<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
California Microwave, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
George L. Spillane
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
LOGO
CALIFORNIA MICROWAVE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 26, 1995
The Annual Meeting of Shareholders of CALIFORNIA MICROWAVE, INC. will be
held at the offices of California Microwave-Microwave Networks Incorporated, a
subsidiary of the Company, located at 10795 Rockley Road, Houston, Texas, on
October 26, 1995, at 10:00 a.m., for the following purposes:
1. To elect Directors.
2. To approve an amendment to the Company's 1992 Stock Option Plan.
3. To ratify the selection of Ernst & Young LLP as independent public
accountants for the Company.
4. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on September 6, 1995,
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
GEORGE L. SPILLANE
Secretary
Sunnyvale, California
October 2, 1995
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTPAID ENVELOPE. IF YOU
ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY
DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 3
CALIFORNIA MICROWAVE, INC.
650 N. MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
CALIFORNIA MICROWAVE, INC., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Shareholders to be held at the offices of California
Microwave-Microwave Networks Incorporated, a subsidiary of the Company, located
at 10795 Rockley Road, Houston, Texas, at 10:00 a.m., on October 26, 1995.
Any proxy given may be revoked by a shareholder at any time before it is
voted by filing with the Secretary of the Company a notice in writing revoking
it, or by duly executing a proxy bearing a later date. Proxies may also be
revoked by any shareholder present at the meeting who expresses a desire to vote
his or her shares in person. Subject to any such revocation, all shares
represented by properly executed proxies which are received prior to the meeting
will be voted in accordance with the specifications on the proxy. If no
specification is made with regard to a proposal set forth in the proxy, the
shares will be voted for all listed nominees for director and in favor of the
proposals.
A copy of the Annual Report of the Company for its fiscal year ended June
30, 1995, is being mailed to shareholders with this proxy statement. The
approximate date on which this proxy statement and the accompanying proxy are
being sent to shareholders is October 2, 1995.
VOTING
Only shareholders of record on September 6, 1995, will be entitled to
notice of and to vote at the meeting. At the close of business on that date, the
Company had 15,838,060 shares of common stock outstanding. A majority of all
shares represented in person or by proxy at the Annual Meeting constitutes a
quorum for the transaction of business at the meeting. Abstentions are
considered as shares present and entitled to vote and therefore will have the
same effect as a vote against a matter presented at the meeting. Brokers who
hold shares in street name for customers have the authority to vote on the
election of directors. With respect to any other matters, shares as to which
brokers have not received discretionary voting authority from their customers
are considered shares not entitled to vote with respect to such matters (rather
than abstentions on such matters), but are counted toward the establishment of a
quorum.
Holders of common stock are entitled to one vote for each share held. In
the election of directors, all shareholders may cumulate their votes for
candidates placed in nomination. Cumulative voting rights entitle a shareholder
to as many votes as shall equal the number of votes represented by shares of
common stock held by such shareholder multiplied by the number of directors to
be elected, and all such votes may be cast for a single candidate or may be
distributed among any or all of the candidates. A stockholder intending to
cumulate votes for the election of directors must notify the Company of such
intention prior to the commencement of the voting for directors. If any
stockholder has given such notice, every stockholder may cumulate votes for
candidates placed in nomination prior to the voting. The persons named in the
proxy will, unless authority to do so is withheld, exercise their discretion
with respect to the cumulative voting of shares represented by proxy in order to
assure the election of as many of the nominees of the Board of Directors as
possible.
<PAGE> 4
ELECTION OF DIRECTORS
Directors are elected to hold office until the next Annual Meeting of
Shareholders or until their successors have been elected. Unless otherwise
instructed by the shareholder, it is intended that the shares represented by the
enclosed proxy will be voted for the nominees named below. Although management
anticipates that all of the nominees will be able to serve, if any nominee is
unable or unwilling to serve at the time of the meeting, the proxy will be voted
for a substitute nominee chosen by management.
The Board of Directors, pursuant to the By-Laws of the Company, in
September 1995 increased the authorized number of directors from seven to eight
and added J. J. Adorjan to the slate of nominees.
All of the nominees are presently directors of the Company, with the
exception of J. J. Adorjan. No nominee or executive officer has any family
relationship with any other nominee or executive officer. The beneficial
ownership of the Company's stock by the nominees is set forth under "Certain
Shareholders."
The following table and biographical paragraphs set forth the names and
ages of the nominees, their principal occupations at present, the positions and
offices held by each with California Microwave, Inc. in addition to the position
as a director, and the period during which each has served as a director of the
Company.
<TABLE>
<CAPTION>
DIRECTOR
CONTINUOUSLY
NOMINEE AGE OCCUPATION SINCE
- ------------------------------------- --- -------------------------------------- ------------
<S> <C> <C> <C>
Philip F. Otto....................... 54 Chairman of the Board, President and 1992
Chief Executive Officer
David B. Leeson(1)(2)................ 58 Founder of and consultant to the 1968
Company and Chairman of the Board
Emeritus
Robert A. Helliwell(1)(3)............ 75 Professor of Electrical Engineering, 1968
Stanford University
Gilbert F. Johnson................... 64 President of the Government Group 1980
Arthur H. Hausman(2)(3).............. 71 Chairman of the Board Emeritus of 1990
Ampex Corporation, a video systems
manufacturer, and business
consultant and private investor
Edward E. David, Jr.(1)(2)........... 70 President of EED, Inc., consultants to 1992
industry and government on
technology and research management
Alfred M. Gray(1)(3)................. 67 Retired Commandant of the U.S. Marine 1993
Corps and consultant to industry and
government
J. J. Adorjan........................ 56 President and Chief Operating Officer --
of Borg-Warner Security Corporation
</TABLE>
- ---------------
(1) Member of Nominating Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
PHILIP F. OTTO rejoined the Company as a director and President of the
Wireless Products Group in January 1992, became President and Chief Executive
Officer of the Company in March 1992 and Chairman of the Board in January 1993.
He served as Executive Vice President, Chief Financial Officer and a director of
2
<PAGE> 5
General Cellular Corporation, a cellular telecommunications company, from 1989
to 1991. Subsequent to Mr. Otto's employment by General Cellular Corporation,
that corporation negotiated a "pre-packaged" plan of reorganization under
Chapter 11 that involved the infusion of additional capital. He also served as
President of Netline Communications Corporation, a telecommunications software
company, in 1988; as a consultant to the telecommunications industry from 1986
to 1988; and as Chief Executive Officer and a director of Telco Systems, Inc., a
fiber optics telecommunications company, from 1981 to 1986. Mr. Otto served as
Chief Financial Officer of the Company from 1975 to 1980, was a director of the
Company from 1976 to 1985 and was an Executive Vice President of the Company
from 1979 to 1981. He holds a Bachelor of Science Degree in Engineering from
Yale University and a Master's Degree in Business Administration from the
Harvard Business School.
DR. DAVID B. LEESON, a founder of the Company, was Chief Executive Officer
of the Company from its inception in 1968 until March 1992, was Chairman of the
Board from the Company's inception until January 1993, and was elected Chairman
of the Board Emeritus in July 1994. He commenced service as a consultant to the
Company under a three-year consulting agreement in January 1993. Dr. Leeson
holds degrees in engineering from California Institute of Technology, M.I.T. and
Stanford University (Ph.D.), and is a Fellow of the Institute of Electrical and
Electronics Engineers ("IEEE"). Prior to founding the Company, Dr. Leeson was
associated with Applied Technology (now a division of Litton Industries) and
Hughes Aircraft Company (now a division of General Motors).
