SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the commission Only (as permitted by Rule
14a-6(e)(2)
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Microlog Corporation
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/_/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________________
5) Total fee paid:
_________________________________________________________________________
/X/ Fee paid previously with preliminary proxy materials.
_________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: FEBRUARY 25, 1997
_____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
February 25, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Microlog Corporation (the "Company") to be held March 25, 1997, at 10:00
a.m., at the Gaithersburg Hilton, 620 Perry Parkway, Gaithersburg, Maryland,
20877, in the Potomac-Rockville room.
The Annual Meeting has been called for the following purposes:
(1) to elect one director to serve for a term of three years;
(2) to ratify the appointment by the Board of Directors of the firm of
Price Waterhouse LLP as independent accountants of the Company for the
fiscal year ending October 31, 1997;
(3) to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors of Microlog Corporation unanimously recommends that
you vote "FOR" proposals (1), and (2) to be considered at the Annual Meeting.
Your vote is important, regardless of the number of shares you own. On
behalf of the Board of Directors, I urge you to vote, sign, date, and return the
enclosed proxy card as soon as possible, even if you plan to attend the Annual
Meeting. Signing this proxy will not prevent you from voting in person should
you be able to attend the meeting. Signing the proxy will assure that your vote
is counted if, for any reason, you are unable to attend.
Sincerely yours,
/s/ Richard A. Thompson
Richard A. Thompson
Chief Executive Officer
<PAGE>
MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS;
TO BE HELD MARCH 25, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
Microlog Corporation (the "Company") will be held on March 25, 1997, at 10:00
a.m., local time, at the Gaithersburg Hilton, 620 Perry Parkway, Gaithersburg,
Maryland, 20877, for the following purposes:
1. To elect one director to serve for a term of three years;
2. To ratify the appointment by the Board of Directors of the firm of
Price Waterhouse LLP as independent accountants of the Company for the
fiscal year ending October 31, 1997;
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has fixed
February 3, 1997 as the record date for the Annual Meeting with respect to this
solicitation. Only shareholders of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
In the event there are not sufficient votes to approve one or more of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company.
By Order of the Board of Directors
/s/ Richard A. Thompson
Richard A. Thompson
Chief Executive Officer
Germantown, Maryland
February 25, 1997
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
<PAGE>
MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
March 25, 1997
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Microlog Corporation, a Virginia
corporation (the "Company"), for use at the 1996 Annual Meeting of Shareholders
to be held on March 25, 1997 at 10:00 a.m., local time, at the Gaithersburg
Hilton, 620 Perry Parkway, Gaithersburg, Maryland, 20877, and at any
adjournments thereof (the "Annual Meeting").
The Annual Meeting is being called for the following purposes:
(1) to elect one director to serve for a term of three years;
(2) to ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending October 31,
1997;
(3) to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Record holders of the Company's common stock, par value $.01 per share
("Common Stock"), at the close of business on February 3, 1997, the record date,
are entitled to notice of, and to vote at, the Annual Meeting. As of January 16,
1997, there were outstanding 4,193,143 shares of Common Stock. Each shareholder
will be entitled to one vote for each share of Common Stock held at the close of
business on the record date. At the Annual Meeting, votes will be counted by
written ballot.
This Proxy Statement, and the accompanying notice of the Annual Meeting and
proxy card, will first be sent or given to shareholders on or about February 26,
1997. The Company's Annual Report to Shareholders for the fiscal year ended
October 31, 1996 accompanies this Proxy Statement.
The shares of Common Stock represented by valid proxies received by the
Company in time for the Annual Meeting will be voted as specified in such
proxies. Executed but unmarked proxies will be voted:
(1) FOR the election of the Board of Directors' nominee for director;
(2) FOR the ratification of the appointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year ending
October 31, 1997;
1
<PAGE>
If any other matters properly come before the Annual Meeting, the persons
named as proxies will, unless the shareholder otherwise specifies in the proxy,
vote upon such matters as determined by a majority of the Board of Directors.
The election of the Board of Directors' nominee for director will require
the affirmative vote of a plurality of the shares entitled to vote in the
election of directors. Approval of the ratification of independent accountants
requires the affirmative vote of the holders of a majority of the shares of
Common Stock of the Company entitled to vote thereon and who vote in person or
by proxy at the Annual Meeting. In order to approve the transaction of any other
business as may properly come before the Annual Meeting, or any adjournments
thereof, the votes cast at the Annual Meeting approving the action must exceed
the votes cast opposing the action. Abstentions and broker non-votes will not be
counted as either approving or opposing the action.
