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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, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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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<PAGE>
[LOGO OF AML COMMUNICATIONS, INC.]
Notice of Annual Meeting of Stockholders
to be held September 14, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders of
AML Communications, Inc., which will be held on Thursday, September 14, 2000, at
10:00 a.m. at the office of the Company, 1000 Avenida Acaso, Camarillo,
California 93012.
At the Annual Meeting, stockholders will be asked to consider the following
proposals:
1. To elect two Class II directors as described in the accompanying Proxy
Statement to hold office until the 2003 Annual Meeting of Stockholders
and until their successors are duly elected and qualified.
2. To approve the Second Amended and Restated 1995 Stock Incentive Plan
reflecting an amendment to the Company's 1995 Amended and Restated
Stock Incentive Plan to increase the number of shares subject thereto
from 1,500,000 to 2,000,000.
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 31, 2000 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 31, 2000 until September 13, 2000, 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/ Scott T. Behan
Scott T. Behan
Secretary
Camarillo, California
August 1, 2000
<PAGE>
[LOGO OF AML COMMUNICATIONS, INC.]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 14, 2000
Approximate date of mailing: August 1, 1999
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 2000 Annual Meeting of Stockholders of AML
Communications, Inc. (the "Annual Meeting") to be held on Thursday, September
14, 2000, at 10:00 a.m. at the principal executive office of the Company, 1000
Avenida Acaso, Camarillo, California 93012 and at any adjournment(s) or
postponement(s) thereof.
VOTING RIGHTS
Stockholders of record of AML as of the close of business on July 31, 2000 (the
"Record Date") have the right to receive notice of and to vote at the Annual
Meeting. On July 13, 2000, AML had issued and outstanding 6,316,631 shares of
Common Stock, $.01 par value (the "Common Stock"), the only class of voting
securities outstanding. The Company owns 114,500 additional shares of treasury
stock as a result of a stock buyback during the fiscal year 1999. The Company
is not entitled to vote such shares, nor are they counted for quorum purposes.
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.
<PAGE>
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 two nominees for director and for the approval of the Company's Second
---
Amended and Restated 1995 Stock Incentive Plan. 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.
2
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of July 31, 2000, 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 two other 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 Common
Beneficial Owner of Common Stock Stock (1)
---------------- --------------- ---------
<S> <C> <C>
Jacob Inbar (2) 952,967 (3) 14.7 %
Tiberiu Mazilu (2) (11) 936,439 (4) 14.4 %
Scott T. Behan (2) 169,037 (5) 2.6 %
Kirk A. Waldron (2) 78,000 (6) *
Richard W. Flatow (2) 33,750 (7) *
David A. Derby (2) 30,000 (8) *
Gerald M. Starek (2) 56,325 (9) *
All current executive officers and directors
as a group (6 persons) (10) 1,320,079 (10) 20.4%
</TABLE>
*Represents less than 1%.
(1) Applicable percentage of ownership is based on 6,316,631 shares of Common
Stock outstanding as of July 31, 2000, together with applicable options for
such stockholder exercisable within 60 days, but not including 114,500
shares of treasury stock. 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) 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.
(4) Includes 244,422 shares owned by Dr. Mazilu's minor child, beneficial
ownership of which is expressly disclaimed by Dr. Mazilu.
(5) Includes 20,000 shares issuable pursuant to options exercisable within 60
days.
(6) Includes 77,500 shares issuable pursuant to options exercisable within 60
days.
(7) Includes 33,750 shares issuable pursuant to options exercisable within 60
days.
(8) Includes 30,000 shares issuable pursuant to options exercisable within 60
days.
(9) Includes 5,625 shares issuable pursuant to options exercisable within 60
days.
(10) Shares of Common Stock subject to options exercisable within 60 days are
deemed outstanding for computing the percentage ownership of all current
executive officers and directors as a group.
(11) Dr. Mazilu resigned his position as a Director, effective February 23,
1999. Pursuant to his employment agreement dated February 23, 1999, Dr.
Mazilu resigned his position as an Officer of the Company effective
February 23, 2000 but continues to serve as an employee of the Company.
Effective February 23, 2000, Dr. Mazilu became a Senior Technical Fellow of
the Company. Dr. Mazilu's shares are not included in the calculation of
percentage ownership or total shares of the current executive officers and
directors as a group.