DR. ROBERT A. HELLIWELL has been a Professor of Electrical Engineering at
Stanford University since 1946. He holds Bachelor of Arts, Master of Science,
Electrical Engineering and Ph.D. degrees from Stanford University.
GILBERT F. JOHNSON served as the Company's President and Chief Operating
Officer from 1985 to 1991 and became President of the Government Group in 1991.
He served as the Company's Executive Vice President and Chief Operating Officer
from 1982 to 1985. Mr. Johnson, who holds a Bachelor's Degree in Electrical
Engineering from the University of Illinois and a Master's Degree in Electrical
Engineering from the University of Southern California, is a senior member of
the IEEE. Prior to joining California Microwave in 1973, Mr. Johnson held
engineering management positions at Applied Technology and Hughes Aircraft
Company.
ARTHUR H. HAUSMAN served as President and Chief Executive Officer of Ampex
Corporation from 1971 through 1980, as its Chairman of the Board, President and
Chief Executive Officer from 1981 through 1982, and as Chairman of the Board
from 1983 through 1987 when he became Chairman of the Board Emeritus. Mr.
Hausman received his Bachelor's Degree in Electrical Engineering from the
University of Texas and his Master's Degree in Engineering Science and Applied
Physics from Harvard University. He is a Director of TCI International, Inc.,
Drexler Technology, Inc. and California Amplifier, Inc. Mr. Hausman is a senior
member of the IEEE.
DR. EDWARD E. DAVID, JR. served as President of Exxon Research and
Engineering Company from 1977 to 1986 and has served as President of EED, Inc.
since 1976. He was Executive Director of Research at Bell Telephone Labs where
he was employed from 1950 to 1970 and Science Advisor to the President of the
United States during the period 1970 through 1973. He holds a Bachelor's Degree
in Electrical Engineering from Georgia Institute of Technology and Master of
Science and Doctor of Science degrees from the Massachusetts Institute of
Technology. Dr. David serves on the Boards of Directors of Intermagnetics
General Corporation and Protein Polymer Technologies, Inc. He is the retiring
U.S. representative to the NATO Science Committee and a member of the Bellcore
Advisory Council.
3
<PAGE> 6
GENERAL ALFRED M. GRAY, USMC (RET.) served as the Commandant of the U.S.
Marine Corps and was a member of the Joint Chiefs of Staff from 1987 to 1991. He
holds a Bachelor's Degree in Science from the State University of New York and
is a member of the National Security Agency Science Advisory Board.
J. J. ADORJAN joined Borg-Warner Security Corporation, a provider of
security services, as its President and Chief Operating Officer in April 1995.
From October 1993 until April 1995, Mr. Adorjan served as President of Emerson
Electric Company and from 1990 to 1992 as Chairman and Chief Executive Officer
of ESCO Electronics Corporation. Mr. Adorjan previously served in various
positions at Emerson, including Vice Chairman of Emerson and Group Vice
President of Emerson's Government and Defense Group from 1987 to 1990 and
Executive Vice President of Emerson from 1983 to 1987. Mr. Adorjan earned his
Bachelor of Science and Master of Science degrees in economics and finance from
Saint Louis University, where he currently serves as Chairman of the Board of
Trustees.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The total number of meetings of the Board of Directors (including regularly
scheduled and special meetings) during fiscal 1995 was seven. Each of the
incumbent directors attended at least 75% of the aggregate of (1) the total
number of meetings of the Board during the year, and (2) the total number of
meetings of all committees of the Board on which he served. The Company has an
Audit Committee, a Compensation Committee and a Nominating Committee.
The responsibilities of the Audit Committee include (1) reviewing and
consulting with the auditors concerning the Company's financial statements,
accounting and financial policies, and internal controls; (2) reviewing the
scope of the independent auditors' activities and the fees of the independent
auditors; (3) maintaining good communications on accounting matters among the
Committee, the Company's independent accountants and the Company's management;
and (4) reviewing the activities of the Company's internal auditor. The members
of the Audit Committee, which met five times during fiscal 1995, are Messrs.
David (Chair), Hausman and Leeson.
The functions of the Compensation Committee are to review the Company's
compensation philosophy; to recommend to the Board of Directors the total
compensation to be paid to the Chief Executive Officer and the Company's other
officers; to approve the form and terms of all incentive and stock plans,
including stock option plans and to consider the dilutive impact of the stock
plans; and to prepare the Compensation Committee Report and approve the peer
groups and stock valuation methods for the Company's annual Proxy Statement. The
members of the Compensation Committee, which met seven times during fiscal 1995,
are Messrs. Hausman (Chair), Gray and Helliwell.
The function of the Nominating Committee is to recommend to the Board a
slate of director candidates to be nominated for election to the Board and to
fill vacancies that occur on the Board. The Nominating Committee will consider
nominees recommended by stockholders, provided such recommendations are
submitted in writing to the Secretary of the Company, are timely, and contain
sufficient background information concerning the nominee to enable a proper
judgment to be made as to the proposed nominee's qualifications, and include a
written consent of the proposed nominee to stand for election if nominated and
to serve if elected. The members of the Nominating Committee, which met once
during fiscal 1995, are Messrs. Leeson (Chair), David, Gray and Helliwell.
4
<PAGE> 7
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their service as directors. During the fiscal year ended June
30, 1995, directors who were not employees of the Company received compensation
at the rate of $20,000 per year for their services as Board members, $500 per
Committee meeting attended, and reimbursement for expenses incurred in attending
meetings of the Board or any Committee of the Board. Commencing in fiscal 1996,
each director who serves as a Chairman of a Committee will receive an additional
$250 per Committee meeting attended. In fiscal 1995, Messrs. David, Hausman,
Helliwell, Gray and Leeson each received an option to purchase 2,000 shares of
Company common stock at an exercise price of $31.50 per share. For information
relating to an increase in option grants to directors, see "Amendment to 1992
Stock Option Plan."
In January 1993, Dr. Leeson commenced service as a consultant to the
Company under a three-year consulting agreement. Under that agreement, Dr.
