MILTOPE GROUP INC.
- -----------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders of Miltope Group Inc.:
The Annual Meeting of Stockholders (the "Meeting") of Miltope
Group Inc., a Delaware corporation (the "Company"), will be held at the
Company's corporate headquarters, 3800 Richardson Road South, Hope
Hull, Alabama, Thursday, July 17, 2003 at 10:00 A.M., Local Time, to
consider and act upon the following:
1. To elect five directors of the Company to serve as the Board of
Directors until the next annual meeting of stockholders and until
their successors are elected and qualified; and
2. To consider and act upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Only stockholders of record of the Common Stock, $.01 par value,
of the Company at the close of business on April 22, 2003 shall be
entitled to receive notice of, and to vote at, the Meeting, and at any
adjournment or postponements thereof. A Proxy and a Proxy Statement
for the Meeting are enclosed herewith.
All stockholders are cordially invited to attend the Meeting. If
you do not expect to be present, you are requested to fill in, date and
sign the enclosed Proxy, which is solicited by the Board of Directors
of the Company, and to mail it promptly in the enclosed envelope to
make sure that your shares are represented at the Meeting. In the
event you decide to attend the Meeting in person, you may, if you
desire, revoke your Proxy and vote your shares in person.
By Order of the Board of Directors
/s/ Tom B. Dake
------------------------------------
TOM B. DAKE
Secretary
Dated: April 30, 2003
IMPORTANT
---------
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
-1-
MILTOPE GROUP INC.
3800 Richardson Road South
Hope Hull, Alabama 36043
(334) 285-8665
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PROXY STATEMENT
Annual Meeting of Stockholders
July 17, 2003
------------------------------
GENERAL
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Miltope Group
Inc., a Delaware corporation (the "Company"), to be voted at the Annual
Meeting of Stockholders of the Company (the "Meeting") to be held at
the Company's corporate headquarters, 3800 Richardson Road South, Hope
Hull, Alabama 36043, on Thursday, July 17, 2003, at 10:00 A.M., Local
Time, and any adjournment or postponements thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders
and in this Proxy Statement.
The principal executive offices of the Company are located at 3800
Richardson Road South, Hope Hull, Alabama 36043. The approximate date
on which this Proxy Statement and the accompanying Proxy will first be
sent or given to stockholders is May 19, 2003.
A Proxy, in the accompanying form, which is properly executed,
duly returned to the Company and not revoked will be voted in
accordance with the instructions contained therein and, in the absence
of specific instructions, will be voted (i) for the election as
directors of persons who have been nominated by the Board of Directors
and (ii) in accordance with the judgment of the person or persons
voting the proxies on any other matter that may be properly brought
before the Meeting provided the Company did not have notice of the
matter at least 45 days before April 22, 2003. Each such Proxy granted
may be revoked at any time thereafter by writing to the Secretary of
the Company prior to the Meeting, or by execution and delivery of a
subsequent Proxy or by attendance and voting in person at the Meeting,
except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority
conferred by such Proxy.
VOTING SECURITIES
Stockholders of record as of the close of business on April 22,
2003 (the "Record Date"), will be entitled to notice of, and to vote
at, the Meeting or any adjournments thereof. On the Record Date there
were outstanding 5,884,909 shares of the Common Stock, $.01 par value.
There was no other class of voting securities outstanding at that date.
Each holder of Common Stock is entitled to one vote for each share held
by such holder. The presence, in person or by proxy, of the holders of
a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Meeting. Under the rules of the Securities
and Exchange Commission, boxes and a designated blank space are
provided on the proxy card for stockholders to mark if they wish to
withhold authority to vote for one or more nominees for director.
Votes withheld in connection with the election of one or more of the
nominees for director will be counted as votes cast against such
individuals and will be counted toward the presence of a quorum for the
transaction of business. If no direction is indicated the proxy will
be voted for the election of the nominees for director. Under the
rules of the National Association of Securities Dealers, Inc. ("NASD"),
a broker "non-vote" has no effect on the outcome of the election of
directors or the establishment of a quorum for such election. The form
of proxy does not provide for abstentions with respect to the election
of directors; however, a stockholder present at the Meeting may abstain
with respect to such election. The treatment of abstentions and broker
"non-votes" with respect to the election of directors is consistent
with applicable Delaware law and the Company's By-Laws.
