<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Rule 14a-11(c) or Rule 14a-12
California Microwave, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
CALIFORNIA MICROWAVE, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 11, 1997
A Special Meeting of Shareholders of CALIFORNIA MICROWAVE, INC. will be
held at the corporate headquarters of California Microwave, Inc., located at 555
Twin Dolphin Drive, Suite 650, Redwood City, California, on July 11, 1997, at
10:00 a.m., for the following purposes:
1. To approve certain amendments to the Company's 1992 Stock Option Plan.
2. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on June 6, 1997, are
entitled to notice of and to vote at the meeting and any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GEORGE L. SPILLANE
GEORGE L. SPILLANE
Secretary
Redwood City, California
June 11, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID 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.
555 TWIN DOLPHIN DRIVE
REDWOOD CITY, CALIFORNIA 94065
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 Special Meeting of Shareholders to be held at the corporate headquarters of
the Company, located at 555 Twin Dolphin Drive, Suite 650, Redwood City,
California, at 10:00 a.m., on July 11, 1997, and at any adjournment or
postponement thereof.
VOTING
Holders of Common Stock are entitled to one vote for each share held. Only
shareholders of record on June 6, 1997, will be entitled to notice of and to
vote at the meeting. At the close of business on that date, the Company had
16,403,986 shares of Common Stock outstanding. A majority of all shares
represented in person or by proxy at the Special 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. Shares held in street name by
brokers who have not received discretionary authority to vote on the particular
matter and have not received voting instructions from their customers, if any,
will have no effect on the outcome of the vote, but will be counted toward the
establishment of a quorum.
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 votes 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 in
favor of the proposal.
The approximate date on which this proxy statement and the accompanying
proxy are being sent to shareholders is June 11, 1997.
APPROVAL OF AMENDMENTS TO
1992 STOCK OPTION PLAN
The Board of Directors in May 1997 approved amendments to the Company's
1992 Stock Option Plan ("Option Plan") for the purpose of increasing by
1,500,000 the number of shares of Common Stock covered by the Option Plan,
changing the limitation on the number of shares covered by options that may be
granted to new employees, and requiring shareholder approval of any future
repricing of stock options granted under the Option Plan. Approval of the
proposed amendments to the Option Plan is required by at least a majority of the
shares of Common Stock of the Company present in person or represented by proxy
at the meeting and entitled to vote.
The Company believes that officers and other key employees should have a
significant stake in the Company's stock price performance under programs which
link their compensation to shareholder return. As a result, stock option grants
are an integral part of the Company's compensation program. The Company is
<PAGE> 4
currently conducting a search for a new Chief Executive Officer and will be
seeking additional executive personnel, and is restructuring certain of its
business operations. In addition to its normal option needs, the Company
anticipates that it will have to offer a significant number of options under the
Option Plan to attract such officers and to incentivise key employees in
connection with its restructuring.
The Company currently relies on a single plan -- the 1992 Stock Option
Plan -- for these grants and currently has less than 123,000 shares of Common
Stock remaining under the plan for future grants. Rather than adopting a new
stock option plan at the present time, the Company proposes to increase the
number of shares authorized for grant under the Option Plan from 1,600,000
shares to 3,100,000 shares of Common Stock, an increase of 1,500,000 shares.
The following is a description of the proposed amendments and material
features of the Option Plan.
DESCRIPTION OF THE PROPOSED AMENDMENTS
The Company proposes to amend the Option Plan to implement the following
changes:
- To increase the number of shares of Common Stock available for option
grants by 1,500,000;
- To change the provision of the Option Plan limiting to 100,000 the number
of shares covered by options that may be granted to any individual in any
single year to provide that such limit shall be 200,000 shares with
respect to options granted in connection with inducing an individual to
become an employee of the Company; and
- To require shareholder approval of any repricing of options granted under
the Option Plan, other than repricing in connection with the
reorganizations or changes in capitalization currently covered by
Paragraph 7 of the Option Plan (e.g., mergers, consolidations, stock
splits and stock dividends).
The continued success of the Company depends upon its ability to attract
and retain highly qualified and competent employees. The Option Plan enhances
that ability and provides additional incentive to such personnel to advance the
interests of the Company and its shareholders. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE SHAREHOLDERS VOTE IN FAVOR OF THE AMENDMENTS TO THE OPTION PLAN.
