PROXY STATEMENT OF
MICROPAC INDUSTRIES, INC.
905 East Walnut Street
Garland, Texas 75040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held AT 11:00 A.M., LOCAL TIME ON
February 28, 2002
Dear Stockholder:
You are invited to attend the Annual Meeting of stockholders of
Micropac Industries, Inc., to be held at the Garland Performing Arts Center, 300
N. Fifth St., Garland, Texas for the following purposes:
To elect five directors to serve until the next annual meeting of
stockholders or until their respective successors are elected and qualified; and
To transact such other business that may properly be brought before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 17,
2002, as the record date for the meeting. Only stockholders of record at that
time are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
The enclosed proxy is solicited by the Board of Directors of the
Company. Further information regarding the matters to be acted upon at the
Annual Meeting are contained in the attached Proxy Statement.
MANAGEMENT HOPES THAT YOU WILL ATTEND THE MEETING IN PERSON. IN ANY
EVENT, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY TO ASSURE THAT YOU ARE
REPRESENTED AT THE MEETING. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR
STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN PROXIES.
By Order of the Board of Directors
JAMES K. MURPHEY, Secretary
DATED: January 29, 2002
MICROPAC INDUSTRIES, INC.
905 EAST WALNUT STREET
GARLAND, TEXAS 75040
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
February 28, 2002
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Micropac Industries, Inc. (the
"Company") for use at the Company's Annual Meeting of Stockholders that will be
held on February 28, 2002, at the time and place and for the purposes set forth
in the foregoing notice. This Proxy Statement, the foregoing notice and the
enclosed proxy are first being sent to stockholders on or about February 6,
2002.
The Company's Annual Report to Stockholders for the fiscal year ended
November 30, 2001 is enclosed.
The Board of Directors does not intend to bring any matter before the
meeting except those specifically indicated in the foregoing notice and does not
know of anyone else who intends to do so. If any other matters properly come
before the meeting, however, the persons named in the enclosed proxy, or their
duly constituted substitutes acting at the meeting, will be authorized to vote,
or otherwise act thereon in accordance with their judgment on such matters. If
the enclosed proxy is executed and returned prior to voting at the meeting, the
shares represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, the shares will be voted FOR the
election as directors of the Company of the five persons named in the section
captioned "Election of Directors".
Any proxy may be revoked at any time prior to its exercise by notifying
the Company's Secretary in writing, by delivering a duly executed proxy bearing
a later date, or by attending the meeting and voting in person.
Only holders of record of common stock at the close of business on
January 17, 2002 are entitled to notice of and to vote at the meeting. On that
date there were 3,127,151 shares of common stock outstanding, each of which is
entitled to one vote in person or by proxy on all matters properly brought
before the meeting. Cumulative voting of shares in the election of directors is
prohibited.
The presence, in person or by proxy, of the holders of a majority of
the outstanding common stock is necessary to constitute a quorum at the meeting.
In order to be elected a director, a nominee must receive a plurality of the
votes cast at the meeting for the election of directors. Other matters, if any,
to be voted on at the meeting require the affirmative vote of a majority of the
shares present in person or represented by proxy at the meeting.
MICROPAC INDUSTRIES, INC.
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The following table shows the number and percentage of shares of the
Company's common stock beneficially owned (a) by each person known by the
Company to own 5% or more of the outstanding common stock, (b) by each director
and nominee, and (c) by all present officers and directors as a group.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Class(1)
- ------------------- ------------------ -----------
Heinz-Werner Hempel (2)(3) 1,952,577 62.4%
Hanseatische Waren-Gesellschaft
MBH & Co., KG
Am Wall 127
28195 Bremen 1 Germany
Nicholas Nadolsky (3) 548,836 17.6 %
1322 Briar Hollow
Garland, Texas 75043
H. Kent Hearn (3) 3,500 Less than .1%
1409 Briar Hollow
Garland, Texas 75043
James K. Murphey (3) -0- -
2290 One Galleria Tower
13355 Noel Road, L.B.75
Dallas, Texas 75240
Ms. Connie Wood (4) 6,000 Less than .2%
106 Cedarview
Rockwall, Texas 75087
All officers and directors 2,510,913 80.3%
as a group (5 Persons)
- -----------------------
(1) Calculated on the basis of the 3,127,151 outstanding shares. There are
no options, warrants, or convertible securities outstanding.
(2) The Company and Mr. Heinz-Werner Hempel are parties to an Ancillary
Agreement entered into in March 1987. The Ancillary Agreement primarily
obligates the Company to register Mr. Hempel's stock and allows Mr.
Hempel to participate in any sale of stock by the Company.
(3) A director of the Company. Each incumbent director has been nominated
for reelection at the Annual Meeting.
