MELTRONIX, INC.
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
June 3, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
MeltroniX, Inc., a California corporation (the "Company"), will be held
on June 3, 2002, at 10:00 a.m., local time, at 9577 Chesapeake Drive,
San Diego, California 92123, for the following purposes:
1. To elect directors to serve for the ensuing year or until their
successors are elected and qualified.
2. To ratify the appointment of Haskell & White LLP as independent
auditors of the Company for the fiscal year ended December 31, 2002.
3. To vote upon such other matters as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on May 1, 2002 are
entitled to notice of and to vote at the meeting. The stock transfer
books will not be closed between the record date and the date of the
meeting. A list of shareholders entitled to vote at the Annual Meeting
will be available for inspection at the executive offices of the Company
for a period of ten days before the Annual Meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to
sign and return the enclosed Proxy as promptly as possible in the envelope
enclosed for that purpose.
Any shareholder attending the meeting may vote in person even if he or
she has returned a Proxy.
Sincerely,
Robert M. Czajkowski
President and Chief Executive Officer
April 30, 2002
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE READ THE ATTACHED
PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
TABLE OF CONTENTS
GENERAL ....................................................... 1
Revocability of Proxies ....................................... 1
Solicitation .................................................. 1
Deadline for Receipt of Shareholder Proposals ................. 1
Record Date and Voting ........................................ 1
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING ................ 2
PROPOSAL ONE--Election of Directors ........................... 2
Nominees ...................................................... 2
Business Experience of Directors .............................. 3
Material Proceedings .......................................... 5
Director Compensation ......................................... 5
Certain Relationships and Related Transactions ................ 6
Approvals Required ............................................ 7
REPORT OF THE AUDIT COMMITTEE ................................. 7
Previous Independent Accountants .............................. 8
New Independent Accountants ................................... 9
PROPOSAL TWO--Ratification of Independent Auditors ............ 9
FEES PAID TO INDEPENDENT AUDITORS ............................. 9
Approvals Required ............................................ 10
OTHER MATTERS ................................................. 10
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 10
EXECUTIVE COMPENSATION AND RELATED INFORMATION ................ 13
Summary of Cash and Certain Other Compensation ................ 13
Option Grants in Last Fiscal Year ............................. 16
Aggregated Option Exercises and Fiscal Year-End Values ........ 17
Compensation and Stock Option Committee Interlocks and Insider
Participation ................................................. 17
Employment Contracts and Termination of Employment and Change
in Control Arrangements ....................................... 18
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ................ 19
General Compensation Policy ................................... 19
Factors ....................................................... 19
Base Salary ................................................... 19
Annual Incentive Compensation ................................. 19
Long-Term Incentive Compensation .............................. 20
CEO Compensation .............................................. 20
Compliance with Internal Revenue Code Section 162(m)........... 21
COMPARISON OF SHAREHOLDER RETURN .............................. 21
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
OF 1934 ...................................................... 22
FORM 10-K ..................................................... 23
APPENDIX A - PROXY CARD ....................................... 24
EXHIBIT A - Company's Audit Committee Charter ............... 26
MELTRONIX, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON June 3, 2002
General
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of MeltroniX, Inc., a California corporation ("MeltroniX" or
the "Company"), for use at the Annual Meeting of Shareholders to be held
on June 3, 2002 (the "Annual Meeting"). The Annual Meeting will be held
at 10:00 a.m., local time, at the Company's corporate headquarters at
9577 Chesapeake Drive, San Diego, California 92123.
These proxy solicitation materials were mailed on or about May 13, 2002
to all shareholders entitled to vote at the Annual Meeting.
Revocability of Proxies
Any person giving a Proxy has the power to revoke it at any time before
its exercise. It may be revoked by filing with the Chief Financial
Officer of the Company at the Company's principal executive offices, 9577
Chesapeake Drive, San Diego, California 92123, a notice of revocation or
another signed Proxy with a later date. Any person may also revoke his
or her Proxy by attending the Annual Meeting and voting in person.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement,
the Proxy and any additional soliciting materials furnished to shareholders.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. In addition, the Company may reimburse
such persons for their costs in forwarding the solicitation materials to
such beneficial owners. The original solicitation of proxies by mail will
be supplemented by solicitation by telephone, telegram, or other means by
directors, officers or employees of the Company. No compensation will be
paid to directors, officers or employees for any such services.
Deadline for Receipt of Shareholder Proposals
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the 2003 Annual Meeting of Shareholders must be
received by the Company no later than February 3, 2003, in order that they
may be included in the proxy statement and form of proxy relating to that
meeting.
Record Date and Voting
Shareholders of record on May 1, 2002 are entitled to notice of and to
vote at the Annual Meeting. On April 26, 2002, 29,848,331 shares of the
Company's common stock, no par value (the "Common Stock"), and 8,230,780
shares of the Company's Series A Preferred Stock, no par value (each
Page 1
share of which is convertible into two (2) shares of Common stock) (the
"Series A Preferred Stock") were issued and outstanding. Abstentions and
broker non-votes are counted as present for the purpose of determining
the presence of a quorum for the transaction of business. Each shareholder
is entitled to one vote for each share of Common Stock held and two votes
for each share of Series A Preferred Stock held. In addition, as long as
any shares of Series A Preferred Stock are outstanding, the holders of
the Series A Preferred Stock voting as a separate series with cumulative
voting rights as among themselves, shall be entitled to elect one director.
The holders of the Series A Preferred Stock and the Common Stock, voting
together as a single class, shall be entitled to elect the remaining
directors of the Company. All votes will be tabulated by the inspector of
election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
This Proxy Statement contains forward-looking statements concerning the
Company's anticipated future revenues and earnings, adequacy of future
cash flow and related matters. These forward-looking statements include,
but are not limited to, statements containing the words "expect", "believe",
"will", "may", "should", "project", "estimate", and like expressions, and
the negative thereof. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from
the statements, including competition, as well as those risks described in
the Company's SEC reports, including the Company's Form 10-K filed pursuant
to the Securities and Exchange Act of 1934.
PROPOSAL ONE - ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
comprised of no fewer than two (2) nor greater than seven (7) Directors,
with the exact number to be fixed by the Board. As of April 30, 2002,
the Company's Board of Directors is comprised of seven (7) Directors
including: Robert M. Czajkowski, David J. Strobel, Charles L. Wood
Andrew K. Wrobel, Paul H. Neuharth, Jr., Dr. Abigail A. Barrow, and
Stephen P. Meyer.