-2-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
ownership of voting securities of the Company by each person who is
known to the management of the Company to have been the beneficial
owner of more than 5% of the outstanding shares of the Company's Common
Stock as of April 22, 2003:
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership* of Class
- --------------- ---------------------------- ----------- --------
Common Stock Modern Holdings Incorporated 3,664,478 62.3%
($.01 par value) 153 E. 53rd Street
Suite 5900
New York, NY 10022
Common Stock Dimensional Fund 312,200 (1) 5.3%
($.01 par value) Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
* Unless otherwise noted, all shares are directly owned.
(1) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported beneficial ownership of 312,200 shares of the Company's
Common Stock as of December 31, 2002. According to Dimensional, all of
the shares are held in portfolios of DFA Investment Dimensions Group Inc.
(the "Fund"), a registered open-end investment company, or in series of
the DFA Investment Trust Company (the "Trust"), a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. Dimensional reported that it
had sole dispositive power with respect to 312,200 shares, and sole
voting power with respect to 312,200 shares.
-3-
OWNERSHIP OF COMMON STOCK BY DIRECTORS, NOMINEES AND OFFICERS
The following table sets forth certain information as of April 22,
2003, regarding the ownership of voting securities of the Company by
(i) each director and nominee of the Board of Directors of the Company,
(ii) each executive officer of the Company and Miltope Corporation
named in the Summary Compensation Table, and (iii) all directors and
executive officers of the Company as a group, and as to the percentage
of outstanding shares held by them on that date:
Name of
Beneficial Owner Amount and Nature of Percent
Title of Class Directors Beneficial Ownership(1) of Class
- -------------- ---------------------- ------------------------ --------
Common Stock William L. Dickinson 74,345 (2) 1.3%
Common Stock Henry Guy** 0 *
Common Stock Jerry O. Tuttle 44,865 (3) *
Common Stock David E. Marcus** 0 *
Common Stock Ronald V. Hite 0 *
Executive Officers
Who are not Directors
----------------------
Common Stock Thomas R. Dickinson 61,000 (4) 1.0%
Common Stock Robert G. Kaseta 60,000 (5) 1.0%
Common Stock Tom B. Dake 25,950 (6) *
Common Stock Jeffrey Q. Palombo 25,000 (7) *
Common Stock Edward F. Crowell 22,270 (8) *
Common Stock Executive officers and
directors
as a group (10 persons) 313,430 (2)(3)(4)(5) 5.3%
(6)(7)(8)
- -----------------
* Represents less than one percent of the class.
** Affiliated with Modern Holdings Incorporated, the principal
stockholder of the Company
(1) Unless otherwise noted, all shares are directly owned. Includes
shares that may be acquired pursuant to options exercisable on
April 22, 2003, and within sixty days of April 22, 2003, pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
(2) Represents 6,250 shares of Common Stock owned by Mr. Dickinson and
68,095 shares of Common Stock that Mr. Dickinson may acquire upon
exercise of stock options.
(3) Represents shares of Common Stock that Mr. Tuttle may acquire upon
exercise of stock options.
(4) Represents 1,000 shares of Common Stock owned by Mr. Dickinson and
60,000 shares of Common Stock that Mr. Dickinson may acquire upon
exercise of stock options.
(5) Represents 1,200 shares of Common Stock owned by Mr. Kaseta,
54,500 shares of Common Stock that Mr. Kaseta may acquire upon
exercise of stock options and 4,300 shares of Common Stock held by
Mr. Kaseta's wife. Mr. Kaseta disclaims beneficial ownership of
the shares owned by his wife.
(6) Represents 1,600 shares of Common Stock owned by Mr. Dake, 21,250
shares of Common Stock that Mr. Dake may acquire upon exercise of
stock options and 3,100 shares of Common Stock owned by Mr. Dake's
wife. Mr. Dake disclaims beneficial ownership of the shares owned
by his wife.
(7) Represents 25,000 shares of Common Stock that Mr. Palombo may
acquire upon exercise of stock options.
(8) Represents 20 shares of Common Stock owned by Mr. Crowell and
22,250 shares of Common Stock that Mr. Crowell may acquire upon
exercise of stock options.
