MICROWAVE POWER DEVICES, INC.
49 WIRELESS BOULEVARD
HAUPPAUGE, NEW YORK 11788-3935
(516) 231-1400 Fax: (516) 231-0712
[LOGO]--------------------------------------------------------------------------
Dear Stockholder:
It is my pleasure to invite you to the Annual Meeting of Stockholders of
Microwave Power Devices, Inc. to be held on Thursday, May 7, 1998, at 11:00
A.M., local time, at the offices of Proskauer Rose LLP, 1585 Broadway, 26th
Floor, New York, New York 10036.
Whether or not you plan to attend and regardless of the number of shares you
own, it is important that your shares be represented at the meeting.
Accordingly, you are urged to sign, date and return your proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.
I sincerely hope you will be able to join us at the meeting. The officers and
directors of the Company look forward to seeing you at that time.
Sincerely,
/s/ Edward J. Shubel
Edward J. Shubel
President and Chief Executive Officer
April 7, 1998
<PAGE>
MICROWAVE POWER DEVICES, INC.
49 Wireless Boulevard
Hauppauge, New York 11788-3935
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of MICROWAVE POWER DEVICES, INC. (the
"Company") will be held at the offices of Proskauer Rose LLP, 1585 Broadway,
26th floor, New York, New York 10036, on Thursday, May 7, 1998, at 11:00 a.m.,
local time, for the following purposes:
1. To elect directors of the Company for the ensuing year;
2. To approve the amendment of the Company's 1996 Stock Option Plan to
increase by 500,000 the number of shares of the Company's Common Stock
for which options may be granted thereunder;
3. To ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company; and
4. To transact any such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on Thursday, April
2, 1998 as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and at any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED
PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen W. Rubin
Secretary
April 7, 1998
<PAGE>
MICROWAVE POWER DEVICES, INC.
49 Wireless Boulevard
Hauppauge, New York 11788-3935
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1998
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Microwave Power Devices, Inc., a Delaware corporation (the
"Company"), to be used at the Annual Meeting of Stockholders to be held at the
offices of Proskauer Rose LLP, 1585 Broadway, 26th Floor, New York, New York
10036, on Thursday, May 7, 1998 at 11:00 A.M., local time, and at any
adjournments thereof.
When the accompanying proxy is properly executed and returned, the shares
of common stock of the Company, par value $.01 per share (the "Common Stock"),
it represents will be voted at the meeting in accordance with any directions
noted thereon and, if no direction is indicated, the shares it represents will
be voted: (i) FOR the election of nominees for directors of the Company listed
herein; (ii) FOR the approval of the amendment to the Company's 1996 Stock
Option Plan to increase by 500,000 the number of shares of Common Stock for
which options may be granted thereunder; (iii) FOR the ratification of the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the current fiscal year; and (iv) in the discretion of the holders
of the proxy with respect to any other business that may properly come before
the meeting and at any adjournments thereof. Any stockholder signing and
delivering a proxy may revoke it at any time before it is voted by delivering to
the Secretary of the Company a written revocation or a duly executed proxy
bearing a date later than the date of the proxy being revoked. Any stockholder
attending the meeting in person may withdraw his proxy and vote his shares.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made primarily by mail; however, officers and regular
employees of the Company may solicit proxies personally or by telephone or by
telegram. Those persons will not be compensated specially for such services. The
Company may reimburse brokers, banks, custodians, nominees, and fiduciaries
holding shares of Common Stock in their names or in the names of their nominees
for their reasonable charges and expenses in forwarding proxies and proxy
material to the beneficial owners of such shares.
A copy of the Notice of Annual Meeting of Stockholders accompanies this
Proxy Statement. The approximate date on which this Proxy Statement first will
be mailed to stockholders of the Company is April 9, 1998.
VOTING RIGHTS
Only holders of record of shares of Common Stock at the close of business
on April 2, 1998 will be entitled to notice of and to vote at the Annual Meeting
of Stockholders. On that date, the Company had outstanding 10,378,890 shares of
Common Stock, the holders of which are entitled to one vote per share on each
matter to come before the Annual Meeting. Voting rights are non-cumulative.
The presence, in person or by proxy, of stockholders holding a majority of
the outstanding shares of Common Stock will constitute a quorum at the Annual
Meeting. Directors will be elected at the Annual Meeting by a plurality of the
votes cast (i.e., the eight nominees receiving the greatest number of votes will
be elected as directors). Abstentions and broker non-votes (which occur when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner) are counted for purposes of determining the presence or absence of a
quorum at the meeting. Abstentions are counted in tabulations of the votes cast
on proposals presented to stockholders, but broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
<PAGE>
PRINCIPAL STOCKHOLDERS
As of April 2, 1998, the persons listed in the following table were the
only persons known to the Company (based on information set forth in Schedules
13G filed with the Securities and Exchange Commission or otherwise provided to
the Company) to be the beneficial owners of more than five percent of the
Company's outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Shares of
Name and Address of Common Stock Percent
Beneficial Owners Beneficially Owned of Class
- - ----------------- ------------------ --------
<S> <C> <C>
Charter Technologies Limited Liability Company (1) 5,139,994 49.52%
c/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, NY 10022
Dimensional Fund Advisors, Inc.(2) 598,100 5.76%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- - ----------
(1) The members of Charter Technologies Limited Liability Company ("Charter
Technologies") are Charterhouse Equity Partners, L.P. ("CEP"), which owns
99% of the ownership interests in Charter Technologies, and George J.