Leeson receives $250,000 per year for consulting with the Company regarding its
business, technology and strategy and will at the Company's request serve as the
Company's representative to certain forums.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows specific compensation information, for the fiscal
years ending June 30, 1995, 1994 and 1993, for the Company's Chief Executive
Officer and the next four most highly compensated executive officers as of June
30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------------
SECURITIES
ANNUAL COMPENSATION OTHER RESTRICTED UNDERLYING
NAME AND PRINCIPAL -------------------------- ANNUAL STOCK OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(2) AWARDS(1) (NUMBER) COMPENSATION(3)
- -------------------------- ---- -------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip F. Otto............ 1995 $323,019 $ 0 $34,704 $ 0 30,000 $ 3,791
Chairman, President and 1994 $275,000 $227,000 $16,172 $ 0 24,000 $ 3,203
Chief Executive Officer 1993 $250,000 $220,000 $ 3,534 $ 0 80,000 $ 2,943
Gilbert F. Johnson........ 1995 $222,755 $ 0 $12,056 $ 0 10,000 $ 6,327
President, Government 1994 $218,000 $160,000 $ 7,276 $ 0 15,000 $ 5,811
Group 1993 $220,781 $247,752 $ 6,612 $ 46,000 50,000 $ 6,539
Douglas H. Morais......... 1995 $218,396 $ 0 $17,538 $ 0 10,000 $ 2,926
President, Wireless 1994 $197,115 $188,000 $ 3,530 $ 0 45,000 $ 1,065
Products Group 1993 $ 63,177 $ 20,000 $ 0 $ 44,250 30,000 $ 600
Garrett E. Pierce(4)...... 1995 $205,000 $ 0 $60,297 $ 0 5,000 $ 1,249
Executive Vice President 1994 $ 46,516 $ 32,200 $12,500 $ 0 72,500 $ 813
and Chief Financial
Officer 1993 $ -- $ -- $ -- $ -- -- $ --
Leon F. Blachowicz(5)..... 1995 $108,180 $100,000 $ 0 $102,750 60,000 $ 0
President, Satellite 1994 $ -- $ -- $ -- $ -- -- $ --
Communications Group 1993 $ -- $ -- $ -- $ -- -- $ --
</TABLE>
- ---------------
(1) At June 30, 1995, the number and aggregate value of unvested restricted
stock holdings for the named executive officers were: Mr. Otto -- 10,000
shares, $157,250; Mr. Johnson -- 3,900 shares, $47,313; Mr. Morais -- 1,800
shares, $26,550; Mr. Pierce -- 0 shares, $0; Mr. Blachowicz -- 3,000 shares,
$102,750. The aggregate values shown in the table were computed by
multiplying the number of unvested restricted shares granted by the closing
market price of the Company's common stock on the date of grant.
(2) In 1995 and 1994, includes for Mr. Pierce $45,794 and $12,500 of relocation
expenses, respectively.
(3) Includes matching employer contributions to the California Microwave
Tax-Deferred Savings Plan (a 401(k) plan) for fiscal 1995 in the amount of
$800 for the benefit of each of Messrs. Otto, Johnson, and Morais; matching
employer contributions to the Tax-Deferred Savings Plan have been increased
to $1,000 for fiscal 1996.Also includes amounts paid by the Company for life
insurance premiums for fiscal 1995, as follows: Mr. Otto -- $2,991, Mr.
Johnson -- $5,527, Mr. Morais -- $2,126, Mr. Pierce -- $1,249, and Mr.
Blachowicz -- $0.
(4) Mr. Pierce joined the Company in April 1994.
(5) Mr. Blachowicz joined the Company in January 1995.
6
<PAGE> 9
STOCK OPTION TABLES
The following table shows information concerning stock options granted to
the individuals named in the Summary Compensation Table above during the fiscal
year ended June 30, 1995.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM(2)(3)
GRANTED IN PRICE EXPIRATION -------------------------------
NAME (NUMBER)(1) FISCAL YEAR ($/SH) DATE 0% 5% 10%
- ------------------------------------------- ----------- -------- ---------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip F. Otto................. 30,000 4.8% $23.25 7/20/04 $0 $ 438,726 $1,111,815
Gilbert F. Johnson............. 10,000 1.6% $23.25 7/20/04 $0 $ 146,242 $ 370,605
Douglas H. Morais.............. 10,000 1.6% $23.25 7/20/04 $0 $ 146,242 $ 370,605
Garrett E. Pierce.............. 5,000 0.8% $23.25 7/20/04 $0 $ 73,121 $ 185,303
Leon F. Blachowicz............. 55,000 8.9% $34.25 1/3/05 $0 $1,184,874 $3,002,618
5,000 0.8% $29.50 4/26/05 $0 $ 92,777 $ 235,115
</TABLE>
- ---------------
(1) All options granted in fiscal 1995 were pursuant to the 1992 Stock Option
Plan. The options are incentive or nonqualified stock options that were
granted at 100% of the fair market value of the Common Stock on the date of
grant. The options expire ten years from the date of grant, unless otherwise
earlier terminated as a result of certain events related to termination of
employment. The options vest 25% per year on each of the first four
anniversaries of the option grant date. Additional vesting of the right to
exercise the options ceases when the optionee's employment terminates.
(2) The 5% and the 10% assumed rates of appreciation applied to the option
exercise price over the ten-year option term are prescribed by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of Common Stock. The named
executive officers will receive benefit from the options only to the extent
that the Company's stock appreciates in value over the exercise price of the
options.
(3) At assumed annual rates of appreciation of 0%, 5% and 10%, the aggregate
potential realizable increase in value for shares held by all stockholders
as of June 30, 1995 for the ten-year period from July 21, 1994 to July 20,
2004, would be $0, $229,876,452 and $582,549,780, respectively.
7
<PAGE> 10
The following table shows information concerning the value of unexercised
stock options held by the individuals named in the Summary Compensation Table
above as of June 30, 1995.
AGGREGATED OPTION EXERCISES(1) IN FISCAL 1995
AND JUNE 30, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT 6/30/95 OPTIONS AT 6/30/95(2)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Philip F. Otto....................... 115,000/113,000 $1,237,625/$921,625
Gilbert F. Johnson................... 34,250/46,250 $396,703/$374,922
Douglas H. Morais.................... 26,250/58,750 $213,203/$348,359
Garrett E. Pierce.................... 18,125/59,375 $87,227/$270,742
Leon F. Blachowicz................... 0/60,000 $0/$0
</TABLE>
- ---------------
(1) During fiscal 1995, options covering 6,000 shares and 1,830 shares were
exercised by Philip F. Otto and Gilbert F. Johnson, respectively.
(2) The value of unexercised options is calculated by multiplying the number of
options outstanding by the difference between the option exercise price and
the June 30, 1995 closing price of $25.0625 per share of the Company's
common stock as reported on the Nasdaq National Market. Options with an
exercise price in excess of the June 30, 1995 closing price were not
included in this calculation.
EMPLOYMENT AGREEMENT
The Company's employment agreement with Mr. Otto provides for a payment to
Mr. Otto, in the event the Company terminates his employment other than for
cause, of an amount equal to the greater of $750,000 or 300% of his then-current
base salary, in 36 monthly installments, and for continued health benefits for
two years or, if earlier, the date he obtains health benefits from a new
employer. Mr. Otto's base salary was increased from $275,000 to $335,000,
effective August 7, 1994. Mr. Otto's employment agreement also provides that the
Company will pay or reimburse Mr. Otto for certain personal expenses.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee (the "Committee") of the Board of Directors is
composed entirely of outside directors, none of whom is or was an officer or
employee of the Company or any of its subsidiaries. The Committee is responsible
for developing and making recommendations to the Board with respect to the
Company's executive compensation policies and has the sole responsibility for
determining the recipients of stock option and restricted stock grants and the
number of options and restricted shares to be granted to each recipient. In
addition, the Committee is responsible for making annual recommendations to the
Board for the compensation to be paid to the Chief Executive Officer and each of
the other executive officers of the Company. The Committee has engaged a
nationally recognized compensation and benefits consulting firm to assist the
Committee and the Company in reviewing the compensation program of the Company's
executive officers, gathering information on competitive compensation rates and
developing more effective methods of compensating the executive officers of the
Company.
