<PAGE> 1
(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)
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 0-1 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------
(5) Total fee paid:
---------------------------------------------------
[ ] 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:
--------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------
(3) Filing party:
----------------------------------------------------
(4) Date filed:
------------------------------------------------------
<PAGE> 2
MICRODYNE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 23, 1998
The Annual Meeting of Stockholders of Microdyne Corporation will be
held Monday, March 23, 1998, at 10:00 a.m. at the Ritz Carlton, Tysons Corner,
1700 Tysons Boulevard, McLean, VA., 22102, 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 11, 1998, are entitled to notice of and to vote at the Annual Meeting
and at any adjournment thereof. All stockholders are cordially invited to
attend the Annual Meeting in person. However, to assure your representation at
the meeting, you are urged to complete, sign and date the enclosed form of
proxy and return it promptly in the envelope provided. Shareholders attending
the meeting may revoke their proxy and vote in person.
By Order of the Board of Directors,
Gareth Higgins
Corporate Secretary
3601 Eisenhower Avenue
Alexandria, Virginia 22304
February 18, 1998
<PAGE> 3
MICRODYNE CORPORATION
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being mailed
on or about February 18, 1998, 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 23, 1998. Proxies are solicited to give all stockholders of record at
the close of business on February 11, 1998, 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 Corporate Secretary of the Company at 3601
Eisenhower Avenue, Alexandria, Virginia 22304.
On December 31, 1997, there were 13,031,081 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 11, 1998 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 31, 1997, Philip T. Cunningham, Chairman of the Board
of Directors of the Company beneficially owned 5,576,887 shares, or 42.8% of
the common stock outstanding on that date.
<PAGE> 4
THE BOARD OF DIRECTORS
The Board of Directors of the Company consists of one member who is
the principal shareholder and former Chief Executive Officer of the Company
(Philip T. Cunningham), one member who is an executive officer of the Company
(Christopher M. Maginniss) and three non-employee members (Curtis M. Coward,
Gregory W. Fazakerley, and H. Brian Thompson).
During the period commencing September 30, 1996 and ending September
28, 1997 (fiscal 1997), 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, except Mr. Thompson and Mr. Coward who were each
unable to attend one such meeting, and all 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 1997. 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
three meetings during fiscal 1997. 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 terms of Messrs. Cunningham, Maginniss, Coward, Fazakerley, and
Thompson as directors of the Company will expire at the time of the 1998 Annual
Meeting. The Company proposes for re-election as directors of the Company each
of Messrs. Cunningham, Maginniss, Coward, Fazakerley, and Thompson for a term
ending at the 1999 Annual Meeting. In addition, the Company proposes the
Company's Chief Executive Officer, Michael E. Jalbert, for election to the
Board of Directors for a term ending at the 1999 Annual Meeting to fill the
vacancy created by an expansion of the Board of Directors from five to six in
contemplation of Mr. Jalbert's nomination to serve on the Board. If you do not
wish your shares to be voted for any particular nominee, 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.
2
<PAGE> 5
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.
<TABLE>
<CAPTION>
NOMINEE AGE DIRECTOR SINCE OFFICE HELD WITH COMPANY
- ------- --- -------------- ------------------------
<S> <C> <C> <C>
Philip T. Cunningham 60 1991 Chairman of the Board
Christopher M. Maginniss 61 1991 Director, Executive Vice President, President - SSD, Treasurer
Curtis M. Coward 51 1995 Director
Gregory W. Fazakerley 49 1991 Director
H. Brian Thompson 58 1991 Director
Michael E. Jalbert 52 N/A President and Chief Executive Officer
</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, Mr. Cunningham 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. As of
March 10, 1997, Mr. Cunningham relinquished his positions of President and
Chief Executive Officer of the Company, and now serves only as Chairman of the
Board.
Christopher M. Maginniss has served as Treasurer and Executive Vice
President of the Company since June 1991. In March 1997, Mr. Maginniss was
named President - Support Services Division. Mr. Maginniss 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 LLP, 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 of MCI Communications Corporation, was the
President of Subscription Television of America, and spent nine years with
McKinsey and Company, an
3
<PAGE> 6
international management consulting firm. He is a director of Bell Canada
International, 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 Committee 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.