3
<PAGE>
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. Two Class II directors are to be elected at the Annual Meeting to hold
office until the 2003 Annual Meeting of Stockholders and until their successors
have been elected and qualified. Each Proxy, unless otherwise specified, will be
voted for the election to the Board of Directors for the nominees set forth
below. The Directors 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 a 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 nominees are and will be available to serve.
The following table sets forth the names and ages of the nominees for directors,
and each other present director whose term of office does not expire in 2000,
the year he was first elected as a director and his positions held with the
Company.
Nominees for term expiring in 2003:
<TABLE>
<CAPTION>
Director Term to
Name Age Positions Since Expire
---- --- --------- -------- -------
<S> <C> <C> <C> <C>
Kirk A. Waldron 37 President, Chief 1999 2003
Executive Officer and
Director
David A. Derby 59 Director 1995 2003
Directors whose terms expire in or after 2001 and who are not currently nominees for re-election:
Jacob Inbar 51 Chairman of the Board 1986 2001
Gerald M. Starek 59 Director 1999 2001
Scott T. Behan 39 Executive Vice President,
Engineering and Director 1999 2002
Richard W. Flatow 59 Director 1995 2002
</TABLE>
4
<PAGE>
Background of the Nominees and Directors
Kirk A. Waldron has been a Director, President and Chief Executive Officer of
the Company since February, 1999. From 1996 up until his current appointment,
Mr. Waldron served as the Company's Chief Financial Officer and in 1998 he was
appointed as the Company's Chief Operating Officer. From 1994 to 1996, Mr.
Waldron was Chief Financial Officer at Dynamotion/ATI Corp., a publicly held
high-tech manufacturer of precision drilling equipment. Mr. Waldron holds a
B.S. in Business Administration from the University of Southern California.
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 (NASDAQ: DTSI), 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.
Jacob Inbar is a co-founder of the Company and has been a Director and
Chairman of the Board since September, 1985. From 1986 to 1999, Mr. Inbar served
as President and Chief Executive Officer of the Company. Mr. Inbar holds a B.S.
in Electrical Engineering from Ben Gurion University, Israel and an M.B.A. from
California Lutheran University.
Gerald M. Starek has been a Director of the Company since March, 1999, and has
served as a Director of Advanced Energy Industries, Inc. since 1998 (NASDAQ:
AEIS). Mr. Starek also serves on the Board of Directors of Intelligent Reasoning
Systems, Inc. of Austin, Texas, since May 1999, and Supercritical Systems, Inc.
of Fremont, California, since August 1999. Both companies are privately held.
From 1993 to 1995, Mr. Starek served on the Board of Directors of Systems
Chemistry, Inc., a privately held company that was purchased in 1995 by
SubMicron Systems, Inc., Previously, Mr. Starek served as President, Chief
Executive Officer and Chairman of the Silicon Valley Group, a supplier of
automated wafer processing equipment for the semiconductor industry that he
founded in 1977.
Scott T. Behan has been a Director of the Company since February, 1999 and an
Executive Vice President of Engineering of the Company since February, 2000.
Prior to his present position with the Company, Mr. Behan served the Company as
Executive Vice President of Sales and Marketing since February, 1999 and from
1994 to 1999, Mr. Behan served as the Company's Vice President of New Business
Development. From 1987 to 1994, Mr. Behan has held a variety of engineering and
sales and marketing positions within the Company. He also has served as a
Director of Vsource, Inc., (NASDAQ: VSRC.OB), formerly Interactive Buyers
Network, an Internet E-commerce service provider, since 1998. Mr. Behan holds a
B.S. in Electrical Engineering from Worcester Polytechnical Institute.
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.
Previously, 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, Derby and Starek, 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 Second Amended and Restated 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.
5
<PAGE>
Board and Committee Attendance
From April 1, 1999 through March 31, 2000, the end of the Company's fiscal year,
the Board of Directors held nine meetings. Each director attended 75% or more
of the total number of meetings of the Board of Directors, with the exception of
Mr. Inbar who attended six of the nine meetings. Each director attended all
committee meetings of which he was a member, during the period for which he had
been a director. The Audit Committee held five meetings and the Compensation
Committee held three 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 Second Amended and Restated 1995 Stock
Incentive Plan, each Nonemployee Director may receive discretionary awards of
shares of Common Stock subject to the terms of the plan. Nonemployee Directors
are not eligible to be considered for the grant of Incentive Stock Options.