At the Annual Meeting, five (5) Directors are to be elected to serve until
the Company's next annual meeting or until their successors are elected and
qualified. The Board of Directors has selected five (5) nominees, four of
whom are current Directors of the Company. The five (5) candidates receiving
the highest number of affirmative votes of the shares entitled to vote at the
Annual Meeting will be elected Directors of the Company.
Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unavailable to
serve. Unless otherwise instructed, the proxy holders will vote the Proxies
received by them FOR the nominees named below. Proxies cannot be voted for a
greater number of persons than the number of nominees named.
Nominees
Set forth below is information regarding the nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they
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were selected as directors or nominees and their ages as of April 30,
2002. All the nominees are currently directors of the Company.
In late September, 2001, Andrew K. Wrobel resigned as the Company's
President and Chief Executive Officer but continued to serve on the
Company's Board of Directors as its Chairman. Robert M. Czajkowski was
appointed by the Board to serve as the Company's President and Chief
Executive Officer upon Mr. Wrobel's resignation from those positions.
Mr. Czajkowski is a nominee for election to the Board of Directors at
the Annual Meeting.
Name Age Position and Offices Held with the Company
Robert M. Czajkowski 64 President, Chief Executive Officer, Director
Stephen P. Meyer 52 Director (2)
Paul H. Neuharth, Jr. 40 Director (1) (2)
David M. Salva 60 Director
David J. Strobel 56 Director
(1) Member of the Compensation and Stock Option Committee
(2) Member of the Audit Committee
Business Experience of Directors
The principal occupations of each current Director of the Company, and
each Director nominee, for at least the last five (5) years are as
follows:
Robert M. Czajkowski was elected to the Board of Directors on July 26,
2001 and was named as the Company's President and Chief Executive Officer
in late September, 2001. Prior to joining the Company, Mr. Czajkowski led
three previous companies through rapid growth in the electronics technology.
His duties included management responsibilities at SAIC, Loral, and Space
Electronics, Inc. Space Electronics, Inc. was Inc.'s Fastest Growth Award
Winner prior to its merger with Maxwell Technologies, Inc. Mr. Czajkowski
is also the CEO of United States Semiconductor Corporation ("US-Semi"),
with whom the Company has a Letter of Intent for infusion of funding and
the deployment of proprietary process technologies owned by US-Semi.
Mr. Czajkowski is a Director nominee at the Annual Meeting.
Stephen P. Meyer was appointed to the Company's Board of Directors on
March 19, 2002. Mr. Meyer received his BA from Dartmouth College and MBA
from Harvard Graduate School of Administration. He has over 25 years of
senior financial and general management experience in starting, developing
and financing technology based companies including Alexander X, Inc.,
where he has served as Chairman and President since 1996. He previously
served with The Titan Corporation (NYSE-TTN) ($1 billion in revenue) as
President, Applied Technology Group, Senior Vice President and Chief
Financial Officer; with REMEC (Nasdaq-REMC) as Senior Vice President and
Chief Financial Officer; and with Science Applications International
Corporation (SAIC) ($6 billion in revenue) as Corporate Vice President and
Page 3
Treasurer, Vice President and Director of Information Technology, Assistant
Vice President and Director of Planning and President of the wholly owned
broker-dealer subsidiary Bull, Inc. In his positions as chief financial
officer he has engineered over $500 million in private and public, debt
and equity transactions (including common stock, preferred stock,
traditional lines of credit, highly leveraged transactions and lease lines)
and as general manager grew an information technology business to over $40
million in annual revenue. Mr. Meyer serves on boards and advisory
committees for various business related organizations. Mr. Meyer is a
Director nominee at the Annual Meeting.
Paul H. Neuharth, Jr. joined the Company's Board of Directors in February,
2001. He received his B.A. from the University of California at Riverside
and his J.D. from the University of San Diego. He is a graduate of the
Institute of International and Comparative Law in Oxford, England.
Mr. Neuharth is a large investor and shareholder in the Company and is the
President of the Neuharth Representation Corporation. He is an officer
and Director of E.T. Search, Inc., a privately held Executive Tax Search
Firm. Mr. Neuharth previously served as the Vice-Chairman for Unit 8 of
the California State University Employees and Chairman of its Bargaining
Committee. Mr. Neuharth has completed the Corporate Governance Institute
Director Professionalism Program through San Diego State University in
conjunction with the Forum for Corporate Directors. Mr. Neuharth is a
member of the Forum for Corporate Directors in San Diego. Mr.
Neuharth is a Director nominee at the Annual Meeting.
David M. Salva, Ph.D. is a Director nominee at the Annual Meeting and has
not previously served with the Company. Dr. Salva is Chairman and President
of United States Semiconductor, founded in 1998 and the developer of RHI-NO.
He has over 30 years of experience in organizational development and
management consulting. His early work included development of management
selection and treatment program design criteria for all VA Medical Centers.
As a clinical/consulting psychologist he has provided significant interventions
to a wide spectrum of industrial and commercial enterprises. Dr. Salva is the
Founder and President of Mid-West Semiconductor Corporation, a technology
incubator company in Missouri, which developed and funded US-Semi. He has been
in the semiconductor industry since 1990 serving as a founder of the Silicon
River Consortium and of the Missouri Advanced Lithography Consortium (MALCO).
He obtained his Ph.D. and M.A. from the University of Kansas. He is a member
of the American Psychological Society, American Psychological Association/
Division of Organizational Psychology, and the American Association for the
Advancement of Science.
David J. Strobel has over 30 years of microelectronics experience, including
technology, business development, strategic partnering and emerging company
growth. Mr. Strobel holds four degrees from the U.S. Air Force Academy,
Cornell, USC and Claremont. Mr. Strobel held positions of increasing
responsibility in these areas at Northrop Electronics, SAIC, Space Electronics,
Inc., and Maxwell Technologies. Mr. Strobel also serves on the Board of
Directors of three other technology firms. Mr. Strobel is a Director nominee
at the Annual Meeting.
Page 4
There are no family relationships among executive officers or directors
of the Company.
During the fiscal year ended December 31, 2001, the Board of Directors held
eleven (11) meetings and acted by unanimous written consent on one (1)
occasion. The Board of Directors has an Audit Committee and a Compensation
and Stock Option Committee. No Director serving for the full fiscal year
attended fewer than 75% of the aggregate number of meetings of the Board of
Directors and meetings of the Committees of the Board on which s/he serves.
The Audit Committee currently consists of three (3) Directors, Mr. Meyer,
Mr. Neuharth, and Dr. Barrow. These directors are independent of the Company.