8
<PAGE> 11
The objectives of the Company's executive compensation program are to
provide the following:
- Levels of compensation that are competitive with those provided in the
various markets in which the Company competes for its executive
resources;
- Annual incentive compensation that varies with the financial performance
of the Company, and rewards corporate, business unit and individual
performance; and
- Long-term incentives which align the interests of management with those
of the shareholders.
The executive compensation program provides an overall level of
compensation competitive relative to the Company's industry peer group. The
Committee develops its executive compensation program with reference to that of
a group of companies in the communications equipment industry. Actual
compensation levels may be greater or less than average levels in surveyed
companies depending upon annual and long-term Company, business unit and
individual performance. The Committee uses its discretion in recommending to the
Board executive compensation at levels that in its judgment are warranted by
external, internal or individual circumstances.
EXECUTIVE OFFICER TOTAL COMPENSATION PROGRAM
The Company's executive officer total compensation program is comprised of
base salary, annual cash incentive compensation, long-term incentive
compensation principally in the form of stock options, and various other common
employee benefits. In July 1992 the Company initiated the Executive Incentive
Plan, a formal pay-for-performance program. In July 1992 and July 1993 the base
salary component of the executive officers' fiscal 1993 and 1994 compensation
generally was not adjusted upward. Fiscal 1995 base salaries of the current
executive officers, excluding the President, are on average 4.2% higher than
their base salaries in fiscal 1994. The annual incentive compensation
opportunity portion of the executive officers' compensation, which is based upon
the Company's financial performance, has been increased relative to what it was
prior to fiscal 1992.
The Committee has reviewed the total compensation of the five highest paid
executive officers in fiscal 1995 and has concluded that their compensation is
reasonable and consistent with the Company's compensation philosophy and
industry practice.
BASE SALARY
Base salary levels for the Company's executive officers are competitively
set relative to the Company's industry peer group and with reference to
published industry surveys. In determining particular executives' salaries, the
Committee also takes into account individual experience and performance and
specific factors particular to the Company.
ANNUAL INCENTIVE COMPENSATION
The Executive Incentive Plan is the Company's annual incentive program for
selected executive officers and other senior managers. The purpose of the plan
is to provide a direct financial incentive to executives (in the form of an
annual cash bonus) to achieve the Company's and their respective business units'
annual profit goals. Target, threshold and maximum bonus goals are set at the
beginning of each fiscal year and target goals are set for the Company and
business unit profit performance. For fiscal 1994 and fiscal 1995, corporate
earnings per share ("EPS") and business unit operating income (as defined),
including a capital charge for assets employed, were selected as the measures of
Company and business unit performance, respectively,
9
<PAGE> 12
against which actual performance was measured. Individual performance may also
be taken into account in determining bonuses, but no bonus is paid unless the
predetermined threshold profit performance level has been reached. Target bonus
awards are set at competitive levels relative to the Company's industry peer
group. No bonuses were paid to officers of the Company with respect to fiscal
1995, other than the $100,000 that was paid to Leon Blachowicz pursuant to the
contract entered into with him at the time of his employment in January 1995.
STOCK OPTION PROGRAM
The stock option program is the Company's principal long-term incentive
plan for executive officers and key managers. The objectives of the program are
to align executive and shareholder long-term interests by creating a strong and
direct link between executive compensation and shareholder return, and to enable
executives to develop and maintain a significant, long-term ownership position
in the Company's common stock. The Compensation Committee believes that stock
options, better than other long-term incentives, create a mutuality of interest
between the management and shareholders because stock options provide value to
the optionees only if the stock price increases.
Stock options are granted at an option price equal to the fair market value
of the Company's common stock on the date of grant, have ten-year terms and vest
ratably over a four-year period. The Committee determines the size of option
grants for individual executive officers by comparing the assumed potential gain
under unvested options outstanding with a target gain objective that is set at a
level the Company believes is competitive within its industry peer group.
BENEFITS
The Company provides benefits to the executive officers that are generally
available to Company employees. The amount of perquisites, as determined in
accordance with the rules of the Securities and Exchange Commission relating to
executive compensation, did not exceed 10% of total salary and bonus for fiscal
1995 for any executive officer.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Otto was appointed to the position of President and Chief Executive
Officer in March 1992 with a base salary of $250,000. In January 1993, Mr. Otto
was elected Chairman of the Board. Effective July 1, 1993, Mr. Otto received a
base salary increase to $275,000 and effective August 7, 1994, Mr. Otto received
a base salary increase to $335,000.
Mr. Otto's annual bonus is determined in accordance with the Executive
Incentive Plan. Based upon the Company's results for fiscal 1995, Mr. Otto did
not become entitled to a bonus under the Plan for that year.
The stock options granted to Mr. Otto during fiscal 1995 are consistent
with the design of the overall executive compensation program and are shown in
the Summary Compensation Table.
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits the
amount of compensation a corporation may deduct as a business expense. Section
162(m) generally disallows deductions for compensation in excess of $1 million
to a company's Chief Executive Officer or to any of its four other most highly
compensated executive officers. Compensation that is "performance-based" is not
subject to that limit if certain requirements are met. The Committee does not
contemplate that there will be nondeductible compensation for 1995 or for 1996
for any of these five executive officers.
10
<PAGE> 13
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the Acts.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ARTHUR H. HAUSMAN, Chairman
ALFRED M. GRAY
ROBERT A. HELLIWELL
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the company's common stock, the Nasdaq Stock Market (US) Index and
the Nasdaq Communications Equipment Index, each of which assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
California Microwave 100.0 171.0 115.9 211.6 263.8 290.6
Nasdaq (US) Index 100.0 105.9 127.3 160.0 161.6 215.3
Nasdaq Communications 100.0 99.8 97.9 176.8 172.5 335.2
Equipment Index
</TABLE>
11
<PAGE> 14
AMENDMENT TO 1992 STOCK OPTION PLAN
The Board of Directors in July 1995 approved an amendment to the Company's
1992 Stock Option Plan ("1992 Option Plan") to provide (a) that the initial
stock option award to directors who are not employees of the Company
("nonemployee directors") be increased from 5,000 shares to 10,000 shares (with
the current non-employee directors to receive an option to purchase an
additional 5,000 shares by reason of this change), (b) that the annual stock
option award for non-employee directors be increased from 2,000 shares to 3,000
shares for members other than chairs of committees and to 5,000 shares for
chairs of committees, and (c) that the one-year vesting requirement applicable
to options granted to non-employee directors be removed. Approval of this
amendment is required by at least a majority of the shares of common stock
present in person or represented by proxy and entitled to vote.
The 1992 Option Plan covers 1,600,000 shares of common stock of the
Company, subject to adjustment in the event of certain changes in the
capitalization of the Company. As of September 6, 1995, options covering
1,330,283 shares, with a total value (market value minus exercise price) of
$5,237,000, were outstanding under the Plan. The amendment to the 1992 Option
Plan will not increase the number of shares covered by the Plan, but will
increase the number of options granted under the Plan to directors.
If the amendment is approved (and assuming election of all the directors
nominated), immediately following the Annual Meeting of Shareholders Messrs.
David, Hausman, and Leeson will receive in their capacities as Chairs of Board
Committees annual grants covering 5,000 shares of common stock each, and Messrs.
