3,000 shares beneficially owned by a trust for Mr. Fazakerley's son
of which Mr. Fazakerley is a co-trustee (Mr. Fazakerley shares voting and
dispositive power with respect to such shares).
(4) Includes 5,000 shares directly owned by Mr. Thompson, 2,000 shares
beneficially owned by Mr. Thompson's spouse as trustee for Mr. Thompson's son,
and 2,000 shares beneficially owned by Mr. Thompson's spouse as trustee for Mr.
Thompson's daughter. Mr. Thompson disclaims beneficial ownership of the shares
held in trust for his son and daughter.
(5) According to a Schedule 13G filed with the Securities and Exchange
Commission and received by the Company from the State of Wisconsin Investment
Board, this public pension fund has sole voting and investment power with
respect to these shares.
--------------------
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below sets forth individual compensation
information for the Chief Executive Officer and the four other most highly paid
executive officers at September 29, 1996, for services rendered in all
capacities during the fiscal years ended September 29, 1996, October 1, 1995,
and September 30, 1994. No performance-based bonuses were paid to any executive
officer of the company for service in fiscal 1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND OTHER ANNUAL OPTIONS
PRINCIPAL COMPENSATION AWARDED
POSITION YEAR SALARY($) BONUS($) ($)(1) (IN SHARES)
-------- ---- --------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Philip T. 1996 270,625 - 200,000 (2) -
Cunningham 1995 251,250 250,000 200,000 (2) -
(CEO) 1994 222,500 230,000 200,000 (2) -
Christopher 1996 225,479 - -
M. Maginniss 1995 209,625 175,000 25,000
(EVP) 1994 186,729 165,000 46,000
David G. 1996 150,000 - -
Laposata 1995 144,167 - -
(SVP) 1994 114,167 27,459 75,000
Christian J. 1996 174,663 - -
Spitz 1995 115,042 20,635 15,000
(SVP) 1994 103,750 16,635 10,000
Neal H. 1996 150,000 - 25,000
Sanders 1995 125,833 50,000 -
(SVP) 1994 105,000 23,000 17,500
</TABLE>
(1) Does not include compensation associated with perquisites because such
amounts do not exceed the lesser of either $50,000 or 10% of total salary and
bonus disclosed.
(2) Compensation pursuant to Mr. Cunningham's Noncompetition Agreement.
6
<PAGE> 9
OPTION TABLES
The following table provides information concerning each grant of
options to purchase the Company's common stock during fiscal year 1996 to
persons named in the Summary Compensation Table. There were no stock
appreciation rights (SARs) granted.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED TO EXER- RATES OF STOCK PRICE
NUMBER OF EMPLOYEES CISE EXPIR- APPRECIATION FOR
OPTIONS IN FISCAL PRICE ATION OPTION TERM
NAME GRANTED(1) YEAR ($/SH.) DATE 5%($) 10%($)
- ---- ---------- ---- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Philip T. Cunningham None - - - - -
Christopher M. Maginniss None - - - - -
David G. Laposata None - - - - -
Christian J. Spitz None - - - - -
Neal H. Sanders 25,000 5.5% $4.56 7/30/01 31,496 69,598
</TABLE>
(1) All are exercisable from date of grant as follows: one-third after one year,
two-thirds after two years, and 100% after three years.
The following table depicts option exercise activity in the last fiscal
year and fiscal year-end option values with respect to each of the executive
officers named in the Summary Compensation Table. The value of unexercised
in-the-money options at September 29, 1996 equals the market value of the
underlying common stock at September 29, 1996 minus the exercise price. The fair
market value of Microdyne common stock at September 29, 1996 was $5.875.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED SEPTEMBER 29, 1996 AND
---------------------------------------------------------------------------
SEPTEMBER 29, 1996 OPTION VALUES
--------------------------------
NUMBER OF VALUE OF
SHARES UNEXERCISED UNEXERCISED IN-THE-
ACQUIRED ON VALUE OPTIONS AT MONEY OPTIONS AT
NAME EXERCISE REALIZED 9/29/96 9/29/96
---- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Philip T. Cunningham None None None None
Christopher M. Maginniss None None 179,368 E $477,902 E
8,334 U $13,543 U
David G. Laposata None None 51,314 E $61,230 E
16,666 U 33,332 U
Christian J. Spitz None None 16,667 E $7,084 E
5,000 U - U
Neal H. Sanders None None 13,366 E $5,312 E
28,334 U $32,813 U
E = Exercisable U = Unexercisable
</TABLE>
7
<PAGE> 10
DIRECTOR COMPENSATION
Directors of the Company who are not also officers receive $1,000 per
meeting, whether regularly scheduled or special; $500 for telephone meetings;
and reimbursement of reasonable expenses incurred in attending meetings.