Sbordone, who owns 1% of the ownership interests in Charter Technologies.
The general partner of CEP is CHUSA Equity Investors, L.P., whose general
partner is Charterhouse Equity, Inc., a wholly-owned subsidiary of
Charterhouse Group International, Inc. ("Charterhouse"). As a result of the
foregoing, all of the shares of Common Stock held by Charter Technologies
would, for purposes of Section 13(d) of the Securities Exchange Act of
1934, be considered to be beneficially owned by Charterhouse.
(2) All such shares are owned by advisory clients of Dimensional Fund Advisors,
Inc. As such, Dimensional Fund Advisors, Inc. disclaims beneficial
ownership of all such securities.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, the entire Board of Directors is to
be elected. In the absence of instructions to the contrary, the shares of Common
Stock represented by a proxy delivered to the Board of Directors will be voted
FOR the eight nominees named under "Management" below. Each nominee has
consented to being named as a nominee in this Proxy Statement and to serve if
elected. However, if any such nominee should become unable to serve as a
director for any reason, votes will be cast instead for a substitute nominee
designated by the Board of Directors or, if none is so designated, will be cast
according to the judgment of the person or persons voting the proxy.
-2-
<PAGE>
Management
Directors and Executive Officers
The following table and the paragraphs that follow it present certain
information concerning the nominees for directors, who are the sole current
directors, and the executive officers of the Company. Directors are elected
annually to serve until the next annual meeting of stockholders and until their
successors have been elected. Officers are elected by and serve at the
discretion of the Board of Directors. There are no family relationships between
any of the directors and executive officers of the Company.
<TABLE>
<CAPTION>
Shares of Common
Stock beneficially
Positions and Offices owned as of Percent
Nominees for Directors Age with the Company April 2, 1998 of Class(1)
---------------------- --- ---------------- ---------------------- -----------
<S> <C> <C> <C> <C>
George J. Sbordone (2)(3) 77 Chairman of the Board of 344,325 3.3%
Directors
Edward J. Shubel (2)(4) 67 President and Chief Executive 415,000 3.9%
Officer; Director
Merril M. Halpern (2)(5) 63 Director 0 0
A. Lawrence Fagan (5)(6)(7) 68 Director 0 0
Alfred Weber (6) 65 Director 5,100 *
David J. Aldrich (7) 41 Director 0 0
Warren A. Law (6)(7) 73 Director 1,000 *
James Silver (2)(8) 40 Director 206,250 2.0%
Executive Officers Who Are Not Directors
- - ----------------------------------------
Fuat Agi (9) 57 Vice President and Chief 57,500 *
Technical Officer
Paul E. Donofrio (10) 39 Vice President and Chief 57,500 *
Financial Officer
Nicholas Mazzella (11) 48 Vice President and General 25,500 *
Manager - Wireless Products
Larry Konopelko (12) 44 Vice President and General 24,500 *
Manager - Satellite, Medical
and Military Products
All directors and executive officers
as a group (12 persons) (13)
1,136,675 10.5%
</TABLE>
- - --------------------------------------------------------------------------------
* Less than 1%.
-3-
<PAGE>
(1) For purposes of calculating the Percent of Class beneficially owned by any
person or group of persons named above, any security which such person or
group of persons has the right to acquire within 60 days after April 2,
1998 is deemed to be beneficially owned for the purpose of computing the
percentage ownership of such person or group of persons, but is not deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person or group of persons.
(2) Member of Executive Committee.
(3) Includes an aggregate of 37,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(4) Includes an aggregate of 227,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(5) Merril M. Halpern and A. Lawrence Fagan are executive officers, directors
and stockholders of Charterhouse. Messrs. Halpern and Fagan each disclaim
beneficial ownership of the shares of Common Stock beneficially owned by
Charterhouse.
(6) Member of Compensation Committee.
(7) Member of Audit Committee.
(8) Includes an aggregate of 18,750 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(9) Includes an aggregate of 57,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(10) Includes an aggregate of 57,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(11) Includes an aggregate of 24,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(12) Includes an aggregate of 24,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
(13) Includes an aggregate of 447,750 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after April 2, 1998.
George J. Sbordone has been Chairman of the Company since August 1991.
Since September 1991, Mr. Sbordone has also been the Chief Executive Officer of
Defense Technologies, Inc. ("DTI") and of a number of holding companies (in
which an affiliate of Charterhouse is a significant investor) which own
subsidiaries engaged in the manufacture of electronic components used in
avionics, radar and communications (the "Charter Technologies Group"). DTI
provides management and consulting services to companies with electronics and
manufacturing operations, including the Charter Technologies Group. From January
1990 to September 1991, Mr. Sbordone was a non-stockholding principal of
Charterhouse, a private investment firm specializing in leveraged buy-out
acquisitions. From 1971 until January 1990, Mr. Sbordone was the Chairman of
Tempo Instruments Incorporated, a manufacturer of electronic devices and power
supplies.
Edward J. Shubel has been President and Chief Executive Officer and a
director of the Company since September 1991. Between 1986 and September 1991,
Mr. Shubel was President of EJS Products Inc., a manufacturer of antennas. From
1974 to 1986, Mr. Shubel was President of Numax Electronics, a manufacturer of
electronic components.
Merril M. Halpern has been a director of the Company since June 1995. Mr.
Halpern has been Chairman of the Board of Charterhouse since October 1984. From
1973 to October 1984, Mr. Halpern served as President and Chief Executive
Officer of Charterhouse. Mr. Halpern is also a director of American Disposal
Services, Inc., a solid waste management firm ("ADS") and Insignia Financial
Group, Inc., a real estate management firm.
