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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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MICROWAVE POWER DEVICES, INC.
(NAME OF SUBJECT COMPANY)
MICROWAVE POWER DEVICES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
59517M103
(CUSIP NUMBER OF COMMON STOCK)
ALFRED WEBER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICROWAVE POWER DEVICES, INC.
49 WIRELESS BOULEVARD
HAUPPAUGE, NEW YORK 11788-3935
(631) 231-1400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO
STEPHEN W. RUBIN, ESQ.
PROSKAUER ROSE LLP
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 969-3000
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[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Microwave Power Devices, Inc., a
Delaware corporation (the "Company"). The address of the Company's principal
executive offices is 49 Wireless Boulevard, Hauppauge, New York 11788-3935. The
telephone number of the principal executive offices of the Company is (631) 231-
1400. The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 ("Schedule 14D-9")
relates is the common stock, par value $0.01 per share (the "Common Stock" or
the "Shares") of the Company. As of October 19, 2000, there were 10,709,064
Shares issued and outstanding and options outstanding to purchase an aggregate
of 1,383,996 Shares under the Company's 1995 Stock Option Plan, 1996 Stock
Option Plan and 1999 Stock Option Plan (collectively, the "Option Plans").
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
This Schedule 14D-9 relates to the tender offer being made by Ericsson MPD
Acquisition Corp., a Delaware corporation ("Purchaser") and a direct wholly
owned subsidiary of Ericsson Inc., a Delaware corporation ("Parent"), disclosed
in a Tender Offer Statement on Schedule TO (the "Schedule TO"), dated October
20, 2000 and filed with the Securities and Exchange Commission (the
"Commission"), to purchase all the outstanding Shares at a price of $8.70 per
Share ("Offer Price") net to the sellers in cash (subject to applicable
withholding taxes), without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 20, 2000 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with the Offer to Purchase and any amendments or supplements thereto, constitute
the "Offer") included in the Schedule TO. A copy of the Offer to Purchase and
Letter of Transmittal has been filed as Exhibit 1 and Exhibit 2 hereto and each
is incorporated herein by reference. Copies of the Offer to Purchase and the
Letter of Transmittal are being furnished to the Company's stockholders
concurrently with this Schedule 14D-9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 12, 2000, among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, as promptly as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in the Merger Agreement, and in accordance with the relevant
provisions of the General Corporation Law of the State of Delaware (the "DGCL"),
Purchaser will be merged with the Company (the "Merger"), with the Company
continuing as the surviving corporation and as a direct wholly owned subsidiary
of Parent (the "Surviving Corporation"). At the effective time (the "Effective
Time") of the Merger, each outstanding Share not tendered in the Offer (other
than Shares held in the treasury of the Company and Shares held by Parent,
Purchaser or any direct or indirect wholly owned subsidiary of Parent or of the
Company (such shares collectively, the "Ineligible Shares") or shares held by
stockholders, if any, who have properly exercised appraisal rights for such
Shares in accordance with Section 262 of the DGCL (such shares, the "Dissenting
Shares")) will be converted into the right to receive the Offer Price, without
interest.
A copy of the Merger Agreement is filed as Exhibit 3 hereto and is
incorporated herein by reference.
The Offer is conditioned upon, among other things, (i) there having been
validly tendered and not withdrawn prior to the expiration of the Offer at least
the number of Shares that shall constitute 50.6% of the then outstanding Shares
on a fully diluted basis (after taking into account all Shares issuable upon the
conversion of shares of Company preferred stock or any other convertible
securities or upon the exercise of any vested options, warrants or rights)
("Minimum Condition") and (ii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
having expired or been terminated prior to the expiration of the Offer. See
section of this Schedule 14D-9 titled "Additional Information." The Offer is
also subject to certain other conditions set forth in Annex A to the Merger
Agreement.
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Parent and Purchaser have entered into a Stockholders' Agreement, dated as
of October 12, 2000 (the "Stockholders' Agreement") with certain stockholders of
the Company, namely George Sbordone, James Silver, Lee Leong, Alfred Weber and
Charter Technologies Limited Liability Company, the Company's largest
stockholder (collectively, the "Principal Stockholders"), pursuant to which,
among other things, the Principal Stockholders have agreed to (i) tender their
Shares after commencement of the Offer (which Shares currently represent in the
aggregate approximately 50.6% of the outstanding Shares on a fully diluted basis
(after taking into account all Shares issuable upon the conversion of shares of
Company preferred stock or any other convertible securities or upon the exercise
of any vested options, warrants or rights)), (ii) vote such Shares in favor of
the Merger and (iii) grant to Purchaser an option to purchase such Shares at
$8.70 per share (such amount, or any greater amount per Share paid pursuant to
the Offer, being the "Per Share Amount") upon the terms and subject to the
conditions set forth in the Stockholders' Agreement. A copy of the Stockholders'
Agreement is filed as Exhibit 4 hereto and is incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of Parent
and Purchaser are located at 740 E. Campbell Road, Richardson Texas 75081. All
information in this Schedule 14D-9 or incorporated by reference herein
concerning Purchaser or its affiliates, or actions or events in respect of any
of them, was provided by Purchaser or Parent, and the Company assumes no
responsibility therefor.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates with certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Rule 14f-1 of the Exchange Act (the "Information Statement") that is attached as
Annex A hereto and is incorporated herein by reference. Except as described or
referred to herein and in Annex A, to the knowledge of the Company, as of the
date hereof, there are no material agreements, arrangements or understandings,
or any actual or potential conflicts of interest, between the Company or its
affiliates and (i) the Company, its executive officers, directors or affiliates;
or (ii) Parent or Purchaser, their respective officers, directors or affiliates.
In considering the recommendation of the Company's Board of Directors
("Company Board") set forth in Item 4 below, the Company's stockholders should
be aware that certain members of the Company's management and certain members of
the Company Board have interests in the Offer and the Merger, which are
described herein and in the Information Statement and which may present them
with certain conflicts of interest. The Board of Directors is aware of these
potential conflicts and considered them along with the other factors described
in Item 4 below.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
NON-DISCLOSURE AGREEMENT AND NON-SOLICITATION AGREEMENT. A summary of
certain material provisions of a Non-Disclosure Agreement, dated July 6, 2000
(the "Non-Disclosure Agreement"), between the Company and Telefonaktiebolaget LM
Ericsson ("Ericsson"), the ultimate parent of Purchaser and Parent and a
Non-Solicitation Agreement, dated August 24, 2000 (as extended on September 14,
2000 and October 4, 2000), between the Company and Ericsson (the
"Non-Solicitation Agreement") is included in "Background of the Offer; Contacts
with the Company; The Merger Agreement" of the Offer to Purchase. A copy of the
Offer to Purchase is filed as Exhibit 1 hereto and is incorporated herein by
reference. Such summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of each such agreement, which are
filed as Exhibits 6 and 7 hereto and each is incorporated herein by reference.
DEVELOPMENT AND SUPPLY AGREEMENT. MPD Technologies, Inc. ("MPD"), a wholly
owned subsidiary of the Company, and Ericsson Wireless Communications, Inc.
("Ericsson Wireless"), an affiliate of Parent, are in the process of negotiating
a Development and Supply Agreement (the "Development and Supply Agreement"). It
is anticipated that the term of the Development and Supply Agreement will run
through December 31, 2002 and, pursuant to the terms of such agreement, MPD will
develop and supply, at the request of Ericsson Wireless or one of its affiliates
and in accordance with Ericsson Wireless's specifications, power amplifier
systems. Each party will retain its full ownership rights and interests in and
to its respective
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intellectual property and neither party shall assign any rights under the
agreement without the other party's prior written consent. The Company and
Ericsson Wireless are currently parties to certain purchase orders for the
purchase of Ericsson Wireless's products and have, in the past, been parties to
certain purchase orders for the purchase of the Company's products. The terms
and conditions of a finalized Development and Supply Agreement executed between
the parties will supersede the terms and conditions of certain purchase orders.
THE MERGER AGREEMENT. A summary of certain material provisions of the
Merger Agreement is included in "Background of the Offer; Contacts with the
Company; The Merger Agreement" of the Offer to Purchase. A copy of the Offer to
Purchase is filed as Exhibit 1 hereto. Such summary does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Merger Agreement which is filed as Exhibit 3 hereto. We urge you to read the
Merger Agreement in its entirety for a more complete description of the material
summarized in the Offer to Purchase.
THE STOCKHOLDERS' AGREEMENT. A summary of certain material provisions of
the Stockholders' Agreement is included in "Background of the Offer; Contacts
with the Company; The Merger Agreement" of the Offer to Purchase. A copy of the
Offer to Purchase has been filed as Exhibit 1 hereto. Such summary does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Stockholders' Agreement which is filed as Exhibit 4 hereto.
We urge you to read the Stockholders' Agreement in its entirety for a more
complete description of the material summarized in the Offer to Purchase.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
WEBER EMPLOYMENT AGREEMENT AND WEBER CHANGE OF CONTROL AGREEMENT. The
Company has entered into an employment agreement with Alfred Weber, the
Company's Chairman, President and Chief Executive Officer, dated as of December
2, 1999 (the "Weber Employment Agreement"). The Weber Employment Agreement is
for an initial term commencing on the date of such agreement and ending on
December 31, 2002 (with automatic renewal periods of one year upon expiration of
the initial term, unless prior to the end of any such renewal term, either party
gives the other party at least 90 days' prior written notice of its intention
not to renew). Pursuant to such agreement, Mr. Weber will receive an annual
salary of $300,000 (subject to increases at the discretion of the Company
Board). Mr. Weber is also entitled to receive an incentive bonus in accordance
with the Company's Executive Incentive Bonus Plan for the fiscal year ending
December 31, 2000, grants of stock options as determined by the Company Board
and such benefits that are generally provided to the Company's senior executive
employees, including a car allowance and $5,000 per year for personal tax and
financial planning services. The Weber Employment Agreement further provides
that, in the event of any termination of the Weber Employment Agreement by the
Company other than for Just Cause (as such term is defined in the Weber
Employment Agreement) for any reason or for no reason, or in the event the
Company gives Mr. Weber notice pursuant to the Weber Employment Agreement of its
intention not to renew the Weber Employment Agreement, the Company's sole
obligation to Mr. Weber shall be to (i) pay him one year's worth of his current
annual salary as of the date of termination and amounts, if any, Mr. Weber is
eligible to receive pursuant to the Company's Executive Incentive Bonus Plan
with respect to the fiscal year which his employment was terminated, (ii)
continue his benefits on any life and medical insurance plans, pensions and
other similar plans established by the Company for its senior executives for one
year and (iii) provide him with use of a luxury automobile and $5,000 per year
for personal tax and financial planning services for one year. Mr. Weber will
also be credited with one year's additional vesting of all stock options. The
compensation to Mr. Weber set forth in the foregoing sentence shall not be
payable in the event Mr. Weber receives compensation under the Weber Change of
Control Agreement. For further discussion on the Executive Incentive Bonus Plan,
see section of this Schedule 14D-9 titled "-- Executive Incentive Bonus Plan."