Directors who are not also executive officers receive, in addition to the
foregoing fees and expense reimbursements, a quarterly fee of $4,000.
--------------------
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
EMPLOYMENT AGREEMENT
Effective June 21, 1991, the date of the merger between the Company and
Federal Technology Corporation, the Company entered into an Executive Employment
Agreement with Mr. Cunningham. Under the terms of the Executive Employment
Agreement, Mr. Cunningham became the Company's Chairman of the Board, President
and Chief Executive Officer. The employment agreement had a term of three years
with an initial base annual salary of $200,000. On October 24, 1995, the Company
entered into a new Executive Employment Agreement with Mr. Cunningham with
respect to the same positions at an initial base salary of $275,000, which may
be adjusted upward by the Board of Directors. The agreement also provides, among
other things, that Mr. Cunningham was eligible to participate in discretionary
bonuses authorized and declared by the Board of Directors. Mr. Cunningham's
employment could be terminable (i) upon his death or (ii) by the Company in the
event he became permanently disabled, in which case Mr. Cunningham would be
entitled to certain salary continuation rights. The agreement expires in 1999.
NONCOMPETITION AGREEMENT
On June 21, 1991, Mr. Cunningham entered into a Noncompetition
Agreement with the Company pursuant to which he agreed that, during the term of
the agreement, he would not, among other things, participate in any manner
described in the agreement in any business which competes with the Company. This
Noncompetition Agreement was extended on June 21, 1995 for an additional term of
four years. The Noncompetition Agreement also generally prohibits Mr. Cunningham
from soliciting business from certain customers and suppliers of the Company and
from disclosing certain information about the Company. The Noncompetition
Agreement provides for the payment to Mr. Cunningham of $200,000 per year
commencing June 21, 1995 and continuing for four years thereafter, unless Mr.
Cunningham fails to comply with certain of the covenants set forth in the
agreement. Mr. Cunningham is entitled to continue to receive the payments under
the Noncompetition Agreement notwithstanding termination of his employment for
any reason.
--------------------
BOARD COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The members of the Committee
are Messrs. Fazakerley, Coward and Thompson, none of whom is a past or present
employee of the Company. There are four primary elements to the executive
compensation program: salary, annual bonuses, long-term incentive compensation,
and fringe benefits.
This program is designed to provide a direct relationship between
executive compensation and corporate performance. The intent is to enhance
shareholder value by means of an executive program that attracts, retains, and
rewards executive officers who contribute to the Company's success. The primary
quantitative measures of corporate performance are revenues, margins, and
earnings per share. The Committee may consider significant qualitative factors
such as the achievement of corporate goals and the general business environment.
Salary
The Compensation Committee establishes the salary for the top five
highly compensated executives, with the exception of Mr. Cunningham, for which a
salary floor is established as part of his Executive Employment Agreement. The
Chief Executive Officer sets salary levels for all other executives based on the
guidelines set by the Compensation Committee. In all cases, the levels set will
be based on the responsibilities and duties of the position, comparative
8
<PAGE> 11
industry salary structure for similar positions, and individual performance.
Compensation for specific functional roles such as sales, business development,
operations, and finance is based on the Company's overall performance as well as
the executive's direct contribution to the corporation. Examples of the factors
to be evaluated include divisional sales and contribution goals, development or
acquisition of new business or product lines, significant cost reductions
resulting in improved profitability, or other similar actions that enhance
shareholder value. Performance Bonuses
The Compensation Committee sets the bonuses for the top five highly
compensated executives. The Chief Executive Officer sets bonus levels for all
other executives consistent with individual performance each year. The Company's
bonus system is designed to be flexible to meet changes in the Company's needs
and the corporate environment. The payment of bonuses is used to motivate
employees to produce favorable results.