A. Lawrence Fagan has been a director of the Company since June 1995. Mr.
Fagan has been President of Charterhouse since January 1997. From 1984 to
December 1996 Mr. Fagan served as Executive Vice President of Charterhouse. Mr.
Fagan is also a director of ADS.
-4-
<PAGE>
Alfred Weber has been a director of the Company since June 1995. Mr. Weber
has been President of C&D Technologies, Inc., a manufacturer of commercial and
industrial battery power systems, since April 1989, its Chief Executive Officer
since January 1993, and its Chairman of the Board since November 1995. Mr. Weber
was an independent consultant from June 1987 to March 1989. From November 1986
to May 1987, Mr. Weber was President and Chief Executive Officer of Uniroyal
Plastics Company, Inc.
David J. Aldrich has been a director of the Company since June 1995. Mr.
Aldrich has served as Vice President and General Manager of the Alpha Microwave
Division of Alpha Industries, Inc., a commercial wireless semiconductor and
ceramics components manufacturer, since May 1996. From January 1995 through
April 1996, Mr. Aldrich was Vice President and Chief Financial Officer of Alpha
Industries, Inc. From September 1991 through December 1994, Mr. Aldrich was a
senior manager, supporting the commercial wireless businesses at M/A-Com, Inc.,
a manufacturer of high technology products. Between 1989 and 1991, Mr. Aldrich
was the Vice President Finance and Controller of the Company.
Warren A. Law has been a director of the Company since June 1995. Mr. Law
has been a professor at the Harvard Business School since 1958 (through June
1991 in an active capacity) and is currently the Edmund Cogswell Converse
Professor of Finance and Banking Emeritus.
James Silver has been a director of the Company since July 1991. From June
1995 to December 1995, Mr. Silver was Vice President-Corporate Finance of the
Company. From August 1991 until June 1995, Mr. Silver was a Vice President of
the Company. Mr. Silver has been an executive officer of DTI and of the holding
companies included in the Charter Technologies Group since September 1991.
Fuat Agi has served as Vice President and Chief Technical Officer of the
Company since June 1995. From June 1972 through June 1995, Mr. Agi served in
various engineering roles for the Company.
Paul E. Donofrio has served as Vice President and Chief Financial Officer
of the Company since January 1993 and has been Chief Financial Officer of the
Company since November 1991. From April 1984 to November 1991, Mr. Donofrio was
an employee of AIL Systems, Inc.-Eaton Corporation, a manufacturer of electronic
systems for military and commercial applications, and held the position of
Finance and Accounting Manager from April 1989 to November 1991.
Nicholas Mazzella has served as Vice President and General Manager -
Wireless Products of the Company since August 1995. From July 1990 to August
1995, Mr. Mazzella served as Vice President - Standard Products and Quality
Assurance of the Company. From March 1988 to July 1990, Mr. Mazzella served as
Director - Standard Products and Quality Assurance of the Company. From February
1984 to March 1988, Mr. Mazzella served in various roles for the Company.
Larry Konopelko has served as Vice President and General Manager -
Satellite, Medical and Military Products of the Company since August 1995. From
April 1994 to August 1995, Mr. Konopelko served as Vice President - Contracts
and Program Management of the Company. From June 1990 to April 1994, Mr.
Konopelko served as Director - Contracts of the Company. From December 1988 to
June 1990, Mr. Konopelko served as Contracts Manager of the Company.
-5-
<PAGE>
Director Compensation
The only directors who are compensated for services as a director are
Messrs. Weber, Aldrich and Law, each of whom receives $2,000 for each meeting of
the Board of Directors which he attends and $2,000 for each meeting of a
committee of the Board of Directors which he attends.
Board Committees and Membership
The Company has established an Executive Committee, a Compensation
Committee and an Audit Committee. The Executive Committee assists the Board in
its responsibilities. Messrs. Sbordone, Shubel, Halpern and Silver are the
members of the Executive Committee. The Compensation Committee approves the
salaries and other benefits of the executive officers of the Company and
administers any bonus, incentive compensation or stock option plans of the
Company. In addition, the Compensation Committee consults with the Company's
management regarding pension and other benefit plans, and compensation policies
and practices of the Company. Messrs. Fagan, Weber and Law are the members of
the Compensation Committee. The Compensation Committee held one meeting in 1997.
The Audit Committee reviews the professional services provided by the
Company's independent auditors, the independence of such auditors from
management of the Company, the annual financial statements of the Company and
the Company's system of internal accounting controls. The Audit Committee also
reviews such other matters with respect to the accounting, auditing and
financial reporting practices and procedures of the Company as it may find
appropriate or as may be brought to its attention, and meets from time to time
with members of the Company's internal audit staff. Messrs. Fagan, Aldrich and
Law are the members of the Audit Committee. The Audit Committee held one meeting
in 1997.
The Company does not have a nominating committee. The Board of Directors
held four meetings and had one telephonic conference in 1997. Each of the
directors attended at least 75% of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings of all committees of the
Board on which such director served.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes in
that ownership, on a timely basis, to the Securities and Exchange Commission.
Based on material provided to the Company, all such required reports were filed
on a timely basis in 1997.