Gray and Helliwell will receive annual grants covering 3,000 shares each. In
addition, these five directors will each receive a grant covering 5,000 shares
for the purpose of putting them on a parity with future non-employee directors
who will receive initial option grants covering 10,000 shares, and Mr. Adorjan
will receive his initial option grant covering 10,000 shares. All options
granted to directors will be exercisable at a price equal to the fair market
value of the Company's common stock on the date of grant.
The Company believes that it is very important to its success that it be
able to continue to attract and retain highly qualified directors and that,
based upon advice from its outside compensation consultants, the increase in
option grants for non-employee directors covered by the amendment will make the
Company's compensation program for directors more competitive. Accordingly, the
Company recommends that the shareholders vote in favor of the amendment to the
1992 Option Plan.
DESCRIPTION OF THE 1992 STOCK OPTION PLAN
Options to purchase common stock of the Company granted under the 1992
Option Plan may be either "incentive stock options" within the meaning of that
term as used in Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified stock options. Under the 1992 Option Plan, options may be granted
to officers, other key employees, and consultants of the Company and its
subsidiaries, except that incentive stock options may not be granted to
consultants of the Company or any of its subsidiaries. Each non-employee
director of the Company will automatically receive a non-qualified stock option
under the 1992 Option Plan immediately following each annual meeting of
shareholders of the Company. If the amendment to the 1992 Stock Option Plan is
approved, the first such option received by a nonemployee director will cover
10,000 shares of common stock of the Company and each option received by a
non-employee director under the 1992 Option Plan thereafter will cover 3,000
shares of common stock in the case of directors who are not chairs of Committees
and 5,000 shares in the case of directors who are chairs of Committees. Each
such option will have an exercise price equal to the fair market value of the
common stock of the Company on the date of the Annual Meeting of Shareholders to
which it relates. Currently approximately 1,000 persons are
12
<PAGE> 15
eligible to participate in the 1992 Option Plan, including eight officers and
five non-employee directors (six if Mr. Adorjan is elected).
The purchase price of shares acquired upon exercise of stock options under
the 1992 Option Plan must be not less than 100% of the fair market value of the
shares on the date the option is granted, with the exception that in the case of
incentive stock options granted to shareholders who own 10% or more of the total
combined voting power of all classes of stock of the Company or its subsidiaries
(a "10% shareholder") the exercise price must be not less than 110% of such fair
market value. Payment of the purchase price may be made in cash or in shares of
common stock of the Company or, in the discretion of the Board of Directors or
Committee designated by the Board, by a promissory note or such other form of
legal consideration that may be acceptable to the Board or Committee. The
aggregate value (at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by any Optionee
during any calendar year may not exceed $100,000. No officer or key employee may
receive options under the 1992 Option Plan covering in excess of 100,000 shares
in any fiscal year.
The term of an option cannot exceed ten years (five years in the case of an
incentive stock option granted to a 10% shareholder). An option granted to an
officer or other key employee or consultant generally becomes exercisable at the
rate of 25% for each year the employee remains with the Company. If the
amendment to the 1992 Stock Option Plan is approved, an option granted to a
non-employee director becomes fully vested on the date of grant. Options granted
to officers and directors can in no event be exercisable until the elapse of six
months from the date of grant.
Unless terminated earlier by reason of expiration of the option term,
options under the 1992 Option Plan will generally terminate three months after
the optionee terminates employment with the Company, or 12 months after the
termination of employment if the optionee dies or becomes disabled while an
employee of the Company. All options granted under the 1992 Option Plan will be
nontransferable by the optionee during the optionee's lifetime. The options may
contain such other terms, provisions and conditions not inconsistent with the
1992 Option Plan as may be determined by the Board of Directors or Committee
administering the Option Plan.
If any option granted under the 1992 Option Plan terminates or expires
unexercised in whole or in part, the shares released from that option may be
made subject to additional options granted under the 1992 Option Plan, including
options granted to the same optionee having a lower exercise price than the
terminated option.
The grant of an incentive stock option should have no tax effect on the
Company or the optionee to whom it is granted, and there generally is no tax
upon exercise of the option. If an optionee does not dispose of shares acquired
upon exercise of the option within two years of the date of granting the option,
nor within one year after exercise of the option, any gain realized by the
optionee on the subsequent sale of such shares is treated as a long-term capital
gain for federal income tax purposes. If the shares are sold prior to the
expiration of such periods, the lesser of (a) the difference between the
exercise price and the value of the stock at the date of exercise and (b) the
amount realized on disposition over the purchase price is treated as
compensation to the optionee taxable as ordinary income. The excess gain, if
any, is treated as capital gain (which will be short-term or long-term capital
gain depending upon the length of time the shares were held). The excess of the
fair market value of the shares over the option price at the time of exercise of
an incentive stock option may subject the recipient to the alternative minimum
tax provided for in the Internal Revenue Code of 1986, as amended (which,
generally speaking, will be applied only if it produces a tax that is higher
than the
13
<PAGE> 16
individual's regular tax liability). The Company is allowed a deduction for tax
purposes only to the extent, and at the time, that the optionee receives
ordinary income by reason of the optionee's sale of shares.
The grant of a non-qualified stock option under the 1992 Option Plan also
should have no tax effect on the Company or the recipient of the grant. The
spread between the exercise price and the market value of the Company's Common
Stock on the date of exercise of a non-qualified option is taxable as ordinary
income to the optionee. To the extent the optionee realizes ordinary income on
the exercise of the option, the Company has a corresponding deduction.
The 1992 Option Plan is to be administered by the Board of Directors or by
a Committee designated by the Board, and the Board may at any time terminate or
amend the 1992 Option Plan. The Compensation Committee has been designated by
the Board to administer the Plan. Any amendment of the Option Plan, however,
which increases the number of shares which may be issued thereunder, or changes
the requirements as to eligibility for participation, must be approved by the
shareholders of the Company.
NEW PLAN BENEFITS
The following table sets forth the number of options granted under the 1992
Option Plan from July 1, 1994 through June 30, 1995 (and, through fiscal 1996
with respect to certain formula option grants to directors), to each person
named in the Summary Compensation Table, all current executive officers as a
group (including the named executive officers who are currently executive
officers), all current directors who are not executive officers as a group, and
all employees other than executive officers as a group.
<TABLE>
<CAPTION>
NUMBER
OF OPTIONS
NAME AND POSITION GRANTED
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Philip F. Otto.................................................................... 30,000
Chairman, President and Chief Executive Officer
Gilbert F. Johnson................................................................ 10,000
President, Government Group
Douglas H. Morais................................................................. 10,000
President, Wireless Products Group
Garrett E. Pierce................................................................. 5,000
Executive Vice President and Chief Financial Officer
Leon F. Blachowicz................................................................ 60,000
President, Satellite Communications Group
Current Executive Officer Group................................................... 120,000
Non-Executive Officer Director
Group(1)........................................................................ 66,000
Non-Executive Officer Employee Group.............................................. 413,250
</TABLE>
- ---------------
(1) Messrs. David, Hausman, Helliwell, Gray and Leeson each received an option
to purchase 2,000 shares after the 1994 Annual Meeting of Shareholders.
