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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AML COMMUNICATIONS
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(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF AML COMMUNICATIONS]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 25, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of AML Communications, Inc., which will be held on Tuesday, August 25, 1998,
at 10:00 a.m. at the Courtyard by Marriott Hotel, 4994 Verdugo Way, Camarillo,
California 93012.
At the Annual Meeting, stockholders will be asked to consider the following
proposals:
1. To elect one Class III director as described in the accompanying Proxy
Statement to hold office until the 2001 Annual Meeting of Stockholders and
until his successor is duly elected and qualified.
2. To approve an amendment to the Company's 1995 Stock Incentive Plan to
increase the number of shares subject thereto from 1,096,586 to 1,500,000.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 15, 1998 as
the Record Date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. Only stockholders of record as of the
Record Date are entitled to such notice and to vote at the Annual Meeting. A
list of stockholders entitled to vote at the Annual Meeting will be open to
examination by any stockholder for any purpose germane to the Annual Meeting
during normal business hours from August 14, 1998 until August 24, 1998, at
the Company's offices located at 1000 Avenida Acaso, Camarillo, California.
All of the Company's stockholders are invited to attend the Annual Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE PRE-ADDRESSED
ENVELOPE PROVIDED WITH THIS NOTICE. NO ADDITIONAL POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN
PERSON, EVEN IF YOU SEND IN YOUR PROXY TO THE MEETING.
By Order of the Board of Directors,
/s/ Edwin J. McAvoy
Edwin J. McAvoy
Secretary
Camarillo, California
July 20, 1998
<PAGE>
[LOGO OF AML COMMUNICATIONS]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 25, 1998
APPROXIMATE DATE OF MAILING: JULY 20, 1998
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of AML Communications, Inc. (the "Company" or "AML") of
proxies for use at the 1998 Annual Meeting of Stockholders of AML
Communications, Inc. (the "Annual Meeting") to be held on Tuesday, August 25,
1998, at 10:00 a.m. at the Courtyard by Marriott Hotel, 4994 Verdugo Way,
Camarillo, California 93012 and at any adjournment or postponement thereof.
VOTING RIGHTS
Stockholders of record of AML as of the close of business on July 15, 1998
(the "Record Date") have the right to receive notice of and to vote at the
Annual Meeting. On June 30, 1998, AML had issued and outstanding 6,297,414
shares of Common Stock, $.01 par value (the "Common Stock"), the only class of
voting securities outstanding.
Each stockholder of record as of the Record Date will be entitled to one
vote for each share of Common Stock held as of the Record Date. The presence
at the Annual Meeting in person or by proxy of a majority of the shares of
Common Stock outstanding as of the Record Date will constitute a quorum for
transacting business. Abstentions are counted for purposes of determining the
presence of a quorum for the transaction of business. With regard to the
election of directors, votes may be cast in favor or withheld; votes that are
withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on proposals other than the election of
directors, and will be counted as present for purposes of the item on which
the abstention is noted, and therefore counted in the tabulation of the votes
cast on a proposal with the effect of a negative vote. Under applicable
Delaware law, broker non-votes are not counted for purposes of determining the
votes cast on a proposal.
PERSONS MAKING THE SOLICITATION
The Proxy is solicited on behalf of the Board of Directors of the Company.
The only solicitation materials to be sent to stockholders will be this Proxy
Statement and the accompanying Proxy. The Board of Directors does not intend
to use specially engaged employees or paid solicitors. The Board of Directors
also intends to solicit Proxies held on behalf of stockholders by brokers,
dealers, banks and voting trustees or their nominees. The Company will pay all
reasonable expenses by such holders for mailing the solicitation material to
the stockholders for whom they hold shares. All solicitation expenses are
being paid by the Company.
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TERMS OF THE PROXY
The enclosed Proxy indicates the matters to be acted upon at the Annual
Meeting and provides a box to be marked to indicate the manner in which the
stockholder's shares are to be voted with respect to such matters. By
appropriately marking the boxes, a stockholder may specify, with respect to
the election of directors, whether the Proxy holder shall vote for or be
without authority to vote on any or all candidates; and with respect to all
other matters, whether the Proxy holder shall vote for or against or be
without authority to vote on such matters.
The Proxy also confers upon the holders thereof discretionary voting
authority with respect to such other business as may properly come before the
Annual Meeting.
Where a stockholder has appropriately directed how the Proxy is to be voted,
the shares will be voted in accordance with the stockholder's direction. In
the absence of instructions, shares represented by valid Proxies will be voted
for the nominee for director. If any other matters are properly presented at
the Annual Meeting, the persons named in the Proxy will vote or refrain from
voting in accordance with their best judgment. A Proxy may be revoked at any
time prior to its exercise by giving written notice of the revocation thereof
to the Corporate Secretary of the Company or by filing a duly executed Proxy
bearing a later date. Stockholders may also vote in person if they attend the
Annual Meeting even though they have executed and returned a Proxy.
The Company's principal executive offices are located at 1000 Avenida Acaso,
Camarillo, California 93012 and its phone number is (805) 388-1345.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of June 30, 1998,
by (i) each person known to the Company to own beneficially more than 5% of
the outstanding Common Stock, (ii) each Director of the Company, (iii) the
Chief Executive Officer and the four most highly compensated officers
(collectively, the "Named Executive Officers") and (iv) all Directors and
executive officers as a group. Except as otherwise noted, each named
beneficial owner has sole voting and investment power with respect to the
shares owned.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL OUTSTANDING
OWNERSHIP OF COMMON
BENEFICIAL OWNER COMMON STOCK STOCK(1)
---------------- ------------ -----------
<S> <C> <C>
Jacob Inbar(2).......... 1,167,023(3)(4) 18.4%
Tiberiu Mazilu(2)....... 936,439(5) 14.9%
Edwin J. McAvoy(2)...... 313,599(6) 5.0%
Scott Behan(2).......... 149,036 2.4%
Kirk A. Waldron(2)...... 13,000(7) *
David Derby(2).......... 5,625(8) *
Richard Flatow(2)....... 9,375(9) *
All current executive
officers and directors
as a group (8
persons)(10)........... 2,629,761 41.3%
</TABLE>
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*Represents less than 1%.
(1) Applicable percentage of ownership is based on 6,297,414 shares of Common
Stock outstanding as of June 30, 1998, together with applicable options
for such stockholder exercisable within 60 days. Shares of Common Stock
subject to options exercisable within 60 days are deemed outstanding for
computing the percentage ownership of the person holding such options,
but are not deemed outstanding for computing the percentage of any other
person.