-6-
<PAGE>
Executive Compensation
The following table sets forth information about the compensation paid, or
payable, by the Company for services rendered in all capacities to the Chief
Executive Officer of the Company and each of the four other most highly paid key
policy-making executive officers of the Company for each of the last three
fiscal years in which such officers were executives officers for all or part of
the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation (1) ---------------------------
---------------------------------------
Other Restricted Securities
Name and Annual Stock Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Award(s) ($) Options # Compensation
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward J. Shubel......... 1997 259,146 43,750(2) 32,691(5) 0 40,000 45,000(6)
President and 1996 241,600 50,000(3) 27,691(5) 0 40,000 45,000(6)
Chief 1995 204,289 75,000(4) 37,036(5) 0 187,500 45,000(6)
Executive
Officer
- - ----------------------------------------------------------------------------------------------------------------------
Fuat Agi................. 1997 145,820 17,500(2) 0 0 20,000 0
Vice President 1996 139,384 0 0 0 20,000 0
and Chief 1995 134,371 20,000(4) 0 0 37,500 0
Technical
Officer
- - ----------------------------------------------------------------------------------------------------------------------
Paul E. Donofrio......... 1997 135,155 17,500(2) 0 0 20,000 0
Vice President 1996 126,543 0 0 0 20,000 0
and Chief 1995 99,781 70,000(7) 0 0 37,500 0
Financial
Officer
- - ----------------------------------------------------------------------------------------------------------------------
Nicholas Mazzella........ 1997 124,269 10,500(2) 0 0 15,000 0
Vice President 1996 117,499 0 0 0 15,000 0
and General 1995 102,732 12,000(4) 0 0 9,500 0
Manager
- - ----------------------------------------------------------------------------------------------------------------------
Larry Konopelko.......... 1997 124,039 10,500(2) 0 0 15,000 0
Vice President 1996 117,318 0 0 0 15,000 0
and General 1995 101,704 12,000(4) 0 0 9,500 0
Manager
</TABLE>
- - ----------
(1) Other than the salary, bonus and other compensation described above, the
Company did not pay the persons named in the Summary Compensation Table any
compensation, including incidental personal benefits, in excess of 10% of
such executive officer's salary.
(2) Represents bonuses relating to performance of services for the Company in
fiscal 1997 which were paid in fiscal 1998.
(3) Represents bonuses relating to performance of services for the Company in
fiscal 1996 which were paid in fiscal 1997.
(4) Represents bonuses relating to performance of services for the Company in
fiscal 1995 which were paid in fiscal 1996.
(5) Represents, in 1997, 1996 and 1995 respectively, the Company's payment for
an automobile lease ($11,468, $9,576 and $9,474), gasoline ($1,900, $1,560
and $1,476) and spousal travel expenses ($19,323, $16,555 and $26,086).
(6) Represents the Company's payment of premiums on a life insurance policy.
See "Employment Agreements."
(7) Represents bonuses relating to performance of services for the Company in
fiscal 1995 which were paid both in fiscal 1995 and in fiscal 1996.
Stock Options
The following table contains information concerning the grant of options
under the Company's 1995 Stock Option Plan (the "1995 Plan") and/or the
Company's 1996 Stock Option Plan (the "1996 Plan") to each of the named
executive officers of the Company during the year ended December 31, 1997. No
stock appreciation rights ("SARS") were granted in 1997.
-7-
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
----------------------------------------------------------------
Percent of Potential Realizable
Number of Total Value at Assumed Annual
Securities Options Rates of
Underlying Granted to Exercise Stock Appreciation
Options Employees in Price Expiration for Option Term(4)
Name Granted(#)(1) Fiscal Year(2) ($/Share) Date(3) 5% 10%
- - ------------------- ---------------- -------------- --------- ---------- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Edward J. Shubel... 40,000 18.8% $2.875 2/24/07 $72,323 $183,280
Fuat Agi........... 20,000 9.4% 2.875 2/24/07 36,161 91,640
Paul E. Donofrio... 20,000 9.4% 2.875 2/24/07 36,161 91,640
Nicholas Mazzella.. 15,000 7.1% 2.875 2/24/07 27,121 68,730
Larry Konopelko.... 15,000 7.1% 2.875 2/24/07 27,121 68,730
</TABLE>
- - ----------
(1) All options granted in 1997 were granted pursuant to the Company's 1995 and
1996 Stock Option Plans and generally become exercisable annually, in
increments of 33 1/3% of the total grant, beginning on the first
anniversary of the date of grant. Options were granted at the fair market
value of Common Stock on the effective date of grant.
(2) The total number of options granted to employees in 1997 was 212,215.
(3) Each option is subject to earlier termination if the officer's employment
with the Company is terminated.
(4) Amounts reported in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Company's Common Stock over the term of the options. The potential
realizable values set forth above do not take into account applicable tax
and expense payments that may be associated with such option exercises.
Actual realizable value, if any, will be dependent on the future price of
the Common Stock on the actual date of exercise, which may be earlier than
the stated expiration date. The 5% and 10% assumed annualized rates of
stock price appreciation over the exercise period of the options used in
the table above are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future price of the Common Stock on any date. There is no representation
either express or implied that the stock price appreciation rates for the
Common Stock assumed for purposes of this table will actually be achieved.
-8-
<PAGE>
The following table sets forth information for each of the named executive
officers with respect to the value of outstanding and unexercised options held
as of December 31, 1997. There were no options exercised during 1997. There were
no SARs exercised during 1997 and none were outstanding as of December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at December 31, 1997 at December 31, 1997 (1)
on Exercise Realized ----------------------------- -------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- - -------------------- ------------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Edward J. Shubel.... 0 $0 200,833 66,667 $0 $165,000
Fuat Agi............ 0 0 44,167 33,333 0 82,500
Paul E. Donofrio.... 0 0 44,167 33,333 0 82,500
Nicholas Mazzella... 0 0 14,500 25,000 0 61,875
Larry Konopelko..... 0 0 14,500 25,000 0 61,875
</TABLE>
- - ----------
(1) Represents the difference between the closing market price of the Common
Stock at December 31, 1997 of $7.00 per share and the exercise price per
share of the in-the-money options, multiplied by the number of shares
underlying the in-the-money options.