Furthermore, Mr. Weber was granted stock options to purchase 300,000 shares of
the Company's Common Stock at an exercise price of $7.00 per share in 1999. For
further discussion on the Option Plans, see section of this Schedule 14D-9
titled "-- Stock Option Plans." The Weber Employment Agreement further provides
that Mr. Weber will receive certain payments and benefits set forth in a change
of control agreement, dated as of December 2, 1999, between Mr. Weber and the
Company (the "Weber Change of Control Agreement"). The Weber Change of Control
Agreement is for a term of 3 years (or as sooner terminated as set forth in the
Weber Change of Control Agreement) and provides that upon a merger,
consolidation, or
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other business combination of the Company, other than a transaction involving
only the Company's affiliates or a transaction immediately following which the
stockholders of the Company immediately prior to the transaction continue to
have a majority of the voting power in the surviving entity ("Change of
Control"), Mr. Weber shall receive, in addition to, and not in lieu of, any and
all salary, amounts and benefits that Mr. Weber would otherwise receive in
continuation of his employment, except any termination benefits payable pursuant
to the Weber Employment Agreement (i) a lump sum equal to two times the sum of
(a) Mr. Weber's current annual salary plus (b) Mr. Weber's current annual
targeted bonus pursuant to the terms of the Company's Executive Incentive Bonus
Plan, (ii) immediate vesting of all of Mr. Weber's outstanding stock options in
the Company's Common Stock and (iii) continuation of health benefits and
coverage for him and his dependants for the next twenty-four months.
Furthermore, pursuant to the Weber Change of Control Agreement, Mr. Weber shall
also receive, within 5 business days following any termination of his employment
with the Company, a lump sum of (i) any earned but unpaid annual salary, (ii)
earned but unpaid bonus, (iii) accrued but unused vacation as of the date of
termination and (iv) incurred but unreimbursed business expenses for the period
prior to termination. The foregoing is a summary of the Weber Employment
Agreement and the Weber Change of Control Agreement and is qualified in its
entirety by reference to the complete text of each such agreement which is filed
as Exhibit 8 and Exhibit 9 hereto, respectively, and is incorporated herein by
reference.
WEBER TAX AGREEMENT. The Company has also entered into an agreement, dated
December 2, 1999 (the "Weber Tax Agreement"), with Mr. Weber providing that, in
the event the Company makes any payments to Mr. Weber upon a Change of Control
(such payment, "Company Payments"), and such Company Payments are subject to an
excise tax ("Excise Tax") due pursuant to Section 4999 of the Internal Revenue
Code of 1986, as amended, the Company shall pay to Mr. Weber an additional
amount (the "Gross-Up Payment") such that the net amount retained by Mr. Weber
after deduction of the Excise Tax and any United States federal, state, and
local income or payroll tax upon the Gross-Up Payment, but before any United
States federal, state, and local income or payroll tax upon the Company
Payments, shall be equal to the Company Payments. The Gross-Up Payment shall be
paid no later than the 30th day following any event which subjects Mr. Weber to
the Excise Tax. The foregoing is a summary of the Weber Tax Agreement and is
qualified in its entirety by reference to the complete text of such agreement
which is filed as Exhibit 10 hereto, and is incorporated herein by reference.
OTHER CHANGE OF CONTROL AGREEMENTS. The Company has also entered into
change of control agreements each with Larry Konopelko, Vice President of the
Company, Polly Winters, Vice President of Human Resources and Risk Management of
the Company, Thomas V. Gilboy, Vice President and Chief Financial Officer of the
Company, and Stephen A. Scover, a Vice President with the Company, in March
1999, March 1999, May 2000 and July 2000, respectively (each a "Change of
Control Agreement"). Each Change of Control Agreement is for a term of 3 years
(or as sooner terminated as set forth in each Change of Control Agreement) and
provides that, upon such employee's termination of employment within six months
of a Change of Control either by the employee for Good Reason (as such term is
defined in each Change of Control Agreement) or by the Company without cause,
then each such employee shall continue to receive (i)(a) in the case of Messrs.
Konopelko, Scover and Ms. Winters, each respective employee's current annual
salary for a period of one year (plus targeted bonus pursuant to the terms of
the Company's Executive Incentive Bonus Plan) or (b), in the case of Mr. Gilboy,
a sum equal to two times the sum of (A) Mr. Gilboy's current annual salary plus
(B) Mr. Gilboy's current annual targeted bonus pursuant to the terms of the
Company's Executive Incentive Bonus Plan and (ii) continuation of health
benefits and coverage for each such employee and his or her dependants for the
next twelve months, provided that each such employee does not become employed by
another employer within that one year period. Furthermore, pursuant to each
Change of Control Agreement, each such employee will also receive, within 5
business days following his or her termination a lump sum of (i) any earned but
unpaid annual salary, (ii) earned but unpaid bonus, (iii) accrued but unused
vacation as of the date of termination and (iv) incurred but unreimbursed
business expenses for the period prior to termination. As of the date of hereof,
the annual salaries of Messrs. Gilboy, Scover and Konopelko and Ms. Winters are
$175,000, $135,000, $155,000 and $115,000, respectively. The foregoing is a
summary of the Change of Control Agreements entered into with each of Messrs.
Gilboy, Scover and Konopelko and Ms. Winters and is qualified in its entirety by
reference to the complete text of
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each such agreement, each of which is filed as Exhibits 11, 12, 13 and 14
hereto, respectively, and each is incorporated herein by reference.
STOCK OPTION PLANS. In June 1995, the Company adopted the 1995 Stock
Option Plan (the "1995 Plan"), pursuant to which key employees of the Company
and eligible consultants to the Company are eligible to receive incentive and/or
non-qualified stock options to purchase up to 525,000 shares of the Company's
Common Stock. The 1995 Plan, which expires on June 26, 2005, is administered by
the Compensation Committee of the Company Board. The selection of participants,
grant of options, determination of price and other conditions relating to the
exercise of options are determined by the Compensation Committee of the Company
Board.
In March 1996, the Company adopted the 1996 Stock Option Plan (the "1996
Plan"), which was amended in March 1998, pursuant to which key employees of the
Company and eligible consultants to the Company are eligible to receive
incentive and/or non-qualified stock options to purchase up to 975,000 shares of
the Company's Common Stock. The 1996 Plan, which expires on March 5, 2006, is
administered by the Compensation Committee of the Company Board. The selection
of participants, grant of options, determination of price and other conditions
relating to the exercise of options are determined by the Compensation Committee
of the Company Board.
In December 1999, the Company adopted the 1999 Stock Option Plan (the "1999
Plan") pursuant to which key employees of the Company and eligible consultants
to the Company are eligible to receive incentive and/or non-qualified stock
options to purchase up to 500,000 shares of the Company's Common Stock. The 1999
Plan, which expires on December 2, 2009, is administered by the Compensation
Committee of the Company Board. The selection of participants, grant of options,
determination of price and other conditions relating to the exercise of options
are determined by the Compensation Committee of the Company Board.
Incentive and non-qualified stock options granted under the Option Plans
are exercisable for a period of up to 10 years from the date of grant. Incentive
stock options are exercisable at an exercise price which is not less than the
fair market value of the common shares on the date of the grant, except that the
term of an incentive stock option granted, under the 1995 Plan, 1996 Plan and
1999 Plan, to a shareholder owning more than 10% of the outstanding common
shares may not exceed 5 years and its exercise price may not be less than 110%
of the fair market value of the common shares on the date of the grant.
Non-qualified stock options are exercisable at an exercise price which is not
less than the par value of the Company's Common Stock on the date of the grant.
The Option Plans provide that if the Company is merged or consolidated with
or into another corporation, among other events, the Company Board may, in its
sole discretion, terminate all outstanding options effective as of the
consummation of such corporate transaction by delivering a notice of termination
to each participant at least 20 days prior to the date of the event; provided
that, during the period from the date on which such notice of termination is
delivered to the consummation of the event, each participant will have the right
to exercise in full all of the options that are then outstanding, whether vested
or unvested. The Merger Agreement, however, provides that the Company agrees
that the Company Board, or any committee appointed by the Company Board, will
not exercise its discretion, discussed in the previous sentence, to accelerate
the vesting of any unvested options thereunder. Additionally, the Merger
Agreement provides that the Company shall take all actions necessary such that,
effective as of the Effective Time, (i) each outstanding option granted under
the Option Plans that is outstanding and unexercised, whether vested or
unvested, as of such date, shall be cancelled and (ii) the Company's Option
Plans shall be terminated. Each holder of a Company stock option that is
outstanding and unexercised at the Effective Time, whether vested or unvested,
shall be entitled to receive from the Surviving Corporation immediately after
the Effective Time in exchange for the cancellation of such option, an amount in
cash equal to the excess, if any, of (x) the Offer Price over (y) the per share
exercise price of such option, multiplied by the number of Shares subject to
such option as of the Effective Time. Any such payment will be subject to
applicable federal, state and local withholding requirements.
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The foregoing is a summary of the 1995 Plan, 1996 Plan and 1999 Plan and is
qualified in its entirety by reference to the complete text of each such plan,
each of which is filed as Exhibits 15, 16 and 17 hereto, respectively, and each
is incorporated herein by reference.
EXECUTIVE INCENTIVE BONUS PLAN. In February 1996, the Company adopted an
executive incentive bonus plan (the "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 (which was performed in February 1996 and
updated in February 1999) that was commissioned by the Company Board. Under the
bonus plan, annual bonuses will be based upon the achievement of performance
goals that are annually preset by the Compensation Committee. These performance
goals are linked to achievement of earnings per share goals. The Compensation
Committee establishes a target bonus amount for each key officer at the
beginning of the year. An executive or employee can earn 0% or from 50% to 125%
of his bonus based upon a measured comparison of actual results achieved to
performance goals. An employee whose employment is terminated for any reason
prior to December 31 for any year in which the target bonus award is assessed
will forfeit his bonus for the entire year. The Company Board reserves the right
to alter, amend, reduce, suspend or terminate the plan. New executive and
employee hires who join the Company in any plan year may be included in the plan
on a pro-rata basis. In 1999, $50,940 in bonuses were earned (paid in 2000)
under the terms of the plan. The foregoing is a summary of the Executive
Incentive Bonus Plan and is qualified in its entirety by reference to the
complete text of the Executive Incentive Bonus Plan which is filed as Exhibit 18
hereto, and is incorporated herein by reference.
INTERESTS OF CERTAIN COMPANY DIRECTORS. Messrs. A. Lawrence Fagan, Merril
M. Halpern and James Silver are current directors of the Company and Mr. Fagan
is a member of the Company's Compensation Committee. Messrs. Fagan and Halpern
are directors, executive officers and stockholders of Charterhouse Group
International, Inc. ("Charterhouse") and Mr. Silver is an executive officer of
Charterhouse. Charter Technologies Limited Liability Company ("Charter
Technologies") owns 5,139,994 Shares, representing approximately 48% of the
total outstanding Shares as of October 19, 2000. Charterhouse Equity Partners,
L.P., ("CEP") owns 99% 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. Messrs.