DESCRIPTION OF 1992 STOCK OPTION PLAN
The Option Plan currently authorizes the Company to issue a maximum of
1,600,000 shares of Common Stock upon the exercise of stock options granted
under the plan. As a result of options previously granted, the Company has
issued approximately 67,000 shares of Common Stock through option exercises and
has reserved approximately 1.4 million shares of Common Stock for outstanding
options under the Option Plan. There are less than 123,000 shares of Common
Stock presently remaining under the plan for future option grants, although
additional shares may become available if outstanding options expire
unexercised. The amended Option Plan would increase the maximum number of shares
issuable by 1,500,000 shares to a total of 3,100,000 shares.
Options to purchase Common Stock of the Company granted under the 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 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
2
<PAGE> 5
director of the Company automatically receives a non-qualified stock option
under the Option Plan immediately following each annual meeting of shareholders
of the Company. The first such option received by a non-employee director covers
10,000 shares of Common Stock and each option received by a non-employee
director under the plan thereafter covers 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 has an exercise
price equal to the fair market value of the Common Stock on the date of the
Annual Meeting of Shareholders to which it relates. Currently approximately
1,000 persons are eligible to participate in the Option Plan, including four
officers and eight nonemployee directors.
The purchase price of shares acquired upon exercise of stock options under
the 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 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. In addition, if the proposed
amendment is approved, no officer or key employee may receive options under the
Option Plan covering in excess of 100,000 shares in any fiscal year, except that
such limit will be 200,000 shares with respect to options granted in connection
with inducing an individual to become an employee of the Company.
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. An option
granted to a non-employee director becomes fully vested on the date of grant.
Unless terminated earlier by reason of expiration of the option term,
options under the 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 Option Plan will be
nontransferable by the optionee during the optionee's lifetime, other than for
estate planning purposes. The options may contain such other terms, provisions
and conditions not inconsistent with the Option Plan as may be determined by the
Board of Directors or Committee administering the plan. If any option granted
under the 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 Option Plan
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 is an employee of the Company or any
of its affiliates from the date of grant until three months prior to the
exercise date, and 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 fair market value of the stock at the date of exercise and (b) the amount
realized on disposition minus 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
3
<PAGE> 6
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 (which, generally speaking, will be
applied only if it produces a tax that is higher than the 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 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. The amount taxed to the optionholder as ordinary income is treated
as earned income. The optionholder's tax basis in the shares will be equal to
the aggregate exercise price paid by the optionholder plus the amount of taxable
income recognized upon the exercise of the option. Upon any subsequent
disposition of the shares, any further gain or loss recognized by the
optionholder will be treated as capital gain or loss and will be long-term
capital gain or loss if the shares are held for more than one year after
exercise. The Company will normally be allowed, at the time of recognition of
ordinary income by the optionholder upon exercise, to take a deduction for
federal income tax purposes in an amount equal to such recognized income.
In 1996, the Internal Revenue Service finalized the regulations under
Section 162(m) of the Internal Revenue Code of 1986 (the "Section 162(m)
Regulations"). Section 162(m) limits the ability of publicly held companies to
deduct compensation expenses in excess of $1,000,000 paid to certain executive
officers. The term "compensation" generally includes all cash and non-cash
compensation deductible by the Company on its tax return, including the amounts
realized by executives (and normally deductible by the Company) upon the
exercise of non-qualified stock options. However, the $1,000,000 limit does not
apply to the amounts realized upon the exercise of stock options that qualify as
performance-based compensation under the Section 162(m) Regulations. The Company
believes that the exercise of stock options granted under the amended plan will
qualify for this exemption from the limit on deductibility.
The Option Plan is administered by the Board of Directors or by a Committee
designated by the Board. The Compensation Committee has been designated by the
Board to administer the plan. The Board may at any time terminate or amend 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. In addition, the Option Plan requires shareholder approval of any
repricing of outstanding options other than in connection with certain
reorganization or recapitalization transactions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE AMENDMENTS TO THE 1992 STOCK OPTION PLAN.
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, 1996, directors who were not employees of the Company received compensation
at the rate of $20,000 per year for their services as Board members, $750 per
Committee meeting attended for the Chair of a Committee and $500 per meeting
attended for other members of the Committee, and reimbursement for expenses
incurred in attending meetings of the Board or any Committee of the Board.
In fiscal 1996 (following the October 1995 annual meeting of shareholders),
as automatic grants under the Company's 1992 Stock Option Plan, (i) Messrs.