(2) The address of such person is 1000 Avenida Acaso, Camarillo, California
93012.
(3) Includes 60,766 shares issuable pursuant to options exercisable within 60
days.
(4) All shares, other than option shares issuable pursuant to options, are
held in the Inbar Trust U/A/D 3/13/90. Mr. Inbar and his wife, Catherine
Inbar, are the trustees with shared voting power with respect to such
shares.
(5) Includes 228,822 shares owned by Dr. Mazilu's minor child, beneficial
ownership of which is expressly disclaimed by Dr. Mazilu.
(6) All shares, other than option shares, are held in the Ed and Marlene
McAvoy Trust. Mr. McAvoy and his wife, Marlene McAvoy, are trustees with
shared voting power with respect to such shares. Includes 15,102 shares
owned by Mr. McAvoy's adult children residing in the same household,
beneficial ownership of which is expressly disclaimed by Mr. McAvoy.
(7) Includes 12,500 shares issuable pursuant to options exercisable within 60
days.
(8) Includes 5,625 shares issuable pursuant to options exercisable within 60
days.
(9) Includes 9,375 shares issuable pursuant to options exercisable within 60
days.
(10) Includes 93,266 shares issuable pursuant to options exercisable within 60
days.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, Class
I, Class II and Class III, each serving for three-year terms, which are
staggered to provide for the election of approximately one-third of the Board
members each year. One Class III director is to be elected at the Annual
Meeting to hold office until the 2001 Annual Meeting of Stockholders and until
his successor has been elected and qualified. Each Proxy, unless otherwise
specified, will be voted for the election to the Board of Directors for the
nominee set forth below. The Director shall be elected by a plurality of the
votes of shares present in person or represented by proxy at the meeting.
In the event that the nominee for director listed below should become
unavailable for election for any reason, the persons named in the accompanying
Proxy have the right to use their discretion to vote for such other person as
may be determined by the holders of such proxies. To the best of the Company's
knowledge, the nominee is and will be available to serve.
The following table sets forth the name and age of the nominee for director,
and each other present director whose term of office does not expire in 1998,
the year he was first elected as a director and his positions held with the
Company.
NOMINEE FOR TERM EXPIRING IN 2001:
<TABLE>
<CAPTION>
DIRECTOR TERM TO
NAME AGE POSITIONS SINCE EXPIRE
---- --- --------- -------- -------
<C> <C> <S> <C> <C>
Jacob Inbar............ 49 President, Chief Executive 1986 2001
Officer and Chairman of the
Board
DIRECTORS WHOSE TERMS EXPIRE IN OR AFTER 1999 AND WHO ARE NOT CURRENTLY
NOMINEES FOR RE-ELECTION:
Edwin J. McAvoy........ 54 Vice President, Sales and 1986 1999
Marketing and Director
Richard W. Flatow...... 57 Director 1995 1999
Tiberiu Mazilu, Ph.D. . 52 Vice President, Custom 1987 2000
Products and Director
David A. Derby......... 57 Director 1995 2000
</TABLE>
BACKGROUND OF THE NOMINEE AND DIRECTORS
JACOB INBAR is a co-founder of the Company and has served as its President,
Chief Executive Officer and as a Director since its incorporation in November
1986. Mr. Inbar has served as the Company's Chairman of the Board since
September 1995. Mr. Inbar holds a B.S. in Electrical Engineering from Ben
Gurion University, Israel and an M.B.A. from California Lutheran University.
TIBERIU MAZILU, PH.D. is a co-founder of the Company and has served as its
Vice President, Custom Products and as a Director since January 1987. Dr.
Mazilu served as the Company's Chairman of the Board from January 1987 until
September 1995. Dr. Mazilu holds a Ph.D. in Electrical Engineering, with a
specialty in electromagnetics, from the University of California, Los Angeles.
EDWIN J. MCAVOY is a co-founder of the Company and has served as its Vice
President, Sales and Marketing and as a Director since its incorporation in
November 1986. Mr. McAvoy holds a B.S. degree in Applied Engineering from
Technical College, Grimsby, England.
DAVID A. DERBY has been a Director of the Company since December 1995, and
has been President, Chief Executive Officer and a Director of Datron Systems
Incorporated, a manufacturer of radio and satellite communication systems and
products, since May 1982. In April 1998, Mr. Derby was elected Chairman of the
Board of Datron Systems Incorporated.
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<PAGE>
RICHARD W. FLATOW has been a Director of the Company since December 1995,
and has been the President of RWF Enterprises, a management consulting firm,
since 1994. From 1993 to 1994, Mr. Flatow was President and Chief Executive
Officer of Futurekids, Inc., a franchiser of computer training for children.
From 1991 to 1993, Mr. Flatow was a Managing Partner and Senior Consultant for
Hankin & Co., a middle-market management consulting firm.
COMMITTEES OF THE BOARD
The Board of Directors has delegated certain of its authority to a
Compensation Committee and an Audit Committee. Both Committees are composed of
Messrs. Flatow and Derby, with Mr. Flatow serving as chairman of the
Compensation Committee and Mr. Derby serving as chairman of the Audit
Committee. No member of either committee is a former or current officer or
employee of the Company.
The Compensation Committee reviews executive salaries and administers any
bonus, incentive compensation and stock option plans of the Company, including
the Company's 1995 Stock Incentive Plan. In addition, the Compensation
Committee consults with management of the Company regarding pension and other
benefit plans, and compensation policies and practices of the Company.
The Audit Committee reviews the professional services provided by the
Company's independent auditors, the independence of such auditors from
management of the Company, the annual financial statements of the Company and
the Company's system of internal accounting controls. The Audit Committee also
reviews such other matters with respect to the accounting, auditing and
financial reporting practices and procedures of the Company as it may find
appropriate or as may be brought to its attention.
The Company does not have a nominating committee. Nominations for the
election of directors are made by the full Board of Directors.
BOARD AND COMMITTEE ATTENDANCE
From April 1, 1997 through March 31, 1998, the end of the Company's fiscal
year, the Board of Directors held eight meetings. Each director attended 75%
or more of the total number of meetings of the Board of Directors held during
the period for which he has been a director. The Audit Committee held one
meeting and the Compensation Committee held five meetings during the fiscal
year.