Michael E. Jalbert was named President and Chief Executive Officer of
Microdyne on March 10, 1997. Prior to joining Microdyne, Mr. Jalbert was
President and Chief Executive Officer from 1995 to 1997 of IDB Communications,
a Bethesda, Maryland satellite service communications provider. From 1992 to
1995, Mr. Jalbert was President of the CSD division of Diversey Corporation, a
chemical manufacturer based in Livonia, Michigan. Mr. Jalbert joined the
Diversey Corporation from West Chemical Corporation, a specialty chemical
manufacturing company based in Princeton, New Jersey, where he was President
and Chief Operating Officer from 1987 to 1992. Mr. Jalbert attended the
Executive Program at the University of Virginia's Darden School of Business in
1976 and holds a B.S. from the Loyola-Concordia University which he received in
1967.
EXECUTIVE OFFICERS
The current executive officers of the Company are: Michael E. Jalbert,
President and Chief Executive Officer; Christopher M. Maginniss, Executive Vice
President and President - Support Services Division; Christian J. Spitz,
President - Aerospace Telemetry Division; George Spiczak, Vice President -
Corporate Resources; and Massoud Safavi, Chief Financial Officer.
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. Jalbert
and Mr. Maginniss.
Massoud Safavi, 44, has served as the Chief Financial Officer for
Microdyne since June 26, 1997. Prior to joining Microdyne, Mr. Safavi spent
nine years with UNC, Inc. where he served as Assistant Treasurer, division
Chief Financial Officer, as well as the Director of Audit. Mr. Safavi is a
C.P.A. and C.M.A. He also holds a B.S. from the University of Pennsylvania's
Wharton School of Business and an M.B.A from the University of Chicago's
Graduate School of Business.
George R. Spiczak, 51, joined Microdyne on June 26, 1997, as Vice
President - Corporate Resources. Before joining Microdyne, Mr. Spiczak was
Director of Human Resources, Mid-Atlantic Region, for the Turner Construction
Company. For 28 years, Mr. Spiczak served in the U.S. Army, where he retired
with the rank of Colonel. Mr. Spiczak holds a B.S. in aviation management from
Embry-Riddle Aeronautical University and an M.S. in Public Administration from
Shippensburg State University.
Christian J. Spitz, 45, has served as the Company's Vice President of
Aerospace Telemetry since 1993, and as Chief Financial Officer since April
1996. As of June 26, 1997, Mr. Spitz relinquished his position of Chief
Financial Officer and was named Vice President- Aerospace Telemetry Division.
Previously, Mr. Spitz 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 31, 1997, 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 5,576,887 (2) 42.8%
Christopher M. Maginniss 197,702 1.5%
Curtis M. Coward 10,000 *
Gregory W. Fazakerley 39,667 (3) *
H. Brian Thompson 45,667 (4) *
Michael E. Jalbert 57,300 *
Christian J. Spitz 35,000 *
Massoud Safavi 4,200 *
All directors and executive officers as a group (9 persons) 5,971,423 45.0%
State of Wisconsin 970,000 (5) 7.4%
Investment Board
P.O. Box 7842
Madison, WI 53707
</TABLE>
- -------------
* Less than 1%
(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, 81,000 shares; Mr. Coward, 10,000 shares; Mr. Fazakerley,
36,667 shares; Mr. Thompson, 36,667 shares; Mr. Jalbert, 50,000
shares; Mr. Spitz, 35,000 shares.
(2) Includes 621,400 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
<PAGE> 8
(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.