Following the 1995 Annual Meeting of Shareholders, and assuming their
election as directors and approval of the amendment to the 1992 Option Plan,
Messrs. Adorjan, David, Hausman and Leeson each will receive options to
purchase 10,000 shares and Messrs. Helliwell and Gray will each receive
options to purchase 8,000 shares.
14
<PAGE> 17
RATIFICATION OF SELECTION OF AUDITORS
Ernst & Young LLP has served as independent public accountants for the
Company since 1968. Representatives of Ernst & Young LLP are expected to be
present at the shareholders' meeting with the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
This matter is not required to be submitted for shareholder approval, but
the Board of Directors has elected to seek ratification of its selection of
independent public accountants by the affirmative vote of the holders of a
majority of the shares present and voting at the meeting. Management has not
determined what action it will take in the event the shareholders do not ratify
the selection of Ernst & Young LLP.
CERTAIN SHAREHOLDERS
The following table sets forth information as of September 15, 1995 (except
as otherwise noted), regarding securities ownership by (i) each person who is
known by the Company to own beneficially more than 5% of any class of the
Company's common stock, (ii) each executive officer named in the Summary
Compensation Table, (iii) the directors and nominees individually, and (iv) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------
NUMBER PERCENT
--------- -------
<S> <C> <C>
Kopp Investment Advisors, Inc.(2)........................................ 2,659,482 16.8%
6600 France Ave. So., Suite 672
Edina, MN 55435
FMR Corp.(3)............................................................. 2,057,700 13.0
82 Devonshire Street
Boston, MA 02109
The Travelers Inc.(4).................................................... 917,444 5.8
388 Greenwich Street
New York, NY 10013
Philip F. Otto(5)........................................................ 179,181 1.2
David B. Leeson(6)....................................................... 84,886 *
Robert A. Helliwell(7)................................................... 29,250 *
Gilbert F. Johnson(8).................................................... 58,763 *
Arthur H. Hausman(9)..................................................... 10,000 *
Edward E. David, Jr.(10)................................................. 4,000 *
Alfred M. Gray(11)....................................................... 7,000 *
J. J. Adorjan............................................................ 0 *
Douglas H. Morais(12).................................................... 43,176 *
Garrett E. Pierce(13).................................................... 19,805 *
Leon F. Blachowicz....................................................... 3,000 *
All Executive Officers and Directors as a Group (13 persons)(14)......... 567,015 3.5
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares.
(1) The shareholders named in the table have sole voting power and dispositive
power with respect to all shares of stock shown as beneficially owned by
them, except as otherwise indicated in the footnotes to
15
<PAGE> 18
this table. Amounts indicated for shares which a person has an option to
acquire are issuable upon exercise of outstanding options which were
exercisable on September 15, 1995 or within 60 days thereafter.
(2) As of July 31, 1995, Kopp Investment Advisors, Inc. reported no voting
power with respect to all shares of common stock and shared dispositive
power with respect to 2,659,482 shares of common stock.
(3) As of July 31, 1995, FMR Corp. reported sole voting power for 70,000 of
such shares, and sole dispositive power with respect to 2,057,700 of such
shares.
(4) As of December 31, 1994, these shares were beneficially owned through
certain wholly owned subsidiaries of Smith Barney Holdings, Inc., 1345
Avenue of the Americas, New York, NY 10105, which is a wholly owned
subsidiary of The Travelers Inc. The Travelers Inc. reported shared voting
and dispositive power with respect to all such shares.
(5) Includes 141,000 shares of common stock which Mr. Otto has an option to
acquire and 1,231 shares Mr. Otto can acquire upon conversion of
subordinated debentures owned by him.
(6) Includes 7,000 shares of common stock which Dr. Leeson has an option to
acquire.
(7) Includes 9,000 shares of common stock which Dr. Helliwell has an option to
acquire.
(8) Includes 45,500 shares of common stock which Mr. Johnson has an option to
acquire.
(9) Includes 1,000 shares held by Mr. Hausman and his wife as Trustees of the
Hausman Family Trust and 9,000 shares of common stock which Mr. Hausman has
an option to acquire.
(10) Includes 4,000 shares of common stock which Dr. David has an option to
acquire.
(11) Includes 7,000 shares of common stock which Mr. Gray has an option to
acquire.
(12) Includes 40,000 shares of common stock which Dr. Morais has an option to
acquire and 176 shares Dr. Morais can acquire upon conversion of
subordinated debentures owned by him.
(13) Includes 19,375 shares of common stock which Mr. Pierce has an option to
acquire.
(14) Includes 351,787 shares of common stock which officers and directors have
an option to acquire.
Under the securities laws of the United States, the Company's directors and
executive officers, and any persons holding more than ten percent of the
Company's common stock, are required to report their initial ownership of the
Company's common stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this proxy statement
any failure to file by such dates of which it becomes aware during the fiscal
year.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders of the Company intended to be presented at the
next annual meeting must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that meeting by June 6,
1996.
16
<PAGE> 19
EXPENSES OF SOLICITATION
The expense of preparing, assembling, printing and mailing the forms of
proxy and the material used in the solicitation of proxies will be paid by the
Company. Arrangements will be made for the forwarding of soliciting materials by
nominees, custodians and fiduciaries to their principals. Corporate Investor
Communications, Inc. will assist the Company in obtaining the return of proxies
at an estimated cost to the Company of $4,500.
OTHER MATTERS
Management knows of no other matters which will be brought before the
meeting, but if such matters are properly presented the proxies solicited hereby
will be voted in accordance with the judgment of the persons holding such
proxies.
BY THE BOARD OF DIRECTORS
LOGO
GEORGE L. SPILLANE
Secretary
Sunnyvale, California
October 2, 1995
17
<PAGE> 20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALIFORNIA MICROWAVE, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
P
The undersigned hereby appoints Philip F. Otto and George L.
Spillane, or either of them, each with power of
R
substitution and revocation, as the proxy or proxies of the
undersigned to represent the undersigned and vote all shares of the
Common Stock, $.10 par value, of CALIFORNIA MICROWAVE, INC., which
the undersigned would
O
be entitled to vote if personally present at the Annual Meeting of
Shareholders of CALIFORNIA MICROWAVE, INC. to be held at the offices
of California Microwave-Microwave Networks Incorporated, a
subsidiary of the Company,
X
located at 10795 Rockley Road, Houston, Texas at 10:00 a.m. on
Thursday, October 26, 1995, and at any adjournments thereof, upon
the following matters:
Y
<TABLE>
<CAPTION>
---------
SEE
REVERSE
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) SIDE
---------
<S> <C>
</TABLE>
<PAGE> 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> <S> <C>
PLEASE
------- MARK YOUR
VOTES AS
X IN THIS
------- EXAMPLE.
-------
</TABLE>
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
CHOICES MADE. WHEN NO CHOICE IS MADE. THIS PROXY WILL BE VOTED FOR ALL
LISTED NOMINEES FOR DIRECTORS AND FOR PROPOSALS 1 AND 2.
<TABLE>
<CAPTION>
1. Election of Directors FOR AGAINST
NOMINEES: Philip F. Otto, David B. Leeson, Robert A.
Helliwell, Gilbert F. Johnson, Arthur H. Hausman, Edward E.
David, Jr., Alfred M. Gray, and J.J. Adorjan
<S> <C> <C> <C> <C> <C> <C> <C>
2. To approve an amendment to the ------ ------
Company's 1992 Stock Option Plan.