Fagan, Halpern and Silver each disclaim beneficial ownership interest of the
Shares beneficially owned by Charter Technologies. Mr. Warren A. Law is a
current director of the Company and a member of the Compensation Committee of
the Company Board. Mr. Law owns 1,000 Shares. Mr. Alfred Weber is a current
director and Chairman, Chief Executive Officer and President of the Company. As
of October 19, 2000, Mr. Weber owns 35,100 Shares and 300,000 unvested options
granted under the Option Plans. Mr. Silver owns 187,500 Shares and 18,750 fully
vested options granted under the Option Plans. Mr. James L. Morice is a current
director of the Company and a member of the Compensation Committee of the
Company Board. Mr. Morice owns 1,000 shares.
INDEMNIFICATION.
The Merger Agreement also provides that By-laws of the Surviving
Corporation will contain provisions granting the same rights to indemnification
that are set forth in Article 7 of the By-laws of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who, at or prior to the Effective Time, were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by law. Moreover, each of Parent and the
Surviving Corporation shall use its reasonable best efforts to maintain in
effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions that are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 200% of current annual premiums
paid by the Company for such insurance.
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Furthermore, from and after the consummation of the Offer, the Merger
Agreement provides that Parent shall cause the Surviving Corporation (which
shall include the provision of necessary funds to the Surviving Corporation, if
necessary) to indemnify, defend and hold harmless any Indemnified Party (as
defined in the Merger Agreement) of the Company or any of its subsidiaries
against all losses, claims, damages, liabilities, costs and expenses (including
attorneys' fees and expenses), judgments, fines, losses, and amounts paid in
settlement in connection with any Claim (as defined in the Merger Agreement) to
the extent that any such Claim is based on, or arises out of, (i) the fact that
such person is or was a director, officer, employee or agent of the Company or
any of its subsidiaries or is or was serving at the request of the Company or
any of its subsidiaries as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (ii) the
Merger Agreement, or any of the transactions contemplated hereby, in each case
to the extent that any such Claim pertains to any matter or fact arising,
existing, or occurring prior to or at the Effective Time, regardless of whether
such Claim is asserted or claimed prior to, at or after the Effective Time, to
the full extent permitted under Delaware law or the Company's Certificate of
Incorporation, By-laws or indemnification agreements in effect at the date
hereof, including provisions relating to advancement of expenses incurred in the
defense of any action or suit. In the event any Indemnified Party becomes
involved in any capacity in any Claim of the type described above, then from and
after consummation of the Offer, Parent shall cause the Company (or the
Surviving Corporation if after the Effective Time) (which shall include the
provision of necessary funds to the Surviving Corporation, if necessary) to
periodically advance to such Indemnified Party its legal and other expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to the provision by such Indemnified Party of an undertaking
to reimburse the amounts so advanced in the event of a final non-appealable
determination by a court of competent jurisdiction that such Indemnified Party
is not entitled thereto. For further discussion of the Merger Agreement, see
section of this Schedule 14D-9 titled "-- The Merger Agreement."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE COMPANY BOARD
The Company Board has unanimously approved the Merger Agreement, the Offer
and the Merger, and has determined that the Offer and the Merger are fair to,
and in the best interests of, the Company's stockholders, and unanimously
recommends that the Company's stockholders accept the Offer and tender their
Shares in the Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a joint press release announcing the Offer, the Merger and
the Merger Agreement are each filed as Exhibits 19 and 20 hereto, respectively,
and each is incorporated herein by reference.
(B) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
BACKGROUND
During the course of the Company Board's fiscal 1999 strategic review of
the Company's operating and financial performance and future prospects, the
Company Board discussed with its management possible courses of action for the
Company to achieve growth in revenues and profitability and to maximize
stockholder value.
In late January and February 1999, CIBC World Markets Corp. ("CIBC World
Markets") and several other firms were invited to present their qualifications
with respect to advising the Company on its business combinations and
acquisitions strategies. The Company subsequently retained CIBC World Markets as
its exclusive financial advisor. In such capacity, CIBC World Markets assisted
the Company in analyzing various strategic alternatives for the Company,
including the potential sale of the Company.
In March 1999, the Company authorized CIBC World Markets to initiate a
controlled auction of the Company. As part of this assignment, the Company asked
CIBC World Markets to identify parties who might have an interest in pursuing a
business combination with the Company. With the assistance of the Company's
management, and at the Company's direction, CIBC World Markets identified,
contacted and had informal discussions with approximately 20 potential buyers
during this process to assess the feasibility of the
7
<PAGE> 9
Company's strategic alternatives and the potential level of interest of such
parties in pursuing one or more of these alternatives. The potential buyers
identified and contacted were comprised of strategic and financial buyers and
were selected primarily based on their current business strategies and past
investment history.
On May 6, 1999, the Company Board met to discuss the eight parties who
executed confidentiality agreements and received an offering memorandum
detailing the general offering terms sought by the Company with potential
strategic parties. Thereafter, written indications of interest were received
from two parties, one of which subsequently declined interest in pursuing a
potential transaction. The remaining bidder was invited to conduct due diligence
and attend a presentation conducted by the Company's management of the Company's
business, financial condition and results of operations. After conducting due
diligence in late May 1999, the potential bidder verbally indicated its decision
to not proceed with a transaction with the Company.
In August 1999, based on the lack of interest generated by the parties
initially identified and contacted, on behalf of the Company, at the Company's
direction, CIBC World Markets approached one of the strategic bidders previously
contacted during the auction process to ascertain its interest in pursuing a
negotiated transaction with the Company. In late August and early September
1999, after an informal meeting and subsequent conversations between
representatives of both companies, the potential buyer proposed preliminary
terms with respect to a potential stock-for-stock merger transaction. However,
after discussions with the potential buyer and its financial advisor, and based
upon then current market conditions, the potential buyer revised the preliminary
terms for a proposed transaction. After careful review of such revised terms,
the Company rejected the revised proposal from the potential buyer. Thereafter,
the potential buyer did not submit a counterproposal to the Company and
discussions between the Company and the potential buyer terminated.
During the later months of 1999 and early months of 2000, the Company
terminated its efforts in seeking other strategic business combinations and
partners. Rather, to increase stockholder value, the Company decided to
concentrate on increasing sales and profits. As a result, the Company also
terminated CIBC World Markets' engagement to assist the Company in connection
with a possible strategic business combination.
In February 2000, Parent started in-depth discussions regarding sourcing
activity with the Company. A project was initiated where the Company was
provided with a specification for a Multi Carrier Power Amplifier ("MCPA")
intended mainly for the United States market.
On April 27, 2000, two representatives from Ericsson Radio Access AB (a
wholly owned subsidiary of Ericsson), Carl-Magnus Mansson, General Manager for
the TDMA Product Line, and Jan Bohult, General Manager for Multi-Standard Radio
Development, met with Alfred Weber, Chief Executive Officer of the Company, in
Hauppauge, New York to discuss the possibility of forming a strategic alliance
between Parent and the Company with respect to the development of next
generation amplifiers. Parent also expressed an interest in having Parent make
an investment in the Company. Parent and the Company agreed to further discuss
possible alternatives in the future.
On May 16, 2000, Mr. Mansson telephoned Mr. Weber to discuss the Company's
interest in a potential transaction with Ericsson in which Ericsson would
acquire all of the Company's outstanding Shares. The discussion resulted in a
meeting on May 22, 2000 in London at Ericsson's headquarters among Rolf
Eriksson, Vice President of Strategic Alliances of Ericsson, Ake Karman,
Financial Officer and Deputy President of Ericsson Radio Access AB, Mr. Mansson
and Eric Berthels, Marketing Director of Ericsson Radio Access AB, and Mr.
Weber. At such meeting, no understanding was reached.
On July 6, 2000, Messrs. Eriksson, Karman, Mansson, and Berthels met in
Hauppauge, Long Island with Mr. Weber, Thomas V. Gilboy, Chief Financial Officer
of the Company, and Mr. Scover for further discussions on strategic cooperation.
At this time, representatives of Ericsson visited certain facilities of the
Company.
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<PAGE> 10
On July 6, 2000, Ericsson and the Company entered into a Non-Disclosure
Agreement.
On August 17, 2000, Messrs. Weber, and Gilboy and a representative of the
Company's legal advisor met in Stockholm, Sweden with Messrs. Eriksson, Karman,
Mansson, Berthels and Mikael Sundstrom, Vice President Corporate Legal Affairs
of Ericsson and a representative of Ericsson's legal advisor for further
discussion of a potential acquisition transaction.
On August 24, 2000, Ericsson and the Company entered into a
Non-Solicitation Agreement (as extended on September 14, 2000 and October 4,
2000).
During the period from August 26 to October 12, 2000, Parent conducted
extensive legal and financial due diligence on the Company's business and
operations, including site visits to the Company's facilities. On September 1,
2000, counsel to Parent distributed to the Company and the Company's counsel
initial drafts of the Merger Agreement and Stockholders' Agreement. During the
first weeks of September, Parent and its legal and financial advisors held
several negotiations with the Company and its legal advisor regarding the
proposed offer price, terms and conditions of the Merger Agreement and
Stockholders' Agreement.
On September 5, 2000, Messrs. Weber and Gilboy, other employees of the
Company and representatives of the Company's legal advisor met in New York with
Messrs. Eriksson, Karman, Mansson, Berthels, Sundstrom, and representatives of
Ericsson's legal and financial advisors for further discussion of terms of the
potential acquisition transaction. Parent stated that the execution of the
Stockholders' Agreement, pursuant to which the Principal Stockholders would,
among other things, agree to support the acquisition transaction with Parent,
would be a condition to Parent's willingness to effect the proposed acquisition
transaction.
On September 6, 2000, the Company called a special meeting of the Company
Board to discuss, among other things, the Company's business prospects and the
proposed terms of the acquisition by Parent. Thereafter, the Company's legal
counsel briefed members of the Company Board on the terms of the draft form of
the existing Merger Agreement and Stockholders' Agreement, the fiduciary
obligations of the Company Board with respect to the proposed acquisition and
other business conditions of the proposed acquisition. Based on the foregoing,
the Company Board authorized the Company and its management to proceed with
discussions and negotiations in finalizing a definitive acquisition agreement.
Finally, the Company Board approved the retention of, and the Company
subsequently engaged, CIBC World Markets, to render an opinion with respect to
the fairness, from financial point of view, of the Offer Price.
On September 12, 2000, the Company called a special meeting of the Company
Board to discuss the current proposal by Parent and to review, with the advice
and assistance of the Company's management and legal advisor, the proposed terms
and conditions of the Merger Agreement and the strategic, financial and legal
considerations concerning a possible transaction with Parent. After a
presentation by the Company's management of the current and forecasted earnings
of the Company and a discussion of the current operations of each of the
Company's divisions, the Company Board reviewed the latest draft form of Merger
Agreement negotiated with Parent. At this meeting, the Company's legal counsel
presented to the Company Board the status of current negotiations with Parent,
the legal terms and conditions of the proposed transaction and other strategic
alternatives available to the Company. After full discussion, the Company Board,
among other things, authorized its officers to continue negotiating a finalized
Merger Agreement on behalf of the Company.
During the period from September 12 to October 12, 2000, the Company, with
advice from its legal counsel, participated in several negotiation sessions with
Parent and its legal counsel with respect to the Merger Agreement and
Stockholders' Agreement. Parent also continued its due diligence efforts on the
Company's business and operations.