COMPENSATION OF DIRECTORS
Directors who are also officers of the Company receive no additional
compensation for their services as directors. Each of the nonemployee
directors receives an annual retainer of $6,000 for serving on the Board and
$500 for each Board or Committee meeting attended, plus out-of-pocket
expenses. In addition, under the terms of the Company's 1995 Stock Incentive
Plan, each nonemployee director receives (i) an automatic grant, upon becoming
a director, of 15,000 non-qualified stock options, to vest 25% per year for
four years and (ii) an automatic grant of 7,500 non-qualified stock options
each year, on the business day following the date of each annual meeting of
stockholders, to vest 25% per year for four years.
The provisions setting forth specific requirements for the grant of stock
options to nonemployee directors of the Company have been deleted under the
Amended and Restated 1995 Stock Incentive Plan, which the Board of Directors
is submitting to stockholders for their approval at the Annual Meeting. See
"Proposal No. 2, Approval of Amended and Restated 1995 Stock Incentive Plan--
Nonemployee Director Options."
6
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
As of June 30, 1998, there were 28,361 shares of Common Stock that remained
available under the 1995 Stock Incentive Plan (the "Plan") for the grant of
stock options or for issuance pursuant to other stock-based incentives. In
order to increase the aggregate number of shares available for stock options
and other stock-based incentives, on June 24, 1998, the Board of Directors
amended and restated the Plan and is submitting such amended and restated Plan
to stockholders for their approval at the Annual Meeting.
The following description of the Plan, as amended and restated, is qualified
in its entirety by reference to the full text of the Plan, as amended and
restated, a copy of which is attached as Exhibit A to this Proxy Statement.
Awards, if any, to be made to any specific employees under the Plan are not
yet determinable.
GENERAL
The purpose of the Plan is to enable the Company to attract, retain and
motivate its employees and consultants by providing for or increasing the
proprietary interests of such employees and consultants in the Company and to
enable the Company to attract, retain and motivate its directors who are not
employees ("Nonemployee Directors"), and further align their interests with
those of the Company's stockholders by providing for or increasing the
proprietary interest of such directors in the Company. The maximum number of
shares of Common Stock that may be issued pursuant to awards granted under the
Plan is currently 1,096,586, subject to certain adjustments to prevent
dilution. It is proposed that the maximum number of shares of Common Stock
that may be issued pursuant to awards under the Plan be increased by 403,414
shares to an aggregate of 1,500,000 shares of Common Stock, subject to certain
adjustments to prevent dilution.
The Plan is administered by the Committee (the "Committee") which is a
committee of the Board consisting of two or more directors, each of whom is a
"nonemployee director," as such term is defined in Rule 16b-3, as amended from
time to time, promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided that in the event the Committee is not
comprised of two or more "nonemployee directors" then all recommendations of
the Committee relating to the Plan shall be subject to the final approval of
the Board; and provided further, that unless otherwise determined by the
Board, with respect to any Award that is intended to qualify as "performance
based compensation" under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), the Committee shall consist of two or more directors,
each of whom is an "outside director" (as such term is defined under Section
162(m) of the Code). The members of the Committee are appointed by the Board
and serve until their successors are appointed. Subject to the provisions of
the Plan, the Committee is authorized and empowered to administer the Plan,
including, without limitation, adopting, amending and rescinding rules and
regulations relating to the Plan; determining which persons are participants
under the Plan and to which of such participants, if any, awards shall be
granted under the Plan; granting awards to participants and determining the
terms and conditions thereof, including the number of shares of Common Stock
issuable pursuant thereto, and the exercise price thereof, provided that the
exercise price of any option to purchase Common Stock shall not be less than
the fair market value of a share of Common Stock on the date such option is
granted subject to certain exceptions; determining whether and the extent to
which adjustments are required; and interpreting and construing the Plan and
the terms, conditions and restrictions of any awards granted under the Plan.
AWARDS TO PARTICIPANTS
The Committee is authorized under the Plan to enter into any type of
arrangement with a participant that is not inconsistent with the provisions of
the Plan and that, by its terms, involves or might involve the issuance of
Common Stock or a Derivative Security (as such term is defined in Rule 16a-1
under the Exchange Act) with an exercise or conversion privilege at a price
related to the Common Stock or with a value derived from the value of the
Common Stock. The entering into of any such arrangement is referred to herein
as the "grant" of an "Award."
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<PAGE>
Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist of one such security or benefit,
or two or more of them in tandem or in the alternative.
A stock option granted to an employee (as distinguished from a Nonemployee
Director or consultant) of the Company may be an Incentive Stock Option or a
Nonqualified Option (as defined below). Awards may be issued, and Common Stock
may be issued, pursuant to an Award, for any lawful consideration as
determined by the Committee, including, without limitation, services rendered
by the recipient of such Award.
An Award granted under the Plan to a participant may include a provision
conditioning or accelerating the receipt of benefits upon the occurrence of
specified events, such as, without limitation, a change in control of the
Company, an acquisition of a specified percentage of the voting power of the
Company, a dissolution, liquidation, merger, reclassification, sale of
substantially all of the property and assets of the Company or other certain
events.
An Award to a participant may permit the participant to pay all or part of
the purchase price of the shares or other property issuable pursuant thereto,
and/or to pay all or part of such Participant's tax withholding obligation
with respect to such issuance, by (a) the delivery of cash; (b) the delivery
of other property deemed acceptable by the Committee; (c) the delivery of
previously owned shares of capital stock of the Company (including
"pyramiding") or other property; (d) a reduction in the amount of Common Stock
or other property otherwise issuable pursuant to such Award; or (e) the
delivery of a promissory note.
Notwithstanding any other provision of the Plan, no employee shall be
granted Awards in excess of 150,000 shares of Common Stock, subject to
adjustment, during any one calendar year and no Nonemployee Director shall be
granted Awards in excess of 25,000 shares of Common Stock, subject to
adjustment, during any one calendar year.
NONEMPLOYEE DIRECTOR OPTIONS
The Plan has been amended to delete the provisions setting forth specific
requirements for the grant of stock options to Nonemployee Directors. Under
the Plan, as amended and restated, the determination of the terms and
conditions of Awards granted to Nonemployee Directors is within the
Committee's discretion, subject to the terms of the Plan. The limit on the
number of shares of Common Stock granted pursuant to Awards to any Nonemployee
Director during any one calendar year is 25,000.