Any shareholder giving a proxy has the right to revoke it at any time
before it is exercised by attending the Annual Meeting and voting in person or
by delivering to the Secretary of the Company at 20270 Goldenrod Lane,
Germantown, MD 20876-4070, a written notice of revocation or duly executed proxy
bearing a later date.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone,
facsimile, or telegraph by officers, directors, and employees of the Company who
will not be specially compensated for such solicitation activities. Arrangements
will also be made with brokerage houses and other custodians, nominees, and
fiduciaries for forwarding solicitation materials to the beneficial owners of
such shares held of record by such persons, and the Company will reimburse such
persons for their reasonable expenses incurred in connection therewith.
The Company is required to file an Annual Report on Form 10-K for the
fiscal year ended October 31, 1996 with the Securities and Exchange Commission
("SEC"). Shareholders can obtain, free of charge, a copy of such Annual Report
by writing to Microlog Corporation, 20270 Goldenrod Lane, Germantown, MD
20876-4070, Attention: Corporate Secretary.
2
<PAGE>
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of January 17, 1997 with
respect to the ownership of shares of Common Stock by (i) owners of more than 5%
of the Company's outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each of the named executive officers of the
Company, and (iv) all directors and officers of the Company as a group. The
information is based on the most recent filings with the SEC by such persons or
upon information provided by such persons to the Company. Unless otherwise
indicated, the persons shown in the table are believed to have sole voting and
investment power with respect to the entire number of shares reported.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER (1) BENEFICIALLY OWNED OWNERSHIP (2)
- -------------------- ------------------ -------------
Joe J. Lynn 333,350 7.9%
20270 Goldenrod Lane
Germantown, MD 20876-4070
J. Graham Hartwell 319,050 7.6%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Hathaway & Associates, Ltd 373,000 8.9%
119 Rowayton Avenue
Rowayton, Connecticut 06853
Richard A. Thompson 175,000(3) 4.0%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Steven R. Delmar 101,000(4) 2.4%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Deborah M. Grove 46,200(5) 1.1%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Robert E. Gray, Jr 27,520(6) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
David M. Gische 35,000(7) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
All officers and directors as
a group (9 persons) 1,028,452(8) 22.9%
- ----------
* Less than 1% of the shares outstanding.
3
<PAGE>
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner of a security for purposes of
the Rule if he or she has or shares voting power or investment power with
respect to such security or has the right to acquire such ownership within
60 days. As used herein, "voting power" is the power to vote or direct the
voting of shares, and "investment power" is the power to dispose or direct
the disposition of shares.
(2) For the purpose of computing the percentage of ownership of each beneficial
owner, any securities which were not outstanding but which were subject to
options, warrants, rights, or conversion privileges held by such beneficial
owner exercisable within 60 days were deemed to be outstanding in
determining the percentage owned by such person but are not deemed
outstanding in determining the percentage owned by any other person.
(3) Includes 12,000 shares held by the Company's Money Purchase Pension Plan,
of which Mr. Thompson is a trustee. Mr. Thompson disclaims beneficial
ownership of such shares. Also includes 160,000 shares that may be acquired
by Mr. Thompson within 60 days of the record date upon the exercise of
stock options. Does not include 180,000 shares that may be acquired by Mr.
Thompson more than 60 days after the record date upon the exercise of stock
options.
(4) Includes 12,000 shares held by the Company's Money Purchase Pension Plan,
of which Mr. Delmar is a trustee. Mr. Delmar disclaims beneficial ownership
of such shares. Also includes 63,000 shares that may be acquired by Mr.
Delmar within 60 days of the record date upon the exercise of stock
options. Does not include 12,000 shares that may be acquired by Mr. Delmar
more than 60 days after the record date upon the exercise of stock options.
(5) Includes 28,000 shares that may be acquired by Ms. Grove within 60 days of
the record date upon the exercise of stock options. Does not include 12,000
shares that may be acquired by Ms. Grove more than 60 days after the record
date upon the exercise of stock options.
(6) Includes 17,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options that have been granted. Includes
6,500 shares held by Mr. Gray's spouse. Mr. Gray disclaims beneficial
ownership of such shares.
(7) Includes 27,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Includes 3,000 shares held by Mr.
Gische's spouse. Mr. Gische disclaims beneficial ownership of such shares.
(8) Includes 298,332 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Does not include 244,001 shares
that may be acquired more than 60 days after the record date upon the
exercise of stock options. Includes 12,000 shares held by the Company's
Money Purchase Pension Plan, of which Messrs. Thompson and Delmar are
trustees. Messrs. Thompson and Delmar each disclaims beneficial ownership
of such shares.