David, Hausman and Leeson, as the Chairs of Committees, each received an option
to purchase 5,000 shares of Common Stock, (ii) Messrs. Gray and Helliwell each
received an option to purchase 3,000 shares of Common Stock, (iii) J.J. Adorjan
received as his initial option grant an option to purchase 10,000 shares of
Common Stock, and (iv) Messrs. David, Hausman, Leeson, Gray and Helliwell each
received an option to purchase an additional 5,000 shares of Common Stock
related to a change in the Plan approved by the Shareholders in 1995. All of the
fiscal 1996 options granted to directors had an exercise price of $20.50 per
share. In fiscal 1997, as automatic grants under the 1992 Stock Option Plan, (i)
Messrs. David, Hausman and Leeson, as Chairs of Committees, each received an
option to purchase 5,000 shares of Common Stock; (ii) Messrs. Gray and Adorjan
each received an option to purchase 3,000 shares of Common Stock; and (iii)
Messrs. Marx, Ward and Whitridge each received as his initial option grant an
option to purchase 10,000 shares. All of the fiscal 1997 options granted to
directors were granted at an exercise price of $14.875 per share.
In January 1993, Dr. Leeson commenced service as a consultant to the
Company under a three-year consulting agreement. Under that agreement, Dr.
Leeson received $250,000 per year for consulting with the Company regarding its
business, technology and strategy. The agreement expired in January 1996. Dr.
Leeson was paid $115,000 for his services as Chairman of the Board of the
Company from December 12, 1996 to March 19, 1997 and for the period commencing
on March 19 and ending on December 31, 1997, Dr. Leeson is being paid a fee of
$5,000 per month for consulting services. General Alfred M. Gray became Chairman
of the Board on March 19, 1997 and is being paid at the rate of approximately
$35,000 per month for his services in that capacity.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows specific compensation information, for the fiscal
years ending June 30, 1996, 1995 and 1994, for the Company's Chief Executive
Officer and the next four most highly compensated executive officers as of June
30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
------------------------------------------------ SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) (NUMBER) COMPENSATION(2)
- ---------------------------- ------ -------- -------- ------------ -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip F. Otto(3)........... 1996 $368,808 $ 0 $ 46,716 $ 0 40,000 $ 4,156
Chairman, President and 1995 $323,019 $ 0 $ 34,704 $ 0 30,000 $ 3,791
Chief Executive Officer 1994 $275,000 $227,000 $ 16,172 $ 0 24,000 $ 3,203
Leon F. Blachowicz(4)....... 1996 $242,598 $ 60,000 $ 27,000 $431,250 40,000 $ 4,098
President, Wireless and 1995 $108,180 $100,000 $ 0 $102,750 60,000 $ 0
Satellite Communications 1994 $ -- $ -- $ -- $ -- -- $ --
Group
Gilbert F. Johnson(5)....... 1996 $233,789 $ 60,000 $ 27,360 $ 0 10,000 $ 7,934
President 1995 $222,755 $ 0 $ 12,056 $ 0 10,000 $ 6,327
1994 $218,000 $160,000 $ 7,276 $ 0 15,000 $ 5,811
Douglas H. Morais(6)........ 1996 $225,014 $ 0 $ 19,446 $ 0 15,000 $ 3,889
Executive Vice President, 1995 $218,396 $ 0 $ 17,538 $ 0 10,000 $ 2,926
Business Development and 1994 $197,115 $188,000 $ 3,530 $ 0 45,000 $ 1,065
Technology
George L. Spillane(7)....... 1996 $187,348 $ 0 $ 15,850 $ 0 2,000 $ 6,355
Vice President, Chief 1995 $177,000 $ 0 $ 13,054 $ 0 0 $ 5,068
Financial Officer and 1994 $177,000 $ 75,000 $ 7,493 $ 0 9,000 $ 3,231
Secretary
</TABLE>
- ---------------
(1) At June 30, 1996, the number and aggregate value of unvested restricted
stock holdings for the named executive officers were: Messrs. Otto-5,000
shares, $78,625; Blachowicz-27,400 shares, $513,450; Johnson-2,000 shares,
$25,150; Morais-1,200 shares, $17,700; and Spillane-1,600 shares, $20,550.