(4) Ms. Wood, the Company's President, has been nominated by the Company
for election to the Board of Directors.
ELECTION OF DIRECTORS
The Board of Directors has determined that the Board should be composed
of five directors and five directors are to be elected at the Meeting to hold
office until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. Proxies solicited hereby will be voted FOR
the election of the five nominees named below unless authority is withheld by
the stockholder. Messrs. Nadolsky, Hearn, Hempel and Murphey are currently
directors of the Company.
Position(s) With
Name Age the Company Director Since
- ---- --- ---------------- --------------
Nicholas Nadolsky 68 Chairman of the Board March 1974
Chief Executive Officer
and a Director
H. Kent Hearn 66 Director February 1983
Heinz-Werner Hempel 73 Director February 1997
James K. Murphey 59 Director March 1990
Connie Wood 62 President N/A
Mr. Nadolsky has served as the Chief Executive Officer of the Company
for more than twenty-eight (28) years.
Mr. Hearn is currently employed as a stockbroker by Milkie/Ferguson
Investments, Inc. Mr. Hearn was formerly employed by Harris Securities, Dallas,
Texas.
Mr. Hempel is the Chief Operating Officer of Hanseatrsche
Waren-Gesellschaft MBH & Co, KG, Bremen Germany.
Mr. Murphey is an attorney and member of the law firm Glast, Phillips &
Murray, P.C. in Dallas, Texas. Prior to 2001, Mr. Murphey was a member of the
law firm of Secore & Waller, L.L.P. in Dallas, Texas.
Ms. Wood is the President of the Company and was elected to such office
in May 1999. Prior to May 1999, Ms. Wood was a Vice President of the Company.
The Board of Directors held four (4) meetings during the year ended
November 2001. Directors receive a fee of $500.00 for each meeting. Mr. Nadolsky
received fees of $2,000 in 2001, which amount is included in the "Other
Compensations" column. All of the Directors other than Mr. Hempel personally
attended all of the meetings. Mr. Hempel attended two of the meetings.
MANAGEMENT REMUNERATION AND TRANSACTIONS
Remuneration
The following table shows as of November 30, 2001, all cash
compensation paid to, or accrued and vested for the account of Mr. Nicholas
Nadolsky, Chairman of the Board and Chief Executive Officer and Ms. Connie Wood,
President.
Annual Compensation
-------------------
Name and Annual Other All Other
Principal Position Year Salary Bonus Comp. Compensation
Nicholas Nadolsky, 2001 $340,695.96 -0- $2,000 $44,184.37
Chairman of the Board 2000 $325,651.30 -0- $2,000 $20,823.34
and Chief Executive 1999 $316,571.38 -0- $2,000 $729,086.12
Officer (1)
Connie Wood, 2001 $146,423.04 -0- $13,671.36
President 2000 $134,903.80 -0- $12,839.70
1999 $125,192.27 -0- $10,768.82
- --------------------------------------------------------------------------------
(1) Mr. Nadolsky has been employed as the Chairman of the Board and Chief
Executive Officer since May 1974 pursuant to employment agreements
which have been periodically amended and renewed. The present
employment agreement was renewed effective March 1, 1999 and provides
that if the Company elects to terminate the employment agreement prior
to March 1, 2004, for reasons other than Mr. Nadolsky's inability or
unwillingness to perform his obligations, the Company is obligated to
pay Mr. Nadolsky his salary for eighteen (18) months after the date of
termination.
Benefit Plans
- -------------
The Company maintains a Family Medical Reimbursement Plan for the
benefit of its executive officers and their dependents. The Plan is funded
through a group insurance policy issued by an independent carrier and provides
for reimbursement of 100% of all bona fide medical and dental expenses that are
not covered by other medical insurance plans. During the fiscal year ended
November 30, 2001, Mr. Nadolsky received reimbursements of $12,188.56 and Ms.
Wood received $4,970.02, which amounts are included in the "All Other
Compensation" columns shown in the preceding remuneration table.
In July 1984, the Company adopted a Salary Reduction Plan pursuant to
Section 401(k) of the Internal Revenue Code. The Plan's benefits are available
to all Company employees who are at least 18 years of age and have completed at
least six months of service to the Company as of the beginning of a Plan year.
Plan participants may elect to defer up to 15% of their total compensation as
their contributions, subject to the maximum allowed by the Internal Revenue code
401(k), and the Company matches their contributions up to a maximum of 6% of
their total compensation. A participant's benefits vest to the extent of 20%
after three years of eligible service and become fully vested at the end of
seven years.
During the fiscal year ended November 30, 2001, the Company made
contributions to the Plan for Mr. Nadolsky in the amount of $10,500 and for Ms.