4
<PAGE>
MATTERS TO BE ACTED UPON
ELECTION OF DIRECTORS
(Proposal No. 1)
The By-Laws of the Company currently provide that the membership of the
Board be divided into three classes. The Board of Directors currently consists
of six directors with each class having two directors. The term of only one
class of directors expires each year, and their successors are elected for a
term of three years and until their successors are duly elected and qualified.
Any director elected to fill any vacancy occurring in the Board of Directors,
including any vacancy created by an increase in the number of directors, shall
hold office for the remainder of the full term of the class of directors in
which the new directorship was created or in which the vacancy occurred. There
is currently one vacancy on the Board.
At the Annual Meeting, one director will be elected. The nominee, Robert E.
Gray, Jr., currently is serving as a director and has indicated a willingness to
continue serving if elected. Two directors were elected in 1996 for three-year
terms ending in 1999, and two directors were elected in 1995 for three-year
terms ending in 1998. The Board is presently searching for a suitable candidate
to fill the vacancy on the Board.
The following table provides information as to the nominee for director of
the Company for term ending in 2000, and as to directors whose terms in office
will continue.
EXPIRATION
NAME AGE OF TERM
---- --- -------
NOMINEE
-------
Robert E. Gray, Jr 55 2000
CONTINUING DIRECTORS
--------------------
J. Graham Hartwell 66 1998
Joe J. Lynn 65 1998
David M. Gische 47 1999
Richard A. Thompson 50 1999
Robert E. Gray, Jr. has been a director of the Company since 1977. He is
currently Senior Vice President of Prosperity Bank and Trust, in Springfield,
Virginia. He was employed by Hallmark Bank & Trust Co. from 1985 to 1992 - as
Director and Executive Vice President from 1989 to 1992, and prior thereto as
Senior Vice President and Chief Lending Officer. From 1992 to 1993, he served as
Senior Vice President of Suburban Bank of Virginia, NA in McLean, Virginia.
David M. Gische has been a director of the Company since April 1985. Mr.
Gische, an attorney, has been associated with the law firm of Ross, Dixon &
Masback in Washington, D.C. since November 1983. From September 1978 until
November 1983, Mr. Gische was associated with the Washington, D.C. law firm of
Hogan & Hartson LLP, counsel to the Company.
Richard A. Thompson is President and Chief Executive Officer of the
Company, effective January 1, 1997. He was President and Chief Operating Officer
of the Company from June 1992 through January 1, 1997. Mr. Thompson was elected
a director of the Company in September 1992. Prior to joining Microlog
Corporation, Mr. Thompson was President and a director of General Kinetics,
Inc., a diversified manufacturing company from October 1989 to December
5
<PAGE>
1991. Other positions he has held have been as President of Thompson Associates,
a management consulting firm from 1988 to 1989 and as Marketing Manager with
General Electric Company from 1985 to 1988. Mr. Thompson is also a Captain in
the U. S. Naval Reserve.
J. Graham Hartwell has been Chairman of the Board since March 1986 and a
director of the Company since 1969. He was President of the Company from its
organization in 1969 until October 1989. In October 1989, Mr. Hartwell became
Chief Executive Officer of the Company and served in that capacity until his
retirement on April 30, 1991.
Joe J. Lynn is Chief Development Officer of the Company, effective January
1, 1997. He was Chief Executive Officer of the Company from May 1, 1991 through
January 1, 1997 and served as President of the Company from October 1989 to June
1992. Before this, Mr. Lynn was Executive Vice President of the Company and
served as President of the Company's subsidiary, Microlog Corporation of
Maryland. He has been a director of the Company since its formation in 1969.
From 1966 until 1970, Mr. Lynn was employed as a manager with DBA Systems, Inc.
Prior thereto, from 1961 to 1966, he served as a manager at the Kennedy Space
Flight Center for RCA, which is presently a subsidiary of General Electric
Company.
During fiscal year 1996, there were nine meetings (including regularly
scheduled and special meetings) of the Board of Directors. All directors
attended more than 75% of such meetings.
The Board has an Audit Committee, a Management Compensation Committee, and
a Stock Option Committee, but does not have a Nominating Committee. The Audit,
Management Compensation, and Stock Option Committees each consists of Messrs.
Gische and Gray.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent accountants. The Audit Committee met one
time during fiscal year 1996. Each member of the Audit Committee attended this
meeting.
The function of the Management Compensation Committee is to make
recommendations to the Board of Directors with respect to the compensation of
certain officers and employees, including the executive officers. The Management
Compensation Committee met one time during fiscal year 1996. Each member of the
Management Compensation Committee attended this meeting.