The same business factors that are used to establish salary are also
used for setting bonuses, but different weight may be applied to various factors
in setting bonuses. The Compensation Committee's responsibility is to review
annually the measures by which corporate bonuses will be granted. In fiscal
1996, the Compensation Committee did not award any bonuses to any executive
officer. Long-Term Incentive Compensation
Long-term incentives for executives are provided by grants under the
Microdyne Key Employee Stock Option Plan. Stock options and stock ownership
serve to align the financial interests of management with those of the
shareholders. Stock options provide executives with an incentive to increase the
long-term profitability of the Company and the value of its stock. Such options
generally will become exercisable over a period of years from the date of grant.
The number of options to be granted to any employee is determined by the
Compensation Committee based on recommendations from the Chief Executive
Officer. Fringe Benefits and Perquisites
To provide competitive compensation and to enhance executive
performance, the Company provides fringe benefits and perquisites to executives.
The fringe benefits are evaluated as part of an executive's overall compensation
package, and include those items deemed appropriate for the Company's size and
those benefits that are common in the community. In addition to the normal
fringe benefits, the Compensation Committee has specifically authorized the
following fringe benefits:
- - Loans to executives may be made from time to time. In general, loans
are limited to short-term bridge loans or to amounts consistent with appropriate
executive compensation levels. The loan must provide for reasonable interest and
repayment terms. Loans may be authorized by the Chief Executive Officer up to
125% of the executive's salary. Larger loans must be approved by the
Compensation Committee.
- - Life insurance for executives may be provided on a group or individual
basis. Life insurance programs may include key man, group insurance, individual
life insurance for estate planning, and split-dollar life insurance. Any life
insurance program that involves a substantial expenditure of corporate funds
must be approved by the Compensation Committee.
Chief Executive Officer Compensation
Compensation decisions for all executives, including Mr. Cunningham,
are generally based on the criteria described in the above sections. The
Committee also considers pertinent industry data on the level of compensation
paid to executive officers in other companies, including those of comparable
size and which are direct competitors, and of companies that are larger in size
but whose markets are the Company's targets for growth.
The Committee set Mr. Cunningham's salary at $275,000 in fiscal 1996.
Mr. Cunningham does not participate in the Company's stock option program for
executives.
The Internal Revenue Code currently limits the deductibility for
federal income tax purposes of compensation paid to the Company's chief
executive officer and to each of the other four most highly compensated
executive officers. The Company may deduct certain types of compensation paid to
any of these individuals only to the extent that during
9
<PAGE> 12
any fiscal year such compensation does not exceed one million dollars. The
Compensation Committee believes that such limitation will not apply to the
compensation to be paid by the Company to its executive officers for the
foreseeable future and no modifications have been made in the Company's
compensation programs due to these limits.
H. Brian Thompson, Chairman
Curtis M. Coward
Gregory W. Fazakerley
--------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Curtis M. Coward, a Director of the Company and a member of the
Compensation Committee, is a partner of the law firm McGuire, Woods, Battle &
Boothe, L.L.P., outside corporate counsel to the Company.
--------------------
10
<PAGE> 13
PERFORMANCE GRAPH
The graph below compares the performance over a five-year period of the
Company's common stock to that of the Russell 2000, a broad market index, and
the Russell Technology Group. It assumes that $100 is invested in the Company's
common stock, the Russell 2000, and the Russell Technology Group on September
30, 1991, and that all dividends were reinvested. In aggregate, the Company's
stock has decreased 37% since September 30, 1991. The Russell 2000 index,
compiled by the Frank Russell Company of Tacoma, Washington, shows the total
return (share price plus reinvested dividends) of 2,000 publicly-traded small-
and mid-capitalization companies. The Russell 2000 has increased 108% over the
five-year period ended September 29, 1996. The Russell Technology Group, also
compiled by the Frank Russell Company, is a subset of approximately 285
companies within the Russell 2000, and is also a total return index. From
September 30, 1991 to September 29, 1996, the Russell Technology Group increased
193%. The Company is a component of both indices.