------ ------
FOR WITHHELD
------ ------ 3. To ratify the selection of Ernst & ------ ------
Young LLP as independent public
------ ------ accountants for the Company. ------ ------
4. With discretionary authority on
such other matters as may properly
come before the meeting.
<CAPTION>
ABSTAIN
<S> <C<C> <C>
------
------
------
------
</TABLE>
<TABLE>
<CAPTION>
MARK HERE FOR ------ MARK HERE IF YOU ------
ADDRESS CHANGE AND ------ PLAN TO ATTEND THE
NOTE AT LEFT MEETING ------
<S> <C> <C> <C> <C> <C> <C>
------
</TABLE>
THE ANNUAL MEETING MAY BE HELD AS
SCHEDULED ONLY IF A MAJORITY OF THE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
------
---------------------------------------
</TABLE>
SHARES OUTSTANDING ARE REPRESENTED AT
THE MEETING BY ATTENDANCE OR PROXY
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(TO WITHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), MARK
</TABLE>
ACCORDINGLY, PLEASE COMPLETE THIS PROXY
AND RETURN IT PROMPTLY IN THE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
BOX AND WRITE THAT NOMINEE(S) NAME(S)
IN SPACE PROVIDED.)
</TABLE>
ENCLOSED ENVELOPE. PLEASE DATE AND SIGN
EXACTLY AS YOUR NAME(S) APPEARS ON
YOUR SHARES. IF SIGNING FOR
INDIVIDUALS, TRUSTS OR CORPORATIONS,
TITLE OR CAPACITY SHOULD BE STATED. IF
SHARES ARE HELD JOINTLY, EACH HOLDER
SHOULD SIGN.
NOTE: PLEASE SIGN AS NAME APPEARS
HEREON. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH.
SIGNATURE: DATE:
SIGNATURE: DATE:
<PAGE> 22
EXHIBIT 10.11
1992 STOCK OPTION PLAN
OF
CALIFORNIA MICROWAVE, INC.
(as amended through August 1995)
1. PURPOSE
The purpose of the 1992 Stock Option Plan (the "Plan") is to enable
California Microwave, Inc. (the "Company") and its subsidiaries to attract and
retain officers and other key employees, directors, and consultants and to
provide them with additional incentive to advance the interests of the Company.
Options qualifying as incentive stock options under Section 422 of the Internal
Revenue Code of 1954, as amended, and non-qualified options may be granted under
the Plan.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company, or by a committee (the "Committee") of two or more directors selected
by the Board.
(b) The Board of Directors or the Committee shall have the power,
subject to the express provisions of the Plan:
(1) To determine the recipients of options under the Plan, the time
of grant of the options, and the number of shares covered by the grant.
(2) To prescribe the terms and provisions of each option granted
(which need not be identical).
(3) To construe and interpret the Plan and options, to establish,
amend, and revoke rules and regulations for the Plan's administration, and to
make all other determinations necessary or advisable for the administration of
the Plan.
3. SHARES SUBJECT TO THE PLAN
Subject to the provisions of Paragraph 7 (relating to the adjustment
upon changes in stock), the number of shares which may be sold pursuant to
options granted under the Plan shall not exceed in the aggregate 1,600,000
shares of Common stock of the Company. Shares sold pursuant to options granted
under the Plan may be unissued shares or reacquired shares.
-1-
<PAGE> 23
If any options granted under the Plan shall for any reason terminate or expire
without having been exercised in full, the shares not purchased under such
options shall be available again for the purposes of the Plan.
4. ELIGIBILITY
(a) Options under this Plan may be granted to officers and other key
employees and consultants of the Company and/or of its subsidiaries, provided
that incentive stock options may be granted hereunder only to officers and other
key employees (including directors who are also officers or employees). No
officer or key employee may receive options under this Plan covering in excess
of 100,000 shares in any fiscal year of the Company (subject to adjustment in
accordance with the provisions of paragraph 7 of the Plan).
(b) Each director of the Company who is not an employee of the Company
shall receive a non-qualified stock option under the Plan immediately following
each annual meeting of shareholders of the Company. The first option received by
a director under this paragraph 4(b) shall cover 10,000 shares of common stock
of the Company and each option received by a director under this Plan thereafter
shall cover 5,000 shares of common stock in the case of a director who is a
chair of a committee of the Board of Directors and 3,000 shares in the case of a
director who is not.(1) Each such option shall have an exercise price equal to
the fair market value of the common stock of the Company on the date of the
annual meeting of shareholders to which it relates, determined in accordance
with the provisions of paragraph 5(a)(2) of this Plan. The number of options
that directors may receive pursuant to this paragraph 4(b) shall be
appropriately adjusted in accordance with the provisions of paragraph 7 of this
Plan. This paragraph 4(b) shall not be amended more than once every six months,
other than to comply with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act or the rules or regulations thereunder.
(c) Persons to whom options to purchase shares are granted are
hereinafter referred to as "optionee(s)."
5. TERMS OF OPTION AGREEMENTS
(a) All Option Agreements. Options granted pursuant to the Plan
shall be evidenced by agreements specifying the number of shares
- -------------------------
(1) The provisions of this sentence were amended by the Board of
Directors in July 1995, subject to obtaining shareholders approval at the Annual
Meeting of Shareholders in October 1995.
-2-
<PAGE> 24
covered thereby, in such form as the Board of Directors or Committee shall from
time to time establish, which agreements may incorporate all or any of the terms
hereof by reference and shall comply with and be subject to the following terms
and conditions:
(1) The Board of Directors or Committee shall have the power to set
the time or times within which each option shall be exercisable and to at any
time accelerate the time or times of exercise (notwithstanding the terms of the
option). Unless the stock option agreement executed by the optionee expressly
otherwise provides, (i) an option granted to an officer or other key employees
or consultant shall become exercisable on a cumulative basis as to one-quarter
of the total number of shares covered thereby on each of the first, second,
third, and fourth anniversary dates of the date of grant of the option, (ii) an
option granted to a director who is not an employee of the Company shall vest
fully on the date of grant,(2) and (iii) an option shall not be exercisable
after the expiration of ten years from the date of grant. Any option granted to
an executive officer or director of the Company shall in no event be exercisable
until the elapse of six months from the date of its grant.
(2) Except as provided in Paragraph 5(b) below, the exercise price
of any stock option granted under this Plan shall not be less than 100% of the
fair market value of the shares of common stock of the Company on the date of
the granting of the option. The fair market value per share shall be the last
sale price on the day the option is granted as reported on the National Market
System, or, if such stock is not then reported on the National Market System but
quotations are reported on the National Association of Securities Dealers
Automated Quotations System, the average of the bid and asked prices on the day
the option is granted, in either event as such price quotes are listed in The
Wall Street Journal, Western Edition (or if not so reported in The Wall Street
Journal, any other listing service or publication known to the Board of
Directors). If the stock is listed upon an established stock exchange or
exchanges, such fair market value shall be deemed to be the closing price of the
common stock on the largest such stock exchange upon which such stock is listed
on the day the option is granted.
(3) To the extent that the right to purchase shares has accrued
hereunder, options may be exercised from time to time by written notice to the
Company, stating the number of shares being purchased and accompanied by the
payment in full of the option price for such shares. Such payment shall be made
in cash or in shares of the outstanding common stock
- -------------------------
(2) The provisions of this clause (ii) were amended by the Board of
Directors in July 1995, subject to obtaining shareholders approval at the Annual
Meeting of Shareholders in October 1995.