The Audit Committee is primarily responsible for assisting the Board of
Directors in its general oversight of the Company's financial reporting
process. The Audit Committee is responsible for approving the services
performed by the Company's independent auditors and reviewing their reports
regarding the Company's accounting practices and systems of internal accounting
controls. During the fiscal year ended December 31, 2001, the Audit Committee
held one (1) meeting. The Company's Audit Committee Charter is attached hereto
as Exhibit A.
The Compensation and Stock Option Committee currently consists of two
(2) Directors, Mr. Neuharth and Dr. Barrow. Dr. Barrow will not continue
as a Director after the Annual Meeting, and the Board of Directors will
replace her seat on the Committee with one of the Directors elected at the
Annual Meeting. During the fiscal year ended December 31, 2001, the
Compensation and Stock Option Committee held one (1) meeting. This Committee
reviews and approves the Company's general compensation policies and sets
compensation levels, subject to Board review, for the Company's directors and
executive officers.
Material Proceedings
There are no proceedings involving a director, director nominee, officer or
5% shareholder, or an affiliate of the foregoing, in which proceedings the
person(s) at issue is a party adverse to the Company.
Director Compensation
Fees and Expenses. Directors are reimbursed for expenses incurred in
connection with attending Board and Committee meetings. Each non-employee
Director receives a fee of $1,500 for each meeting attended, $750 for each
Board committee meeting that does not occur on the date of a Board meeting
and a fee of $1,000 for each quarter of Board service as a Director. Directors
who are also employees of the Company receive no additional remuneration for
serving as Directors (other than reimbursement for expenses incurred).
During the fiscal year ended December 31, 2001, the Company paid no fees
to any Director in his or her capacity as a Director.
Page 5
Automatic Option Grants. Pursuant to the Automatic Option Grant Program
of the 1993 Plan as amended May 17, 1999, by the Board and approved by
the Shareholders in October 1999, on which date it became effective, each
individual who first joins the Board as a non-employee director receives
an option grant for 40,000 shares of Common Stock on the date of his or
her initial election or appointment to the Board. Beginning with the July
26, 2000 Annual Meeting, each individual who is to continue to serve as a
non-employee Board member, whether or not he or she is standing for
re-election at that particular meeting, will receive an option grant for
30,000 shares of Common Stock. Each grant under the Automatic Option Grant
Program will have an exercise price per share equal to the fair market value
per share of the Common Stock on the grant date and will have a maximum term
of ten years, subject to earlier termination should the optionee cease to
serve as a Board member. Each option granted under the Automatic Option Grant
Program becomes exercisable in four successive equal annual installments over
the optionee's period of continued Board service, measured from the grant
date. However, the shares subject to each outstanding option under the
Automatic Option Grant Program will accelerate and become exercisable in full
upon (i) an acquisition of the Company by merger or asset sale, (ii) a
hostile takeover of the Company or (iii) the optionee's death or
disability while continuing to serve as a Board member.
On February 6, 2001, Mr. Neuharth was awarded an option grant for 40,000
shares under the Automatic Option Grant Program. On July 10, 2001,
Messrs. Czajkowski, Strobel and Wood were awarded option grants for 40,000
shares under the Automatic Option Grant Program.
Certain Relationships and Related Transactions
As further explained in "Employment Contracts and Termination of Employment
and Change in Control Arrangements" below, the Company's employment agreement
with Andrew K. Wrobel was terminated upon Mr. Wrobel's resignation and the
delivery of a separate Resignation and Release Agreement between the
Company and Mr. Wrobel dated September 21, 2001. However, Mr. Wrobel's
stock options continue to be effective. The Resignation and Release
Agreement provided that the Company would deliver to Mr. Wrobel (i)
cash payments totaling approximately $67,000, (ii) the release of a
promissory note and deed of trust that Mr. Wrobel had previously executed
to a third party, (iii) indemnification agreements regarding creditors of
the Company whose loans Mr. Wrobel had guaranteed, and (iv) 1,250,000
shares of MeltroniX common stock to a company affiliated with Mr. Wrobel
in exchange for Mr. Wrobel's release of any claim for stock options
regarding the Company's stock. In the event that the payments described
above were not timely made, the Company agreed to deliver freely tradable
shares of its common stock as a penalty.
Robert M. Czajkowski is President and Chief Executive Officer of the
Company and serves on its Board of Directors. Richard K. Ausbrook is
Secretary of the Company. Stuart Shanken is Vice President of Marketing
and Business Development. Mr. Czajkowski executed a $100,000 promissory
note to the Company dated as of April 24, 2002 as payment for stock
options issued pursuant to the Company's 1993 Stock Option/Stock
Issuance Plan. Each Mr. Ausbrook and Mr. Shanken executed a similar
note dates as of the same date. Each is an interest free note due
April 30, 2003.
Page 6
The Company has entered into an indemnification agreement with each of
its directors.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. All future transactions between
the Company and its officers, directors, principal shareholders and
affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors
on the Board of Directors, and will be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties.
Approvals Required
Each share of Common Stock is entitled to one vote, and each share of
Series A Preferred Stock is entitled to two votes, on each Director nominee.
The affirmative vote of a majority of the total number of eligible votes is
required for approval of each Director nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR'
THE ELECTION OF EACH OF THE NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY
UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED
AND QUALIFIED. ABSTENTIONS HAVE THE EFFECT OF VOTES AGAINST THIS PROPOSAL
ONE. IF YOUR SHARES ARE HELD IN STREET NAME, YOUR BROKER MAY VOTE FAVORABLY
FOR THIS PROPOSAL ONE, UNLESS YOU INSTRUCT YOUR BROKER OTHERWISE.
REPORT OF THE AUDIT COMMITTEE
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future
filings with the SEC, or subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), except to
the extent that the Company specifically incorporates it by reference
into a document filed under the Securities Act of 1933, as amended, or
the Exchange Act.
The Audit Committee is primarily responsible for assisting the Board of
Directors in its general oversight of the Company's financial reporting,
internal control and audit functions. Management is responsible for the
preparation, presentation and integrity of the Company's financial
statements, accounting and financial reporting principles, internal
controls and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. The Company's independent
auditor is responsible for performing an independent audit of the annual
consolidated financial statements in accordance with auditing standards
generally accepted in the United States.
Among other matters, the Audit Committee monitors the activities and
performance of the Company's independent auditor, including the audit
scope, audit fees, auditor independence matters and the extent to which
the independent auditor may be retained to perform non-audit services.
The Audit Committee and the Board of Directors have ultimate authority
and responsibility to select, evaluate and, when appropriate, replace
the Company's independent auditor. The Audit Committee also reviews the
results of the audit work with regard to the adequacy and appropriateness
of the Company's financial, accounting and internal controls. In addition,
the Audit Committee generally oversees the Company's internal compliance
programs.