Under the terms of the Second Amended and Restated 1995 Stock Incentive Plan, no
Nonemployee Director shall be granted Options in excess of 25,000 shares of
Common Stock during any one calendar year.
6
<PAGE>
Proposal No. 2
APPROVAL OF SECOND AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
As of July 26, 2000, there were 56,779 shares of Common Stock that remained
available under the existing Amended and Restated 1995 Stock Incentive 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 July 26, 2000, the Board of
Directors approved the Second Amended and Restated 1995 Stock Incentive Plan and
is submitting such amended and restated plan (the "Amended Plan") to
stockholders for their approval at the Annual Meeting. The following description
of the Amended Plan is qualified in its entirety by reference to the full text
of the Amended Plan, a copy of which is attached as Exhibit A to this Proxy
Statement. Any awards to be made to any specific employees under the Amended
Plan have not yet been determined.
General
The purpose of the Amended Plan is to enable the Company to attract, retain and
motivate its employees and consultants, as well as its directors who are not
employees ("Nonemployee Directors") by providing for or increasing the
proprietary interests of such employees, consultants or Nonemployee Directors in
the Company. The maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the existing Amended and Restated 1995 Stock
Incentive Plan is currently 1,500,000, 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 Amended Plan be increased by 500,000
shares to an aggregate of 2,000,000 shares of Common Stock, subject to certain
adjustments to prevent dilution. This increase in the number of authorized
shares is the only proposed change to the existing plan.
The Amended Plan is administered by a committee of the Board consisting of two
or more directors (the "Committee"), each of whom is an "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").
However, if the Committee is not comprised of two or more "nonemployee
directors" then all recommendations of the Committee relating to the Amended
Plan shall be subject to the final approval of the Board. 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 "outside directors" (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 Amended Plan, the
Committee is authorized and empowered to administer the Amended Plan, including,
without limitation:
. adopting, amending and rescinding rules and regulations relating to the
Amended Plan;
. determining which persons are participants under the Amended Plan and which
of such participants, if any, shall be granted awards under the Amended
Plan;
. granting awards to participants and determining the terms and conditions
thereof, including the number of shares of Common Stock issuable, and the
exercise price of those awards, subject to certain limitations;
. determining whether and the extent to which adjustments are required; and
. interpreting and construing the Amended Plan and the terms, conditions and
restrictions of any awards granted under the Plan.
Awards to Participants
The Committee is authorized under the Amended Plan to enter into any type of
arrangement with a participant that is not inconsistent with the provisions of
the Amended 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." 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,
7
<PAGE>
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. An Award may consist of
one such security or benefit, or two or more of them in tandem or in the
alternative.
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. In no event may
the exercise price of any option to purchase Common Stock be less than the fair
market value of a share of Common Stock on the date such option is granted. 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, including 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
. the delivery of cash;
. the delivery of other property deemed acceptable by the Committee;
. the delivery of previously owned shares of capital stock of the Company
(including "pyramiding") or other property;
. a reduction in the amount of Common Stock or other property otherwise
issuable pursuant to such Award; or
. the delivery of a promissory note.
Notwithstanding any other provision of the Amended 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. 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).
Nonemployee Director Options
Under the Amended Plan, 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 Amended 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 original 1995 Stock Incentive Plan became effective on November 3, 1995 and
was amended and restated on June 24, 1998. The Amended Plan became effective
upon its adoption by the Board of Directors on July 26, 2000, but no shares of
Common Stock may be issued or sold under the Amended Plan until it has been
approved by the Company's stockholders. Unless sooner terminated by the Board of
Directors, the Amended Plan will terminate on November 1, 2005. After
termination of the Amended 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 Amended Plan on or after October 31, 2015.
Amendment of the Plan
The Amended Plan provides that it may be amended or terminated by the Board at
any time, except that no amendment or termination of the Amended Plan shall
deprive the recipient of any Award that was previously granted to the recipient
under the Amended 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 by the
Company's stockholders, then such amendment will not be effective until it has
been approved by the Company's stockholders.
8
<PAGE>
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 Amended 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 on this summary 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 participant in the Amended Plan 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 Stock 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 Amended Plan, employees of the Company may be granted options
that are intended to qualify as incentive stock options ("Incentive Stock
Options") under the provisions of Section 422 of the Code. Generally, except as
described below with respect to alternative minimum tax, 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;
. 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,
. 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,
. 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
. 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 (a) one year after the date of transfer of the
Option Shares to the optionee pursuant to the exercise of the Incentive Stock
Option and (b) two years from the date of grant of the Incentive Stock Option,
then the optionee will recognize long-term 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 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.