Employment Agreements
In September 1991, Mr. Shubel entered into an employment agreement with the
Company under which he serves as the Company's President. The employment
agreement currently provides for an annual base salary of $264,000 and
terminates on August 30, 1998. The employment agreement provides that after the
expiration of the current term it will be automatically renewed for successive
one year terms unless either party gives the other party at least 60 days prior
written notice of non-renewal.
In April 1992, the Company entered into agreements with Mr. Shubel pursuant
to which the Company agreed to purchase and pay the annual premiums on an
insurance policy on Mr. Shubel's life which had an original face value of $1.1
million. Upon Mr. Shubel's retirement, the cash surrender value of this policy
will be used to pay a monthly pension to Mr. Shubel or his beneficiaries for 60
months. If Mr. Shubel dies before his retirement, then the proceeds of this
policy will be split between the Company (up to the aggregate amount of premiums
paid by the Company) and Mr. Shubel's beneficiaries.
-9-
<PAGE>
Stock Option Plans
The Company has adopted the Microwave Power Devices, Inc. 1995 Stock Option
Plan and the 1996 Stock Option Plan (collectively, the "Plans"). The Plans
provide for the grant of incentive stock options and non-qualified stock options
to key employees and consultants of the Company and its subsidiaries. The Plans
are administered by the Compensation Committee of the Board of Directors which
determines the key employees and consultants eligible to receive options and the
terms thereof (including exercise price and vesting requirements), all in a
manner consistent with the terms of the Plans. An aggregate of 1,000,000 shares
of Common Stock are subject to the grant of options under the Plans, and as of
April 2, 1998 options have been granted to purchase an aggregate of 947,840
shares of Common Stock.
401(k) Plan
The Company adopted the Microwave Power Devices, Inc. In-VEST Plan, which
is a 401(k) Plan, effective January 1, 1992. The plan is available to all
employees who have been employed by the Company for at least 30 days. An
employee may contribute, on a pre-tax basis, up to 14% of the employee's total
annual compensation from the Company (defined as Internal Revenue Code Section
3401(a) compensation). After one year of employment, the Company also makes
matching contributions ranging from 50% to 100% (based on years of service) of
such employee's contributions up to a maximum of 6% of such employee's
compensation.
Contributions are allocated to each employee's individual account and are,
at the employee's election, invested in one or more investment funds. Employee
contributions are fully vested and non-forfeitable. Employer contributions are
subject to a graduated vesting schedule beginning during a participant's second
year of employment by the Company and resulting in full vesting by the end of
the fifth year.
Executive Incentive Bonus Plan
The Company adopted, in February 1996, an executive incentive bonus plan to
reward key officers who have significant impact on the operating success of the
company. The plan is based on The Jaffe Group's Executive Compensation Audit,
Analysis and Recommendations, a study that was commissioned by the Board of
Directors. Under the bonus plan, future annual bonuses will be based upon the
achievement of performance goals that are annually preset by the Committee. For
1997, these performance goals were linked to earnings per share, net sales and
contract awards/bookings. For 1998, these performance goals will be linked to
earnings per share, net sales and operating cash flow. The Committee establishes
a target bonus amount for each key officer at the beginning of the year. The
target amount is then divided into three portions, as follows: one-half of the
target bonus award is linked to the achievement of earnings per share goals;
one-quarter of the target bonus award is linked to the achievement of net sales
goals; and one-quarter of the target bonus award is linked to the achievement of
contract awards/bookings goals (for 1997) or operating cash flow goals (for
1998). For 1997, an executive could earn 0% or from 25% to 200% of each portion
of his bonus, based upon a measured comparison of actual results achieved to
performance goals. For 1998, an executive can earn 0% or from 50% to 200% of
each portion of his bonus, based upon a measured comparison of actual results
achieved to performance goals. An officer whose employment is terminated
voluntarily or for cause prior to December 31 will forfeit his bonus for the
entire year. An officer whose employment is terminated by the Company but not
for cause will receive, at the discretion of the Committee, an award for such
year pro-rated to the date of separation, or such lesser amount as the Committee
deems appropriate. An officer whose employment is terminated due to retirement,
disability or death will receive an award for such year pro-rated to the date of
separation. New executive hires may be included in the plan on a pro-rata basis.
In 1997, $105,000 in bonuses were earned (paid in 1998) under the terms of this
plan.
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Compensation Committee Interlocks and Insider Participation
Messrs. Fagan, Weber, and Law are the members of the Compensation
Committee. Mr. Fagan is a director, executive officer and a stockholder of
Charterhouse which may be deemed to be the beneficial owner of the shares of
Common Stock of the Company owned by Charter Technologies. Messrs. Weber and Law
own 5,100 and 1,000 shares of Common Stock, respectively.
Compensation Committee Report
Compensation Policies. The principal goal of the Company's compensation
program as administered by the Compensation Committee is to help the Company
attract, motivate and retain the executive talent required to develop and
achieve the Company's strategic and operating goals with a view to maximizing
shareholder value. The key elements of this program and the objectives of each
element are as follows:
Base Salary. Base salaries paid in 1997 to the Company's executive officers
are competitive with those payable to executives holding corresponding positions
at corporations within the Company's industry that are of comparable size.