Page 7
The Audit Committee has reviewed and discussed with the Company's management
and Haskell & White LLP the audited consolidated financial statements of
the Company contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2001. The Audit Committee has also discussed with
Haskell & White LLP the matters required to be discussed pursuant to SAS
No. 61 (Codification of Statements on Auditing Standards, AU Section 380),
which includes, among other items, matters related to the conduct of the
audit of the Company's consolidated financial statements.
The Audit Committee has received and reviewed the written disclosures and
the letter from Haskell & White LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), and
has discussed with Haskell & White LLP its independence from the Company.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001 for filing with the SEC.
Audit Committee Members:
Paul H. Neuharth, Jr.,
Stephen P. Meyer
Previous Independent Accountants
On February 6, 2001, the independent accountants for the Company,
BDO Seidman, LLP ("BDO"), resigned. BDO was responsible for performing
an independent audit of the annual consolidated financial statements in
accordance with auditing standards generally accepted in the United
States for fiscal years 1996 through and including 1999.
The reports of BDO on the financial statements for the past two fiscal
years contain no adverse opinion or disclaimer of opinion, and such
reports were not qualified or modified as to uncertainty, audit scope or
accounting principles, with the exception of the auditors' report covering
the Company's financial statements included in the Company's Form 10-K for
the year ended December 31, 1998, which contained a modification regarding
the registrant's ability to continue as a going concern.
The Audit Committee participated in and approved the new independent
accountants, Haskell & White LLP.
In connection with the audits for the two most recent fiscal years and
through February 6, 2001, there have been no disagreements with BDO on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure of the nature presented in
Item 304(a)1(iv) of Securities and Exchange Commission Regulation S-K,
which disagreements if not resolved to the satisfaction of BDO would
have caused them to make reference thereto in their report on the
financial statements for such years.
During the two most recent fiscal years and through February 6, 2001,
there have been no reportable events as defined in Item 304(a)1(v)
Regulation S-K of Securities and Exchange Commission.
Page 8
The Registrant has requested that BDO furnish it with a letter addressed
to the SEC stating whether or not it agrees with the above statements.
A copy of such letter will be promptly filed with the Securities and
Exchange Commission upon the Company's receipt.
New independent accountants.
The Company engaged Haskell & White LLP ("Haskell & White") as its new
independent accountants as of February 6, 2001. Prior to their retention
on February 6, 2001, the Company did not consult with Haskell & White on
any matters. The Board of Directors appointed BDO as independent auditors
of the Company for the fiscal year ended December 31, 2000. Upon BDO's
resignation on February 6, 2001, the Board exercised its authority to
appoint Haskell & White as independent auditors of the Company. As such,
Haskell & White was responsible for performing an independent audit of
the annual consolidated financial statements in accordance with auditing
standards generally accepted in the United States for the fiscal year
ended December 31, 2001.
PROPOSAL TWO - RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Haskell & White as
independent certified public accountants to audit the financial statements
of the Company for the fiscal year ended December 31, 2002,
and is asking the shareholders to ratify this appointment.
In the event the shareholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors in its discretion may direct the
appointment of a different independent accounting firm at any time during
the year if the Board of Directors believes that such a change would be in
the best interests of the Company and its shareholders. The affirmative vote
of a majority of the Company's shareholders represented and voting at the
Annual Meeting is required to ratify the selection of Haskell & White.
A representative of Haskell & White is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate
questions. No representative of BDO is expected to be present at the
Annual Meeting.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of Haskell & White to serve as the Company's
independent accountants for the fiscal year ended December 31, 2002.
FEES PAID TO INDEPENDENT AUDITORS
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by Haskell & White LLP for the fiscal
year ended December 31, 2002.
Page 9
Fees for Audit of Fiscal 2000 Financial Statement and
for Reviews of 2001 Quarterly Financial Statements $85,000.00
Fees for Financial Information Systems Design
and Implementation $0
Fees for All Other Non-Audit Services (1) $22,500.00
TOTAL $107,500.00
(1) Comprised of $22,500 for preparation of the Company's 2000 tax
returns.
In connection with the recently revised standards for independence of the
Company's independent public accountants promulgated by the Securities and
Exchange Commission, the Audit Committee has considered whether the
provision of "Other Non-Audit Services" is compatible with maintaining the
independence of Haskell & White.
Approvals Required
Each share of Common Stock is entitled to one vote, and each share of
Series A Preferred Stock is entitled to two votes, on the ratification
of the Company's independent auditors. The affirmative vote of a
majority of the total number of eligible votes is required for
ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' THE
RATIFICATION OF THE COMPANY'S INDEPENDENT AUDITORS. ABSTENTIONS HAVE
THE EFFECT OF VOTES AGAINST THIS PROPOSAL TWO. IF YOUR SHARES ARE HELD
IN STREET NAME, YOUR BROKER MAY VOTE FAVORABLY FOR THIS PROPOSAL TWO,
UNLESS YOU INSTRUCT YOUR BROKER OTHERWISE.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come
before the annual meeting, it is the intention of the persons named in
the enclosed form of Proxy to vote the shares they represent as the Board
of Directors may recommend. Discretionary authority with respect to such
other matters is granted by the execution of the enclosed Proxy.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company regarding
the ownership of the Company's Common Stock as of April 26, 2002 for (i)
each Director and nominee who owns Common Stock, (ii) all persons or
entities who were known by the Company to be beneficial owners of five
percent (5%) or more of the Company's Common Stock, (iii) the Chief
Executive Officer and the other executive officers whose compensation for
2001 were each in excess of $100,000 and (iv) all executive officers and
Directors of the Company as a group.
Page 10
Percent of
Number of Total Shares
Shares Outstanding
Beneficially Beneficially
Name and Address of Beneficial Owner Owned(1) Owned
- ------------------------------------ ------------ ------------
Entities that may be deemed to be
affiliated with Transpac Capital Pte.