The function of the Stock Option Committee is to make recommendations to
the Board of Directors with respect to the grant of stock options to officers
and employees. The Stock Option Committee met six times during fiscal year 1996.
Each member of the Stock Option Committee attended these meetings.
6
<PAGE>
MANAGEMENT
The executive officers of the Company, and their respective ages as of
January 16, 1997, are as follows:
NAME AGE OFFICES AND POSITIONS HELD
- ---- --- --------------------------
Joe J. Lynn* 65 Chief Development Officer and
Director
Richard A. Thompson* 50 President, Chief Executive Officer
and Director
Steven R. Delmar 41 Executive Vice President and
Chief Financial Officer
Deborah M. Grove 44 President of subsidiary, Old
Dominion Systems Incorporated of
Maryland
* Effective as of January 1, 1997, Mr. Lynn, who had been Chief Executive
Officer since May 1, 1991, resigned from that position, but agreed to remain
employed by the Company for an additional three years as Chief Development
Officer, with duties specified by the Board of Directors. Mr. Thompson, who had
been President and Chief Operating Officer since June 1992, became the Chief
Executive Officer.
Steven R. Delmar has been Executive Vice President of the Company since
October 1989 and was President of Microlog Corporation of Maryland, a
wholly-owned subsidiary of the Company, from May 1991 to July 1992. Mr. Delmar
was Microlog's Chief Financial Officer from January 1987 to May 1991. He served
as Chief Operating Officer of Microlog (rather than Chief Financial Officer)
from May 1991 until July 1992, and following the hiring of Mr. Thompson as
President and Chief Operating Officer, Mr. Delmar resumed his position as Chief
Financial Officer. He was Vice President of the Company from January 1987 to
October 1989. Since 1979, Mr. Delmar has held various offices with the Company
and its subsidiaries, including Assistant Comptroller, Comptroller, General
Manager and Vice President. A certified public accountant, Mr. Delmar held
accounting positions with Bechtel Power Corporation, a commercial construction
firm, and the Veterans Administration prior to his employment with Microlog.
Deborah M. Grove became President of Old Dominion Systems Incorporated of
Maryland, a wholly-owned subsidiary of the Company, in May 1991. From 1983 until
May 1991, Ms. Grove was Vice President of Old Dominion Systems Incorporated of
Maryland and from 1985 until May 1991, Vice President of Old Dominion Services,
Inc. Ms. Grove holds a Master of Science degree in Business and Finance and a
Bachelor of Science degree in Business Administration.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending October 31, 1994,
1995, and 1996, the salary, bonus, and certain other forms of compensation paid
or accrued for those years by the Company and its subsidiaries to the Chief
Executive Officer and each of the three other executive officers whose salary
and bonus compensation exceeded $100,000 in fiscal 1996 ("named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Other ------ -------
Annual Restricted
Compen- Stock Options LTIP All Other
Fiscal Salary Bonus sation Award(s) /SARs Payouts Compen-
Name and Principal Position Year ($)(a) ($) ($)(b) ($) (#) ($) sation ($)(c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joe J. Lynn 1996 184,206 24,500 22,410 10,908
Chief Executive Officer 1995 169,919 50,000 7,715 10,851
1994 169,207 4,513 12,027
Richard A. Thompson 1996 164,994 31,500 16,341 150,000 13,000
President and Chief 1995 160,000 90,000 4,622 100,000 12,125
Operating Officer 1994 157,453 5,947 12,500
Steven R. Delmar 1996 135,000 25,500 8,861 10,555
Executive Vice President 1995 130,000 40,000 3,980 15,000 10,255
and Chief Financial Officer 1994 129,163 3,873 11,164
Deborah M. Grove 1996 115,003 23,500 12,609 9,117
President of subsidiary, 1995 110,000 40,000 10,039 15,000 8,784
Old Dominion Systems 1994 106,386 9,498 8,520
Incorporated of Maryland
</TABLE>
(a) Includes deferred compensation
For fiscal 1996, 1995, and 1994 Mr. Lynn's deferred compensation included
in his salary was $14,200, $4,919, and $151 respectively.
For fiscal 1996, 1995, and 1994 Mr. Delmar's deferred compensation included
in his salary was $0, $0, and $149 respectively.
For fiscal 1996, 1995, and 1994 Ms. Grove's deferred compensation included
in her salary was $0, $0, and $124 respectively.
(b) Other annual compensation consists of reimbursements under the Company's
Executive Medical Reimbursement Plan, paid personal leave, and personal use
of automobiles.
(c) All other compensation consists of 401k matching contributions and pension
plan contributions.
For fiscal 1996 Mr. Lynn's 401k matching and pension contributions were
$1,908, and $9,000 respectively.