The aggregate values shown above 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) Includes matching employer contributions to the California Microwave
Tax-Deferred Savings Plan (a 401(k) plan) in the amount of $1,000 for the
benefit of each of Messrs. Otto, Blachowicz, Johnson, Morais and Spillane;
matching employer contributions to the Tax-Deferred Savings Plan have been
increased to a maximum of $1,200 for fiscal 1997. Also includes amounts paid
by the Company for profit sharing as contributions to the California
Microwave Deferred Profit Sharing Plan as follows: Messrs. Otto-$963;
Blachowicz-$0; Johnson-$1,234; Morais-$829; and Spillane-$1,087, and for
life insurance premiums for fiscal 1996, as follows: Messrs. Otto-$2,193;
Blachowicz-$3,098; Johnson-$5,700; Morais-$2,060; and Spillane-$4,268.
(3) Mr. Otto resigned as the Company's Chairman and Chief Executive Officer in
December 1996.
(4) Mr. Blachowicz joined the Company in January 1995 and served as President of
the Satellite Communications Group until March 1996, when he also became
President of the combined Wireless and Satellite Communications Group.
6
<PAGE> 9
(5) Mr. Johnson served as President of the Company's Government Group until
October 1996 and was appointed the Company's President in October 1996.
(6) Prior to March 1996, Dr. Morais served as President, Wireless Products
Group. Dr. Morais resigned as an officer of the Company in December 1996.
(7) Mr. Spillane also served as Chief Financial Officer from 1980 through April
1994 and from January 1996 until May 1996 when Dennis R. Raney became an
Executive Vice President and Chief Financial Officer of the Company, and has
served as Chief Financial Officer since Mr. Raney's resignation in February
1997.
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, 1996. The officers of the Company did not participate in a
replacement option program made available to non-officer employees during 1996,
pursuant to which non-officer employees received options covering 425,670
shares, exercisable at a price of $21.00 per share in place of options covering
513,707 shares, exercisable at an average exercise price of $25.35 per share.
In fiscal 1997 to date, Messrs. Johnson, Blachowicz and Spillane have been
granted options to purchase 5,000, 5,000 and 1,500 shares respectively; all such
options expire in July 2007 and carry an exercise price of $14.25 per share.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM(2)(3)
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION ---------------------------
NAME GRANTED(1) IN FISCAL YEAR PRICE ($/SH) DATE 0% 5% 10%
- -------------------------- ---------- -------------- ------------ ---------- --- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip F. Otto(4)......... 40,000 3.6% $26.00 7/26/05 $ 0 $654,160 $1,657,760
Leon F. Blachowicz........ 30,000 2.7% $26.00 7/26/05 $ 0 $490,620 $1,243,320
10,000 0.9% $17.75 1/25/06 $ 0 $111,648 $ 282,935
Gilbert F. Johnson........ 10,000 0.9% $26.00 7/26/05 $ 0 $163,540 $ 414,440
Douglas H. Morais(4)...... 10,000 0.9% $26.00 7/26/05 $ 0 $163,540 $ 414,440
5,000 0.4% $17.75 1/25/06 $ 0 $ 55,824 $ 141,468
George L. Spillane........ 2,000 0.2% $26.00 7/26/05 $ 0 $ 32,708 $ 82,888
</TABLE>
- ---------------
(1) All options granted in fiscal 1996 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 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
7
<PAGE> 10
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, 1996 for the ten-year period from July 25, 1995 to July 26,
2005, would be $0, $153,773,820 and $389,690,730, respectively.
(4) Mr. Otto resigned as an officer and director of the Company, and Dr. Morais
resigned as an officer of the Company, in December 1996.
The following table shows information concerning the value of unexercised
stock options held by the individuals named in the Summary Compensation Table as
of June 30, 1996.
AGGREGATED OPTION EXERCISES (1) IN FISCAL 1996
AND JUNE 30, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT 6/30/96 OPTIONS AT 6/30/96(2)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------ ------------------------------- ---------------------------------
<S> <C> <C>
Philip F. Otto(3)....... 173,500/94,500 $315,625/$59,375
Leon F. Blachowicz...... 15,000/85,000 $0/$0
Gilbert F. Johnson...... 32,500/37,500 $0/$23,750
Douglas H. Morais(3).... 47,500/52,500 $11,250/$3,750
George L. Spillane...... 37,724/10,250 $128,750/$17,813
</TABLE>
- ---------------
(1) During fiscal 1996, options covering 20,500 shares were exercised by Gilbert
F. Johnson.
(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 closing price of $15.25 per share of the Company's Common Stock as
reported on the Nasdaq National Market on June 28, 1996, the last trading
day in the month. Options with an exercise price in excess of the June 28,
1996 closing price were not included in this calculation. On May 30, 1997
the closing price of the Company's Common Stock as reported on the Nasdaq
National Market was $12.25 per share.