Ltd.(2)..................... 9,630,302 20.3%
6 Shenton Way
#2D-09 DBS Building
Tower Two
Singapore 068809
Development Bank of Singapore
(3)......................... 2,513,993 5.3%
6 Sheraton Way #20-09
DBS Building Tower Two
Singapore 06880
Motorola, Inc.(4)........... 1,739,864 3.7%
1303 East Algonquin Road
Schaumburg, Illinois 60196
Texas Instruments Singapore,
Ltd.(5)..................... 2,112,052 4.5%
Abigail A. Barrow(6)........ 70,000 0.1%
Randal D. Siville(7)........ 42,000 0.1%
James Waring(8)............. 2,002,846 4.2%
Andrew K. Wrobel(9)......... 1,242,903 2.6%
Robert M. Czajkowski)....... 40,000 0.1%
David J. Strobel(6)......... 40,000 0.1%
Charles L. Wood(6).......... 40,000 0.1%
Stephen P. Meyer(6).......... 100,000 0.2%
All current directors and
executive officers as a group
(8 persons).................. 5,136,987 10.9%
Page 11
(1) This table is based upon information supplied by officers, directors
and principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission ("Commission"). Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Percentage beneficially owned is based on a total of
29,848,331 shares of Common Stock issued and outstanding as of April 26,
2002. Shares of Common Stock subject to options or warrants currently
exercisable or convertible, or exercisable or convertible within 60 days
of April 26, 2002, are deemed outstanding for computing the percentage of
the person holding such options or warrants but are not outstanding for
computing the percentage of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property
laws, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned.
(2) Transpac Capital Pte. Ltd. ("Transpac Capital"), a Singapore private
limited company, does not have a direct ownership interest in the Common
Stock of MeltroniX. Transpac Nominees Pte. Ltd. ("Transpac Nominees"), a
Singapore private limited company and wholly-owned subsidiary of Transpac
Capital, holds securities of MeltroniX in a nominee capacity for the benefit
of several entities associated with Transpac Capital, including Transpac
Industrial Holdings Limited ("TIH"), a Singapore public listed company;
Regional Investment Company Limited ("Regional"), a Singapore public
limited company; Transpac Equity Fund ("TEF"), a British Virgin Islands
trust; Transpac Venture Partnership II ("TVP"), a collective investment
scheme, Transpac Managers Fund III Ltd. ("TMF"), a British Virgin Islands
international business company, and NatSteel Equity III Pte. Ltd.
("NATSTEEL"), a Singapore private limited company. In its capacity as the
investment adviser to each of these entities and the sole stockholder of
Transpac Nominees, Transpac Capital has the power to control the voting
and disposition of the shares of Common Stock and Series A Preferred Stock
and warrants for Common Stock held by Transpac Nominees described below.
Each of the foregoing entities other than Transpac Nominees may be referred
to herein as a "Transpac Entity." Each share of Series A Preferred Stock is
currently convertible into two shares of Common Stock.
Transpac Nominees holds 1,599,632 shares of Series A Preferred Stock,
convertible into 3,483,865 shares of Common Stock and warrants for 198,500
shares of Common Stock for the benefit of TIH. Transpac Nominees holds
440,843 shares of Series A Preferred Stock, convertible into 960,119 shares
of Common Stock and warrants for 54,500 shares of Common Stock for the
benefit of Regional. Transpac Nominees holds 944,664 shares of Series A
Preferred Stock, convertible into 2,057,400 shares of Common Stock and
warrants for 117,151 shares of Common Stock for the benefit of TEF. Transpac
Nominees holds 667,563 shares of Series A Preferred Stock, convertible
into 1,453,897 shares of Common Stock and warrants for 82,787 shares of
Common Stock for the benefit of TVP. Transpac Nominees holds 12,595 shares
of Series A Preferred Stock, convertible into 27,430 shares of Common Stock
and warrants for 1,562 shares of Common Stock for the benefit of TMF.
Transpac Nominees holds 366,529 shares of Series A Preferred Stock,
convertible into 798,270 shares of Common Stock and warrants for 45,500
shares of Common Stock for the benefit of NatSteel. Transpac Nominees in
total hold 349,321 shares of Common Stock. Each of TIH, Regional, TEF,
TVP, TMF and NatSteel disclaims beneficial ownership of any shares held
for the benefit of any other Transpac entity.
Page 12
(3) Includes 1,154,311 shares of Series A Preferred Stock which are
convertible into 2,513,993 shares of Common Stock within 60 days of
April 26, 2002.
(4) Includes 869,932 shares of Series A Preferred Stock which are
convertible into 1,739,864 shares of Common Stock within 60 days of
April 26, 2002.
(5) Includes 1,056,026 shares of Series A Preferred Stock which are
convertible into 2,112,052 shares of Common Stock within 60 days of
April 26, 2002.
(6) All shares in the form of stock options exercisable within 60 days
of April 26, 2002.
(7) Shares purchased.
(8) Includes 553,000 shares of Common Stock, 562,423 shares of Series
A Preferred Stock held by the Waring Family Trust, which are convertible
within 60 days of April 26, 2002, into 1,124,846 shares of Common Stock
of the Company. Also includes 37,500 shares of Series A Preferred Stock
held by two individual trusts for the benefit of Mr. Waring's two minor
children, which are convertible within 60 days of April 26, 2002, into
75,000 shares of Common Stock of the Company. Mr. Waring also holds a
warrant to acquire 250,000 shares of Common stock which is exercisable
within 60 days of April 26, 2002.
(9) Includes 1,163,545 shares of Common Stock and 39,679 shares of
Series A Preferred Stock which is convertible within 60 days of April
26, 2002, into 79,358 shares of Common Stock of the Company.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning
compensation earned, for services rendered in all capacities to the
Company and its subsidiaries, for the fiscal years ended December
31, 2001, 2000 and 1999, by all persons who served as the Company's
Chief Executive Officer during 2001, and each of the other four (4) most
highly compensated executive officers of the Company who earned more
than $100,000 in compensation for the fiscal year ended December 31,
2001 (hereafter referred to as "Named Executive Officers").
Page 13
Long Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
---------------------------- -------------------------------- -------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Award(s) Options Payouts Compensation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)(2)
- ------------------ ---- ------- ------- ------------ ---------- ---------- ------- --------------
Robert M. Czajkowski(3).. 2001 31,385 -- -- -- 40,000 -- --
President and 2000 -- -- -- -- -- -- --
Chief Executive Officer 1999 -- -- -- -- -- -- --
Randal D. Siville(4).... 2001 96,983 -- -- -- -- -- --
Vice President of Finance
and 2000 68,786 -- -- -- -- --
Chief Financial Officer 1999 -- -- -- -- -- -- --
Andrew K. Wrobel(5)..... 2001 177,619 -- -- -- -- -- --
Chairman, President and 2000 260,000 74,000 -- -- -- -- 1,000
Chief Executive Officer 1999 242,546 141,786 -- -- 1,032,000 -- 6,344
Denis J. Trafecanty(6). 2001 7,912 -- -- -- -- -- --
Senior Vice President 2000 175,280 -- -- -- -- -- --
and 1999 162,462 10,000 32,050 -- 516,000 -- 10,219
Chief Financial Officer
Timothy R. Sullivan(8).. 2001 -- -- -- -- -- --
Vice President and 2000 48,943 -- -- -- -- -- --
Controller 1999 121,233 17,562 -- -- 258,000 -- 3,677
Page 14
(1) Other Annual Compensation for all other employees listed in the table is
less than $50,000 and 10% of the total of annual salary and bonus for such
individual.