PLAN DURATION
The Plan became effective on November 3, 1995 and the Plan, as amended and
restated, became effective upon its adoption by the Board of Directors on June
24, 1998, but no shares of Common Stock may be issued or sold under the Plan,
as amended and restated, until it has been approved by the Company's
stockholders. Unless sooner terminated by the Board of Directors, the Plan
will terminate on November 1, 2005. After termination of the Plan, no
additional Awards may be granted thereunder. Although Common Stock may be
issued on or after November 1, 2005 pursuant to the exercise of Awards granted
prior to such date, no Common Stock shall be issued under the Plan on or after
October 31, 2015.
AMENDMENT OF THE PLAN
The Plan provides that it may be amended or terminated by the Board at any
time, except that no amendment or termination of the Plan shall deprive the
recipient of any Award that was previously granted to the recipient under the
Plan of his or her rights thereto without the recipient's consent. If any
national securities exchange upon which any of the Company's securities are
listed requires that any such amendment be approved
8
<PAGE>
by the Company's stockholders, then such amendment will not be effective until
it has been approved by the Company's stockholders.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
which will generally apply to Awards made under the Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of Awards will depend on the recipient and the specific nature of
the Award. No information is provided herein with respect to estate, state or
local tax laws, although there may be certain tax consequences upon the
receipt or exercise of an Award or the disposition of any acquired shares
under those laws. Because the following is only a brief summary of the general
federal income tax rules, recipients of Awards should not rely thereon for
individual tax advice, as each taxpayer's situation and the consequences of
any particular Award will vary depending upon the specific facts and
circumstances involved. Each taxpayer is advised to consult with his or her
own tax advisor for particular federal, as well as state and local, income and
any other tax advice.
NONQUALIFIED OPTIONS
Stock options granted to persons who are not employees of the Company,
including options granted to Nonemployee Directors and consultants of the
Company, will be "Nonqualified Options." Stock options granted to persons who
are employees of the Company may be Nonqualified Options or Incentive Options
(defined below). The grant of a Nonqualified Option is generally not a taxable
event for the optionee. Upon exercise of the option, the optionee will
generally recognize ordinary income equal to the excess of the fair market
value of the stock acquired upon exercise (determined as of the date of
exercise) over the exercise price of such option, and the Company will be
entitled to a tax deduction equal to such amount. See "Special Rules for
Awards Granted to Insiders," below. A subsequent sale of the shares generally
will give rise to capital gain or loss equal to the difference between the
sales price and the sum of the exercise price paid for such shares plus the
ordinary income recognized with respect to such shares.
INCENTIVE STOCK OPTIONS
Pursuant to the Plan, employees of the Company may be granted options which
are intended to qualify as incentive stock options ("Incentive Stock Options")
under the provisions of Section 422 of the Code. Generally, the optionee is
not taxed and the Company is not entitled to a deduction on the grant or the
exercise of an Incentive Stock Option. However, if the optionee sells the
shares acquired upon the exercise of an Incentive Stock Option ("Option
Shares") at any time within (a) one year after the date of transfer of the
Option Shares to the optionee pursuant to the exercise of such Incentive Stock
Option or (b) two years from the date of grant of such Incentive Stock Option
(a "Disqualifying Disposition"), then (1) the optionee will recognize capital
gain equal to the excess, if any, of the sales price over the fair market
value of the Option Shares on the date of exercise, (2) the optionee will
recognize ordinary income equal to the excess, if any, of the lesser of the
sales price or the fair market value of the Option Shares on the date of
exercise, over the exercise price of such Incentive Stock Option, (3) the
optionee will recognize capital loss equal to the excess, if any, of the
exercise price of such Incentive Stock Option over the sales price of the
Option Shares, and (4) the Company will generally be entitled to a deduction
equal to the amount of ordinary income recognized by the optionee. If the
optionee sells the Option Shares at any time after the optionee has held the
Option Shares for at least (i) one year after the date of transfer of the
Option Shares to the optionee pursuant to the exercise of the Incentive Stock
Option and (ii) two years from the date of grant of the Incentive Stock
Option, then the optionee will recognize capital gain or loss equal to the
difference between the sales price and the exercise price of such Incentive
Stock Option, and the Company will not be entitled to any deduction.
The amount by which the fair market value of Option Shares on the date of
exercise exceeds the exercise price will be included as a positive adjustment
in the calculation of an optionee's "alternative minimum taxable
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<PAGE>
income" ("AMTI") in the year of exercise. The "alternative minimum tax"
imposed on individual taxpayers is generally equal to the amount by which 28%
(26% of AMTI below certain amounts) of the individual's AMTI (reduced by
certain exemption amounts) exceeds his or her regular income tax liability for
the year. Participants of the Plan should determine, prior to exercising an
Incentive Stock Option, whether and the extent to which exercise of an
Incentive Stock Option will result in alternative minimum tax in the year of
exercise.
SPECIAL RULES FOR AWARDS GRANTED TO INSIDERS
If an optionee is a director, officer or shareholder subject to Section 16
of the Exchange Act (an "Insider"), the determination of the amount and the
timing of income recognition in connection with an award under the Plan, and
the beginning of the holding period for any shares received, may be required
to be deferred until the expiration of any period during which the Insider
would be restricted from disposing of any stock received, unless the Insider
makes a proper election under Section 83(b) of the Code (an "83(b) Election")
within 30 days from the date of exercise. Insiders should consult their tax
advisors to determine the tax consequences to them of exercising stock options
granted to them pursuant to the Plan.
RESTRICTED STOCK
Awards under the Plan may also include stock sales, stock bonuses or other
grants of stock that include provisions for the delayed vesting of the
recipient's rights to the Common Stock. Unless the recipient makes an 83(b)
Election as discussed above within 30 days after the receipt of the restricted
Common Stock, the recipient generally will not be taxed on the receipt of
shares of restricted Common Stock until the restrictions on such shares expire
or are removed. When the restrictions expire or are removed, the recipient
will recognize ordinary income (and the Company will be entitled to a
deduction) in an amount equal to the excess of the fair market value of the
Common Stock at that time over the purchase price. However, if the recipient
makes an 83(b) Election within 30 days of the receipt of restricted Common
Stock, he or she will recognize ordinary income (and the Company will be
entitled to a deduction) equal to the excess of the fair market value of the
Common Stock on the date of receipt (determined without regard to vesting
restrictions) over the purchase price.
MISCELLANEOUS TAX ISSUES
Awards may be granted under the Plan which do not fall clearly into the
categories described above. The federal income tax treatment of these Awards
will depend upon the specific terms of such Awards. Generally, the Company
will be required to make arrangements for withholding applicable taxes with
respect to any ordinary income recognized by a participant in connection with
Awards made under the Plan.