(3) Mr. Otto resigned as an officer and director of the Company, and Dr. Morais
resigned as an officer of the Company, in December 1996.
8
<PAGE> 11
AMENDED PLAN BENEFITS
The following table sets forth the number of shares granted under the
Option Plan from July 1, 1995 through June 30, 1996 (and through fiscal 1997
with respect to certain formula 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>
OPTION PLAN
-----------------
NUMBER OF OPTIONS
NAME AND POSITION GRANTED
---------------------------------------------------- -----------------
<S> <C>
Philip F. Otto(1)................................... 40,000
Chairman, President and Chief Executive Officer
Leon F. Blachowicz.................................. 40,000
President, Wireless and Satellite Communications
Group
Gilbert F. Johnson.................................. 10,000
President
Douglas H. Morais(1)................................ 15,000
Executive Vice President, Business Technology and
Development
George L. Spillane.................................. 2,000
Vice President, Chief Financial Officer and
Secretary
Current Executive Officer Group..................... 55,000
Non-Executive Officer Director Group................ 99,000
Non-Executive Officer Employee Group................ 1,047,518
</TABLE>
- ---------------
(1) Mr. Otto resigned as an officer and director of the Company, and Dr. Morais
resigned as an officer of the Company, in December 1996.
9
<PAGE> 12
CERTAIN SHAREHOLDERS
The following table sets forth information as of May 31, 1997 (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 and currently employed by the Company, (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>
The Travelers Group Inc.(2).............................. 1,779,500 10.8%
388 Greenwich Street
New York, NY 10013
Clover Capital Management, Inc.(3) ...................... 1,183,750 7.2%
11 Tobey Village Office Park
Pittsford, NY 14534
David L. Babson & Co., Inc............................... 913,800 5.6%
One Memorial Drive
Cambridge, MA 02142
David B. Leeson(4)....................................... 79,586 *
George L. Spillane(5).................................... 78,474 *
Leon F. Blachowicz(6).................................... 75,699 *
Gilbert F. Johnson(7).................................... 71,088 *
Frederick W. Whitridge, Jr.(8)........................... 40,000 *
Arthur H. Hausman(9)..................................... 25,000 *
Terry A. Ward(10)........................................ 24,212 *
Edward E. David, Jr.(11)................................. 19,000 *
Alfred M. Gray(12)....................................... 18,000 *
J.J. Adorjan(13)......................................... 13,000 *
William B. Marx, Jr.(14) ................................ 10,000 *
All Executive Officers and Directors as a Group (12
persons)(15)........................................... 508,928 3.1%
</TABLE>
- ---------------
* Less than one percent.
(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 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 May 31, 1997
or within 60 days thereafter.
(2) As of May 31, 1997, these shares were beneficially owned either directly or
through certain wholly owned subsidiaries of The Travelers Group Inc. The
Travelers Group Inc. and its subsidiaries reported shared voting and
dispositive power with respect to all of such shares.
(3) As of May 31, 1997, Clover Capital Management, Inc. reported shared voting
power and shared dispositive power with respect to all of such shares.
(4) Includes 22,000 shares of Common Stock which Dr. Leeson has an option to
acquire.
(5) Includes 46,974 shares of Common Stock which Mr. Spillane has an option to
acquire.
10
<PAGE> 13
(6) Includes 47,500 shares of Common Stock which Mr. Blachowicz has an option
to acquire.
(7) Includes 62,500 shares of Common Stock which Mr. Johnson has an option to
acquire.
(8) Includes 10,000 shares of Common Stock which Mr. Whitridge has an option to
acquire, and 15,000 shares owned by Providence Investors LLC with respect
to which Mr. Whitridge shares voting and dispositive power but disclaims
beneficial ownership except to the extent of his pecuniary interest
therein.
(9) Includes 1,000 shares held by Mr. Hausman and his wife as Trustees of the
Hausman Family Trust and 24,000 shares of Common Stock which Mr. Hausman
has an option to acquire.
(10) Includes 10,183 shares of Common Stock which Mr. Ward has an option to
acquire.
(11) Includes 19,000 shares of Common Stock which Dr. David has an option to
acquire.
(12) Includes 18,000 shares of Common Stock which Mr. Gray has an option to
acquire.
(13) Includes 13,000 shares of Common Stock which Mr. Adorjan has an option to
acquire.
(14) Includes 10,000 shares of Common Stock which Mr. Marx has an option to
acquire.