For fiscal 1996 Mr. Thompson's 401k matching and pension contributions were
$4,000, and $9,000 respectively.
For fiscal 1996 Mr. Delmar's 401k matching and pension contributions were
$2,275, and $8,280 respectively.
For fiscal 1996 Ms. Grove's 401k matching and pension contributions were
$1,770, and $7,347 respectively.
8
<PAGE>
STOCK OPTIONS
The following table contains information with respect to grants of stock
options to each of the named executive officers during the fiscal year ended
October 31, 1996. All such grants were made under the prior stock option plan or
the new Stock Option Plan (subject to shareholder approval).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual Rates
Individual Grants Rates of Stock Price
------------------------------------------------------------- Appreciation for
% of Total Option Term (a)
Number of Options Granted Exercise Expiration --------------------------
Options Granted to Employees Price ($/sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard A. Thompson (b) 150,000 59% $5.50 12/20/05 519,000 1,314,838
</TABLE>
- ----------
(a) Share prices for Mr. Thompson assuming a 5% and 10% annual appreciation at
the end of the term of his option are $8.96 and $14.27, respectively.
(b) These options vest over a three-year period with 33.3% vesting at the end
of each year, subject to the Company's stock price meeting or exceeding
specified levels.
The following table provides information concerning the exercise of stock
options by the named executive officers during fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities In-the Money Options
Underlying at FY-End ($)(a)
Unexercised Options
at FY End (#)
Shares Acquired Value Exercisable/ Exercisable/
NAME on Exercise (#) Realized ($)(b) Unexercisable Unexercisable
- ---- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Thompson 10,000 $14,750 160,000/180,000 880,000/990,000
Deborah M. Grove -- -- 28,000/ 12,000 154,000/ 66,000
Steven R. Delmar 25,000 -- 63,000/ 12,000 346,500/ 66,000
- ----------
</TABLE>
(a) Calculations based on closing price of stock of $5.50 on October 31, 1996.
(b) The amount realized subsequent to October 31, 1996 was $9,000.00.
9
<PAGE>
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENTS
The Company is a party to an employment agreement with Mr. Lynn. The
agreement provides for employment of Mr. Lynn through December 31, 1999. Mr.
Lynn's annual salary under his employment agreement equals (a) the sum of
$80,000 for 1997, $84,000 for 1998 and $88,200 for 1999 (the "Base Amount"),
plus (b) the sum of $93,779.70 per annum for 1997, 1998, and 1999 (the
"Additional Amount"). The employment agreement entitles Mr. Lynn to certain
employee benefits, generally those available to the Company's employees or
executive officers, but not including participation in the incentive stock
option plan or executive bonus plan. Upon termination of employment without
cause, the Base Amount, plus all benefits, will be paid for twelve months, the
Additional Amount will be paid for the remainder of the term of the employment
agreement and, for any portion of such period during which Mr. Lynn is not
entitled to receive the Base Amount, the Additional Amount will be increased by
$2,000 per month. The employment agreement permits Mr. Lynn to move to a part
time status, with a pro rata decrease in the Base Amount, or to become a
consultant and perform only consulting services reasonably requested by the
Company, in which event Mr. Lynn would not receive the Base Amount but would
receive the Additional Amount increased by $2,000 per month, plus applicable
benefits.
The Company is a party to an employment agreement with Mr. Thompson. The
agreement provides for employment of Mr. Thompson through December 31, 1998. Mr.
Thompson's annual salary under his employment agreement is subject to increase
and discretionary bonuses each year as determined by the Board of Directors. On
December 16, 1996, the Board of Directors set a salary to become effective as of
January 1, 1997 under this agreement for Mr. Thompson of $185,000, which
represents a 12% increase from the prior year. The employment contract entitles
Mr. Thompson to certain fringe benefits, including insurance coverage and
various executive perquisites. Upon termination of employment without cause, the
existing base salary, plus all benefits, will be paid in monthly installments
for twelve months. The employment agreement also entitles Mr. Thompson to
continue to serve as a director of the Company for so long as he continues to be
an officer of the Company.
The Company is a party to a noncontributory deferred compensation agreement
with Mr. Lynn under which the Company is obligated to make payments to Mr. Lynn
(or his beneficiaries) over the ten-year period subsequent to his retirement (on
or after age 65), permanent disability, or death. The aggregate amount owed to
Mr. Lynn under this agreement is payable either in equal monthly installments
over the ten-year period or in an appropriately discounted single sum payment
(at the election of Mr. Lynn). This amount is determined by multiplying $2,500
by the number of months of employment during the period April 1, 1988 to January
1, 1995 and adding an initial contribution of $10,000. During the fiscal year
ended October 31, 1996, the Company accrued $14,200 in interest for Mr. Lynn
under this contract.