9
<PAGE>
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 Amended 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.
Restricted Stock
Awards under the Amended 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 Amended Plan that 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 Amended Plan.
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 Amended 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 Amended
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.
The terms of the agreements pursuant to which specific Awards are made under the
Amended 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.
The Company generally obtains a deduction equal to the ordinary income
recognized by the recipient of an Award. 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. Nevertheless, the
Amended Plan has been structured in order to enable the Company to issue Awards
that are treated as "performance-based compensation" not subject to this
$1,000,000 limit.
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 Amended Plan may be subject to the
provisions of Section 16(b) of the Exchange Act, under which a purchase of
shares of Common
10
<PAGE>
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 Amended Plan 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 SECOND 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, 2000, 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)
--------------------------------------
Name and Principal Position FY Salary(2) Bonus Other(3)
--------------------------- -- --------- ------- --------
<S> <C> <C> <C> <C>
Kirk A. Waldron, President and 2000 $151,221 $ -- $3,781
Chief Executive Officer 1999 111,096 -- --
1998 101,154 11,000 3,860
Scott T. Behan, Executive Vice 2000 130,547 -- 3,264
President of Engineering 1999 108,862 -- --
1998 102,800 10,500 4,083
Tiberiu Mazilu, Senior Technical 2000 121,308 -- 3,033
Fellow (4) 1999 127,189 -- --
1998 136,607 13,000 5,753
</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) Dr. Mazilu resigned his position as a Director, effective February 23,
1999. Pursuant to his employment agreement dated February 23, 1999, Dr.
Mazilu resigned his position as an Officer of the Company effective
February 23, 2000 but continues to serve as an employee of the Company.
Effective February 23, 2000, Dr. Mazilu became a Senior Technical Fellow of
the Company. Dr. Mazilu's salary was adjusted effective February 23, 2000,
pursuant to his employment contract, which specifies that he be paid
$58,500 per annum ending February 23, 2001.
12
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of options
to each of the Company's Named Executive Officers during the fiscal year ended
March 31, 2000. In addition, in accordance with the rules and regulations of
the Securities and Exchange Commission, the following table sets forth the
hypothetical gains that would exist for the options based on the assumption that
the stock price were to appreciate annually by 5% and 10% respectively. The
rates do not represent the Company's estimate or projection of future Common
Stock prices and no assurance can be given that the share price will appreciate
at the rates shown in the table.
Option Grants During Fiscal 2000
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates
Number of % of Total of Stock Price
Securities Options Granted Exercise Appreciation
Underlying to Employees in Price Expiration for Option Term
-----------------
Name Options Granted Fiscal Year(1) ($/Share) Date(2) 5% 10%
---- --------------- -------------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Kirk A. Waldron 100,000 37.3 % 1.219 4/06/09 $198,562 $316,177
Scott T. Behan 50,000 18.7 % 1.219 4/06/09 99,281 158,089
Tiberiu Mazilu - - - - - -
</TABLE>
(1) Options to purchase an aggregate of 268,000 shares of Common Stock were
granted to employees, including the Named Executive Officers, during the
fiscal year ending March 31, 2000 with exercise prices ranging from $1.219
to $4.219 per share, in each case the fair market value of the Common Stock
on the date of grant. All such options are subject to vesting over a four-
year period, with 25% of the options exercisable on each successive
anniversary of the date of grant.
(2) Options granted have a term of 5 or 10 years, subject to earlier
termination in certain events related to termination of employment.
13
<PAGE>
Option Exercises and Fiscal Year-End Option Values
The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock held by each of the Named Executive
Officers as of March 31, 2000:
Fiscal Year-End Option Values
-----------------------------
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the
Shares Underlying Unexercised Money Options/SARs
Acquired Value Options/SARs at FY end (#) at FY end ($) (2)
----------------------------- ----------------------------
on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kirk A. Waldron 12,500 $101,125 32,500 (3) 235,000 (4) $14,138 $443,350
Scott T. Behan 20,000 152,425 -- 110,000 (5) -- 277,925
Tiberiu Mazilu -- -- -- -- -- --
</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, 2000 represents the
closing trading price of the Common Stock on such date ($4.31 per share)
minus the exercise price.