(15) Includes 316,345 shares of Common Stock which all executive officers and
directors as a group have an option to acquire.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders of the Company intended to be presented at the
next annual meeting must have been received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that meeting by May 30,
1997.
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 $6,000.
11
<PAGE> 14
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
/s/ George L. Spillane
George L. Spillane
Secretary
Redwood City, California
June 11, 1997
12
<PAGE> 15
SKU: 3250-PS-97
<PAGE> 16
June 11, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders to
be held at 10:00 a.m. on Friday, July 11, 1997, at the corporate headquarters of
California Microwave, located at 555 Twin Dolphin Drive, Redwood City,
California. Detailed information as to the business to be transacted at the
meeting is contained in the accompanying Notice of Special Meeting and Proxy
Statement.
Regardless of whether you plan to attend the meeting, it is important that
your shares be voted. Accordingly, we ask that you sign and return your proxy as
soon as possible in the envelope provided. If you do plan to attend the meeting,
please mark the appropriate box on the proxy.
You are invited to call our toll-free information line at 1-888-CAL-6789
for current information about your company or to be connected free-of-charge to
our Investor Relations department or to our Transfer Agent. Also, come and visit
us at our Web site (http://www.calmike.com) for more information about
California Microwave.
Sincerely,
/s/ Alfred M. Gray
--------------------
Alfred M. Gray
Chairman of the Board
<PAGE> 17
PROXY
CALIFORNIA MICROWAVE, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Gilbert F. Johnson and George L.
Spillane, or either of them, each with power of 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 be entitled to vote if personally present at the
Special Meeting of Shareholders, to be held at the corporate headquarters of
California Microwave, Inc., located at 555 Twin Dolphin Drive, Suite 650,
Redwood City, California, at 10:00 a.m. on July 11, 1997, and at any
adjournments thereof, upon the following matters:
1. To approve certain amendments to the Company's 1992 Stock
Option Plan.
2. To transact such other business as may properly come before
the meeting.
The Special Meeting may be held as scheduled only if a majority of the
shares outstanding are represented at the meeting by attendance or proxy.
Accordingly, please complete this proxy and return it promptly in the enclosed
envelope. Please date and sign exactly as your name(s) appears on your shares.
If signing for estates, trusts, or corporations, title or capacity should be
stated. If shares are held jointly, each holder should sign.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[SEE REVERSE SIDE]
<PAGE> 18
[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
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 proposal 1.
1. To approve the amendments to the Company's 1992 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. With discretionary authority on such other matters as may properly come
before the meeting.
MARK HERE FOR MARK HERE IF YOU
ADDRESS CHANGE AND [ ] PLAN TO ATTEND [ ]
NOTE AT LEFT THE MEETING
NOTE: Please sign as your name(s) appear(s) hereon. If more than one name
appears, all must sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature ____________ Date________ Signature ____________ Date _________
<PAGE> 19
APPENDIX TO EDGAR FILING
1992 Stock Option Plan
of
CALIFORNIA MICROWAVE, INC.
(as amended through May 19, 1997)
<PAGE> 20
1992 STOCK OPTION PLAN
OF
CALIFORNIA MICROWAVE, INC.
(as amended through May 19, 1997)
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-
<PAGE> 21
3,100,000* shares of Common Stock of the Company. Shares sold pursuant to
options granted under the Plan may be unissued shares or reacquired shares. 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), except that such
limit is 200,000 shares with respect to options granted in connection with
inducing an individual to become an employee of the Company.
(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. 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)."
- --------
*Includes 1,500,000 shares subject to shareholder approval.
-2-
<PAGE> 22
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 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, 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
-3-
<PAGE> 23
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
-4-
<PAGE> 24
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) No stock option shall be transferrable by the optionee
otherwise than by will, or if the optionee dies intestate, by the laws of
descent and distribution of the state of domicile of the optionee at the time of
death, provided that a non-qualified stock option may be transferred by the
optionee to a trust or other entity established by the optionee for estate
planning purposes. Except for exercises of non-qualified stock options by trusts
or entities established by the optionee for estate planning purposes, all stock
options shall be exercisable during the lifetime of the optionee only by the
optionee.
(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.
-5-
<PAGE> 25
(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.
(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
-6-
<PAGE> 26
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 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, and any repricing of outstanding options (other
than pursuant to Paragraph 7 hereof), 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.
-7-
<PAGE> 27
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 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.
-8-