With certain exceptions, an individual may not deduct investment interest to
the extent such interest exceeds the individual's net investment income for
the year. Investment interest generally includes interest paid on indebtedness
incurred to purchase Common Stock. Interest disallowed under this rule may be
carried forward to and deducted in later years, subject to the same
limitations.
Special rules will apply in cases where a recipient of an Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the Plan by delivering previously owned shares of Common
Stock or reducing the number of shares of Common Stock otherwise issuable
pursuant to the Award. The surrender or withholding of such shares will in
certain circumstances result in the recognition of income with respect to such
shares or a carryover basis in the shares acquired, and may constitute a
Disqualifying Disposition with respect to Option Shares.
A holder's tax basis in shares of Common Stock acquired pursuant to the Plan
generally will equal the amount paid for such shares of Common Stock plus any
amount recognized as ordinary income with respect to such shares. Other than
ordinary income recognized with respect to shares of Common Stock and included
in basis, any subsequent gain or loss upon the disposition of such shares
generally will be capital gain or loss. The rate at which any such gain will
be taxed will, as a general matter, depend upon the holder's holding period in
the shares.
10
<PAGE>
The terms of the agreements pursuant to which specific Awards are made under
the Plan may provide for accelerated vesting or payment of an Award in
connection with a change in ownership or control of the Company. In that event
and depending upon the individual circumstances of the recipient, certain
amounts with respect to such Awards may constitute "excess parachute payments"
under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a non-deductible 20% excise tax on
any "excess parachute payments" and the Company will be denied any deduction
with respect to such payments. Recipients of Awards should consult their tax
advisors as to whether accelerated vesting of an Award in connection with a
change of ownership or control of the Company would give rise to an excess
parachute payment.
In certain instances the Company may be denied a deduction for compensation
(including amounts attributable to the ordinary income recognized with respect
to options, restricted stock or other Awards) paid to certain corporate
officers of the Company to the extent the compensation exceeds $1,000,000 (per
person) annually.
SECTION 16(B) OF THE EXCHANGE ACT
The acquisition and disposition of shares of Common Stock by Insiders
pursuant to awards granted to them under the Plan may be subject to the
provisions of Section 16(b) of the Exchange Act, under which a purchase of
shares of Common Stock within six months before or after a sale of shares of
Common Stock could result in recovery by the Company of all or a portion of
any amount by which the sale proceeds exceed the purchase price. Insiders are
required to file reports of changes in beneficial ownership under Section
16(a) of the Exchange Act upon acquisition and disposition of shares. Rule
16b-3 provides an exemption from Section 16(b) liability for certain
transactions pursuant to employee benefit plans.
BOARD RECOMMENDATION
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to adopt the Plan, as amended and restated, in
the form attached as Appendix A in order to attract, retain and motivate its
employees, consultants and Nonemployee Directors. A majority of the votes cast
at the Annual Meeting is necessary for the approval of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid by the Company to the Named Executive Officers who received
salary and bonuses in excess of $100,000 during the fiscal year ended March
31, 1998 as well as the previous two fiscal years, for all services rendered
in all capacities to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------
ALL
NAME AND PRINCIPAL POSITION FY SALARY(2) BONUS OTHER(3)
--------------------------- ---- --------- ------- --------
<S> <C> <C> <C> <C>
Jacob Inbar................................ 1998 $175,565 $17,000 $6,108
President, Chief Executive Officer and 1997 170,172 23,000 6,480
Chairman of the Board 1996 124,729 37,000 5,120
Tiberiu Mazilu............................. 1998 137,399 13,000 5,753
Vice President, Custom Products 1997 132,405 16,000 6,480
1996 97,480 24,000 3,727
Edwin J. McAvoy............................ 1998 135,883 13,000 5,654
Vice President, Sales and Marketing 1997 129,271 16,000 6,480
1996 97,480 24,000 4,003
Scott T. Behan............................. 1998 102,952 10,500 4,083
Vice President, New Product Development 1997 87,308 15,000 6,462
1996 68,401 20,000 2,271
Kirk A. Waldron............................ 1998 101,938 11,000 3,860
Chief Financial Officer, Chief Operating
Officer, 1997 26,923(4) 12,000 --
Vice President of Finance 1996 -- -- --
</TABLE>
- - --------
(1) Other than salary, bonus and the other compensation described herein, the
Company did not pay any Named Executive Officer any compensation,
including incidental personal benefits, in excess of 10% of such Named
Executive Officer's salary.
(2) Salary includes amounts deferred pursuant to the Company's 401(k) plan.
(3) The amounts shown represent Company contributions to the Company's 401(k)
plan and profit sharing plans for the benefit of the Named Executive
Officer.
(4) Reflects compensation starting December 16, 1996, the date Mr. Waldron
commenced employment with the Company. Mr. Waldron was elected Chief
Operating Officer of the Company on February 6, 1998.
12
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
options to each of the Company's Named Executive Officers during the fiscal
year ended March 31, 1998. In addition, in accordance with the rules and
regulations of the Securities and Exchange Commission, the following table
sets forth the hypothetical gains that would exist for the options based on
the assumption that the stock price were to appreciate annually by 5% and 10%
respectively. The rates do not represent the Company's estimate or projection
of future Common Stock prices and no assurance can be given that the share
price will appreciate at the rates shown in the table.
OPTION GRANTS DURING FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES
% OF TOTAL OF STOCK PRICE
NUMBER OF OPTIONS GRANTED APPRECIATION
SECURITIES TO EMPLOYEES EXERCISE FOR OPTION TERM
UNDERLYING IN FISCAL PRICE EXPIRATION -----------------
NAME OPTIONS GRANTED YEAR(1) ($/SHARE) DATE(2) 5% 10%
---- --------------- --------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kirk A. Waldron......... 50,000 25.0% 3.875 4/28/01 $247,279 $312,036
</TABLE>
- - --------
(1) Options to purchase an aggregate of 199,838 shares of Common Stock were
granted to employees, including the Named Executive Officer, during the
fiscal year ended March 31, 1998 with exercise prices ranging from $3.88
to $8.06 per share, in each case the fair market value of the Common Stock
on the date of grant. All such options are subject to vesting over a four
year period, with 25% of the options exercisable on each successive
anniversary of the date of grant.