Wood in the amount of $8,701.34, which amounts are included in the "All Other
Compensation" column shown in the preceding remuneration table.
Mr. Nadolsky's employment agreement provides that Mr. Nadolsky may
elect to carry over any unused vacation times to subsequent periods or elect to
be paid for such unused vacation time. In 2001, Mr. Nadolsky elected to be paid
for all prior unused vacation time in the amount of $21,495.81 and the amount of
such payment is included in the "All Other Compensation" column shown in the
preceding remuneration table.
On January 15, 2001, the Board of Directors adopted the Micropac
Industries, Inc. 2001 Employee Stock Option Plan. To date, no options have been
granted under the Plan.
Interest In Certain Transactions
- --------------------------------
On January 15, 2001, the Board of Directors, with Mr. Nadolsky
abstaining, approved an offer for the Company to purchase 500,000 shares of Mr.
Nadolsky's common stock at a cash purchase price of $2.50 per share for a total
price of $1,250,000. Mr. Nadolsky accepted this offer and sold 500,000 of his
shares on February 5, 2001, for $1,250,000.
In January 2001, the Board of Directors approved the entering into an
agreement under the term of which the Company would, under certain
circumstances, agree to purchase Mr. Nadolsky's remaining shares of common
stock.
Since 1980, the Company has leased a 4,800 square-foot building from
Mr. Nadolsky which is used primarily for manufacturing. The lease originally
provided for a monthly rental of $1,900 (an amount based upon a January 1984,
independent appraisal of the building's value) and was to have expired on
January 1, 1987. Since 1987, the Company has extended the term of this lease
from time to time. The last renewal of the lease was on July 1, 1999 for a five
(5) year period at a monthly rental rate of $2,906.20. The rental paid to Mr.
Nadolsky pursuant to this lease was $36,758.48 for the fiscal year ended
November 30, 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent accountants since 1975
and has been responsible for the Company's financial audit for the fiscal year
ended November 30, 2001.
Management anticipates that a representative from Arthur Andersen LLP
will be present at the Annual Meeting to be given the opportunity to make a
statement if he desires to do so. It is also anticipated that such
representative will be available to respond to appropriate questions from
stockholders.
AUDIT FEES
Arthur Andersen LLP has billed the Company $54,000 for professional
services for the audit of the Company's financial statements for 2001 and the
review of the interim financial statements included in the Quarterly Reports.
In addition to the audit fees, Arthur Andersen LLP has billed the
Company $26,615 for tax advisory and tax return preparation services.
REVIEW OF AUDITED FINANACIAL STATEMENTS
The Board of Directors does not have standing audit, nominating, or
compensation committee or committees performing similar functions.
The Board of directors has discussed with management and the
independent auditors the quality and adequacy of the Company's internal
controls. The directors have considered and reviewed with the independent
auditors their audit plans, the scope of the audit, the identification of audit
risks.
The Board of Directors has reviewed the Company's audited financial
statements for the fiscal year ended November 30, 2001, and discussed them with
management and the Company's independent auditors. Management has the
responsibility for the preparation and integrity of the Company's financial
statements and the independent auditors have the responsibility for the
examination of those statements. Based on this and discussions with management
and the independent auditors, the Board of Directors has recommended that the
Company's audited financial statements be included in its Annual Report on Form
10-KSB for the fiscal year ended November 30, 2001 for filing with the
Securities and Exchange Commission. It is not the duty of the Directors to plan
or conduct audits, to determine that Company's financial statements are complete
and accurate and are in accordance with accounting principles generally accepted
in the United States. Those responsibilities belong to management and Company's
independent auditors. In giving its recommendations, the Directors considered
(a) management's representation that such financial statements have been
prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States, and (b) the report of the
Company's independent auditors with respect to such financial statements.
The Board of Directors has received and reviewed written disclosures
and a letter from the independent accountant's required by the Independence
Standards Board Standard No. 1, entitled "Independence Discussions with Audit
Committee," as amended to date, and has discussed with the independent
accountants their independence from management.
COST OF SOLICITATION OF PROXIES
The Company will bear the costs of the solicitation of proxies for the
Meeting, including the cost of preparing, assembling and mailing proxy
materials, the handling and tabulation of proxies received and all charges to
brokerage houses and other institutions, nominees and fiduciaries in forwarding
such materials to beneficial owners. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone or telegraph
by directors, officers and regular employees of the Company.
STOCKHOLDERS PROPOSALS
Any stockholder proposing to have any appropriate matter brought before
the next Annual Meeting of Stockholders scheduled for February 2003 must submit
such proposal in accordance with the proxy rules of the Securities and Exchange
Commission. Such proposal should be sent to Mr. Dave Hendon, P. 0. Box 469017,
Garland, Texas 75046, no later than November 1, 2002.