-4-
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
At the Meeting, five directors are to be elected to serve until
the next annual meeting of stockholders and until their successors
shall be duly elected and shall qualify. Unless otherwise specified,
all proxies received will be voted in favor of the election of the five
nominees of the Board of Directors named below as directors of the
Company. Proxies cannot be voted for a number of directors greater
than five. All of the nominees are presently directors of the Company.
The term of the current directors expires at the Meeting. Should any
of the nominees not remain a candidate for election at the date of the
Meeting (which contingency is not now contemplated or foreseen by the
Board of Directors), proxies solicited hereunder will be voted in favor
of those nominees who do remain candidates and may be voted for
substitute nominees selected by the Board of Directors. Assuming a
quorum is present, a vote of a majority of the shares present, in
person or by proxy, at the Meeting is required to elect each of the
nominees as a director in accordance with the Company's By-Laws.
The following table sets forth the names of the nominees, their
ages, and their current positions with the Company:
Name Age Title
- --------------------- ----- --------
William L. Dickinson 79 Director
Henry Guy 35 Director
Jerry O. Tuttle 68 Director
Ronald V. Hite 59 Director
David E. Marcus 37 Director
Mr. W. Dickinson has served as a director of the Company since
February 1993. Mr. Dickinson served as United States Representative to
Congress from the 2nd District of Alabama from 1964 to January 1993.
Mr. Dickinson was a ranking Republican for eleven years on the House
Armed Services Committee, and a senior Republican on the House
Subcommittee on Procurement and Military Systems and the House
Subcommittee on Military Installations and Facilities prior to his
retirement in 1993.
Mr. Guy has served as a director of the Company since October
2001. As Modern Holdings Incorporated's ("Modern Holdings") and GUI's
President and Chief Executive Officer, Mr. Guy is responsible for
oversight of corporate and portfolio company operations as well as new
venture sourcing and creation. Mr. Guy joined Modern Holdings in 2000
after having spent 2 years as Chief Financial Officer of Modern
Holding's portfolio company, Ephibian, Inc. Before joining Ephibian,
Mr. Guy spent six years as a U.S. Naval officer, serving in a variety
of operational assignments. Mr. Guy also sits on the boards of
Contest, Inc., Bassett, Spruce Technologies, and Netcom AB.
Mr. Tuttle has served as a director of the Company since February
1998. Most recently, Mr. Tuttle has been involved in the formation of
several business to business e-commerce ventures. Mr. Tuttle served as
Senior Vice President of ManTech International Corporation, ("ManTech")
and President of ManTech Systems Engineering Corporation from October
1996 to January 2000. Prior to joining ManTech, Mr. Tuttle was
associated with Oracle Government as Vice President, Business
Development and Chief Staff Officer. In December 1993, Mr. Tuttle
retired from the United States Navy as a Vice Admiral. The culmination
of his naval career was his assignment as Director of Space and
Electronic Warfare, a position he held until his retirement.
-5-
Mr. Hite has served as a director of the Company since April 2003.
Mr. Hite currently serves as Chairman and Chief Executive Officer of
Cypress International, Inc. a Virginia based defense consulting firm.
Prior to joining Cypress, Mr. Hite had a distinguished 33 year career
as an Army officer and retired in July, 1997 after having attained the
rank of Lt. General. General Hite's last active duty assignment was as
Military Deputy to the Assistant Secretary of the Army for Research,
Development and Acquisition. In that position he was the senior
military advisor to the Army Acquisition Executive and the Army Chief
of Staff on all research, development and acquisition programs and
related issues.
Mr. Marcus has served as a director of the Company since April
2003. Mr. Marcus currently serves as Chairman of the Board of Great
Universal, Inc. and Modern Holdings, Inc. and is the founder of
Marcstone Capital Management, LP. Mr. Marcus has worked with Franklin
Mutual Advisors, LLC (formerly Heine Securitites Corporation) since
1988 in various roles, most recently as Vice President and Director of
European Investments.
In addition to the foregoing directors of the Company, Mr. Thomas
R. Dickinson is President and Chief Executive Officer, and Mr. Tom B.
Dake is Vice President Finance and Chief Financial Officer, of the
Company and Miltope Corporation, an Alabama corporation ("Miltope").