MANAGEMENT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally are made by
the two-member Management Compensation Committee of the Board. Each member of
the Management Compensation Committee is a non-employee director. All decisions
by the Management Compensation Committee relating to the compensation of the
Company's executive officers are reviewed by the full Board. Set forth below is
a report submitted by the Management Compensation Committee addressing the
Company's compensation policies for fiscal 1996 as they affected the Company's
executive officers, including the Chief Executive Officer and the named
executive officers.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS. The Company's executive
compensation policies are designed to provide competitive levels of
compensation, assist the Company in attracting and
10
<PAGE>
retaining qualified executives, reward superior corporate performance, and
recognize individual initiative and achievement. Measurement of corporate
performance is primarily based upon Company goals and industry performance
levels. The Company considers compensation paid to its executive officers to be
deductible for purposes of Section 162(m) of the Internal Revenue Code. Target
levels of the executive officers' overall compensation are intended to be
consistent with other executives in the Company's industry, including members of
its peer group, taking into account the size and financial results of these
respective companies. In the past few years, this policy has resulted in certain
executive officers' overall compensation being at the lower end of executive
compensation in the Company's industry and peer group. However, the Management
Compensation Committee expects to consider during 1997 whether this result is
consistent with the Company's performance over the past two years. The
Management Compensation Committee believes that stock ownership by management
and stock-based performance compensation arrangements are beneficial in aligning
management's and shareholders' interests in the enhancement of shareholder
value.
RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION. Compensation paid to the
Company's executive officers in fiscal 1996, which related to the performance of
the Company, consisted of the following components: base salary, cash bonuses,
grants of stock options under stock option plans, and executive perquisites.
Base Salary. The Management Compensation Committee reviews executive base
salaries on a regular basis. In view of the Company's financial performance
during fiscal 1996, base salaries for Messrs. Thompson and Delmar, and Ms. Grove
were increased effective January 1, 1997 to approximately $185,000, $145,000,
and $125,000, respectively.
Cash Bonuses. The Management Compensation Committee also determines,
generally on an annual basis, whether to award bonuses to executive officers
based upon their individual performance or on the performance of the Company as
a whole. In prior years, the Board, at the recommendation of the Management
Compensation Committee, has adopted specific incentive compensation arrangements
for executive officers which consist of cash bonuses payable if the Company
achieved certain pre-tax (and pre-bonus) profit and sales goals. The Company
utilizes an executive bonus plan under which a pool of funds, determined by
formula, is set aside for selected executives. The amount of funds set aside for
the bonus pool is based on the Company's sales and pre-tax income. A new
Executive Bonus Plan with new performance goals was adopted for fiscal 1997.
Bonuses of $110,000 were paid for fiscal 1996 under the Executive Bonus Plan in
effect for fiscal 1996.
Stock Options. The Company provides a long-term incentive through a stock
option plan (the "Stock Option Plan") which was adopted in 1995. The Stock
Option Plan is intended to foster management team cohesion and align management
and shareholder interests. Key employees, including executive officers, are
eligible for grants under the Stock Option Plan. The Stock Option Plan is
administered by the Stock Option Committee, which consists exclusively of
non-employee directors. Awards are intended to provide incentives for executive
officers to enhance long-term corporate performance, as reflected in stock
price, thereby increasing shareholder value, and to provide non-cash
compensation to such officers as part of their overall compensation package. The
Company believes that the Stock Option Plan encourages superior performance that
can result in significantly enhanced shareholder value. The option price of
shares granted under the Stock Option Plan may be less than the fair market
value of the shares underlying the option on the date of grant, but such options
generally have been granted at fair market value. Options granted under the
Stock Option Plan generally terminate automatically upon termination of
employment or service with the Company, except in cases of disability or death.
11
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As part of his three year employment contract, based upon the Board's view
that Mr. Thompson's continued performance as President and Chief Operating
Officer (now Chief Executive Officer) is very important to the Company, the
Board recommended, and the Stock Option Committee of the Board granted, on
December 20, 1995 additional options for Mr. Thompson to purchase 150,000 shares
of Common Stock, vesting in ten years ending in December 2005. The additional
options contain an accelerated vesting provision based upon the trading price of
the Company's Common Stock in June of each of 1996 ($3.50), 1997 ($5.00), and
1998 ($10.00). The Company's Common Stock was trading at a price of less than
$3.00 when these price targets were initially agreed upon, and had traded at
significantly lower levels in the prior year.