On October 12, 2000, the Company called a special meeting of the Company
Board to discuss, with the advice and assistance of the Company's management and
legal advisor, the final proposed terms, conditions of the proposed Merger
Agreement. Representatives of CIBC World Markets also attended the meeting. At
such meeting, Company's legal counsel reviewed with the Company Board the
material terms and conditions of the Merger Agreement and the Stockholders'
Agreement. Thereafter, CIBC World Markets reviewed with the Company Board its
financial analysis of the consideration payable in the Offer and the Merger and
rendered to the Company Board an oral opinion (which opinion was confirmed by
delivery of a written opinion dated
9
<PAGE> 11
October 12, 2000) to the effect that, as of the date of the opinion and based
upon and subject to certain matters stated in such opinion, the $8.70 per Share
cash consideration to be received in the Offer and the Merger, taken together,
by the holders of Shares (other than Parent and its affiliates) was fair, from a
financial point of view, to such holders. Following the Company Board's review
of the final terms of the Merger Agreement and discussion of other matters
related thereto by the Company's legal advisor, the Company Board unanimously
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the Company's stockholders, approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, authorized the
execution and delivery of the Merger Agreement, recommended that the Company's
stockholders accept the Offer and tender their Shares in the Offer, and
recommended that the Company's stockholders approve and adopt the Merger
Agreement.
Later on in the evening of October 12, 2000, Parent, Purchaser and the
Company executed the Merger Agreement and Parent, Purchaser and the Principal
Stockholders executed the Stockholders' Agreement.
On the morning of October 13, 2000, the Company and Parent issued a joint
press release announcing the execution of the Merger Agreement. A copy of this
press release is filed as Exhibit 20 hereto and is incorporated herein by
reference.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE COMPANY BOARD
In approving the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and recommending that all holders
of Shares accept the Offer and tender their Shares in the Offer and recommending
that the Company's stockholders approve and adopt the Merger Agreement, the
Company Board considered a number of factors including, without limitation, the
following:
1. the presentations and views expressed by management of the Company
(at meetings of the Company Board held throughout the past two years)
regarding, among other things: (a) the financial condition, results of
operations, cash flows, business and prospects of the Company, including
the prospects of the Company if it remains independent; (b) the strategic
alternatives available to the Company; (c) the fact that in view of the
discussions held with various parties, currently and over the past few
years, management of the Company believed it was unlikely that any other
party would propose an acquisition or strategic business combination that,
taken as a whole, would be more favorable to the Company and its
stockholders than the Offer and the Merger; and (d) the recommendation of
the Merger by the management of the Company;
2. the historical market prices, price to earnings ratios, recent
trading activity and trading range of the Shares, including the fact that
the Offer Price represents (i) a premium of approximately 45% over the
$6.00 closing price of the Shares on the Nasdaq Stock Market on the last
full trading day preceding the public announcement of the execution of the
Merger Agreement, and (ii) a premium of approximately 22.2% over the 30-day
average trading price of $7.19 per Share;
3. the extensive arms-length negotiations between the Company and
Parent leading to the belief of the Company Board that $8.70 per Share
represented the highest price per Share that could be negotiated with
Parent;
4. the written opinion dated October 12, 2000 of CIBC World Markets
to the Company Board to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the $8.70 per
Share cash consideration to be received in the Offer and the Merger, taken
together, by the holders of Shares (other than Parent and its affiliates)
was fair, from a financial point of view, to such holders. The full text of
the written opinion of CIBC World Markets, dated October 12, 2000, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached hereto as Annex B and is incorporated herein
by reference. THE OPINION OF CIBC WORLD MARKETS IS ADDRESSED TO THE COMPANY
BOARD, RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
$8.70 PER SHARE CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE
MERGER, TAKEN TOGETHER, BY THE HOLDERS OF SHARES (OTHER THAN PARENT AND ITS
AFFILIATES), AND DOES NOT CONSTITUTE A
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<PAGE> 12
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER OR NOT SUCH STOCKHOLDER
SHOULD TENDER SHARES IN THE OFFER OR AS TO ANY OTHER MATTERS RELATING TO
THE OFFER OR THE MERGER. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY;
5. that the Merger Agreement provides for a prompt cash tender offer
for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
6. that, the Merger Agreement, which prohibits the Company and any
subsidiary from, directly or indirectly, through any officer, director,
agent or otherwise, (i) soliciting, initiating or encouraging the
submission of, any Acquisition Proposal (as defined in the Merger
Agreement) or (ii) participating in any discussions or negotiations
regarding, or furnishing to any person, any information with respect to, or
assisting or participating in, facilitating or encouraging, any unsolicited
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal, permits the Company Board to withdraw or modify its
approval and recommendation of the Offer and the Merger if the Company
Board determines in good faith that it its required to do so by its
fiduciary duties under applicable law after having received advice from
outside counsel;
7. the conditions to the Offer and the Merger, including that neither
the Offer or the Merger is subject to the receipt by Parent of any
financing;
8. that all of the Company's stockholders would generally be treated
the same, with all stockholders being able to participate in the Offer and
receive the same per Share consideration upon Purchaser's acceptance for
payment, and payment for, the Shares;
9. that Parent and Surviving Corporation shall provide substantially
comparable plans or arrangements in effect immediately before the Effective
Time for current or former employees, officers or directors of the Company
or any Subsidiary, after the Effective Time, in a manner determined in the
sole discretion of the Parent and Parent would also cause the Surviving
Corporation to perform the Company's obligations under the change in
control and severance agreements between the Company and certain of its
officers and employees unless any such officer or employee agrees
otherwise;
10. the provisions of the Merger Agreement, including the termination
provisions, provisions concerning the conduct of the Offer and the parties'
representations, warranties and covenants;
11. the consents and approvals required to consummate the Merger and
the favorable prospects for receiving all such consents and approvals;
12. the likelihood of the consummation of the transactions
contemplated by the Merger Agreement;
13. Parent's ability to consummate the Offer and the Merger on an
expedited basis;
14. that each of the Principal Stockholders who collectively hold
approximately 53.6% of the issued and outstanding Shares as of October 19,
2000 have indicated their willingness and desire to execute the
Stockholders' Agreement and thereby, among other things, agreeing to (i)
tender their Shares after commencement of the Offer (which Shares currently
represent in the aggregate approximately 50.6% of the outstanding Shares on
a fully diluted basis (after taking into account all Shares issuable upon
the conversion of shares of Company preferred stock or any other
convertible securities or upon the exercise of any vested options, warrants
or rights)), (ii) vote such Shares in favor of the Merger and (iii) grant
to Purchaser an option to purchase such Shares at the Per Share Amount upon
the terms and subject to the conditions set forth in the Stockholders'
Agreement;
15. that the Stockholders' Agreement, once executed by the Principal
Stockholders, would effectively preclude the possibility of accepting a
higher third party offer since the Principal Stockholders own in excess of
a majority of the outstanding Shares;
16. the business reputation and capabilities of Parent and its
management, and Parent's financial strength, including its ability to
finance the Offer; and
11
<PAGE> 13
17. the current and anticipated status of the amplifier and wireless
telecommunications market in the United States, and the economy segment in
particular, including increasing competition.
The foregoing discussion of information and factors considered and given
weight by the Company Board is not intended to be exhaustive, but is believed to
include all of the material factors considered by the Company Board. In view of
the variety of factors considered in connection with its evaluation of the Offer
and the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weight to the specific factors considered
in reaching its determinations and recommendations. In addition, individual
members of the Company Board may have given different weight to different
factors.
(C) INTENT TO TENDER
To the Company's knowledge after reasonable inquiry, all of the Company's
executive officers, directors and affiliates currently intend to either (i)
tender all Shares held of record or beneficially by them pursuant to the Offer,
or (ii) vote all Shares held of record or beneficially by them for the adoption
of the Merger Agreement. The foregoing does not include any Shares over which,
or with respect to which, any such executive officer, director or affiliate acts
in a fiduciary or representative capacity or is subject to the instructions of a
third party with respect to such tender or vote.
ITEM 5. PERSON/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company retained CIBC World Markets to render an opinion to the Company
Board in connection with the Offer and the Merger. Pursuant to the terms of this
engagement, the Company has agreed to pay CIBC World Markets for its opinion
services upon completion of the Offer and the Merger an aggregate fee of
$500,000. The Company also has agreed to reimburse CIBC World Markets for
reasonable out-of-pocket expenses, including reasonable fees and expenses of its
legal counsel, and has agreed to indemnify CIBC World Markets and related
parties against certain liabilities, including liabilities under the federal
securities laws, arising out of its engagement. CIBC World Markets and its
affiliates have in the past provided financial services to the Company unrelated
to the Offer and the Merger, including the rendering of financial advisory
services in connection with the Company's prior controlled auction process to
solicit potential buyers, for which services CIBC World Markets and its
affiliates have received compensation. In the ordinary course of business, CIBC
World Markets and its affiliates may actively trade securities of the Company
and Parent for their own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any person to make solicitations or recommendations to
the Company's stockholders with respect to the Offer or the Merger.
ITEM 6. INTERESTS IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in the Shares have been effected in the past 60 days by the
Company or any subsidiary of the Company, or, to the knowledge of the Company,
any affiliate or any executive officer or director of the Company, except as set
forth on Annex C hereto and the execution of the Stockholders' Agreement.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer that relates
to: (i) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (ii) any
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (iii) any purchase, sale
or transfer of a material amount of assets of the Company or any subsidiary of
the Company; or (iv) any material change in the present dividend rate or policy,
or indebtedness or capitalization, of the Company.
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<PAGE> 14
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice ("Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied.
Pursuant to the HSR Act, on October 17, 2000, Ericsson, and on October 18,
2000, the Company, filed their respective Premerger Notification and Report Form
in connection with the purchase of Shares pursuant to the Offer with the
Antitrust Division and the FTC. Under the provisions of the HSR Act applicable
to the Offer, the purchase of Shares pursuant to the Offer may not be
consummated until the expiration of a 15-calendar day waiting period following
the filing by Ericsson. Accordingly, the waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer will expire at 11:59
p.m., New York City time, on November 1, 2000, unless such waiting period is
earlier terminated by the FTC and the Antitrust Division or extended by a
request from the FTC or the Antitrust Division for additional information and
documentary material prior to the expiration of the waiting period. Pursuant to
the HSR Act, Ericsson has requested early termination of the waiting period
applicable to the Offer. There can be no assurance, however, that the 15-day HSR
Act waiting period will be terminated early. If either the FTC or the Antitrust
Division were to request additional information and documentary material from
Ericsson and/or the Company with respect to the Offer, the waiting period with
respect to the Offer would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance with such request.
Thereafter, the waiting period could be extended only by court order or by
consent of Ericsson. If the acquisition of Shares is delayed pursuant to a
request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not, be
extended and, in any event, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with, unless
the waiting period is sooner terminated by the FTC and the Antitrust Division.
Only one extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. It
is a condition to the Offer that the waiting period applicable under the HSR Act
to the Offer expire or be terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Ericsson, Parent, the
Company or their respective subsidiaries. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of information available to
Parent relating to the businesses in which Ericsson, Parent, the Company and
their respective subsidiaries are engaged, Parent and Purchaser believe that the
Offer will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be.