(2) Options granted have a term of 5 years, subject to earlier termination in
certain events related to termination of employment.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock held by each of the Named
Executive Officers as of March 31, 1998:
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
----------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FY END THE MONEY OPTIONS/SARS
SHARES (#) AT FY END ($)(2)
ACQUIRED VALUE -------------------------- -------------------------
ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jacob Inbar............. 103,280 $503,506 60,766(3) -- $286,791 $ --
Tiberiu Mazilu.......... 20,369 51,391 -- -- -- --
Edwin J. McAvoy......... 36,553 112,035 -- -- -- --
Scott T. Behan.......... 6,092 15,370 -- -- -- --
Kirk A. Waldron......... -- -- -- 50,000(4) -- 62,750
</TABLE>
- - --------
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Fair market value of the Common Stock as of March 31, 1998 represents the
closing trading price of the Common Stock on such date ($5.13 per share)
minus the exercise price.
(3) Represents options granted in August 1994.
(4) Represents options granted in April 1997.
13
<PAGE>
LEGAL PROCEEDINGS
The Company may be subject, from time to time, to various legal proceedings
relating to claims arising out of its operations in the ordinary course of its
business. Two purported class action lawsuits have been filed against the
Company and certain of its current and former officers and directors. The
first lawsuit, entitled Ronny Sussman v. AML Communications, Inc., et al.,
Case No. CIV 179776, was filed on March 19, 1998 in the Superior Court for the
State of California (Ventura County) (the "State Action"). The second lawsuit,
entitled Ronny Sussman v. AML Communications, Inc., et al., Case No. 98-2010
CAS (Ex) (C.D. Cal.), was filed on March 20, 1998 in the federal district
court in Los Angeles, California (the "Federal Action"). The individual
defendants named in both of the actions are Jacob Inbar (the Company's
President, Chief Executive Officer and Chairman of the Board of Directors),
Tiberiu Mazilu (the Company's Vice President of Custom Products and a member
of the Board of Directors), Edwin J. McAvoy (the Company's Vice President of
Sales and Marketing and a member of the Board of Directors), Scott T. Behan
(the Company's Vice President of New Product Development) and William E.
Sheridan III (the Company's former Chief Financial Officer). While the Federal
Action asserts claims under the federal securities laws and the State Action
asserts claims under California's securities laws, the complaints are
otherwise essentially identical. The complaints allege that during the
purported class period of April 10, 1996 to March 25, 1997, defendants made
overly optimistic estimates regarding the Company's anticipated financial
performance for fiscal years 1997 and 1998, and overly optimistic statements
regarding the Company's ability to develop and to sell new products for the
PCS market, all allegedly in order to profit from insider trading at
artificially inflated prices.
In the State Action, the Company filed a motion to dismiss or stay all
proceedings pending the resolution of the Federal Action, and alternatively
moved for a protective order governing discovery in the State Action. On June
8, 1998, the Court granted the defendants' motion to stay all discovery in the
State Action unless and until the stay of discovery is lifted in the Federal
Action. However, defendants still have to respond to the State Action
complaint and anticipate filing a demurrer, which is the California equivalent
of a motion to dismiss for failure to state a claim, on or before July 23,
1998.
In the Federal Action, pursuant to the Private Securities Litigation Reform
Act of 1995, plaintiff's motion for the appointment of lead plaintiff and lead
counsel is scheduled to be heard on June 29, 1998. The Company's response to
the complaint is due 45 days following the appointment of lead plaintiff and
lead counsel. The Company anticipates filing a motion to dismiss the claim.
The Company denies the material allegations in the complaints and intends to
defend the actions vigorously. An adverse determination could have a material
adverse effect upon the Company.
The Company and its legal counsel are currently evaluating the claims. At
this stage, it is not possible to predict the outcome or determine a range of
possible losses, if any. The Company, its directors and officers deny the
material allegations in the complaints and intend to defend the actions
vigorously. An adverse determination could have a material adverse effect upon
the Company's financial position or results of operations. During the year
ended March 31, 1998, the Company recorded $150,000 as costs related to these
lawsuits.
The Company currently is not party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management
believes would have a material adverse effect on the business, financial
condition or results of operations of the Company.
INDEMNIFICATION
The General Corporation Law of the State of Delaware, the state of
incorporation of the Company, and the Bylaws of the Company provide for
indemnification of directors and officers. Section 145 of the Delaware General
Corporation Law provides generally that a person sued as a director, officer,
employee or agent of a corporation may be indemnified by the corporation for
reasonable expenses, including attorneys' fees, if, in cases other than
actions brought by or in the right of the corporation, he or she has acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation (and in the case of a
criminal proceeding, had no reasonable cause to believe that his or her
conduct was unlawful). Section 145
14
<PAGE>
provides that no indemnification for any claim or matter may be made, in the
case of an action brought by or in the right of the corporation, if the person
has been adjudged to be liable, unless the Court of Chancery or other court
determines that indemnity is fair and reasonable despite the adjudication of
liability. Indemnification is mandatory, in the case of a director, officer,
employee or agent who has been successful on the merits, or otherwise, in
defense of a suit against him or her. The determination of whether a director,
officer, employee or agent should be indemnified must be made by a majority of
disinterested directors, independent legal counsel or the stockholders.
Directors and officers of the Company are covered under policies of
directors' and officers' liability insurance. The directors and officers are
parties to Indemnity Agreements (the "Indemnity Agreements"). The Indemnity
Agreements provide indemnification for the directors and officers in the event
the directors' and officers' liability insurance does not cover a particular
claim for indemnification or if such a claim or claims exceed the limits of
such coverage. The Indemnity Agreements are generally intended to provide
indemnification for any amounts a director or officer is legally obligated to
pay because of claims arising out of the director's or officer's service to
the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, certain officers of
the Company and persons holding more than 10% of the Company's Common Stock to
file reports concerning their ownership of Common Stock by dates established
under the Exchange Act and also requires that the Company disclose in the
Proxy Statement any non-compliance with those requirements during the fiscal
year ended March 31, 1998. Based solely upon a review of reports delivered to
the Company for fiscal year 1998, all Section 16(a) filing requirements were
satisfied.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as the independent public accountants for the
Company during the fiscal year ended March 31, 1998. Representatives of that
firm are expected to be present at the Annual Meeting and will have an
opportunity to make a statement and will be available to respond to
appropriate questions. The Company has selected Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending March 31,
1999.