(2) All other compensation is comprised of (i) matching contributions made by
the Company on behalf of the Named Executive Officer to its Section 401(k)
Plan and (ii) annual premiums paid for group term life insurance policies.
Under such policies, the Named Executive Officer may designate the
beneficiary of the insurance proceeds payable upon death. The amounts of
the Company's matching contribution to its Section 401(k) Plan and the
life insurance premiums are set forth below:
Matching 401(k) Life Insurance
Contribution ($) Premium ($)
---------------- --------------
Robert M. Czajkowski........ 2001 -- --
2000 -- --
1999 -- --
Randal D. Siville.......... 2001 -- --
2000 -- --
1999 -- --
Andrew K. Wrobel.......... 2001 -- --
2000 -- 1,000
1999 -- 6,344
Denis J. Trafecanty.......... 2001 -- --
2000 -- --
1999 4,869 5,350
Timothy R. Sullivan.......... 2001 -- --
2000 -- --
1999 3,677 --
(3) Mr. Czajkowski joined the Board of Directors effective as of July 27,
2001. He was appointed President and Chief Executive Officer of the
Company in late September, 2001 after Mr. Wrobel resigned from those
offices.
(4) Mr. Siville joined the Company in April, 2000 as Vice President of
Finance and Chief Financial Officer.
(5) Mr. Wrobel was appointed as to the Board of Directors in October
1997. Mr. Wrobel was appointed President and Chief Executive Officer of
the Company in October 1997, and resigned from those offices in late
September, 2001.
Page 15
(6) Mr. Trafecanty was appointed as Chief Financial Officer of the Company
in August 1996 and ceased to be an employee of the Company January 11, 2000.
The Company provided a car allowance to Mr. Trafecanty of $6,000 for each
of 1999 and 1998, living expenses totaling $7,199 and $10,926 for 1999 and
1998 respectively, and reimbursed Mr. Trafecanty for other benefits, which
totaled $19,232 and $18,637 for 1999 and 1998 respectively. Payments made
to Mr. Trafecanty in 2001 constituted severance pay under a separation
agreement between the Company and Mr. Trafecanty.
(7) Mr. Sullivan was appointed as Vice President and Controller of the Company
in March 1997 and ceased to be an employee of the Company March 13, 2000.
Option Grants in Last Fiscal Year
The following table contains information concerning stock option grants made
to the Company's Chief Executive Officer and each of the other Named Executive
Officers during the fiscal year ended December 31, 2001. No stock appreciation
rights were granted or exercised during such fiscal year.
Individual Grants
--------------------------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration ----------------------------
Name Granted (#) Fiscal Year ($/SH) Date 5% ($) 10% ($)
----------- ----------- ------------ ----------- ---------- ------- --------
Robert M. Czajkowski.... 40,000 50% $0.18 1/10/2012 $4,528 $11,475
Randal D. Siville........ 0 0 0 0 0 0
Andrew K. Wrobel....... 0 0 0 0 0 0
Denis J. Trafecanty..... 0 0 0 0 0 0
Timothy R. Sullivan..... 0 0 0 0 0 0
Page 16
Aggregated Option Exercises and Fiscal Year-End Values
No options were exercised by the Company's Chief Executive Officer or
the other Named Executive Officers during the fiscal year ended December
31, 2001. The following table sets forth information concerning option
holdings for such fiscal year with respect to the Company's Chief Executive
Officer and each of the other Named Executive Officers. The fair market
value of the Common Stock at fiscal year-end was $0.10 per share, based on
the average of the highest bid and lowest ask price as quoted on the OTC
Bulletin Board. No stock appreciation rights were exercised or outstanding
during such fiscal year.
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End (#) Fiscal Year-End ($)
---------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Robert M. Czajkowski... 0 40,000 0 0
Randal D. Siville...... 0 0 0 0
Andrew K. Wrobel....... 0 0 0 0
Denis J. Trafecanty.... 0 0 0 0
Timothy R. Sullivan.... 0 0 0 0
Compensation and Stock Option Committee Interlocks and Insider Participation
The individuals who served on the Compensation and Stock Option Committee
of the Company's Board of Directors during the fiscal year ended December
31, 2001, were Mr. Neuharth and Dr. Barrow.
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that
has or has had one or more executive officers serving as a member of the
Company's Board of Directors or Compensation and Stock Option Committee.
Page 17
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Employment Agreement with Andrew K. Wrobel. Effective October 6, 1997,
the Company entered into a one (1) year employment agreement ("Agreement")
with Andrew K. Wrobel. Under the terms of the Employment Agreement, which
was in effect through September 21, 2001, Mr. Wrobel was entitled to a
base salary of not less than $220,000 per year, plus a minimum increase
of six (6) percent of his base salary on each anniversary of the agreement.
Mr. Wrobel was also entitled to receive a bonus equal to sixty percent
(60%) of his then existing base salary, payable quarterly pro rata upon
the Company's achievement of the performance criteria set forth in the
business plan to be prepared by Mr. Wrobel for the Company and approved
by the Board. The October 6, 1997 Employment Agreement also guaranteed
Mr. Wrobel stock options for 500,000 shares of the Company's Common
Stock at the fair market value on the date of the Agreement ($0.43 per
share), which options were to become exercisable on an accelerated basis
in the event of an acquisition of the Company by merger or asset sale,
unless the options are assumed by the acquiring entity. In the fiscal
year ended December 31, 2001, Mr. Wrobel participated in all of the
Company's employee benefit plans.
The October 6, 1997 Employment Agreement was terminated upon Mr. Wrobel's
resignation and the delivery of a separate Resignation and Release
Agreement between the Company and Mr. Wrobel dated September 21, 2001.
The Resignation and Release Agreement provided that the Company would
deliver to Mr. Wrobel (i) cash payments totaling approximately $67,000,
(ii) the release of a promissory note and deed of trust that Mr. Wrobel
had previously executed to a third party, (iii) indemnification agreements
regarding creditors of the Company whose loans Mr. Wrobel had guaranteed,
and (iv) 1,250,000 shares of MeltroniX common stock to a company affiliated
with Mr. Wrobel in exchange for Mr. Wrobel's release of any claim for stock
options regarding the Company's stock. In the event that the payments
described above were not timely made, the Company agreed to deliver freely
tradable shares of its common stock as a penalty.