Section 14(f) Information Statement. The Information Statement attached as
Annex A hereto is being furnished in connection with the possible designation by
Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed
to the Company's Board other than at a meeting of the Company's stockholders.
Exon-Florio Filing. The Purchaser and the Company expect, as soon as
practicable after the date hereof, to jointly file with the Committee on Foreign
Investment in the United States ("CFIUS") a voluntary
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<PAGE> 15
notice pursuant to the Exon-Florio Amendment to the Defense Production Act of
1950 and the regulations thereunder (the "Exon-Florio Provision") with respect
to the Offer and the Merger. Under the Exon-Florio Provision, the President of
the United States is authorized to prohibit or suspend an acquisition, merger or
takeover by a foreign person of a person engaged in interstate commerce in the
United States if the President determines, after investigation, that (i) there
is credible evidence that leads him to believe that such a foreign person in
exercising control of such an acquired person might take action that threatens
to impair the national security of the United States and (ii) other provisions
of existing law do not provide adequate authority to protect national security.
Pursuant to the Exon-Florio Provision, notice of an acquisition, merger or
takeover by a foreign person may be made to CFIUS either voluntarily by the
parties to such proposed transaction or by any member of CFIUS. CFIUS comprises
representatives of the Department of the Treasury, State, Commerce, Defense, and
Justice, the Offices of Management and Budget and Science and Technology Policy,
the United States Trade Representative and the Council of Economic Advisors, as
well as the Assistants to the President for National Security Affairs and for
Economic Policy.
A determination that a formal investigation is called for must be made
within 30 days after notification of a proposed acquisition, merger, or takeover
is first filed with CFIUS. If CFIUS decides to initiate a formal investigation,
it must complete the investigation and make a recommendation to the President
within 45 calendar days after the commencement thereof. Thereafter, the
President must reach his decision within 15 calendar days. If CFIUS declines to
investigate, it will send a letter to the parties stating that action under the
Exon-Florio Provision is concluded. The Exon-Florio Provision does not require
the filing of a notification, nor does it prohibit the consummation of an
acquisition, merger or takeover if a notification is not made. If no
notification is made, however, such an acquisition, merger or takeover may
remain indefinitely subject to divestment should the President subsequently
determine that the national security of the United States may be threatened or
impaired.
Although Purchaser believes that the Offer and the Merger should not raise
any national security concerns, there can be no assurance that CFIUS will not
determine to conduct an investigation thereof, and if an investigation is
commenced, there can be no assurance regarding the outcome of such
investigation.
ITAR. The International Traffic in Arms Regulations require companies,
like the Company, that are registered with the Office of Defense Trade Controls
of the United States Department of State (the "ODTC") to manufacture defense
articles to notify the ODTC 60 days in advance of a transfer of ownership or
control to a foreign person. On September 22, 2000, the Company filed with the
ODTC of the United States Department of State a notification of the proposed
change in the ownership and control of the Company.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. Offer to Purchase, dated October 20, 2000.*
2. Letter of Transmittal.*
3. Agreement and Plan of Merger, dated October 12, 2000, among
Parent, Purchaser and the Company.
4. Stockholders' Agreement, dated October 12, 2000, among the
several stockholders of the Company that are parties
thereto, Parent and Purchaser.
5. Information Statement pursuant to Section 14f-1 of the
Exchange Act, dated October 20, 2000 (included as Annex A to
this Schedule 14D-9 and filed as an exhibit herewith).*
6. Non-Disclosure Agreement, dated July 6, 2000, between the
Company and Ericsson.
7. Non-Solicitation Agreement, dated August 24, 2000, between
the Company and Ericsson, as extended.
8. Employment Agreement, dated December 2, 1999, between the
Company and Alfred Weber.
9. Change of Control Agreement, dated December 2, 1999, between
the Company and Alfred Weber.
10. Weber Tax Agreement, dated December 2, 1999, between the
Company and Alfred Weber.
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
11. Change of Control Agreement, dated May 15, 2000, between the
Company and Thomas V. Gilboy.
12. Change of Control Agreement, dated July 31, 2000, between
the Company and Stephen A. Scover.
13. Change of Control Agreement, dated March 1, 1999, between
the Company and Larry Konopelko.
14. Change of Control Agreement, dated March 1, 1999, between
the Company and Polly Winters.
15. 1995 Stock Option Plan.
16. 1996 Stock Option Plan, as amended.
17. 1999 Stock Option Plan.
18. Executive Incentive Bonus Plan.
19. Letter to Stockholders from Alfred Weber, dated October 20,
2000.*
20. Joint Press Release, dated October 13, 2000, issued by
Ericsson and the Company.
21. Opinion of CIBC World Markets Corp., dated October 12, 2000
(included as Annex B to this Schedule 14D-9 and filed as an
exhibit herewith).*
</TABLE>
---------------
* Copy attached to, or enclosed with, copies of this Schedule mailed to
stockholders.
15
<PAGE> 17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
MICROWAVE POWER DEVICES, INC.
By: /s/ ALFRED WEBER
------------------------------------
Name: Alfred Weber
Title: Chairman, President and
Chief Executive Officer
Dated: October 20, 2000
16
<PAGE> 18
ANNEX A
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF MICROWAVE POWER DEVICES, INC.'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY
TO MICROWAVE POWER DEVICES, INC.
------------------------
GENERAL
This Information Statement is being mailed on or about October 20, 2000 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Microwave Power Devices, Inc., a Delaware corporation (the
"Company"), to the holders of record of shares of common stock, par value $0.01
per share, of the Company (the "Common Stock"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Purchaser (as defined below) to the Board of Directors of the
Company ("Company Board"). Such designation is to be made pursuant to an
Agreement and Plan of Merger, dated October 12, 2000 (the "Merger Agreement"),
among Ericsson Inc., a Delaware corporation ("Parent"), Ericsson MPD Acquisition
Corp., a Delaware corporation ("Purchaser"), and the Company.
The Merger Agreement provides that, after the purchase by Purchaser
pursuant to the cash tender offer (the "Offer"), Purchaser will be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Company Board (the "Purchaser Designees") as will give Purchaser
representation on the Company Board equal to the product of (i) the total number
of directors on the Company Board (after giving effect to the directors elected
pursuant to this sentence) and (ii) the percentage that the aggregate number of
shares of Common Stock beneficially owned by Purchaser or any affiliate of
Purchaser following such purchase bears to the total number of shares of Common
Stock then outstanding. The Company has agreed in the Merger Agreement to take
all action necessary to cause the Purchaser Designees to be elected to the
Company Board, including, in connection therewith, increasing the size of the
Company Board or securing the resignations of incumbent directors or both.
Notwithstanding the foregoing, until the effective time (the "Effective Time")
of the merger pursuant to the Merger Agreement (the "Merger"), the Company shall
use its reasonable best efforts to ensure that at least two members of the
Company Board as of the date of the Merger Agreement who are not employees of
the Company remain members of the Company Board.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
VOTING SECURITIES OF THE COMPANY
The shares of Common Stock are the only class of voting securities of the
Company outstanding. Each share of Common Stock has one vote. As of October 19,
2000, there were 10,709,064 shares of Common Stock outstanding. The Company's
Common Stock is the only class of voting stock currently outstanding.
A-1
<PAGE> 19
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
The Merger Agreement provides that, after the purchase by Purchaser
pursuant to Offer, Purchaser will be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Company Board as will
give Purchaser representation on the Company Board (after giving effect to the
directors elected pursuant to this sentence) equal to the product of (i) the
total number of directors on the Company's Board and (ii) the percentage that
the aggregate number of shares of Common Stock beneficially owned by Purchaser
or any affiliate of Purchaser following such purchase bears to the total number
of shares of Common Stock then outstanding. The Company has agreed in the Merger
Agreement to take all action necessary to cause Purchaser Designees to be
elected to the Company Board, including, in connection therewith, increasing the
size of the Company Board or securing the resignations of incumbent directors or
both. Notwithstanding the foregoing, until the Effective Time, the Company shall
use its reasonable best efforts to ensure that at least two members of the
Company Board as of the date of the Merger Agreement who are not employees of
the Company remain members of the Company Board. For a summary of the Merger
Agreement, see section of the Offer to Purchase, dated October 20, 2000 ("Offer
to Purchase") titled "Background of the Offer; Contacts with the Company; Merger
Agreement". A copy of the Offer to Purchase has been filed as Exhibit 1 to the
Schedule 14D-9 and is incorporated herein by reference. Such summary does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Merger Agreement which is filed as Exhibit 3 to the
Schedule 14D-9 and is incorporated herein by reference.
The Company Board currently consists of seven members.
The Purchaser Designees will be selected by Purchaser from among the
individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. None of the
Purchaser Designees is currently a director of, or holds any positions with the
Company.
The name, age, citizenship, present principal occupation or employment and
five-year employment history of each of the individuals who may be selected
Purchaser Designees are set forth below. Unless otherwise indicated, each such
person has held his or her present position as set forth below for the past five
years and each occupation refers to employment with Telefonaktiebologet LM
Ericsson.
Unless otherwise indicated under such person's name, such person is a
citizen of the Kingdom of Sweden.
<TABLE>
<CAPTION>
Name, Citizenship and Current Current Principal Occupation or Employment; Material Positions
Business Address Held During the Past Five Years and Business Addresses Thereof
----------------------------- --------------------------------------------------------------
<S> <C>
Eric Berthels Marketing Director of Ericsson Radio Access AB by whom he has
Ericsson Radio Access AB been employed since May 1998. He was previously employed by
Box 11 Ericsson Radio Systems AB (SE-164 80 Stockholm, Sweden) from
SE-164 93 Stockholm 1990 to 1998.
Sweden
Rolf Ericsson Vice-President of Telefonaktiebolaget LM Ericsson since 1998.
Telefonaktiebolaget LM He was previously employed by Ericsson Business Networks, AB
Ericsson (Augustendalsv. 21, Nacka Strand, SE-13189 Stockholm, Sweden).
SE-126 25 Stockholm
Sweden
Kenneth Johanssons Vice President of Ericsson Inc. by whom he has been employed
Mountain View Road since 1990.
Lynchbury, VA 24502
Ake Karman Director of Finance of Ericsson Radio Access AB by whom he has
Ericsson Radio Access AB been employed since April 1995.
Box 11
SE-164 93 Stockholm
Sweden
</TABLE>
A-2
<PAGE> 20
<TABLE>
<CAPTION>
Name, Citizenship and Current Current Principal Occupation or Employment; Material Positions
Business Address Held During the Past Five Years and Business Addresses Thereof
----------------------------- --------------------------------------------------------------
<S> <C>
Lawrence Lyles Vice President and General Counsel and Director of Ericsson
Ericsson Inc. Inc. since September 1, 1987. He has been employed by Ericsson
740 E. Campbell Road Inc. since 1986.
Richardson, Texas 75081
Citizenship: United States
Carl-Magnus Mansson General Manager of Ericsson Radio Access AB by whom he has
Ericsson Radio Access AB been employed since January 1995.