Mr. T. Dickinson (age 58) has served as President and Chief
Executive Officer of the Company and Miltope Corporation since January
15,1999. Mr. Dickinson joined Miltope in October 1998 as Chief
Operating Officer. In September 1998, Mr. Dickinson retired from the
United States Army as a Brigadier General. Mr. Dickinson held several
command and staff positions culminating in his final assignment as the
Chief of Ordnance for the United States Army.
Mr. Dake (age 50) has served as Vice President Finance and Chief
Financial Officer of the Company and Miltope Corporation since April
21, 1999. Mr. Dake joined Miltope in May 1997 as Controller and served
as Acting Chief Financial Officer from October 1998 through April 1999.
Prior to joining Miltope, Mr. Dake served in a financial executive
capacity with various manufacturing companies.
-6-
BOARD OF DIRECTORS AND COMMITTEES
During the 2002 fiscal year, there were seven regular and special
meetings of the Board of Directors.
The Board of Directors has designated from among its members an
Audit Committee, which consists of Mr. Tuttle, Mr. Dickinson, and Mr.
Guy. The Audit Committee, which reviews the Company's financial and
accounting practices and controls, held two meetings during the fiscal
year ended December 31, 2002. The Company has a Stock Option Committee
of the Board of Directors for the Company's 1995 Plan that consists of
Messrs. Guy and Tuttle. This committee met two times in 2002. The
Company has a Compensation Committee of the Board of Directors which
reviews the compensation of the Company's employees, including
establishing performance based bonuses for certain executive officers
of the Company and Miltope. The Compensation Committee consists of
Messrs. Guy and Tuttle. This committee met two times in 2002. The
Company does not have a standing nominating committee.
All directors attended at least 75% of the Board and committee
meetings in 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was formed in 1984 as a wholly owned subsidiary of
Stonebrook Group Inc., a Delaware corporation ("Stonebrook") which
owned approximately 55.6% of the outstanding Common Stock of the
Company through December 31, 1994. Miltope Corporation was formed in
1975 and was a wholly owned subsidiary of Stonebrook until it became a
wholly owned subsidiary of the Company in June 1984. In January 1995,
Modern Holdings Incorporated (formerly Xsource Corporation), a Delaware
corporation, acquired 62.8% of the outstanding shares of the Common
Stock of the Company pursuant to certain share exchange transactions
with Stonebrook and Stuvik AB, a Swedish corporation and, at such time,
a holder of 7.2% of the outstanding shares of the Company's Common
Stock. Prior to June of 1999 Modern Holdings Incorporated was a
subsidiary of Great Universal Incorporated, a Delaware corporation
("GUI"), and a wholly owned subsidiary of MIC-USA Inc. ("MIC-USA"), a
Delaware corporation and a wholly owned subsidiary of MIC. In
connection with the reorganization of GUI in June 1999, the Company
became a subsidiary of GUI, which became a wholly owned subsidiary of
Great Universal LLC, a Delaware limited liability company ("GU-LLC"),
whose sole member from the date of reorganization until December 31,
1999 was MIC-USA. On December 31, 1999 MIC-USA formed The 1999 Great
Universal LLC Trust (the "Trust") and assigned all ownership interest
of GU-LLC to the Trust. In addition, Mr. Guy is President and Chief
Executive Officer of both Modern Holdings Incorporated and GUI. Mr.
Marcus is the Chairman of both Modern Holdings Incorporated and GUI.
During 2002 and 2001, the Company recorded no sales to related
companies and had no receivables from previous sales.
-7-
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table shows all the cash compensation paid or to be
paid by the Company or by Miltope Corporation ("Miltope"), its wholly
owned subsidiary, as well as certain other compensation paid or accrued
during the fiscal years ended December 31, 2002, 2001 and 2000 to the
President and Chief Executive Officer of the Company and the four other
most highly compensated executive officers. There were no restricted
stock awards or long-term incentive plan payouts to any of the
executive officers named in the following table.