Individual experience and performance is considered when setting salaries within
the range for each position. Annual reviews are held and adjustments are made
based on attainment of individual goals and in a manner consistent with the
Company's overall operating and financial performance.
Bonuses. Bonuses are intended to motivate individual and team performance
by creating potential to earn annual incentive awards that are generally
contingent upon the performance of the Company and that are comparable to those
payable to executives holding corresponding positions at corporations within the
Company's industry that are of comparable size.
Long Term Incentives. The Company provides its executives with long-term
incentive compensation through grants of stock options under the Company's stock
option plans. The grant of stock options aligns the executive's interests with
those of the Company's stockholders by providing the executive with an
opportunity to purchase and maintain an equity interest in the Company and to
share in the appreciation of the value of the Company's Common Stock. The size
of option grants is comparable to grants by other corporations within the
Company's industry that are of comparable size.
CEO's Compensation. As discussed under "Management -- Employment
Agreements," the Company entered into an employment agreement with Mr. Shubel in
1991, which was prior to the formation of the Compensation Committee. Pursuant
to such employment agreement, the Company paid to Mr. Shubel a base salary of
$250,000 in 1997. In addition, the Compensation Committee determined to grant
Mr. Shubel a bonus of $43,750 with respect to 1997 (paid in 1998) under the
terms of the executive incentive bonus plan. Mr. Shubel was also awarded options
in 1997 to purchase 40,000 shares of the Company's Common Stock under the
Microwave Power Devices, Inc. 1996 Stock Option Plan.
The Compensation Committee
A. Lawrence Fagan
Alfred Weber
Warren A. Law
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Performance Graph
The following performance graph compares the twenty-seven month cumulative
return of the Company's Common Stock to the total returns of the Standard &
Poor's 500 Stock Index and the Nasdaq Stock Market Electronic Component Stocks
Index, which is a total return index of electronic component companies. Each
case assumes a $100 investment on September 29, 1995 (the first day of public
trading of the Company's Common Stock) and reinvestment of any dividends.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
COMPARISON OF CUMULATIVE TOTAL RETURN
Measurement Period MPDI S&P 500 Nasdaq Elec Comp
------------------ ---- ------- ----------------
September 1995 $100 $100 $100
December 1995 127 105 86
December 1996 31 127 149
December 1997 80 166 157
Certain Transactions
On September 3, 1991, Messrs. Sbordone, Shubel and Silver purchased from
the Company 306,825, 187,500 and 187,500 shares of the Company's Common Stock,
respectively. Messrs. Sbordone and Silver paid the purchase price by delivery of
promissory notes in the amounts of $122,730 and $75,000, respectively. On
January 31, 1996 and September 30, 1997, Mr. Silver repaid the principal balance
of his note in $37,500 increments. Mr. Shubel paid the purchase price by a cash
payment of $10,000 and by delivery of a promissory note in the amount of
$65,000. The principal amounts of all the promissory notes were payable,
together with interest at the rate of 8.0% per annum, on September 3, 1996. Such
payment date was subsequently extended to September 3, 1998, and again extended
to September 3, 2001. To secure this debt, each of Messrs. Sbordone, Shubel and
Silver pledged 306,828, 162,500 and 187,500 shares, respectively, to the
Company. As Mr. Silver's promissory note has been fully repaid, his 187,500
shares are no longer pledged to the Company.
Pursuant to consulting agreements which were effective January 1, 1996,
Messrs. Sbordone and Silver served as consultants to the Company receiving
consulting fees in 1997 of $125,000 and $100,000, respectively. These consulting
services consist of: services relating to the Company's banking and other
financial relationships including assistance in connection with the financing
and refinancing of corporate indebtedness; analysis and assistance from both a
financial
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<PAGE>
and operational standpoint in connection with the expansion of the Company's
business operations; assistance with strategic planning; advice related to
acquisitions; and other general management guidance or assistance.
PROPOSAL 2
APPROVAL OF THE AMENDMENT TO THE MICROWAVE
POWER DEVICES, INC. 1996 STOCK OPTION PLAN
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present and entitled to vote at the meeting is required to approve
the amendment to the Microwave Power Devices, Inc. 1996 Stock Option Plan (the
"Plan") to increase by 500,000 the number of shares of the Company's Common
Stock for which options may be granted under the Plan. Under the Plan as
currently in effect, options to purchase 475,000 shares of Common Stock were
subject to grant, 427,465 of which have been granted. The Board of Directors
recommends that the stockholders vote their shares for the proposal to amend the
Plan. In the absence of instructions to the contrary, the shares of Common Stock
represented by a proxy delivered to the Board of Directors will be voted FOR the
amendment of the Plan.
The Plan
On March 2, 1998, the Compensation Committee and the Board of Directors of
the Company approved (subject to stockholder approval) the amendment to the
Plan. The Plan is a stock plan providing for the grant of incentive stock
options and nonqualified stock options to key employees and consultants of the
Company and its subsidiaries. The Company estimates that approximately 125
employees are eligible to participate in the Plan. The following description of
the Plan is a summary and is qualified in its entirety by reference to the Plan,
a copy of which has been filed as an Exhibit to the Company's Annual Report on
Form 10-K/A-1 for the year ended December 31, 1995.
Duration. No option may be granted under the Plan after March 5, 2006 (the
"Termination Date"). Options granted prior to the Termination Date, however, may
extend beyond such date and the provisions of the Plan will continue to apply
thereto.