STOCKHOLDER PROPOSALS
No proposals have been submitted by stockholders for consideration at the
Annual Meeting. Any proposal relating to a proper subject which an eligible
stockholder of the Company may intend to present for action at the 1999 Annual
Meeting of Stockholders of the Company must be received by March 20, 1999 to
be considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting. The Board of Directors of the Company will review
any proposals from eligible stockholders which it receives by that date and,
with the advice of counsel, will determine whether any such proposal will be
included in its 1999 proxy solicitation materials under applicable proxy rules
of the Securities and Exchange Commission (the "SEC").
OTHER MATTERS
The Company does not know of any business other than that described herein
which will be presented for consideration or action by the stockholders at the
Annual Meeting. If, however, any other business shall properly come before the
Annual Meeting, shares represented by Proxies will be voted in accordance with
the best judgment of the persons named therein or their substitutes.
15
<PAGE>
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders is being mailed to
stockholders together with this Proxy Statement. Stockholders are referred to
the report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not part of the proxy
soliciting material.
FORM 10-KSB ANNUAL REPORT
The Company will provide to any stockholder, without charge, a copy of its
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998,
including financial statements, filed with the SEC, upon the request of such
stockholder. Requests should be directed to AML Communications, Inc.,
Attention: Investor Relations, 1000 Avenida Acaso, Camarillo, California 93012.
By Order of the Board of Directors,
/s/ Edwin J. McAvoy
Edwin J. McAvoy
Secretary
Camarillo, California
July 20, 1998
16
<PAGE>
APPENDIX A
STOCK INCENTIVE PLAN
OF
AML COMMUNICATIONS, INC.
AS AMENDED AND RESTATED JUNE 24, 1998
SECTION 1. PURPOSE OF PLAN
This Amended and Restated Stock Incentive Plan (this "Plan") is intended to
serve as an incentive to, and to encourage stock ownership by, certain
directors, officers and other persons employed by AML Communications, Inc., a
Delaware corporation (the "Company"), so that they may acquire or increase
their proprietary interests in the success of the Company and to encourage
them to remain in the Company's service.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee of or
consultant to the Company or any of its subsidiaries (an "Employee") and any
director of the Company who is not an Employee (a "Nonemployee Director")
shall be eligible to be considered for the grant of options hereunder (each an
"Option"); provided that only persons who are employees of the Company shall
be eligible to be considered for the grant of "Incentive Stock Options" (as
defined herein).
SECTION 3. OPTIONS
(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with an
Employee or a Nonemployee Director that is not inconsistent with the
provisions of this Plan and that, by its terms, involves or might involve the
issuance of (i) shares of Common Stock, par value $.01 per share, of the
Company ("Common Shares") or (ii) a Derivative Security (as such term is
defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as such Rule may be amended from time to
time) with an exercise or conversion privilege at a price related to the
Common Shares or with a value derived from the value of the Common Shares. The
entering into of any such arrangement is referred to herein as the "grant" of
an Option.
(b) Common Shares may be issued pursuant to an Option for any lawful
consideration as determined by the Committee, including, without limitation,
services rendered by the recipient of such Option.
(c) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Option granted under this Plan, which terms and conditions may include, among
other things:
(i) a provision permitting the recipient of such Option, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Common Shares or other property issuable pursuant to such
Option, and/or such recipient's tax withholding obligation with respect to
such issuance, in whole or in part, by any one or more of the following:
(A) the delivery of previously owned shares of capital stock of the
Company (including "pyramiding") or other property, provided that the
Company is not then prohibited from purchasing or acquiring shares of
its capital stock or such other property,
(B) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Option, or
(C) the delivery of cash or a promissory note, the terms and
conditions of which shall be determined by the Committee;
A-1
<PAGE>
(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Option, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, the dissolution or
liquidation of the Company, a sale of substantially all of the property and
assets of the Company or an event of the type described in Section 7
hereof; or
(iii) any provisions required in order for such Option to qualify (A) as
an incentive stock option (an "Incentive Stock Option") under Section 422
of the Internal Revenue Code of 1986, as amended from (the "Code"),
provided that the recipient of such Option is eligible under the Code to
receive an Incentive Stock Option and/or (B) as performance based
compensation described in Section 162(m) of the Code ("Performance-Based
Compensation").
(d) Notwithstanding any other provision of this Plan, no Employee shall be
granted Options in excess of 150,000 shares of Common Stock and no Nonemployee
Director shall be granted Options in excess of 25,000 shares of Common Stock
during any one calendar year. The limitation set forth in this Section 3(d)
shall be subject to adjustment as provided in Section 7 hereof, but only to
the extent such adjustment would not affect the status of compensation
attributable to Options hereunder as Performance-Based Compensation.
SECTION 4. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued pursuant to all
Incentive Stock Options granted under this Plan shall not exceed 1,500,000,
subject to adjustment as provided in Section 7 hereof.
(b) The aggregate number of Common Shares issued and issuable pursuant to
all Options (including Incentive Stock Options) granted under this Plan shall
not exceed 1,500,000, subject to adjustment as provided in Section 7 hereof.
(c) For purposes of Section 4(b) hereof, the aggregate number of Common
Shares issued and issuable pursuant to all Options granted under this Plan
shall at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such time
pursuant to Options granted under this Plan, other than Common Shares that
were subsequently reacquired by the Company pursuant to the terms and
conditions of such Options and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares that were otherwise issuable prior to
such time pursuant to Options granted under this Plan, but that were
withheld by the Company as payment of the purchase price of the Common
Shares issued pursuant to such Options or as payment of the recipient's tax
withholding obligation with respect to such issuance; plus
(iii) the maximum number of Common Shares issuable at or after such time
pursuant to Options granted under this Plan prior to such time.
(d) The "Fair Market Value" of a Common Share or other security on any date
(the "Determination Date") shall be equal to the closing price per Common
Share or unit of such other security on the business day immediately preceding
the Determination Date, as reported in The Wall Street Journal, Western
Edition, or, if no closing price was so reported for such immediately
preceding business day, the closing price for the next preceding business day
for which a closing price was so reported, or, if no closing price was so
reported for any of the 30 business days immediately preceding the
Determination Date, the average of the high bid and low asked prices per
Common Share or unit of such other security on the business day immediately
preceding the Determination Date in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, or, if the Common Shares
or such other security were not quoted by any such organization on such
immediately preceding business day, the average of the closing bid and asked
prices on such day as furnished by a professional market maker making a market
in the Common Shares or such other security selected by the Board.