Change in Control Arrangements. The Compensation and Stock Option Committee
of the Board of Directors has the authority as Plan Administrator of the
1993 Plan to provide for the accelerated vesting of the shares of Common
Stock subject to outstanding options held by the Chief Executive Officer
and the Company's other executive officers under that plan in the event
their employment were to be terminated (whether involuntarily or through
a forced resignation) following an acquisition of the Company by merger
or asset sale. In connection with a hostile change in control of the
Company effected through a successful tender offer for more than 50% of
the Company's outstanding voting stock or through a proxy contest for the
election of Board members, the Plan Administrator has the discretionary
authority to provide for automatic acceleration of outstanding options
under the Discretionary Option Grant Program of the 1993 Plan and the
automatic vesting of outstanding shares under the Stock Issuance Program.
Page 18
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
For the 2001 fiscal year, the Compensation and Stock Option Committee of
the Board of Directors was responsible for establishing the base salary
and incentive cash bonus programs for the Company's executive officers
and other key employees and administering certain other compensation
programs for such individuals, subject in each instance to review and
final approval by the full Board. The Compensation and Stock Option
Committee also had the exclusive responsibility during such year for
the administration of the Company's 1993 Plan under which grants may be
made to executive officers and other key employees.
General Compensation Policy. The fundamental policy of the Compensation
and Stock Option Committee is to provide the Company's executive officers
and other key employees with compensation opportunities based upon their
contribution to the financial success of the Company and their personal
performance. It is the Compensation and Stock Option Committee's objective
to have a substantial portion of each officer's compensation contingent
upon the Company's performance as well as upon his own level of performance.
Accordingly, the compensation package for each executive officer and key
employee is comprised of three elements: (i) base salary which reflects
individual performance, (ii) annual variable performance awards payable
in cash and tied to the Company's achievement of financial performance
targets, and (iii) long-term stock-based incentive awards which strengthen
the mutuality of interests between the executive officers and the Company's
shareholders. As an executive officer's level of responsibility increases,
it is the intent of the Compensation and Stock Option Committee to have a
greater portion of his total compensation be dependent upon Company
performance and stock price appreciation rather than base salary.
Factors. For Andrew K. Wrobel, the Compensation and Stock Option Committee
followed the terms of his employment agreement with the Company in
determining his compensation for 2001. That agreement specified the
compensation, subject to Board adjustment, that was paid to Mr. Wrobel
during 2001. Several of the more important factors which the Compensation
and Stock Option Committee considered in establishing the components of
the compensation packages for executive officers who do not have an
employment agreement with the Company for the 2001 fiscal year are
summarized below. Additional factors were also taken into account and the
compensation and Stock Option Committee may, in its discretion, apply
entirely different factors, particularly different measures of financial
performance, in setting executive compensation for future fiscal years.
Base Salary. The base salary for each officer who does not have an
employment agreement with the Company is determined on the basis of the
following factors: experience, personal performance and internal
comparability considerations. The weight given to each of these factors
differs from individual to individual, as the Compensation and Stock
Option Committee deems appropriate.
Annual Incentive Compensation. Annual bonuses are earned by each executive
officer primarily on the basis of the Company's achievement of certain
corporate financial performance targets established for each fiscal year
combined with the individual performance of such individual.
Page 19
Long-Term Incentive Compensation. Long-term incentives are provided
through stock option grants. The grants are designed to align the interests
of each executive officer with those of the shareholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant
allows the individual to acquire shares of the Common Stock at a fixed
price per share (the market price on the grant date) over a specified
period of time (up to ten years). Each option generally becomes exercisable
in installments over a two and one-half (2 1/2) or three (3)-year period,
contingent upon the executive officer's continued employment with the
Company or a subsidiary. Accordingly, the option will provide a return
to the executive officer only if the executive officer remains employed
by the Company during the vesting period, and then only if the market
price of the underlying shares appreciates over the option term.
The number of shares subject to each option grant is set at a level
intended to create a meaningful opportunity for stock ownership based on
the officer's current position with the Company, the base salary
associated with that position, the size of comparable awards made to
individuals in similar positions within the industry, the individual's
potential for increased responsibility and promotion over the option
term, and the individual's personal performance in recent periods. The
Compensation and Stock Option Committee also takes into account the
number of vested and unvested options held by the executive officer
in order to maintain an appropriate level of equity incentive for that
individual. However, the Compensation and Stock Option Committee does
not adhere to any specific guidelines as to the relative option holdings
of the Company's executive officers. In 2001, Mr. Czajkowski received
option grants for 40,000 shares of the Company's Common Stock for his
participation on the Board of Directors. Such options are described in
the Summary Compensation Table, in the column entitled "Long Term
Compensation Awards--Securities Underlying Options" and in the "Option
Grants in Last Fiscal Year" table.
CEO Compensation. In setting the compensation payable to the Company's
Chief Executive Officer during fiscal year 2001, Mr. Wrobel, the
Compensation and Stock Option Committee followed the terms of the employment
agreement that was previously negotiated between Mr. Wrobel and the Company
and subsequently executed. In accordance with the terms of his employment
agreement, Mr. Wrobel received a base salary of $260,000 in 2001.
For fiscal year 2001, Mr. Wrobel was entitled to a bonus equal to sixty
percent (60%) of his then-existing base salary, payable quarterly pro-rata
upon the Company's achievement of the performance criteria set forth in the
business plan prepared by Mr. Wrobel for the Company and approved by the
Board. The business plan approved by the Board required the Company to
achieve a defined cumulative net income for fiscal year 2001 measured as of
each quarterly period for Mr. Wrobel to be entitled to a bonus in that
quarter equal to fifteen percent (15%) of his then-existing base salary.
Based on these factors and such other factors as the Board of Directors
deemed appropriate, the Board of Directors awarded Mr. Wrobel no bonus in
2001. The 2000 base salary in Mr. Wrobel's employment agreement was based
on such factors as the Board of Directors determined to be appropriate at
Page 20
the time the employment agreement was negotiated in 1997. On October 6,
1997, Mr. Wrobel was granted an option to purchase 500,000 shares of
Common Stock (see "Employment Contracts and Termination of Employment and
Change in Control Arrangements-Employment Agreement with Andrew K. Wrobel")
to make a portion of his total compensation contingent on increased value
for the Company's Shareholders; the option will have no value unless there
is appreciation in the value of the Company's Common Stock over the option
term. On November 4, 1997, Mr. Wrobel received an option to purchase 100,000
shares of Common Stock. On October 14, 1999, Mr. Wrobel received an option
to purchase 1,032,000 shares of Common Stock. While Mr. Wrobel's right to
salary and bonuses was terminated upon his resignation and delivery of the
Resignation and Release Agreement between the Company and Mr. Wrobel dated
September 21, 2001,
Compliance with Internal Revenue Code Section 162(m). As a result of
Section 162(m) of the Internal Revenue Code, the Company will not be
allowed a federal income tax deduction for compensation paid to certain
executive officers, to the extent that compensation exceeds $1 million
per officer in any fiscal year. This limitation applies to all compensation
paid to the covered executive officers, which is not considered to be
performance-based. Compensation that does qualify as performance-based
compensation will not have to be taken into account for purposes of this
limitation. Non-performance based compensation paid to the Company's
executive officers for the 2001 fiscal year did not exceed the $1 million
limit per officer, and the Compensation and Stock Option Committee does
not anticipate that the non-performance based cash compensation to be paid
to the Company's executive officers for fiscal 2002 will exceed that limit.