Box 11
SE-164 93 Stockholm
Sweden
</TABLE>
Parent and Purchaser have advised the Company that, to the best of their
knowledge, none of the individuals listed above (i) is currently a director of,
or holds any position with, the Company, (ii) has been employed by a corporation
or organization over the past five years which is a parent, subsidiary or other
affiliate of the Company, (iii) has any familial relationship with any directors
or executive officers of the Company or any other Purchaser Designee and (iv) to
the knowledge of Parent and Purchaser, beneficially owns any equity securities
(or rights to acquire any such securities) of the Company. The Company has been
advised by Parent and Purchaser that, to Parent's and Purchaser's knowledge,
none of the individuals listed above has been involved in any transaction with
the Company or any of its directors, executive officers or affiliates that are
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission, except as may be disclosed herein, in the Schedule
14D-9 or in the Offer to Purchase filed by Purchaser, a copy of which is being
mailed to the Company's stockholders together with the Schedule 14D-9 and the
Information Statement.
It is expected that Purchaser Designees may assume office at any time
following the purchase by Purchaser of at least 50.6% of the outstanding Shares
(on a fully-diluted basis (after taking into account all Shares issuable upon
the conversion of shares of Company preferred stock or any other convertible
securities or upon the exercise of any vested options, warrants or rights)), and
that, upon assuming office, Purchaser Designees will thereafter constitute at
least a majority of the Company Board. This step will be accomplished at a
meeting or by written consent of the Company Board providing that the size of
the Company Board will be increased and/or sufficient numbers of current
directors will resign such that, immediately following such action, the number
of vacancies to be filled by Purchaser Designees will constitute at least a
majority of the available positions on the Company Board. It is currently not
known which of the current directors of the Company will resign.
A-3
<PAGE> 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of October 19, 2000, 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
COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIALLY OWNED OF CLASS
------------------------------------- ------------------- --------
<S> <C> <C>
Charter Technologies Limited Liability Company(1)........... 5,139,994 48.00%
c/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, NY 10022
State of Wisconsin Investment Board(2)...................... 972,400 9.08%
PO Box 7842
Madison, WI 53707
Wellington Management Company, LLP(3)....................... 822,000 7.68%
75 State Street
Boston, MA 02109
</TABLE>
---------------
(1) The principal member of Charter Technologies Limited Liability Company
("Charter Technologies") is Charterhouse Equity Partners, L.P. ("CEP"),
which owns 99% 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) The State of Wisconsin Investment Board retains sole voting and dispositive
power for all shares.
(3) Wellington Management Company, in its capacity as investment advisor, may be
deemed to beneficially own all the shares which are held of record by
clients of Wellington Management Company.
STOCKHOLDERS' AGREEMENT
Parent and Purchaser have entered into a Stockholders' Agreement, dated as
of October 12, 2000 (the "Stockholders' Agreement") with certain stockholders of
the Company, namely George Sbordone, James Silver, Lee Leong, Alfred Weber and
Charter Technologies Limited Liability Company, the Company's largest
stockholder (collectively, the "Principal Stockholders"), pursuant to which,
among other things, the Principal Stockholders have agreed to (i) tender their
Shares after commencement of the Offer (which Shares currently represent in the
aggregate approximately 50.6% of the outstanding Shares on a fully diluted basis
(after taking into account all Shares issuable upon the conversion of shares of
Company preferred stock or any other convertible securities or upon the exercise
of any vested options, warrants or rights)), (ii) vote such Shares in favor of
the Merger and (iii) grant to Purchaser an option to purchase such Shares at
$8.70 per share upon the terms and subject to the conditions set forth in the
Stockholders' Agreement. For a summary of the Stockholders' Agreement, see
section of the Offer to Purchase titled "Background of the Offer; Contacts with
the Company; The Merger Agreement". A copy of the Offer to Purchase has been
filed as Exhibit 1 to the Schedule 14D-9 and is incorporated herein by
reference. Such summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Stockholders' Agreement which
is filed as Exhibit 4 to the Schedule 14D-9 and is incorporated herein by
reference.
A-4
<PAGE> 22
SECURITY OWNERSHIP OF CURRENT MANAGEMENT
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
The following table and the paragraphs that follow it present certain
information concerning the 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 Company Board. 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 OF
DIRECTORS AGE WITH THE COMPANY OCTOBER 19, 2000 CLASS(1)
--------- --- --------------------- ------------------ ----------
<S> <C> <C> <C> <C>
Alfred Weber(2)(3)................ 67 Chairman, President and Chief 135,100 1.25%
Executive Officer; Director
Merril M. Halpern(2)(4)........... 65 Director 0 *
A. Lawrence Fagan(4)(5)(6)........ 70 Director 0 *
David J. Aldrich(6)............... 43 Director 0 *
Warren A. Law(5)(6)............... 75 Director 1,000 *
James Silver(2)(4)(7)............. 42 Director 206,250 1.92%
James L. Morice(5)................ 62 Director 1,000 0
EXECUTIVE OFFICERS WHO ARE NOT
DIRECTORS
----------------------------------
Thomas V. Gilboy.................. 46 Vice President, Chief 0 *
Financial Officer
Mel Gould......................... 58 Vice President, Operations 0 *
Larry Konopelko(8)................ 46 Vice President and General 32,000 *
Manager -- Satellite, Medical
and Military Products
Stephen A. Scover(9).............. 42 Vice President and General 4,500 *
Manager -- Wireless Products
All directors and executive
officers as a group (11
persons)(10).................... 379,850 3.50%
</TABLE>
---------------
* Less than 1%.
(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 October 19,
2000 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 100,000 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after October 19,
2000.
(4) Merril M. Halpern and A. Lawrence Fagan are executive officers, directors
and stockholders of Charterhouse. Mr. James Silver a Senior Vice President
of Charterhouse. Messrs. Halpern, Silver and Fagan each disclaim beneficial
ownership of the shares of Common Stock beneficially owned by Charterhouse.
(5) Member of Compensation Committee.
(6) Member of Audit Committee.
(7) Includes an aggregate of 18,750 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after October 19,
2000.
A-5
<PAGE> 23
(8) Includes an aggregate of 32,000 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after October 19,
2000.
(9) Includes an aggregate of 4,500 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after October 19,
2000.
(10) Includes an aggregate of 155,250 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days after October 19,
2000.
Alfred Weber has been a director of the Company since June 1995. In
November 1999, Mr. Weber became Chairman of the Company. In December 1999, Mr.
Weber also became President and Chief Executive Office of the Company. From
April 1999 through November 1999, Mr. Weber was an entrepreneur specializing in
telecommunications infrastructure companies for Charterhouse, a firm
specializing in private equity investments. Prior to his retirement in March
1999, Mr. Weber was President and Chief Operating Officer of C&D Technologies,
Inc., a manufacturer of industrial batteries and power systems, since April
1989, Chief Executive Officer since January 1993 and Chairman of the Board since
November 1995.
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. Mr.
Halpern is also a director of Interliant Corporation, an application service
provider.
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.
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.
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 August 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. From September 1991 through August, 2000, Mr. Silver was an
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. Since September 1, 2000, Mr. Silver has been a Senior Vice President of
Charterhouse.
James L. Morice has been a director of the Company since April 2000. Mr.
Morice is a partner of Mirtz Morice, Inc., a management consulting firm, which
he helped found in 1982. Mr. Morice is a director of HSBC USA Inc., a New
York-based bank holding company.
Thomas V. Gilboy has served as Vice President and Chief Financial Officer
of the Company since May 2000. From April 1998 to April 2000, Mr. Gilboy was a
consultant acting as an interim Chief Financial Officer or in other business
systems development roles for private and public companies. From April 1996 to
March 1998, Mr. Gilboy was the Chief Financial Officer of PureTec Corporation,
an international plastics company. From January 1991 to March 1996, Mr. Gilboy
served as the Chief Financial Officer of Troy Corporation, a chemical company.
A-6
<PAGE> 24
Mel Gould has served as Vice President, Operations of the Company since
August 2000. From September 1994 to March 1997, Mr. Gould served as General
Manager of Coherent Communications, a manufacturer of telecommunications
equipment. From April 1997 to March 2000, Mr. Gould served as Vice President
Operations of S.L. Waber, a division of S.L. Industries, a manufacturer of
electrical surge suppressive equipment. From April 2000 to July 2000, Mr. Gould
served as an independent consultant to companies.
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.
Stephen A. Scover has served as Vice President and General
Manager -- Wireless Products of the Company since July 2000. From May 1995 to
February 2000, Mr. Scover served as a Director, Wireless Products for the
Company. From March 2000 to June 2000, Mr. Scover served as Director, Wireless
Marketing and Product Management of the Company.
DIRECTOR COMPENSATION
The only directors who are compensated for services as a director are
Messrs. Aldrich, Morice 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. Prior to being appointed
Chairman, President and CEO, in December 1999, Mr. Weber received compensation
for his services as a director and committee member.
BOARD COMMITTEES AND MEMBERSHIP
The Company has established an Executive Committee, a Compensation
Committee and an Audit Committee. The Executive Committee assists the Company
Board in its responsibilities. Messrs. Halpern, Weber 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, Morice and Law are the members of the Compensation
Committee. The Compensation Committee held two meetings in 1999. Prior to being
appointed Chairman, President and CEO, in December 1999, Mr. Weber was a member
of the Compensation Committee.
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 1999.
The Company does not have a nominating committee. The Company Board held
five meetings in 1999. Each of the directors attended at least 75% of (i) the
total number of meetings of the Company Board and (ii) the total number of
meetings of all committees of the Company Board on which such director served.
A-7
<PAGE> 25
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 (the "Named Executive Officers")
for each of the last three completed fiscal years in which such officers were
executives officers for all or part of the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION(1) --------------------------
-------------------------------------- RESTRICTED SECURITIES
SALARY OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) BONUS($) COMPENSATION($) AWARD(S)($) OPTIONS#(14) COMPENSATION
--------------------------- ---- ------- -------- ---------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred Weber(2).......... 1999 19,615 0 0 0 300,000 0
Chairman, President and
Chief Executive Officer
Edward J. Shubel(3)...... 1999 287,714 32,188(4) 25,874(7) 0 39,000 45,000(8)
Former, President and 1998 279,885 60,000(5) 24,126(7) 0 42,000 45,000(8)
Chief Executive Officer 1997 259,146 43,750(6) 32,691(7) 0 40,000 45,000(8)
Paul E. Donofrio(9)...... 1999 175,021 12,188(10) 0 0 30,000 0
Former, Executive Vice 1998 148,593 20,000(11) 0 0 21,000 0
President, Chief
Operating and Financial
Officer 1997 135,155 17,500(6) 0 0 20,000 0
Fuat Agi(12)............. 1999 154,972 7,500(10) 0 0 21,000 0
Former, Vice President
and General Manager 1998 154,245 20,000(11) 0 0 21,000 0
and Chief Technical
Officer 1997 145,820 17,500(6) 0 0 20,000 0
Larry Konopelko.......... 1999 138,821 6,563(10) 0 0 15,000 0
Vice President and 1998 133,433 12,000(11) 0 0 15,000 0
General Manager 1997 124,039 10,500(6) 0 0 15,000 0
Nicholas Mazzella(13).... 1999 134,676 4,688(10) 0 0 12,000 0
Former, Vice President 1998 133,607 12,000(11) 0 0 15,000 0
1997 124,269 10,500(6) 0 0 15,000 0
</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) Mr. Weber was appointed Chairman in November 1999, and President and Chief
Executive Officer in December 1999.