(3) Represents options granted in April, 1997 and June, 1998.
(4) Represents options granted in April, 1997, June, 1998, February, 1999 and
April, 1999.
(5) Represents options granted in June, 1998, February, 1999, and April, 1999.
14
<PAGE>
Employment Contracts and Change in Control Agreements
The Company has entered into employment agreements with Jacob Inbar,
Tiberiu Mazilu and Edwin McAvoy (collectively, the "Employees"). The Employees
are eligible to participate in the Company's employee benefits plans and
executive compensation programs for the duration of the contract period(s).
In February, 1999, upon his resignation as the Company's President and
Chief Executive Officer, the Company entered into an employment agreement with
Jacob Inbar, effective through August, 2001. This agreement is a matter of
separate inducement from his current position as Chairman of the Board, for the
performance of such part-time duties, functions, responsibilities and authority
as are consistent with that of a Chairman, working part-time, former senior
executive and co-founder of the Company. The terms of the agreement are such
that he receives an aggregate base salary ("Annual Base Salary") comprised of an
annual salary ("Annual Salary") and an initial annual bonus ("Initial Annual
Bonus"). The Annual Salary for the first year will be in the amount of $12,000.
The Annual Salary for the second year and a half is to be negotiated between Mr.
Inbar and the Chief Executive Officer, but will in no cases be less than the
first year amount. The Initial Annual Bonus will be in the amount of $58,000
per year of the contract, including a pro rata amount of this annual rate for
the last six months of the contract. The Initial Annual Bonus is payable in
advance on a quarterly basis. In addition, Mr. Inbar received a $400 a month
office stipend for the duration of the contract and the Company provided Mr.
Inbar with an automobile comparable to the automobile provided to him at the
time of the agreement, including all expenses related to the business use
thereof (including insurance, gasoline and maintenance) through December 1,
1999. The agreement also provides that in the event Mr. Inbar's employment is
terminated by the Company at any time during the duration of the employment
agreement, for reasons of disability, good reason, without cause or by mutual
agreement, Mr. Inbar will receive severance compensation in an amount equal to
the Annual Base Salary payable in bi-weekly increments through August 23, 2001.
In addition, all unvested stock options, restricted stock and other awards
issued pursuant to the Stock Incentive Plan shall immediately vest and the
Company shall continue to provide Mr. Inbar and his dependents with medical
benefits for the duration of the employment contract.
In February, 1999, upon his resignation as the Company's Vice President of
Sales and Marketing and a Director, the Company entered into an employment
agreement with Edwin J. McAvoy, effective through February 23, 2001. This
agreement was made in the interest of retaining Mr. McAvoy in the position of
Director of Programs of the Company. The terms of the agreement are such that
he receives an annual base salary of $117,000 payable in accordance with the
Company's normal payment practices. In addition, Mr. McAvoy was provided with
an automobile comparable to the automobile provided to him at the time of the
agreement, including all expenses related to the business use thereof (including
insurance, gasoline and maintenance) through December 26, 1999. The agreement
also provides that in the event Mr. McAvoy's employment is terminated by the
Company within the first twelve months of the employment term, for reasons of
disability, good reason, or without, Mr. McAvoy will receive severance
compensation in an amount equal to the Annual Base Salary effective upon the
date of Termination, pro-rated bi-weekly, through August 23, 2000. If Mr.
McAvoy's employment is terminated by the Company within the second twelve months
of the employment contract, Mr. McAvoy will receive severance compensation in an
amount equal to the Annual Base Salary effective upon the date of Termination,
pro-rated bi-weekly, for a period of six months from the date of Termination.
In addition, all theretofore unvested stock options, restricted stock and other
awards issued pursuant to the Stock Incentive Plan shall immediately vest and
the Company shall continue to provide Mr. McAvoy and his dependents with medical
benefits for the duration of the employment contract.