Long Term
Compensation
Annual Compensation Awards
------------------- -------------
Number
of
Securities All
Name and Underlying Other
Principal Position Year Salary Bonus Options Compensation
------------------- ---- ------ ------ ---------- ------------
Thomas R. Dickinson 2002 $262,748 $ -- 25,000 --
President and 2001 $212,502 69,600 10,000 --
Chief Executive Officer 2000 $208,400 69,600 10,000 --
Tom B. Dake 2002 $157,354 $ -- 20,000 --
Vice President, 2001 $130,754 41,300 10,000 --
Finance and Chief 2000 $120,284 40,550 20,000 --
Financial Officer
Robert G. Kaseta 2002 $164,362 $ -- 20,000 --
Vice President, 2001 $142,980 43,710 5,000 --
Engineering of 2000 $136,776 46,119 -- --
Miltope
Jeffrey Q. Palombo 2002 $169,278 $ -- 20,000 --
Vice President, 2001 $136,480 50,900 10,000 --
Business Development 2000 $121,455 49,982 -- --
of Miltope
Edward F. Crowell 2002 $127,112 $ -- 10,000 --
Vice President, 2001 $115,737 22,150 5,000 --
Human Resources 2000 $109,658 21,755 -- --
of Miltope
-8-
Option Grants in Last Fiscal Year
The following table sets forth information with respect to grants
of options to purchase shares of Class A Common Stock granted to the
Named Executive Officers during the fiscal year ended December 31,
2002.
Individual Grants
-----------------
Number of Percentof Total Potential Realizable Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise or of Stock Price Appreciation
Options Employees in Base Price Expiration For Option Term
Name Granted Fiscal Year ($/sh) (2) Date (2) ---------------------------
5% ($) 10% ($)
- -------------------- ---------- ------------- ---------- ---------- -------- ---------
Thomas R. Dickinson 25,000 18.67% $2.98 7/18/2002 $ 41,074 $ 101,167
Tom B. Dake 20,000 14.93% $2.98 7/18/2002 $ 32,859 $ 80,934
Robert G. Kaseta 20,000 14.93% $2.98 7/18/2002 $ 32,859 $ 80,934
Jeffery Q. Palombo 20,000 14.93% $2.98 7/18/2002 $ 32,859 $ 80,934
Edward F. Crowell 20,000 14.93% $2.98 7/18/2002 $ 32,859 $ 80,934
(1) The exercise price is set by the Compensation Committee, but may
not be less than the fair market value of the Common Stock on a date
specified by the Committee within 10 business days of the date of the
grant of the option. All options shown were granted on July 18, 2002.
(2) Options will vest in four equal installments on each of the first
four anniversaries of the date of grant.
Stock Option and Fiscal Year-End Option Values
----------------------------------------------
The following table presents the number of outstanding stock
options and the aggregate dollar value of unexercised in-the-money
stock options held by each of the executive officers included in the
Summary Compensation Table at December 31, 2002.
Number of Securities
Number of Underlying Unexercised Value of Unexercised In-The-
Shares Options at Fiscal Year-end Money Options at FY-End (1)
Acquired ----------------------------------------------------------
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------------- ----------- ------------- ----------- -------------
Thomas R. Dickinson -0- -0- 45,000 50,000 $ 56,060 $ 32,110
Tom B. Dake -0- -0- 16,250 38,750 $ 23,795 $ 26,045
Robert G. Kaseta -0- -0- 54,500 27,500 $ 21,888 $ 11,363
Jeffery Q. Palombo -0- -0- 25,000 30,000 $ 20,875 $ 14,125
Edward F. Crowell -0- -0- 22,250 15,750 $ 12,588 $ 8,353
(1) Value of unexercised in-the-money stock options is calculated
by subtracting the aggregate exercise price of such options
from the fair market value of the total number of shares
underlying the in-the-money stock options on December 31, 2002
that was the last trading date of the year 2002. The last sale
price of the Company's Common Stock on December 31, 2002 on The
NASDAQ Stock Market was $2.97
-9-
The following table summarized information as of December 31, 2002,
relating to equity compensation plans of the Company pursuant to
which grants of options, restricted stock units or other rights to
acquire shares may be granted in the future.
Equity Compensation Plan Information
------------------------------------
Number of Weighted-
securities to average Number of securities
be issued upon exercise price remaining available for
exercise of of outstanding future issuance under
outstanding options, equity compensation
options, warrants and plans (excluding
warrants and rights securities reflected in
rights column (a))
-------------- -------------- ------------------------
Plan Category <a> <b> <c>
Equity 438,489 $2.34 61,511
compensation
plans approved
by security
holders (1)
Equity 146,061 $1.64 153,939
compensation
plans not
approved by
security
holders (2)
Total 584,550 $2.17 215,450
(1) These plans are the Company's 1995 Stock Option and Performance
Plan.