(3) Mr. Shubel retired in December 1999. See the section of this Information
Statement titled "--Employment Agreements and Termination Arrangements."
(4) Represents bonuses relating to performance of services for the Company in
fiscal 1999, $15,000 of which was paid in fiscal 1999 and $17,188 of which
was paid in fiscal 2000.
(5) Represents bonuses relating to performance of services for the Company in
fiscal 1998, $10,000 of which was paid in fiscal 1998 and $50,000 of which
was paid in fiscal 1999.
(6) Represents bonuses relating to performance of services for the Company in
fiscal 1997 which were paid in fiscal 1998.
(7) Represents, in 1999, 1998 and 1997 respectively, the Company's payment for
an automobile lease ($18,277, $10,513 and $11,468), gasoline ($1,801,
$1,210 and $1,900) and spousal travel expenses ($5,796, $12,403 and
$19,323).
(8) Represents the Company's payment of premiums on a life insurance policy.
See the section of this Information Statement titled "-- Employment
Agreements and Termination Arrangements."
A-8
<PAGE> 26
(9) Mr. Donofrio resigned in January 2000. See section of this Information
Statement titled "-- Employment Agreements and Termination Arrangements."
(10) Represents bonuses relating to performance of services for the Company, in
fiscal 1999 which were paid in fiscal 2000.
(11) Represents bonuses relating to performance of services for the Company in
fiscal 1998 which were paid in fiscal 1999.
(12) Mr. Agi retired in March 2000.
(13) Mr. Mazzella resigned in February 2000.
(14) See the section of this Information Statement titled "-- Stock Option
Plans."
STOCK OPTIONS
The following table contains information concerning the grant of options
under the Company's 1995 Stock Option Plan (the "1995 Plan"), the Company's 1996
Stock Option Plan (the "1996 Plan") and/or the Company's 1999 Stock Option Plan
(the "1999 Plan") to each of the Named Executive Officers of the Company during
the last completed fiscal year. No stock appreciation rights ("SARS") were
granted in 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE) DATE(3) 5% 10%
---- ------------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alfred Weber......... 300,000 57.8% $ 7.00 12/2/09 $1,320,679 $3,346,859
Edward J. Shubel..... 39,000 7.5% 10.00 3/1/09 245,269 621,560
Paul E. Donofrio..... 30,000 5.8% 10.00 3/1/09 188,668 478,123
Fuat Agi............. 21,000 4.0% 10.00 3/1/09 132,068 334,686
Larry Konopelko...... 15,000 2.9% 10.00 3/1/09 94,334 239,061
Nicholas Mazzella.... 12,000 2.3% 10.00 3/1/09 75,467 191,249
</TABLE>
---------------
(1) All options granted in 1999 were granted pursuant to the Company's 1995
Plan, 1996 Plan and 1999 Plan 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 1999 was 519,005.
(3) Each option is subject to earlier termination if the officer's employment
with the Company is terminated. See the section of this Information
Statement titled "-- Stock Option Plans."
(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 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.
A-9
<PAGE> 27
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, 1999. There were 162,167 options exercised during 1999. There
were no SARs exercised during 1999 and none were outstanding as of December 31,
1999.
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, 1999 AT DECEMBER 31, 1999(2)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred Weber............. 0 $ 0 0 300,000 $ 0 $37,500
Edward J. Shubel......... 40,667 322,128 307,833 0 77,665 0
Paul E. Donofrio......... 57,834 425,560 20,000 50,666 0 38,831
Fuat Agi................. 13,666 132,784 54,167 41,667 0 38,835
Larry Konopelko.......... 22,500 175,688 17,000 30,000 0 28,750
Nicholas Mazzella........ 27,500 171,250 12,000 27,000 0 28,750
</TABLE>
---------------
(1) Represents the difference between the market price of the Common Stock on
the date of the exercise and the exercise price per share of the options,
multiplied by the number of shares underlying the options.
(2) Represents the difference between the closing market price of the Common
Stock at December 31, 1999 of $7.125 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 AND TERMINATION ARRANGEMENTS
In December 1999, Mr. Weber entered into an employment agreement with the
Company pursuant to which he serves as the Company's Chairman, President and
Chief Executive Office. The employment agreement currently provides for an
annual base salary of $300,000 and terminates on December 31, 2002. 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 90 days prior written notice of non-renewal. See
section of the Schedule 14D-9 titled "Past Contacts, Transactions, Negotiations
and Agreements -- Arrangements with Executive Officers, Directors or Affiliates
of the Company -- Weber Employment Agreement and Weber Change of Control
Agreement," which sections and exhibits referenced in such section thereto are
incorporated herein by reference.
From September 1991 to December 1999, Mr. Shubel had an employment
agreement with the Company pursuant to which he served as the Company's
President. On December 2, 1999, Mr. Shubel entered into a termination agreement
with the Company whereby he will receive, among other things, continuation of
his annual base salary, of $279,000, and health benefits until August 30, 2000
and accelerated vesting of any unexercised stock options which will remain
exercisable until August 30, 2001. From April 1992 to December 1999, the Company
had 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. Since Mr. Shubel's retirement, in
December 1999, the cash surrender value of this policy is being used to pay a
monthly pension to Mr. Shubel or his beneficiaries for 60 months.
On January 14, 2000, Mr. Donofrio entered into a termination agreement with
the Company whereby he will receive, among other things, continuation of his
annual base salary, of $175,000, and health benefits until January 14, 2001 and
accelerated vesting of any unexercised stock options which will remain
exercisable until January 14, 2001.
Mr. Fuat Agi's termination arrangement with the Company provides that his
salary will continue from April 30, 2000 through October 20, 2000. These
payments will cease if he resumes employment with the
A-10
<PAGE> 28
Company or is employed by another corporation or entity. In addition, any vested
portions of his options will remain exercisable until March 30, 2001. Mr. Agi
has entered into a release agreement in consideration of these benefits.
CHANGE OF CONTROL AGREEMENTS
In March 1999, the Company entered into change of control agreements with
Messrs. Shubel, Donofrio, Agi and Mazzella. The agreements for Messrs. Shubel,
Donofrio, Agi and Mazzella were terminated on December 2, 1999, January 14,
2000, February 25, 2000 and March 31, 2000, respectively, as a result of these
employees termination of service for the Company. For discussion of the change
of control agreements the Company has entered with certain of its current
employees, see sections in the Schedule 14D-9 titled "Past Contacts,
Transactions, Negotiations and Agreements -- Arrangements with Executive
Officers, Directors or Affiliates of the Company -- Weber Employment Agreement
and Weber Change of Control Agreement", "-- Other Change of Control Agreements"
and "-- Executive Incentive Bonus Plan" which sections and exhibits referenced
in such sections are incorporated herein by reference.
WEBER TAX AGREEMENT
The Company has also entered into an agreement, dated December 2, 1999 (the
"Weber Tax Agreement"), with Mr. Weber providing that, in the event the Company
makes any payments to Mr. Weber upon a Change of Control (such payment, "Company
Payments"), and such Company Payments are subject to an excise tax ("Excise
Tax") due pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended, the Company shall pay to Mr. Weber an additional amount (the "Gross-Up
Payment") such that the net amount retained by Mr. Weber after deduction of the
Excise Tax and any United States federal, state, and local income or payroll tax
upon the Gross-Up Payment, but before any United States federal, state, and
local income or payroll tax upon the Company Payments, shall be equal to the
Company Payments. The Gross-Up Payment shall be paid no later than the 30th day
following any event which subjects Mr. Weber to the Excise Tax. The foregoing is
a summary of the Weber Tax Agreement and is qualified in its entirety by
reference to the complete text of such agreement which is filed as Exhibit 10 to
the Schedule 14D-9, and is incorporated herein by reference.
STOCK OPTION PLANS
The Company has adopted the 1995 Plan, the 1996 Plan and the 1999 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 Board of
Directors or a committee of at least two non-employee directors appointed by 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. The terms
of each option grant will be evidenced by an individual option agreement.
However, unless otherwise provided in a participant's option agreement, upon
termination of employment with the Company for death, retirement, disability or
without cause, all outstanding options then exercisable (including any options
not previously exercisable but made exercisable by the Board at or after
termination of employment) will remain exercisable for the following time
periods but in no event beyond the stated term of the option: (i) in the event
of a participant's death, retirement or disability, options will remain
exercisable for a period of one year from the date of the participant's death,
retirement or disability, provided that the Company Board may at any time extend
this time period; and (ii) in the event the participant's employment is
terminated by the Company without cause, the options will remain exercisable for
90 days from the date of the participant's termination of employment, provided
that the Company Board may at any time extend this time period. Where, however,
in the case of options granted under the 1999 Plan, an optionee voluntarily
terminates employment or, in the case of options granted under all Plans, the
Company terminates an optionee's employment for cause, all outstanding options
will immediately terminate and become null and void. An aggregate of 2,000,000
shares of Common Stock are subject to the grant of options under the Plans. As
of October 19, 2000, options have been granted to purchase an aggregate of
1,718,060 shares of Common Stock, leaving an aggregate of 281,940 options
available for
A-11
<PAGE> 29
grant. In addition, an aggregate of 1,383,996 shares of Common Stock are
outstanding under the Plans, as of October 19, 2000. The foregoing is a summary
of the 1995 Plan, the 1996 Plan and the 1999 Plan and each is qualified in its
entirety by reference to the complete text of the 1995 Plan, 1996 Plan and 1999
Plan filed as Exhibits 16, 17 and 18, respectively, to the Schedule 14D-9, each
of which are incorporated herein by reference.
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
In February 1996, the Company adopted 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 (which was performed in February 1996 and
updated in February 1999) that was commissioned by the Company Board. Under the
bonus plan, annual bonuses will be based upon the achievement of performance
goals that are annually preset by the Compensation Committee. These performance
goals are linked to achievement of earnings per share goals. The Compensation
Committee establishes a target bonus amount for each key officer at the
beginning of the year. An executive or employee can earn 0% or from 50% to 125%
of his bonus based upon a measured comparison of actual results achieved to
performance goals. An employee whose employment is terminated for any reason
prior to December 31 for any year in which the target bonus award is assessed
will forfeit his bonus for the entire year. The Company Board reserves the right
to alter, amend, reduce, suspend or terminate the plan. New executive and
employee hires who join the Company in any plan year may be included in the plan
on a pro-rata basis. In 1999, $50,940 in bonuses were earned (paid in 2000)
under the terms of the plan. For a complete text of such plan, see Exhibit 19 to
the Schedule 14D-9 which is incorporated herein by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Fagan, Morice 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. Mr. Law owns 1,000
shares of Common Stock. Mr. Morice owns 1,000 shares of Common Stock. See
section of this Information Statement titled "Certain Relationships and Related
Transactions."