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 28, 1997, for services
rendered in all capacities during the fiscal years ended September 28, 1997,
September 29, 1996 and October 1, 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER ANNUAL OPTIONS
NAME AND COMPENSATION AWARDED
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) (IN SHARES)
- ------------------ ---- ---------- --------- ------------------------ -----------
<S> <C> <C> <C> <C> <C>
Michael E. Jalbert 1997 129,808 135,000 (4) -- 300,000
(President and CEO) 1996 -- -- -- --
1995 -- -- -- --
Philip T. Cunningham 1997 230,155 -- 200,000 (2) --
(Chairman, Board of 1996 270,625 -- 200,000 (2) --
Directors, former CEO) 1995 251,250 250,000 200,000 (2) --
Christopher M. Maginniss 1997 222,708 40,000 (4) -- 30,000
(EVP and VP - SSD) 1996 225,479 -- -- --
1995 209,625 175,000 -- 25,000
Christian J. Spitz 1997 175,000 68,761 (4) -- 40,000
(VP - ATD) 1996 174,663 -- -- --
1995 115,042 20,635 -- 15,000
David G. Laposata 1997 173,958 25,000 170,515 (3) 40,000
(SVP) 1996 150,000 -- -- --
1995 144,167 -- -- --
</TABLE>
(1) Does not include compensation associated with perquisites because such
amounts do not exceed the lesser of either $50,000 or 10% of total
salary and bonus disclosed.
(2) Compensation pursuant to Mr. Cunningham's non-compete agreement.
(3) Other compensation relates to severance package and bonus related to
the discontinuation of the Networking Products Division. This
severance package and bonus will be paid out during Microdyne's fiscal
year 1998.
6
<PAGE> 9
OPTION TABLES
The following table provides information concerning each grant of
options to purchase the Company's common stock during fiscal year 1997 to
persons named in the Summary Compensation Table. There were no stock
appreciation rights (SARs) granted.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF STOCK
GRANTED TO EXER- PRICE APPRECIATION FOR
NUMBER OF EMPLOYEES CISE EXPIR- OPTION TERM
OPTIONS IN FISCAL PRICE ATION -----------
NAME GRANTED(1) YEAR ($/SH.) DATE 5%($) 10%($)
---- ---------- ---- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Philip T. Cunningham None - - - - -
Christopher M. 30,000 5.0% $5.00 11/26/01 41,442 91,577
Maginniss
Michael E. Jalbert 300,000 49.7% $5.00 3/10/02 414,420 915,768
David G. Laposata 40,000 6.7% $5.00 10/31/98 62,520 75,000
Christian J. Spitz 40,000 6.7% $5.00 11/26/01 55,256 122,102
</TABLE>
(1) Except for Mr. Jalbert, all other options are exercisable from date of
grant as follows: one-third after one year, two-thirds after two
years, and 100% after three years. Mr. Jalbert may exercise his
options as follows: one-sixth as of March 10, 1997; one-sixth as of
March 9, 1998; one-third as of March 9, 1999; one third as of March 9,
2000.
7
<PAGE> 10
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 28, 1997 equals the market value
of the underlying common stock at September 28, 1997 minus the exercise price.
The fair market value of Microdyne common stock at September 28, 1997 was
$6.25.
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED SEPTEMBER 28, 1997 AND
SEPTEMBER 28, 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNEXERCISED UNEXERCISED IN-
ACQUIRED ON VALUE OPTIONS AT THE-MONEY
NAME EXERCISE REALIZED 9/28/97 OPTIONS AT 9/28/97
---- -------- --------- ------- -------------------
<S> <C> <C> <C> <C>
Philip T. Cunningham None None None None
Christopher M. None None 197,702 $574,333
Maginniss 20,000 U $ 25,000 U
Michael E. Jalbert None None 50,000 E $62,500 E
250,000 U $312,500 U
David G. Laposata None None 107,980 E $166,687 E
Christian J. Spitz None None 35,000 E $ 26,250 E
26,667 U $ 33,334 U
</TABLE>
E = Exercisable U = Unexercisable
DIRECTOR COMPENSATION
Directors of the Company who are not also officers receive $1,000 per
meeting, whether regularly scheduled or special; $1,000 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 AGREEMENTS
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
8
<PAGE> 11
other things, that Mr. Cunningham is 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.
On March 10, 1997, Mr. Jalbert assumed the role of President and Chief
Executive Officer, formerly held by Mr. Cunningham. As a result, Mr.
Cunningham's salary was adjusted to $170,000 annually to reflect compensation
for his continuing work as Chairman of the Board of Directors.
Effective March 10, 1997, the Company entered into an Executive
Employment Agreement with Mr. Jalbert. Under the terms of the Executive
Employment Agreement, Mr. Jalbert became the Company's President and Chief
Executive Officer. The employment agreement had a term of two years with a base
annual salary of $250,000, which may be adjusted upward by the Board of
Directors. In addition, the agreement also provided for the grant to Mr.