(2) These plans are those of the Company's outside directors.
Termination Policies and Arrangements
-------------------------------------
The Company has in place severance and termination policies that
include executive officers as well as all employees of the Company as
of December 31, 2002.
Compensation Of Directors
-------------------------
At a meeting of the Compensation Committee on April 23, 2003, it
was determined that a change in the compensation of directors was
necessary due to the additional accountability and responsibilities
under Sabanes-Oxley. Additionally, there had been no Directors
compensation changes in over five years. The following Director
compensation went into effect as of the above meeting date.
Directors receive an annual fee of $10,000 and an additional fee
of $1,500 for each meeting of the Board of Directors attended by such
director and $1,500 per meeting of a committee of the Board which is
held on a day other than a day on which a Board meeting is also held.
All directors are reimbursed for out-of-pocket expenses in attending
such meetings.
Additionally, all directors receive 4,000 shares of the stock of
the Company at the initial commencement of their term as a director.
All directors also receive stock options at the commencement of
each year of service as a director entitling each to purchase up to
5,000 shares of the Company's Common Stock, for an exercise price equal
to not less than 85% of the market value of the Common Stock covered by
the options on the date of grant.
-10-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of
more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission. The Company believes that, during the fiscal year
ended December 31, 2002, its executive officers, directors and holders
of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements. In making these statements, the
Company has relied upon a review of reports on Forms 3, 4 and 5
furnished to the Company during, or with respect to, its last fiscal
year.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The policies of the Compensation Committee regarding executive
compensation are to determine compensation levels based upon a
combination of corporate performance and individual performance
measured against pre-established objectives that are determined each
fiscal year by the Committee and approved by the entire Board of
Directors. The goal is to achieve compensation levels that reflect
both individual performance and incentives based upon common financial
targets.
The salary of the President and Chief Executive Officer is
reviewed annually by the Compensation Committee with reference to a
review of the compensation levels of chief executive officers of
comparable companies in the defense electronics industry and of
selected public companies in the geographic region of the Company which
the Compensation Committee believes are competitors of, or similarly
situated to, the Company. Based upon this review, the salary of the
President and Chief Executive Officer is established. Compensation
levels for other executive officers of the Company are similarly
established. Salaries of the Company's executive officers are in the
lower portion of the range of salaries paid by the other companies
surveyed.
Bonus targets are separately established at the beginning of each
fiscal year with reference to the Company's performance measured
against pre-set criteria principally relating to corporate income and
growth. As of April 22, 2003, the Compensation Committee had not
determined bonus amounts for executive officers of the Company.
Grants of stock options, which generally vest over four years, are
based in substantial part on the Committee's judgment as to the long-
term incentive effect that a grant would have on the executive
officer's and the Company's long-term performance.
Payments of base salary for the 2002 fiscal year do not exceed $1
million for any named executive officer included in the Summary
Compensation Table.
COMPENSATION COMMITTEE
Henry Guy
Jerry O. Tuttle
-11-
COMPARISON OF TOTAL STOCKHOLDER RETURN
The following graph sets forth the Company's total stockholder
return over a five-year period, beginning December 31, 1997, and ending
December 31, 2002, as compared to the NASDAQ Stock Market Index and the
NASDAQ Non-Financial Index. The total stockholder return assumes $100
invested at the beginning of the period in the Company's Common Stock,
the NASDAQ Stock Market Index and the NASDAQ Non-Financial Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
MILTOPE GROUP INC., NASDAQ STOCK MARKET & NASDAQ NON-FINANCIAL INDEX
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Nasdaq Stock Market 100 141 261 158 125 87
Nasdaq Non-Financial 100 147 288 168 129 84
Miltope Group Inc. 100 39 23 21 48 97
NOTE - REFLECTS $100 INVESTED IN 1997 IN COMPANY STOCK AND REFLECTS
YEAR-END VALUE FOR EACH RESPECTIVE YEAR
AUDITORS
Deloitte & Touche LLP were the Company's independent public
auditors for the fiscal year ended December 31, 2002. The Audit
Committee of the Board of Directors will recommend the appointment of
the auditors for the current fiscal year. It is expected that Deloitte
& Touche LLP will be selected by the Audit Committee to serve as the
Company's auditors for the current fiscal year. Representatives of
Deloitte & Touche LLP intend to be present at the Meeting and available
to respond to appropriate questions and, in addition, such
representatives will be given an opportunity to make a statement at the
meeting if they so desire.