Purpose. The purpose of the Plan is to attract and retain eligible
participants of outstanding competence and to encourage their best efforts on
behalf of the Company. The Board of Directors believes that stock options
provide performance incentives to eligible participants to the benefit of the
Company and its shareholders, and recommends approval of the amendment to the
Plan by stockholders.
Administration. The Plan is administered by the Compensation Committee (the
"Committee"), which determines the key employees and consultants eligible to
receive options and the terms thereof, all in a manner consistent with the Plan.
Subject to any general guidelines established by the Board of Directors, the
Committee has full and final authority to determine the persons to whom, and the
time or times at which, options are granted, the number of shares subject to
each option (subject to a maximum of 150,000 option shares that may be granted
in any year to any one employee, with any unused portion of this limitation
available to be carried forward), the number of options which shall be treated
as incentive stock options, the duration of each option, appropriate vesting
requirements, and other terms and provisions of each option. The Committee also
has the authority to accelerate the vesting of a stock option. In determining
persons who are to receive options, and the number of shares to be covered by
each option, the Committee considers, among other things, the person's position,
responsibilities, service, accomplishments, and such person's present and future
value to the Company.
Shares Subject to Options. The Plan currently provides that the total
number of shares of Common Stock subject to the grant of options is 475,000
shares, subject to adjustment under certain circumstances. Options which
terminate or expire unexercised are available for subsequent grants. There are
presently only 47,535 shares of Common Stock available for the grant of options.
The purpose of the proposed amendment to the Plan is to make available for the
grant of options a new pool of 500,000 shares of Common Stock.
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<PAGE>
Options. The Plan provides for the grant of incentive stock options and
nonqualified stock options to key employees and consultants, as determined by
the Committee. The exercise price of incentive stock options granted under the
Plan shall be at least 100% of the fair market value of the Common Stock on the
date of grant and the exercise price of nonqualified stock options shall be at
least equal to the par value of the Common Stock. The Committee may provide that
options will be exercisable in full at any time or from time to time during the
option term or provide for the exercise thereof in such installments at such
times as the Committee may determine. Nonqualified stock options shall be
exercisable for not more than ten years, and incentive stock options may be
exercisable for up to ten years except as otherwise provided. An option may be
exercised only during the optionee's employment, provided, however, that if
employment terminates as a result of death, disability or retirement, then
options may be exercised for a period of one year, and if employment is
terminated by the Company without cause, then options may be exercised for a
period of 90 days, in each case subject to the earlier expiration of the option
in accordance with the terms of its grant. The Committee may provide that an
optionee may pay for shares upon exercise of an option (i) in cash, (ii) in
already-owned shares of Common Stock, (iii) by agreeing to surrender then
exercisable options equivalent in value, (iv) by payment through a cash or
margin arrangement with a broker, (v) in shares otherwise issuable upon exercise
of the option or (vi) by such other medium or by any combination of (i), (ii),
(iii), (iv) or (v) as authorized by the Committee. The grant of an option may be
accompanied by a reload option, which gives an optionee who pays the exercise
price of an option with shares of Common Stock an additional option to acquire
the same number of shares that was used to pay for the original option.
Grants to Date. A total of 427,465 options have been granted under the
Plan. Upon grant, such options vest to the extent of 33 1/3% of the shares of
Common Stock covered thereby on each of the next three anniversary dates of the
grant, subject to earlier vesting on such individual's death, disability,
retirement, termination without cause or on the acquisition of the Company. On
April 2, 1998, the closing price of the Common Stock as reported by Nasdaq was
$8.875.
Adjustments and Amendments of the Plan. Adjustments to the Plan and to
outstanding options will be made to reflect stock dividends, recapitalizations
and similar events. The Committee has the right to amend, suspend, or terminate
the Plan at any time; provided, however, that, unless otherwise required by law
or specifically provided in the Plan, the rights of a participant with respect
to options granted prior to such amendment, suspension or termination, may not
be materially impaired without the consent of such participant and provided
further that without the approval of the stockholders of the Company entitled to
vote, no amendment may be made which would (i) increase the aggregate number of
shares of Common Stock that may be issued under the Plan (except to reflect
stock dividends, recapitalizations, and similar events), (ii) decrease the
minimum purchase price of any option, (iii) increase the individual limitation
set forth in Article VI.A of the Plan, or (iv) extend the maximum option period.
The Plan is not subject to any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Plan is not, nor is it intended to
be, qualified under Section 401(a) of the Code.
Non-Assignability of Options. No option may be assignable or transferable
by the recipient, except by will or by the laws of descent and distribution.
During the lifetime of a recipient, options may be exercisable only by him or
his personal representative or guardian. No option or interest therein may be
pledged, attached or otherwise encumbered other than in favor of the Company.
Certain Federal Income Tax Consequences. The rules concerning the Federal
income tax consequences with respect to stock options granted pursuant to the
Plan are quite technical. Moreover, the applicable statutory provisions are
subject to change, as are their interpretations and applications which may vary
in individual circumstances. Therefore, the following discussion of tax
consequences is designed to provide a general understanding thereof as of the
date hereof.
Under current federal income tax laws, the grant of an incentive stock
option generally has no income tax consequences for the optionee or the Company.