In February, 1999, upon his resignation as a Director, the Company entered
into an employment agreement with Tiberiu Mazilu, effective through February 23,
2001. This agreement was made in the interest of retaining Dr. Mazilu in the
position as an Executive and Vice President of Engineering of the Company for
the first year of the contract, and as a consultant for the second year of the
contract. In accordance with the terms of the agreement, Dr. Mazilu resigned as
a director and an Officer of the Company as of February 23, 1999 and February
23, 2000, respectively, but continues to serve as a Senior Technical Fellow of
the Company. The terms of the agreement are such that he receives an annual
base salary of $117,000 for the first year of the contract, and $58,500 for the
second year of the contract, both amounts payable in accordance with the
Company's normal payment practices. In addition, Dr. Mazilu was provided with
an automobile comparable to the automobile provided to him at the time of the
agreement, including all expenses related to the business use thereof (including
insurance, gasoline and maintenance) through November 11, 1999. The agreement
also provides that if Dr. Mazilu's employment is terminated by the Company
within the second twelve months of the employment contract, Dr. Mazilu will
receive severance compensation in an amount equal to the Annual Base Salary
effective upon the date of Termination, pro-rated bi-weekly, for a period of six
months from the date of Termination. In addition, all theretofore unvested
stock options, restricted stock and other awards issued pursuant to the 1995
Stock Incentive Plan shall immediately vest and the Company shall continue to
provide Dr. Mazilu and his dependents with medical benefits for the duration of
the employment contract.
In August, 1998, in the interest of retaining Mr. Waldron's services, the
Company entered into a Change in Control Agreement with Mr. Waldron. In the
case where the Company is consolidated or merged with or into another
corporation or
15
<PAGE>
corporations in which the stockholders of the Company immediately prior to the
consolidation or merger do not retain a majority of the voting power of the
surviving corporation or a sale of all or substantially all of the assets of the
Company, and Mr. Waldron's employment is terminated within one year of the
effective date of the Change in Control, he would be entitled to a severance
payment equal to his annual base salary, at the rate in effect immediately prior
to such Change in Control, payable in a single lump sum payment within ten days
of the effective date of such Change in Control, or immediately upon
termination. This agreement is binding upon all successors and assigns and is
effective for as long as the Executive is an employee of the Company.
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 were 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"). While the Federal Action asserted
claims under the federal securities laws and the State Action asserted claims
under California's securities laws, the complaints were otherwise essentially
identical, and alleged 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 Federal Action, in November, 1999, the parties reached a settlement in
principle for $2.25 million, all of which was covered by the Company's insurers.
On May 1, 2000, the lawsuit was dismissed pursuant to an order of the district
court from which no appeal has been taken. The judgment is thus now final and
non-appealable. Pursuant to the stipulation of settlement, the plaintiffs
dismissed the State Action with prejudice in June, 2000.
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
16
<PAGE>
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 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.
17
<PAGE>
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, 2000. Based solely upon a review of reports delivered to the
Company for fiscal year 2000, 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, 2000. 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, 2001.
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 2001 Annual
Meeting of Stockholders of the Company must be received by April 4, 2001 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 2001 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.
ANNUAL REPORT
The Company's 2000 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, 2000, 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/ Scott T. Behan
Scott T. Behan
Secretary
Camarillo, California
August 1, 2000
18
<PAGE>
APPENDIX A
SECOND AMENDED AND RESTATED 1995
STOCK INCENTIVE PLAN AS AMENDED AND RESTATED
JULY 26, 2000
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
<PAGE>
(C) the delivery of cash or a promissory note, the terms and
conditions of which shall be determined by the Committee;
(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 2,000,000,
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 2,000,000, 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
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
AML COMMUNICATIONS, INC.
1000 Avenida Acaso
Camarillo, CA 93012
PROXY FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 14, 2000
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 2000 Annual Meeting of
Stockholders, revoking all prior proxies, hereby appoints Jacob Inbar and Scott
T. Behan, 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
31, 2000 at the 2000 Annual Meeting of Stockholders to be held on September 14,
2000 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(S) FOR DIRECTOR LISTED AND IN THE DISCRETION OF THE PROXIES ON ALL
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE 2000 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(S) FOR CLASS 2 DIRECTOR LISTED BELOW AND IN THE DISCRETION
OF THE PROXIES ON MATTERS DESCRIBED IN ITEM 3.
1. Election of 2 Class 2 Directors: Kirk A. Waldron
David A. Derby
FOR the Nominees listed above [_]
WITHHOLD AUTHORITY to vote for the Nominees listed above [_]
____________________________________________________________
2. Approval of the Company's Second Amended and Restated 1995 Stock Incentive
Plan reflecting an amendment to the Company's 1995 Amended and Restated
Stock Incentive Plan to increase the number of shares subject thereto from
1,500,000 to 2,000,000.
FOR [_]
AGAINST [_]
ABSTAIN [_]
____________________________________________________________
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the 2000 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.