In addition, option grants and other awards made under the 1993 Plan prior
to January 1, 2002 were structured so that any compensation deemed paid to
an executive officer in connection with those awards will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. However, any compensation deemed paid by the Company in
connection with transactions relating to options or other awards granted
during the 2001 fiscal year will have to be taken into account for purposes
of the $1 million limitation. Because it is unlikely that the compensation
payable to any of the Company's executive officers in the foreseeable future
will approach the $1 million limit, the Compensation and Stock Option
Committee has decided at this time not to take any action to limit or
restructure the elements of compensation payable to the Company's executive
officers. The Compensation and Stock Option Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
Dated as of April 30, 2002
Dr. Abigail A. Barrow
Paul H. Neuharth, Jr.,
COMPARISON OF SHAREHOLDER RETURN
The following graph compares the annual cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on January 1, 1997
and plotted at the end of each fiscal year thereafter, in each of (i) the
Company's Common Stock, (ii) the Nasdaq Stock Market, and (iii) the Media
General Financial Services SIC Code Index 3674--Semiconductors, Related
Devices-which consists of other companies in the semiconductor industry.
Page 21
It should be noted that the Company has not paid any dividends on the
Common Stock, and no dividends are included in the representation of the
Company's performance. The stock price performance on the graph below is
not necessarily indicative of future price performance.
[GRAPH APPEARS HERE]
SEC Code Index
Measurement Period (Semiconductors,
(Fiscal Year Covered) MeltroniX Related Devices) Broad Market
- --------------------- ------------ ----------------- ---------------
Jan. 1, 1997 $100.00 $100.00 $100.00
Dec. 31, 1997 $ 58.00 $104.21 $122.32
Dec. 31, 1998 $ 18.00 $156.89 $172.52
Dec. 31, 1999 $144.00 $337.57 $304.29
Dec. 31, 2000 $ 25.00 $250.83 $191.25
Dec. 31, 2001 $ 10.00 $203.56 $152.46
(1) The graph covers the period from January 1, 1996 through the fiscal year
ended December 31, 2001.
(2) The graph assumes that $100 was invested on January 1, 1996 in the
Company's Common Stock and in each index (Peer Group, Broad Market)
and that all dividends were reinvested. No cash dividends have been
declared on the Company's Common Stock.
(3) Shareholder returns over the indicated period should not be considered
indicative of future shareholder returns.
(4) The performance graph and all of the material in the Compensation and
Stock Option Committee Report is not deemed filed with the Securities and
Exchange Commission, and is not incorporated by reference to any filing of
the Company under the Securities Act of 1933, as amended or the Securities
Exchange Act of 1934, whether made before or after the date of this Proxy
Statement and irrespective of any general incorporation language in any
such filing.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than
ten percent of the Company's Common Stock, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Page 22
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 4's or
5's were required for such persons, the Company believes that all filing
requirements applicable to its officers, directors, and greater than ten
percent beneficial owners during the period from January 1, 2001 to
December 31, 2001, were complied with.
FORM 10-K
The Company files an Annual Report on Form 10-K with the SEC. A copy of
the Annual Report on Form 10-K (excluding exhibits) including financial
statements and schedules has been included with the mailing of this proxy
to all shareholders. Shareholders may obtain additional copies of these
reports, including financial statements and financial statement schedules,
without charge, by writing to Randal D. Siville, Vice President of Finance
and Chief Financial Officer of the Company, at the Company's executive
offices at 9577 Chesapeake Drive, San Diego, California 92123.
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come
before the Annual Meeting, it is the intention of the persons named in
the enclosed form of Proxy to vote the shares they represent as the
Board of Directors may recommend. Discretionary authority with respect
to such other matters is granted by the execution of the enclosed Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT M. CZAJKOWSKI
President and Chief Executive Officer
April 30, 2002
San Diego, California
Page 23
APPENDIX A
MELTRONIX, INC.
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS - June 3, 2002
FOR ANNUAL MEETING OF THE SHAREHOLDERS OF MELTRONIX, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT M. CZAJKOWSKI and RANDAL
D. SIVILLE, and each of them, with full power of substitution, as proxies
to vote the shares which the undersigned is entitled to vote at the Annual
Meeting of the Shareholders to be held at 9577 Chesapeake Drive, San Diego,
California 92123-1304 on June 3, 2002, at 10:00 a.m. (the "Annual Meeting").
The shares represented by this Proxy shall be voted in the manner set forth
on the reverse side.
(Continued and to be signed on the reverse side.)
Page 24
This proxy when properly signed will be voted in the manner directed herein
by the undersigned shareholder.
IF NO DIRECTION IS PROVIDED, THIS PROXY WILL BE VOTED
AS RECOMMENDED BY THE BOARD OF DIRECTORS.
Proposal 1: election of directors: FOR WITHHOLD vote
election of all nominees from all nominees
Robert M. Czajkowski ____ ____
Stephen P. Meyer ____ ____
Paul H. Neuharth, Jr. ____ ____
David M. Salva, Ph.D. ____ ____
David J. Strobel ____ ____
Except nominee(s) below, from whom vote is withheld:
____________________________________________
Proposal 2: To ratify the appointment FOR AGAINST ABSTAIN
of Haskell & White LLP as independent ____ ____ ____
accountants of the Company for the
fiscal year ended December 31, 2002.
The Board of Directors recommends a vote FOR the proposals. This Proxy,
when properly executed, will be voted as specified above. This Proxy
will be voted FOR the proposals if no specification is made. This Proxy
will also be voted at the discretion of the Proxy holder on such matters
other than the four specific proposals as may come before the meeting.
IMPORTANT-PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
an authorized person.
Signature_________________________________________ Dated: ________, 2002
Signature if held jointly_________________________ Dated: ________, 2002
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