A-2
<PAGE>
SECTION 5. DURATION OF PLAN
Options shall not be granted under this Plan after November 1, 2005.
Although Common Shares may be issued on or after November 1, 2005 pursuant to
Options granted prior to such date, no Common Shares shall be issued under
this Plan after October 31, 2015.
SECTION 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee (the "Committee") of the
Board consisting of two or more directors, each of whom is a "non-employee
director" (as such term is defined in Rule 16b-3 promulgated under the
Exchange Act, as such Rule may be amended from time to time); provided,
however, that in the event the Committee is not comprised of two or more "non-
employee directors," then (i) the Committee shall only be authorized and
empowered to recommend to the Board all things necessary or desirable in
connection with the administration of this Plan, including, without
limitation, the things listed in Section 6, (ii) all recommendations of the
Committee relating to this Plan shall be subject to final approval by the
Board and (iii) all references herein to the Committee shall be deemed to
refer to the Board; provided further, that unless otherwise determined by the
Board, with respect to any Option that is intended to qualify as Performance-
Based Compensation, the Plan shall be administered by a committee consisting
of two or more directors, each of whom is an "outside director" (as such term
is defined under Section 162(m) of the Code).
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(i) adopt, amend and rescind rules and regulations relating to this Plan;
(ii) determine which persons are Employees and to which of such
Employees, if any, Options shall be granted hereunder;
(iii) grant Options to Employees and Nonemployee Directors (provided that
Nonemployee Directors shall not be eligible to be considered for the grant
of Incentive Stock Options) and determine the terms and conditions thereof,
including (A) the number of Common Shares issuable pursuant thereto and (B)
the exercise price for any Option, provided that the exercise price of any
option to purchase Common Shares shall not be less than the Fair Market
Value of a Common Share on the date such option is granted, except that (1)
the Committee may specifically provide that the exercise price of any such
option may be higher or lower in the case of an option granted at the time
an Employee commences employment with the Company in assumption and
substitution of options issued by another company that are forfeited or
cancelled at the time the Employee commences employment with the Company,
and (2) in the event an Employee is required to pay or forego the receipt
of any cash amount in consideration of receipt of an option, the exercise
price plus such cash amount shall equal or exceed 100% of the Fair Market
Value of a Common Share on the date the option is granted;
(iv) determine whether, and the extent to which, adjustments are required
pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms and conditions of all
Options granted hereunder.
SECTION 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly
cash dividend) or other distribution, stock split, reverse stock split or the
like, or if substantially all of the property and assets of the Company are
sold, then, unless the terms of such transaction shall provide otherwise, the
Committee may make appropriate and proportionate adjustments in (a) the number
and type of shares or other
A-3
<PAGE>
securities or cash or other property that may be acquired pursuant to Options
theretofore granted under this Plan, (b) the maximum number and type of shares
or other securities that may be issued pursuant to Incentive Stock and other
Options thereafter granted under this Plan, and (c) to the extent permitted
under Section 3(e) hereof, the maximum number of Common Shares for which
options may be granted during any one calendar year; provided, however, that
no adjustment shall be made under this Section 7 to the number of Common
Shares that may be acquired pursuant to outstanding Incentive Stock Options or
the maximum number of Common Shares with respect to which Incentive Stock
Options may be granted under this Plan to the extent such adjustment would
result in such options being treated as other than Incentive Stock Options;
provided further that no such adjustment shall be made to the extent the
Committee determines that such adjustment would result in the disallowance of
a federal income tax deduction for compensation attributable to Options
hereunder by causing such compensation to be other than Performance-Based
Compensation.
SECTION 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any manner;
provided, however, that no such amendment or termination shall deprive the
recipient of any Option theretofore granted under this Plan, without the
consent of such recipient, of any of his or her rights thereunder or with
respect thereto.
SECTION 9. EFFECTIVE DATE OF PLAN
The Stock Incentive Plan became effective on November 3, 1995. The
amendments to the Stock Incentive Plan reflected in this Amended and Restated
Stock Incentive Plan shall be effective as of June 24, 1998, the date upon
which it was approved by the Board; provided, however, that no Options may be
granted nor may Common Shares be issued under this Amended and Restated Stock
Incentive Plan until it has been approved, directly or indirectly, by (a) the
affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held
in accordance with the laws of the State of Delaware or (b) the written
consent of the holders of a majority of the securities of the Company entitled
to vote.
A-4
<PAGE>
AML COMMUNICATIONS, INC.
1000 Avenida Acaso
Camarillo, CA 93012
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
AUGUST 25, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AML COMMUNICATIONS, INC.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement for the 1998 Annual Meeting of
Stockholders, revoking all prior proxies, hereby appoints Jacob Inbar and Edwin
J. McAvoy, and each of them, as Proxies, each with the power to appoint and
substitute, and hereby authorizes each of them to represent and to vote as
designated on the reverse side, all the shares of Common Stock of AML
Communications, Inc. (the "Company") held of record by the undersigned on July
15, 1998 at the 1998 Annual Meeting of Stockholders to be held on August 25,
1998 and any postponements or adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR
THE NOMINEE FOR DIRECTOR LISTED, FOR PROPOSAL 2 AND IN THE DISCRETION OF THE
PROXIES ON ALL SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE 1998 ANNUAL
MEETING OF STOCKHOLDERS.
(Continued on reverse side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE
VOTED FOR THE NOMINEE FOR CLASS 3 DIRECTOR LISTED BELOW, FOR THE APPROVAL OF AN
AMENDMENT TO THE COMPANY'S 1995 STOCK INCENTIVE PLAN AND IN THE DISCRETION OF
THE PROXIES ON MATTERS DESCRIBED IN ITEM 3.
1. Election of Class 3 Director: Jacob Inbar
FOR the Nominee listed above [ ]
WITHHOLD AUTHORITY to vote for the Nominee listed above [ ]
_________________________________________________________________
2. Approval of an amendment to the Company's 1995 Stock Incentive Plan to
increase the number of shares subject thereto from 1,096,586 to 1,500,000.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
_________________________________________________________________
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the 1998 Annual Meeting of Stockholders
and any and all postponements or adjournments thereof.
Do you plan to attend the meeting: Yes No
Dated:
Signature of Stockholder:
Signature of Joint Stockholder if held jointly:
Title:
Please sign exactly as the name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the president or other authorized officer.
If a partnership, please sign in the partnership's name by an authorized person.
