MICROPAC INDUSTRIES, INC.
905 East Walnut Street
Garland, Texas 75040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 26, 1998
TO THE STOCKHOLDERS OF MICROPAC INDUSTRIES, INC.
Notice is hereby given that the Annual Meeting of Stockholders of Micropac
Industries, Inc. (the "Company"), will be held on Thursday, February 26, 1998,
at 11:00 a.m., Central Standard Time, in the Garland Performing Arts Center, 300
N. Fifth St., Garland, Texas for the following purposes:
1. To elect four directors to serve until the next annual meeting of
stockholders or until their respective successors are elected and
qualified.
2. 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 6, 1998
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 15, 1998
MICROPAC INDUSTRIES, INC.
905 EAST WALNUT STREET
GARLAND, TEXAS 75040
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1998
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 26, 1998, 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 January 23, 1998.
The Company's Annual Report to Stockholders for the fiscal year ended
November 30, 1997 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 four 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
6, 1998 are entitled to notice of and to vote at the meeting. On that date there
were 3,627,151 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 53.8%
Hanseatische Waren-Gesellschaft
MBH & Co., KG
Am Wall 127
28195 Bremen 1 Germany
Nicholas Nadolsky (3) 1,048,836 28.9%
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
All officers and directors 3,010,913 83.0%
as a group (5 Persons)
- -----------------------
(1) Calculated on the basis of the 3,627,151 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.
ELECTION OF DIRECTORS
The Board of Directors has determined that the Board should be limited to
four directors and four 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 four 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 64 Chairman of the Board March 1974
President and Director
H. Kent Hearn 62 Director February 1983
Heinz-Werner Hempel 69 Director February 1997
James K. Murphey 55 Director March 1990
Mr. Nadolsky has served as President and Chief Executive Officer of the
Company for more than twenty-four (24) 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 of Secore & Waller,
L.L.P. in Dallas, Texas. Prior to 1997, Mr. Murphey was a member of the law firm
of Glast, Phillips & Murray, P.C. in Dallas, Texas.
The Board of Directors held four (4) meetings during the year ended
November, 1997. Directors receive a fee of $500.00 for each meeting. Mr.
Nadolsky received fees of $2,000 in 1997, which amount is included in the "Other
Compensations" column.
The Board of Directors does not have standing audit, nominating, or
compensation committee or committees performing similar functions.
MANAGEMENT REMUNERATION AND TRANSACTIONS
Remuneration
- ------------
The following table shows as of November 30, 1997, 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, Vice
President.
Annual Compensation
-------------------
Name and Annual Other All Other
Principal Position Year Salary Bonus Comp. Compensation
================================================================================
Nicholas Nadolsky, 1997 $305,936 -0- $2,000 $13,426
Chairman of the Board 1996 $299,924 -0- $2,000 $ 9,069
and Chief Executive 1995 $290,639 -0- $3,000 $11,410
Officer (1)
Connie Wood, 1997 $109,000 -0- $11,021
Vice President 1996 $102,427 -0- $ 6,901
(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 provides that if the Company elects to terminate the employment
agreement prior to March 1, 1999, 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
- -------------
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, 1997, the Company made
contributions to the Plan for Mr. Nadolsky in the amount of $9,500 and for Ms.
Wood in the amount of $6,540, which amount is included in the "All Other
Compensation" column shown in the preceding remuneration table.
The Employment Agreement provides that the Company is the owner of
insurance policies on Mr. Nadolsky's life in the amount of $1,000,000. Mr.
Nadolsky has the option to require that these policies be transferred to him in
return for the payment of future premium payments. The insurance premiums paid
by the Company on these policies in 1997 were $37,930, which amount is not
included in the "All Other Compensation" column shown in the preceding
remuneration table.
Interest In Certain Transactions
- --------------------------------
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. The Company elected to extend the term of this lease for a
three year period expiring on January 1, 1990, pursuant to a renewal option
contained in the original lease. The renewal option allowed for an increase
based on changes in the consumer price index using 1985 as a base year. The
lease was renewed for a five (5) year period ending December 31, 1994. The
rental paid to Mr. Nadolsky pursuant to this lease was $34,116.40 for the fiscal
year ended November 30, 1997. Effective January 1, 1995, this lease was extended
for a five (5) year period on the same terms and conditions.
Effective June 26, 1989, Mr. Nadolsky and Mr. Heinz-Werner Hempel entered
into a shareholders agreement whereby they agreed that their shares of the
Company's common stock would be jointly voted. This agreement further provides
that if either Mr. Nadolsky or Mr. Hempel receives an offer to purchase his
stock, neither party will sell such stock unless both agree that such sale is in
the best interest of the Company; if they do not agree, neither of them shall
sell such stock. Either party also has the right to give the other party the
option to terminate the agreement by offering to purchase the other's shares.
The shares owned by Mr. Nadolsky and Mr. Hempel constitute 82.7% of the
total outstanding shares of the Company's common stock. Mr. Hempel owns 53.8% of
the Company's common stock.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Company has served as independent accountants since 1975
and has been responsible for the Company's financial statements for the fiscal
year ended November 30, 1997.
Management anticipates that a representative from Arthur Andersen & Co.
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.
ANNUAL REPORT
The Company has filed with the Securities and Exchange Commission an annual
report on Form 1OKSB under the Securities Exchange Act of 1934, for the fiscal
year ended November 30, 1997. Upon written request, the Company will furnish any
person who is a stockholder of the Company as of January 6, 1998 a copy of that
report, including the financial statements and schedules thereto, without
charge. Any such written request should be addressed to Mr. Dave Hendon,
Micropac Industries, Inc., P. O. Box 469017, Garland, Texas 75046. The written
request must include a representation that on January 6, 1998 the person making
the request was a beneficial owner of the Company's Common Stock.
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, 1999, 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, 1998.