AUDIT FEES
The aggregate fees and expenses billed by Deloitte & Touche LLP,
the member firms of Deloitte Touche Tohmatsu, and their respective
affiliates (collectively, "Deloitte & Touche") which includes Deloitte
Consulting for professional services rendered for the audit of the
Company's annual financial statements for the fiscal year ended
December 31, 2002 and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $120,000.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche for services
rendered to the Company, other than the services described above under
"Audit Fees", for the fiscal year ended December 31, 2002 were $34,500,
including an employee benefit plan audit of $10,000 and tax preparation
and consultation services of $24,500.
The audit committee has considered whether the provision of non-
audit services is compatible with maintaining the principal
accountant's independence.
-12-
AUDIT COMMITTEE REPORT
In compliance with the requirements of the NASDAQ Stock Exchange,
the Audit Committee of the Company adopted a formal written charter
approved by the Board of Directors on July 20, 2000, which outlines the
Audit Committee's responsibilities and how it carries out those
responsibilities. In connection with the performance of its
responsibilities under this charter, the Audit Committee has:
- - Reviewed and discussed the audited financial statements of the
Company with management;
- - Discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (required
communication by external auditors with audit committees):
- - Received from the independent auditors disclosures regarding the
auditors' independence required by Independence Standards Board
Standard No. 1 and discussed with the auditors the auditors'
independence; and
- - Recommended, based on the review and discussion noted above, to
the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 for filing with the Securities and Exchange
Commission.
- - Retained Mr. Guy as a non-independent member of the Audit
Committee at the request of the Board of Directors. The Board of
Directors has determined that it is in the best interest of the Company
to retain Mr. Guy as not only a member of the Audit Committee but also
as the financial expert for the Audit Committee until such time as a
qualified replacement is recruited, certified and voted on to the Board
of Directors and to the Audit Committee.
The Board of Directors has determined that Mr. Guy qualifies as an
audit committee financial expert within the meaning of SEC rules. The
members of the audit committee are independent within the rules of
NASDAQ with the exception of Mr. Guy as noted above.
AUDIT COMMITTEE
Henry Guy
William L. Dickinson
Jerry O. Tuttle
ANNUAL REPORT
All stockholders of record as of April 22, 2003 are concurrently
being sent a copy of the Company's Form 10K as filed with the United
States Securities and Exchange Commission for the fiscal year ended
December 31, 2002, which contains certified financial statements of the
Company for the fiscal years ended December 31, 2002 and 2001.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by January 3, 2003 in order
to be considered for inclusion in proxy materials distributed in
connection with the next annual meeting of stockholders. All such
proposals should be in compliance with applicable Securities and
Exchange Commission regulations.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board of Directors of
the Company does not know of any other matter to be brought before the
Meeting. However, if any other matters not mentioned in the Proxy
Statement are properly brought before the Meeting or any adjournments
thereof, the persons named in the enclosed Proxy or their substitutes
will have discretionary authority to vote proxies given in said form,
or otherwise act, in respect of such matters in accordance with their
best judgment.
All of the costs and expenses in connection with the solicitation
of proxies with respect to the matters described herein will be borne
by the Company. In addition to solicitation of proxies by use of the
mails, directors, officers and employees (who will receive no
compensation therefore in addition to their regular remuneration) of
the Company may solicit the return of proxies by telephone, telegram or
personal interview. The Company will request banks, brokerage houses
and other custodians, nominees and fiduciaries to forward copies of the
proxy material to their principals and to request instructions for
voting the proxies. The Company may reimburse such banks, brokerage
houses and other custodians, nominees and fiduciaries for their
expenses in connection therewith.
It is important that proxies be returned promptly. Stockholders
are, therefore, urged to fill in, date, sign and return the Proxy
immediately. No postage need be affixed if mailed in the enclosed
envelope in the United States.
By order of the Board of Directors
/s/ Tom B. Dake
--------------------------------------
TOM B. DAKE
Secretary
April 30, 2003
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