Executive Perquisites. In prior years, the Company has provided certain
perquisites for its executive officers which the Management Compensation
Committee has determined are customary for similar companies. With respect to
fiscal 1996, the Management Compensation Committee decided to set aside
approximately $115,000 for executives and a group of other key employees,
collectively, for executive perquisites selected by such employees. The
Committee determined that self-selection of perquisites would probably be most
efficient for this portion of compensation of the executive and other key
employees, taking advantage of available cost savings, tax benefits, and other
factors.
Other Compensation. In addition to the compensation paid to executive
officers as described above, executive officers and other key employees receive
benefits under the Company's Medical Reimbursement Plan (along with supplemental
health benefits of up to $7,500 per executive), and executive officers receive,
along with and on the same terms as other employees, contributions by the
Company pursuant to the Company's Pension Plan and matching contributions under
the Company's Pre-Tax Savings Plan (401k).
CEO Compensation. In setting the Chief Executive Officer's salary and
incentive compensation for fiscal 1997, the Management Compensation Committee
reviewed the Company's fiscal 1996 financial performance in revenues, expenses,
and pre-tax net income. Based upon its review at the outset of fiscal 1997, the
Committee approved an increase in Mr. Thompson's salary for fiscal 1997 of
$20,000 to $185,000. The Committee believes that any significant increase in Mr.
Thompson's compensation for 1997 will come from the executive bonus plan, which
is based on achieving the Company's revenue and net income targets, and that Mr.
Thompson has substantial motivation to increase the value of the Company's
Common Stock due to the large number of stock options that he holds. The
Committee believes a significant performance-based component of total
compensation serves the interests of shareholders by directly linking management
compensation with corporate performance.
Management Compensation Committee Report
Submitted by the Members of the Management Compensation Committee:
David M. Gische
Robert E. Gray, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
12
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COMPARATIVE COMPANY PERFORMANCE
The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the NASDAQ Stock Market, and a peer
group index over the last five fiscal years. The peer group consists of Active
Voice Corporation, Boston Technology, Inc., Brite Voice Systems, Inc., Centigram
Communications Inc., Cognitronics Corporation, Comverse Technology, Inc., Davox
Corporation, Digital Sound Corporation, Intervoice Inc., Octel Communications,
CP., Periphonics Corporation, and Syntellect, Inc.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
Among Microlog Corporation,
NASDAQ Market Index, and Peer Group Index
[GRAPHIC OMITTED
FISCAL YEAR ENDING
COMPANY 1991 1992 1993 1994 1995 1996
MICROLOG CORP 100 66.67 225.00 39.59 283.33 366.67
PEER GROUP 100 123.71 173.28 189.00 230.80 256.02
BROAD MARKET 100 96.87 127.13 135.16 160.32 188.27
Assumes $100 Invested on Nov. 1, 1991
Assumes Dividends Reinvested
Fiscal Year Ending October 31, 1996
COMPENSATION OF DIRECTORS
Compensation of Mr. Gische and Mr. Gray, through fiscal 1996, consisted of
$1,000 per meeting with a maximum of $10,000 per year for each such director.
Employee directors are not paid for attending meetings of the Board of
Directors.
The Company has a non-employee director stock option plan (the
"Non-Employee Director Plan"), which was approved by the shareholders, pursuant
to which 125,000 shares of Common Stock have been reserved for issuance to
non-employee directors of the Company upon exercise of options granted under the
Non-Employee Director Plan. The Company believes that options issued under the
Non-Employee Director Plan create an incentive for non-employee directors to
expend maximum effort for the growth and success of the Company. Options for
3,000 shares of Common Stock were granted during fiscal 1996 to each of Messrs.
Gische and Gray under the Non-Employee Director Plan. The option price of all
options granted under the Non-Employee Director Plan equal the fair market value
of the shares underlying the option on the date of grant.
13
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Options granted under the Non-Employee Director Plan expire if not exercised
within ten years from the date of the grant of the option.
SECTION 16(A) DISCLOSURE
Each director and officer of the Company, and each person who beneficially
owns more than 10% of the Company's Common Stock, is required by Section 16(a)
of the Securities Exchange Act of 1934 to file reports with the Securities and
Exchange Commission ("SEC") of beneficial ownership of the Company's equity
securities and certain changes to such ownership. Based on its review of the
reports and written representations furnished by the persons required to file
reports under Section 16(a), the Company believes that (i) Mr. Richard A.