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of the Company which have been held by the optionee for at least six months or
in a combination of cash and such stock, except that the Board of Directors or
the Committee in its sole discretion may authorize payment by any optionee (for
all or part of his or her purchase price) by a promissory note or such other
from of legal consideration that may be acceptable to the Board or Committee.
If shares of common stock are used in part or full payment for the
shares to be acquired upon exercise of the option, such shares shall be valued
for the purpose of such exchange as of the date of exercise of the option in
accordance with the provisions of Subparagraph (2) above. Any certificates for
shares of outstanding common stock used to pay the option price shall be
accompanied by stock powers duly endorsed in blank by the registered holder of
the certificate (with the signature thereon guaranteed). In the event the
certificates tendered by the optionee in such payment cover more shares than are
required for such payment, the certificates shall also be accompanied by
instructions from the optionee to the Company's transfer agent with regard to
disposition of the balance of the shares covered thereby.
If payment by promissory note is authorized, the interest rate,
term, repayment schedule and other provisions of such note shall be as specified
by the Board of Directors or the Committee; provided, however, that such note
shall bear interest at a rate not less than the applicable test rate of interest
prescribed by Regulation 1.483-1(d)(1) of the Income Tax Regulations, as in
effect at the time the stock is purchased. The Board of Directors or Committee
may require that the optionee pledge his or her stock to the Company for the
purpose of securing the payment of such note, and the Company may hold the
certificate(s) representing such stock in order to perfect its security
interest.
An option may be exercised by a securities broker acting on behalf
of an optionee pursuant to authorization instructions approved by the Company,
provided that the notice of exercise of such option shall be delivered, and the
exercise price of such option shall be paid in full, as specified above.
(4) The Company at all times shall keep available the number of
shares of stock required to satisfy options granted under the Plan.
(5) The Company may require any person to whom an option is
granted, his or her legal representative, heir, legatee, or distributee, as a
condition of exercising any option granted hereunder, to give written assurance
satisfactory to the Company to the effect that such person is acquiring the
shares subject to the option for his or her own account for investment and not
with any present intention of selling or otherwise
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<PAGE> 26
distributing the same. The Company reserves the right to place a legend on any
share certificate issued pursuant to this Plan to assure compliance with this
paragraph. No shares of common stock of the Company shall be required to be
distributed until the Company shall have taken such action, if any, as is then
required to comply with the provisions of the Securities Act of 1933 or any
other then applicable securities law.
(6) Neither a person to whom an option is granted, nor such
person's legal representative, heir, legatee, or distributee, shall be deemed to
be the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such option unless and until such person has exercised his or
her option pursuant to the terms thereof.
(7) Options shall be transferable only by will or by the laws of
descent and distribution, and during the lifetime of the person to whom they are
granted such person alone may exercise them.
(8) An option granted to an employee or director shall terminate
and may not be exercised if the person to whom it is granted ceases to be
employed by the Company or by a subsidiary of the Company, or ceases to be a
director (unless such person continues as an employee), with the following
exceptions:
(i) If the employment or directorship is terminated for any
reason other than the person's death or disability, he or she may at any time
within not more than three months after such termination exercise the option,
but only to the extent that it was exercisable by such person on the date of
such termination, or
(ii) If such person dies or becomes disabled while in the
employ of the Company or of a subsidiary, or while a director, his or her option
may be exercised by his or her personal representatives, heirs or legatees at
any time within not more than twelve (12) months following the date of death or
disability, but only to the extent such option was exercisable by such person on
the date of death or disability.
An option granted to a consultant shall terminate in accordance
with the terms specified in the option.
(9) In no event may an option be exercised by anyone after the
expiration of the term of the option established pursuant to Subparagraph
5(a)(1) hereof.
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<PAGE> 27
(10) Each option granted pursuant to this Plan shall specify
whether it is a non-qualified or an incentive stock option, provided that the
Board of Directors or Committee may give the optionee the right to elect to
receive either an incentive or a non-qualified stock option.
(11) An option granted pursuant to this Plan may have such other
terms as the Board of Directors or Committee in its discretion may deem
necessary or appropriate and shares issued upon exercise of any option hereunder
may be subject to such restrictions as the Board of Directors or Committee deems
appropriate.
(b) Incentive Stock Options. In addition to the terms and conditions
specified above, incentive stock options granted under this Plan shall be
subject to the following terms and conditions:
(1) The aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by any optionee during any calendar year
(under all option plans of the Company or its parent and subsidiary
corporations) shall not exceed $100,000.
(2) As to individuals otherwise eligible under this Plan who own
more than 10 percent of the total combined voting power of all classes of stock
of the Company and its parent and subsidiary corporations, an incentive option
can be granted under this Plan to any such individual only if at the time such
option is granted the option price is at least 110 percent of the fair market
value of the stock subject to the option and such option by its terms is not
exercisable after the expiration of five years from the date such option is
granted.
6. USE OF PROCEEDS FROM SHARES
Proceeds from the sale of shares pursuant to options granted under the
Plan shall be used for general corporate purposes.
7. ADJUSTMENT UPON CHANGES IN SHARES
(a) If any change is made in the shares subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), appropriate adjustments
shall be made by the Board of Directors or Committee in the maximum
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<PAGE> 28
number of shares subject to the Plan and the number of shares and price per
share of stock subject to outstanding options.
(b) Other than in the case of a reincorporation of the Company in
another state, in the event of (i) dissolution or liquidation of the Company,
(ii) a transaction in which more than 50 percent of the shares of the Company
that are entitled to vote are exchanged, or (iii) any merger or consolidation or
other reorganization in which the Company is not the surviving corporation (or
in which the Company becomes a subsidiary of another corporation), outstanding
options under this Plan shall become fully exercisable immediately prior to any
such event.
8. RIGHTS AS AN EMPLOYEE.
Nothing in this Plan or in any options awarded hereunder shall confer
upon any employee any right to continue in the employ of the Company or of any
of its subsidiaries or interfere in any way with the right of the Company or any
such subsidiary to terminate such employee's employment at any time.
9. WITHHOLDING TAX
There shall be deducted from the compensation of any employee holding
options under this Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Company to such governmental
authority for the account of the person with respect to such options.
10. TERMINATION AND AMENDMENT OF PLAN
The Board of Directors may at any time terminate this Plan or make such
modifications of the Plan as it shall deem advisable. Any modification which
increases the number of shares which may be issued under the Plan (other than
pursuant to Paragraph 7 hereof ), or changes the requirements as to eligibility
for participation in the Plan shall become effective only upon approval 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.
11. INDEMNIFICATION
In addition to such other rights of indemnification as they may have as
directors, the members of the Board of Directors or Committee administering the
Plan shall be indemnified by the Company against the
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<PAGE> 29
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such member is liable
for negligence or misconduct in the performance of his duties; provided that
within 60 days after institution of any such action, suit or proceeding, the
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
12. EFFECTIVE DATE AND DURATION OF THE PLAN
The 1992 Stock Option Plan shall become effective on July 23, 1992. Any
rights granted under this Plan must be granted within ten (10) years of such
effective date.
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