Jalbert of options to purchase 300,000 shares of the Company's stock at a fixed
price of $5.00 per share which are exercisable over the next three years and
which expire over the next five years. The agreement also provides, among
other things, that Mr. Jalbert is eligible to participate in additional stock
options and discretionary bonuses authorized and declared by the Board of
Directors. Mr. Jalbert'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. Jalbert 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
stockholder 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.
9
<PAGE> 12
SALARY
The Compensation Committee establishes the salary for the top five
highly compensated executives, with the exception of Mr. Jalbert, 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
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 stockholder 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.
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
stockholders. 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.
During October 1997, Microdyne entered into an agreement with Mr.
Maginniss. Under the terms of the agreement, the officer exchanged a $317,000
note receivable for shares of the Company's stock upon exercise of certain
stock options held by him. The terms of the agreement further stipulate that
the officer will
10
<PAGE> 13
repay the Company the full value of the note receivable due to the Company and
any accrued interest thereon no later than September 30, 1998. The note
receivable has an annual interest rate of 6%.
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. Jalbert, 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. Jalbert's salary at $250,000 in fiscal 1997. Mr.
Jalbert participates in the Company's stock option program for executives and
was granted 300,000 stock options that become exercisable over three years as
part of his employment agreement.
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 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, LLP, outside corporate counsel to the Company.
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, 1992, and that all dividends were reinvested. In aggregate, the
Company's stock has increased 2% since September 30, 1992. 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 154%
over the five-year period ended September 28, 1997. 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,
11
<PAGE> 14
1992 to September 28, 1997, the Russell Technology Group increased 243%. The
Company is a component of both indices.
<TABLE>
<CAPTION>
Microdyne Russell 200 Russell Technology
<S> <C> <C> <C>
1992 100 100 100
1993 76 133 146
1994 78 137 158
1995 414 169 256
1996 96 191 272
1997 102 254 343
</TABLE>
- - 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, 1992 ($6.125, which has been
established as 100 on the index) and for each succeeding September 30
through 1994, October 1, 1995, September 29, 1996 and September 28,
1997. Those prices and the respective index points are: 1993: $4.625
(76); 1994: $4.75 (78); 1995: $25.375 (414); 1996: $5.875 (96); 1997:
$6.25 (102);. Microdyne data courtesy of NASDAQ.
- - The Russell 2000 index points are as follows: September 30, 1992: 100;
September 30, 1993: 133; September 30, 1994: 137; October 1, 1995:
169; September 29, 1996: 191; September 28, 1997: 254. Russell 2000
data courtesy of Frank Russell Co.
- - The Russell Technology Group index points are as follows: September
30, 1992: 100; September 30, 1993: 146; September 30, 1994: 158;
October 1, 1995: 256; September 29, 1996: 272; September 28, 1997:
343. Russell Technology Group data courtesy of Frank Russell Co.
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, two forms were not
timely filed during the fiscal year ended September 28, 1997. Mr. Safavi and
Mr. Jalbert each filed an untimely Form 3 during the fiscal year ended
September 28, 1997.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address
by the Chief Executive Officer 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, it is the intention of the persons named in the enclosed proxy to
vote the shares they represent as the Board of Directors may recommend. 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.
12
<PAGE> 15
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, 1998.
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 D. F. King & Co. 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.
Gareth Higgins
Corporate Secretary
February 18, 1998
13
<PAGE> 16
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MICRODYNE
CORPORATION
The undersigned hereby appoints Christopher M. Maginniss or Gareth
Higgins, 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 11, 1998, at the annual meeting of the stockholders to be held on
March 23, 1998 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. Election of Directors [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
below (except as marked to the vote for all nominees listed below
contrary below
</TABLE>
Philip T. Cunningham, Michael E. Jalbert, 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:
- --------------------------------------------------------------------------------
(Continued on the reverse side)
================================================================================
(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 IN FAVOR OF THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.
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 the President or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
DATED: , 1998
------------------ ----
------------------------------------
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
14