Thompson, the Company's President, Chief Executive Officer, and a Director,
filed four late reports with the SEC of six transactions involving changes in
beneficial ownership, (ii) Director, Robert E. Gray, Jr. filed two late reports
of three transactions, and (iii) Director, David M. Gische filed one late report
of a single transaction. The majority of the transactions involved grants or
exercises of stock options that were not reported on a timely basis due to a
misunderstanding about applicable filing requirements.
The Company is taking a look at the procedures for the process of filing
the required forms with the SEC to ensure filings are timely from this point
forward.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal No. 2)
The Board of Directors has appointed the firm of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year ending October 31,
1997, subject to ratification of such appointment by the shareholders. The
appointment of this firm was recommended to the Board of Directors by its Audit
Committee. Price Waterhouse LLP has been acting as independent accountants of
the Company since 1979.
The submission of this matter to shareholders at the Annual Meeting is not
required by law or by the By-Laws of the Company. Nevertheless, the Board of
Directors of the Company is submitting it to the shareholders to ascertain their
views. If this appointment is not ratified by the holders of at least a majority
of the shares of Common Stock of the Company at the Annual Meeting, the Board of
Directors intends to reconsider its appointment of Price Waterhouse LLP as
independent accountants of the Company.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting and will be available to respond to questions or make a statement, if
they so desire.
14
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SHAREHOLDER PROPOSALS AND OTHER MATTERS
Proposals of shareholders intended to be presented at the Company's 1998
Annual Meeting of Shareholders must be received at the Company's principal
executive offices not later than October 31, 1997 in order for such proposals to
be included in the Company's proxy statement and proxy relating to the 1998
Annual Meeting of Shareholders. Nothing in this paragraph shall be deemed to
require the Company to include in the proxy statement and proxy relating to the
1998 Annual Meeting of Shareholders any shareholder proposal that does not meet
all of the requirements for such inclusion in effect at that time.
The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Annual Meeting other than those specifically referred to herein. If, however,
any other matters should properly come before the Annual Meeting, it is the
intention of the person named in the enclosed proxy to vote the shares
represented thereby in accordance with the determination of a majority of the
Board of Directors.
The Board of Directors of the Company urges each shareholder, whether or
not he or she intends to be present at the Annual Meeting, to complete, sign,
and return the enclosed proxy as promptly as possible.
By Order of the Board of Directors
/s/ Richard A. Thompson
Richard A. Thompson
Chief Executive Officer
15
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REVOCABLE PROXY
MICROLOG CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder hereby appoints Joe J. Lynn, Richard A.
Thompson, or Steven R. Delmar, or any of them, attorneys and proxies of the
undersigned, with full power of substitution and with authority in each of them
to act in the absence of the other, to vote and act for the undersigned at the
Annual Meeting of Shareholders of the Company to be held at the Gaithersburg
Hilton, 620 Perry Parkway, Gaithersburg, Maryland, 20877, on March 25, 1997, at
10:00 a.m., local time, and at any adjournments thereof, in respect of all
shares of the Common Stock of the Company which the undersigned may be entitled
to vote, on the following matters:
1. Election of one director for a three year term ending in 2000:
Robert E. Gray, Jr.
[ ] FOR the nominee listed above. [ ] WITHHOLD AUTHORITY to vote for
the nominee listed above.
2. Proposal to ratify the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending October 31,
1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, on any other matters that may properly come before the
meeting, or any adjournments thereof, in accordance with the recommendations of
a majority of the Board of Directors.
(Continued and to be dated and signed on reverse side.)
<PAGE>
(continued from other side)
This proxy, when properly executed, will be voted as directed herein by the
undersigned shareholder. However, if no direction is given, this proxy will be
voted FOR the nominees in proposal 1 and 2.
The undersigned hereby acknowledges prior receipt of a copy of the Notice
of Annual Meeting of Shareholders and Proxy Statement dated February 25, 1997,
and the 1996 Annual Report to Shareholders, and hereby revokes any proxy or
proxies heretofore given. This Proxy may be revoked at any time before it is
voted by delivering to the Secretary of the Company either a written revocation
of proxy, or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person.
If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope.
[ ] I PLAN TO ATTEND THE MARCH 25, 1997 ANNUAL SHAREHOLDERS MEETING
Date: _________________, 1997.
-----------------------------------
Signature of Shareholder or
Authorized Representative
PLEASE DATE AND SIGN EXACTLY AS
NAME APPEARS HEREON. EACH EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN,
ATTORNEY-IN-FACT, AND OTHER
FIDUCIARY SHOULD SIGN AND INDICATE
HIS OR HER FULL TITLE. IN THE CASE
OF STOCK OWNERSHIP IN THE NAME OF
TWO OR MORE PERSONS, BOTH PERSONS
SHOULD SIGN.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