<TABLE>
<CAPTION>
Microdyne Russell 200 Russell Technology
<S> <C> <C> <C>
1991 100 100 100
1992 65 109 108
1993 49 145 157
1994 51 149 170
1995 271 184 276
1996 63 208 293
</TABLE>
Notes:
- - Microdyne has not paid dividends during the past five years. Microdyne
Corporation data represent the closing prices of the Company's common stock
on September 30, 1991 ($9.375, which has been established as 100 on the
index) and for each succeeding September 30 through 1994, October 1, 1995,
and September 29, 1996. Those prices and the respective index points are:
1992: $6.125 (65); 1993: $4.625 (49); 1994: $4.75 (51); 1995: $25.375
(271); and 1996: $5.875 (63). Microdyne data courtesy of NASDAQ.
- - The Russell 2000 index points are as follows: September 30, 1991: 100;
September 30, 1992: 109; September 30, 1993: 145; September 30, 1994: 149;
October 1, 1995: 184; and September 29, 1996: 208. Russell 2000 data
courtesy of Frank Russell Co.
- - The Russell Technology Group index points are as follows: September 30,
1991: 100; September 30, 1992: 108; September 30, 1993: 157; September 30,
1994: 170; October 1, 1995: 276; and September 29, 1996: 293. Russell
Technology Group data courtesy of Frank Russell Co.
11
<PAGE> 14
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than ten
percent of the Company's common stock file initial reports of ownership of
common stock and reports of changes of ownership with the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
Executive officers, directors, and stockholders are required to furnish
the Company with copies of all Section 16(a) forms they file. Based on a review
of such copies and other records available to the Company, all such forms were
timely filed during the fiscal year ended September 29, 1996.
--------------------
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by
the Chairman and a general discussion period during which stockholders will have
an opportunity to ask questions about the business of the Company.
If any matter not described in this proxy statement should come before
the meeting, the Board of Directors will vote the shares represented by it in
accordance with its best judgment. At the time this proxy statement went to
press, the Board of Directors knew of no other matters which might be presented
for stockholder action at the meeting.
--------------------
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals intended for inclusion in next year's proxy statement should
be sent to the Corporate Secretary of the Company at 3601 Eisenhower Avenue,
Alexandria, Virginia 22304, and must be received by September 30, 1997.
--------------------
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP serves as the independent public accountant of the
Company. Representatives of Grant Thornton are expected to be present at the
meeting, will have the opportunity to make a statement if they desire, and are
expected to be available to respond to appropriate questions,
----------------------
OTHER INFORMATION
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to solicitations by mail, directors, officers, and
regular employees of the Company may solicit proxies in person or by telephone.
No additional compensation will be paid to directors, officers, or regular
employees for such services. Arrangements will be made with banks, brokerage
houses, and other custodians, nominees, and fiduciaries to forward solicitation
material to the beneficial owners of stock held of record by such persons or
firms, and the Company will reimburse such persons of firms for reasonable
out-of-pocket expenses incurred by them in so doing. The Company also has
retained Beacon Hill Partners to aid in the solicitation of proxies, at an
estimated cost of $3,000 plus reimbursement of reasonable out-of-pocket
expenses.
--------------------
The above notice and Proxy Statement are sent by order of the Board of
Directors.
Neal H. Sanders
Vice President and Corporate Secretary
February 17, 1997
12
<PAGE> 15
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MICRODYNE CORPORATION
The undersigned hereby appoints Christopher M. Maginniss or Neal H. Sanders,
each with the power to appoint his or her substitute, and hereby authorizes them
to represent and to vote, as designated below, all the shares of common stock of
Microdyne Corporation held on record by the undersigned on February 12, 1997, at
the annual meeting of the shareholders to be held on March 17, 1997 or any
adjournment thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below listed below
Philip T. Cunningham, Christopher M. Maginniss, Curtis M. Coward, Gregory W. Fazakerley, and H. Brian Thompson
INSTRUCTION: To withhold authority for any individual nominee, write that nominee's name in the space provided below:
</TABLE>
- -------------------------------------------------------------------------------
(Continued on the reverse side)
<PAGE> 16
(CONTINUED FROM THE OTHER SIDE)
2. In their discretion, the Proxies are authorized to vote upon such other
business matters as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When signing
as attorney, as executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
DATED: , 1997
----------------------
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
MICRODYNE CORPORATION 3601 Eisenhower Avenue Alexandria, VA 22304