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 1999 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
A-12
<PAGE> 30
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 in the section of this Information
Statement titled "Security Ownership of Current Management -- Employment
Agreements," the Company entered into an employment agreement with Mr. Shubel in
1991. Pursuant to such employment agreement, the Company paid to Mr. Shubel a
base salary of $287,714 in 1999. In addition, the Compensation Committee
determined to grant Mr. Shubel a bonus of $17,188, which represents a pro-rated
share of the annual bonus, with respect to 1999 (paid in 2000) under the terms
of the executive incentive bonus plan and a $15,000 discretionary bonus which
was paid in October 1999. Mr. Shubel was also awarded options in 1999 to
purchase 39,000 shares of the Company's Common Stock under the Microwave Power
Devices, Inc. 1996 Stock Option Plan.
In addition, as also discussed in the section of this Information Statement
titled "Security Ownership of Current Management -- Employment Agreements," the
Company entered into an employment agreement with Mr. Weber in December 1999.
Pursuant to such employment agreement, the Company paid to Mr. Weber a base
salary at an annual rate of $300,000 in 1999. Mr. Weber was also awarded options
to purchase 300,000 shares of the Company's Common Stock under the 1999 Plan.
The Compensation Committee
A. Lawrence Fagan
Warren A. Law
A-13
<PAGE> 31
PERFORMANCE GRAPH
The following performance graph compares the fifty-one 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
cumulative stockholder return is measured by dividing: (i) the sum of (a) the
cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (b) the excess of the Company's share price as of the end of
the measurement period over the price at the beginning of the measurement
period, by (ii) the share price at the beginning of the measurement period.
COMPARISON OF CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MPDI S&P 500 NASDAQ ELEC COMP
------------------ ---- ------- ----------------
<S> <C> <C> <C>
September 1995............................................ $100 $100 $100
December 1995............................................. 127 106 86
December 1996............................................. 31 130 149
December 1997............................................. 80 174 157
December 1998............................................. 119 225 242
December 1999............................................. 81 272 475
</TABLE>
A-14
<PAGE> 32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 3, 1991, Mr. Shubel purchased from the Company 187,500 shares
of the Company's Common Stock. 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 amount of the promissory note was 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, 2001. To secure this debt, Mr. Shubel
had pledged 162,500 shares to the Company. In September 1999, Mr. Shubel repaid
the principal balance on his promissory note. As Mr. Shubel's promissory note
has been fully repaid, his 162,500 shares are no longer pledged to the Company.
Mr. Sbordone is presently indebted to the Company in the amount of approximately
$125,000. Mr. Sbordone has pledged all of his Shares to the Company to secure
such indebtedness. Such indebtedness is payable upon the sale of Mr. Sbordone's
Shares.
Pursuant to a consulting agreement which was effective January 1, 1996, Mr.
Silver served as a consultant to the Company receiving consulting fees in 1999
of $100,000. These consulting services consisted 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 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. This agreement was terminated on January 30,
2000.
Certain employees of the Company have entered into change of control
agreements with the Company whereby, upon consummation of the Merger, such
employees may be entitled to receive certain payments. For a further discussion
of the interests of such employees in connection with the Merger and Offer, see
sections in the Schedule 14D-9 titled "Past Contacts, Transactions, Negotiations
and Agreements -- Arrangements with Executive Officers, Directors or Affiliates
of the Company -- Weber Employment Agreement and Weber Change of Control
Agreement", "-- Weber Tax Agreement", "-- Other Change of Control Agreements",
"-- Stock Option Plans" and "-- Executive Incentive Bonus Plan," which sections
are incorporated herein by reference.
The Company's current directors and executive officers will also receive
cash consideration in return for their tender of shares of Common Stock pursuant
to the Offer and payments with respect to their ownership in stock options of
the Company. For a further discussion of the interests of the Company's
directors and executive officers in connection with the Merger and Offer, see
sections in the Schedule 14D-9 titled "Past Contacts, Transactions, Negotiations
and Agreements -- Arrangements with Parent, Purchaser and their Affiliates
Certain Relationships -- Stock Option Plans" and "-- Interests of Certain
Company Directors," which sections are incorporated herein by reference.
For a discussion of the interests of Purchaser Designees in connection with
the Offer and Merger, see section in this Information Statement titled "Right to
Designate Directors; Purchaser Designees." For a discussion of the interests of
certain beneficial owners in connection with the Offer and Merger, see section
of this Information Statement titled, "Security Ownership of Certain Beneficial
Owners -- Stockholders' Agreement." For a discussion of the interests of Parent,
Purchaser and their affiliates in the Company and the Offer and Merger, see
section of the Schedule 14D-9 titled "Past Contacts, Transactions, Negotiations
and Agreements -- Arrangements with Parent, Purchaser and their Affiliates"
which section is incorporated herein by reference.
SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 COMPLIANCE
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 Commission. Based on material provided
to the Company, all such required reports were filed on a timely basis in 1999.
A-15
<PAGE> 33
ANNEX B
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
October 12, 2000
The Board of Directors
Microwave Power Devices, Inc.
49 Wireless Boulevard
Hauppauge, New York 11788-3935
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness, from a
financial point of view, to the holders of the common stock of Microwave Power
Devices, Inc. ("MPDI"), other than Ericsson Inc. ("Ericsson") and its
affiliates, of the Cash Consideration (defined below) provided for pursuant to
the Agreement and Plan of Merger, dated as of October 12, 2000 (the "Merger
Agreement"), among Ericsson, Ericsson MPD Acquisition Corp., a wholly owned
direct subsidiary of Ericsson ("Sub"), and MPDI. The Merger Agreement provides
for, among other things, (i) the commencement by Sub of a tender offer to
purchase all outstanding shares of the common stock, par value $0.01 per share,
of MPDI ("MPDI Common Stock" and, such tender offer, the "Tender Offer") at a
purchase price of $8.70 per share, net to the seller in cash (the "Cash
Consideration"), and (ii) subsequent to the Tender Offer, the merger of Sub with
and into MPDI (the "Merger" and, together with the Tender Offer, the
"Transaction") pursuant to which each outstanding share of MPDI Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed audited financial statements of MPDI for the fiscal years
ended December 31, 1997, December 31, 1998 and December 31, 1999;
(c) reviewed unaudited financial statements of MPDI for the six months
ended June 30, 2000;
(d) reviewed financial projections of MPDI prepared by the management
of MPDI;
(e) reviewed historical market prices and trading volume for MPDI
Common Stock;
(f) held discussions with the senior management of MPDI with respect
to the business and prospects for future growth of MPDI;
(g) reviewed and analyzed certain publicly available financial data
for certain companies we deemed comparable to MPDI;
(h) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to Transaction;
(i) performed a discounted cash flow analysis of MPDI using certain
assumptions of future performance provided to or discussed with us by the
management of MPDI;
(j) reviewed public information concerning MPDI; and
(k) performed such other analyses, reviewed such other information and
considered such other factors as we deemed appropriate.
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all the
financial and other information provided to or discussed with us by MPDI and its
employees, representatives and affiliates. With respect to forecasts of the
future financial condition and operating results of MPDI provided to or
discussed with us, we assumed, at the direction of the
<PAGE> 34
The Board of Directors
Microwave Power Devices, Inc.
October 12, 2000
Page 2
management of MPDI, without independent verification or investigation, that such
forecasts were reasonably prepared on bases reflecting the best available
information, estimates and judgments of the management of MPDI. We also have
assumed, with your consent, that in the course of obtaining the necessary
regulatory approvals for the Transaction, no limitations, restrictions or
conditions will be imposed that would have a material adverse effect on the
contemplated benefits of the Transaction to MPDI. We have neither made nor
obtained any independent evaluations or appraisals of the assets or liabilities
(contingent or otherwise) of MPDI or its affiliated entities. In connection with
our engagement with respect to the Transaction, we were not requested to, and we
did not, solicit third party indications of interest in the acquisition of all
or a part of MPDI nor were we requested to, and we did not, participate in the
negotiation or structuring of the Transaction. We are not expressing any opinion
as to the underlying valuation, future performance or long-term viability of
MPDI, or the price at which MPDI Common Stock will trade subsequent to
announcement or upon consummation of the Transaction. Our Opinion is necessarily
based on the information available to us and general economic, financial and
stock market conditions and circumstances as they exist and can be evaluated by
us on the date hereof. It should be understood that, although subsequent
developments may affect this Opinion, we do not have any obligation to update,
revise or reaffirm the Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have been retained by MPDI solely for purposes of rendering this Opinion
and will receive a fee for our services, a portion of which is contingent upon
consummation of the Transaction. We also will receive a fee upon delivery of
this Opinion. CIBC World Markets and its affiliates have in the past provided
services to MPDI unrelated to the proposed Transaction, for which services CIBC
World Markets and such affiliates have received compensation. In the ordinary
course of business, CIBC World Markets and its affiliates may actively trade
securities of MPDI or Ericsson for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Cash Consideration is fair, from a financial point of view, to
the holders of MPDI Common Stock (other than Ericsson and its affiliates). This
Opinion is for the use of the Board of Directors of MPDI in connection with its
evaluation of the Transaction, and does not constitute a recommendation to any
stockholder as to whether such stockholder should tender shares of MPDI Common
Stock in the Tender Offer or how such stockholder should vote on any matters
relating to the Transaction.
Very truly yours,
/s/ CIBC World Markets Corp.
CIBC WORLD MARKETS CORP.
<PAGE> 35
ANNEX C
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK
OF THE COMPANY EFFECTED DURING THE PAST 60 DAYS
(a) The following table sets forth options granted by the Company during
the past 60 days:
<TABLE>
<CAPTION>
NUMBER OF
NAME OPTIONS GRANTED(1)(2) DATE OF GRANT(3) EXERCISE PRICE
---- --------------------- ---------------- --------------
<S> <C> <C> <C>
Steven Scover....................... 5,000 7/12/00 $6.5000
Mel Gould........................... 10,000 8/7/00 $4.7656
Nicholas Bainlardi.................. 2,000 7/24/00 $6.0625
Clifford Mulle...................... 2,000 8/14/00 $4.8750
Vincent La Rose..................... 1,500 5/22/00 $6.1250
Charles Nogueras.................... 1,000 6/12/00 $6.9375
Chen-Lung Chou...................... 1,000 7/6/00 $6.0000
Leo Coniglio........................ 500 7/10/00 $6.1250
</TABLE>
---------------
(1) each option entitles the holder thereof to purchase one Share.
(2) all such options were granted under the 1996 Stock Option Plan as
non-qualified stock options.
(3) the grant of such options was approved and ratified by the Compensation
Committee of the Company Board on September 6, 2000.
(b) The following table sets forth Shares issued by the Company pursuant to
exercises of options during the past 60 days:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES ISSUED DATE OF ISSUANCE EXERCISE PRICE
---- ------------- ---------------- --------------
<S> <C> <C> <C>
Kevin Pietramala........................... 510(1) 8/29/00 $2.875
Paul Donofrio.............................. 4,458(2) 8/31/00 $2.875
Paul Donofrio.............................. 2,208(1) 8/31/00 $2.875
</TABLE>
---------------
(1) such options were originally granted to the holder thereof under the 1996
Stock Option Plan as incentive stock options.
(2) such options were originally granted to the holder thereof under the 1995
Stock Option Plan as incentive stock options.