No taxable income results to the optionee upon the grant or exercise of an
incentive stock option. However, the amount by which the fair market value of
the stock acquired pursuant to the incentive stock option exceeds the exercise
price is an adjustment item for purposes of Alternative Minimum Tax. If no
disposition of the shares is made within either two years from the date the
incentive stock option was granted or one year
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<PAGE>
from the date of exercise of the incentive stock option, any gain or loss
realized upon disposition of the shares will be treated as a long-term capital
gain or loss to the optionee. If the Common Stock is held for more than eighteen
months after the date of exercise, the optionee will be taxed at the lowest rate
applicable to capital gains for such optionee. The Company will not be entitled
to a tax deduction upon such exercise of an incentive stock option, nor upon a
subsequent disposition of the shares unless such disposition occurs prior to the
expiration of the holding period described above. In general, if the optionee
does not satisfy the foregoing holding periods, any gain equal to the difference
between the exercise price and the fair market value of the stock at exercise
(or, if a lesser amount, the amount realized on disposition over the exercise
price) will constitute ordinary income. In the event of such a disposition
before the expiration of the holding period described above, the Company is
entitled to a deduction at that time equal to the amount of ordinary income
recognized by the optionee. Any gain in excess of the amount recognized by the
optionee as ordinary income would be taxed to the optionee as short-term or
long-term capital gain (depending on the applicable holding period).
An optionee will realize no taxable income upon the grant of a nonqualified
option and the Company will not receive a deduction at the time of such grant.
Upon exercise of a nonqualified stock option an optionee generally will
recognize ordinary income in an amount equal to the excess of the fair market
value of the stock on the date of exercise over the exercise price. Upon a
subsequent sale of the stock by the optionee, the optionee will recognize
short-term or long-term capital gain or loss depending upon his or her holding
period for the stock. If the Common Stock is held for more than eighteen months
after the date of exercise, the optionee will be taxed at the lowest rate
applicable to capital gains for such optionee. The Company will generally be
allowed a deduction equal to the amount recognized by the optionee as ordinary
income.
In addition: (i) any officers and directors of the Company subject to
Section 16(b) of the Exchange Act may be subject to special tax rules regarding
the income tax consequences concerning their options; (ii) any entitlement to a
tax deduction on the part of the Company is subject to the applicable Federal
tax rules, including, without limitation, Section 162(m); and (iii) in the event
that the exercisability of an option is accelerated because of a change in
control, payments relating to the options, either alone or together with certain
other payments may constitute parachute payments under Internal Revenue Code
Section 280G, which excess amounts may be subject to excise tax.
PROPOSAL 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has reappointed Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998 and
recommends the ratification by the stockholders of that reappointment. In the
absence of instructions to the contrary, the shares of Common Stock represented
by a proxy delivered to the Board of Directors will be voted FOR the
ratification of the appointment of Arthur Andersen LLP.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting of Stockholders and will be available to respond to appropriate
questions and make such statements as he or she may desire.
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<PAGE>
STOCKHOLDERS PROPOSALS
Stockholders of the Company wishing to include proposals in the proxy
material in relation to the annual meeting of the Company to be held in 1999
must submit the same in writing so as to be received at the executive office of
the Company on or before December 31, 1998. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to stockholders' proposals.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 1997 is
being mailed together with this Proxy Statement to the Company's stockholders of
record at the close of business on April 2, 1998.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
at the meeting and does not intend to bring any other matters before the
meeting. However, if any other matters properly come before the meeting or any
adjournments thereof, it is intended that the persons named in the accompanying
proxy will vote thereon according to their best judgment in the interests of the
Company.
By Order of the Board of Directors,
Stephen W. Rubin
Secretary
April 7, 1998
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION WILL
BE APPRECIATED.
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<PAGE>
MICROWAVE POWER DEVICES, INC.
49 Wireless Boulevard, Hauppauge, New York 11788-3935
Solicited by the Board of Directors for the
Annual Meeting of Stockholders on May 7, 1998.
The undersigned hereby appoints George J. Sbordone, Edward J. Shubel and
Stephen W. Rubin, or any of them, with power of substitution, as Proxies and
hereby authorizes them to represent and to vote, as designated below, all shares
of Common Stock of Microwave Power Devices, Inc. (the "Company") held of record
by the undersigned at the close of business on April 2, 1998 at the Annual
Meeting of Stockholders to be held on Thursday, May 7, 1998, and at any
adjournments thereof.
1. ELECTION OF DIRECTORS
|_| FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY
BELOW):
George J. Sbordone Merril M. Halpern Alfred Weber Warren A. Law
Edward J. Shubel A. Lawrence Fagan David J. Aldrich James Silver
|_| WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
ABOVE).
2. PROPOSAL TO AMEND THE COMPANY'S 1996 STOCK OPTION PLAN TO INCREASE BY
500,000 THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK FOR WHICH
OPTIONS MAY BE GRANTED THEREUNDER.
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon any other
business that may properly come before the meeting and at any
adjournments thereof.
(Continued and to be SIGNED on other side)
<PAGE>
(Continued from other side)
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. PLEASE SIGN EXACTLY AS
NAME APPEARS ON THIS PROXY.
Dated: _____________________,1998
___________________________________
Signature
___________________________________
Signature, if held jointly
Please sign exactly as your name
appears on this Proxy. If shares
are registered in more than one
name, the signatures of all such
persons are required. A corporation
should sign in its full corporate
name by a duly authorized officer,
stating such officer's title.
Trustees, guardians, executors and
administrators should sign in their
official capacity giving their full
title as such. A partnership should
sign in the partnership name by an
authorized person, stating such
person's title and relationship to
the partnership.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE.
No postage is required if mailed in the United States of America.
