<PAGE>
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
AM Communications, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
AM Communications, Inc.
------------------------------------------------
(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), 14a-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 the 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:
---------------------------------------------------------------
<PAGE>
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:
$125.00
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2) Form Schedule or Registration Statement No.:
Schedule 14A Preliminary Proxy Statement
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3) Filing Party:
AM Communications, Inc.
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4) Date Filed:
8/28/97
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<PAGE>
AM COMMUNICATIONS, INC.
100 Commerce Boulevard
Quakertown, PA 18951-2237
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 17, 1997
The Annual Meeting of Stockholders of AM Communications, Inc. (the
"Company") will be held on Friday, October 17, 1997 at 9:30 a.m. at Meyers
Restaurant, 501 N. West End Boulevard (Route 309, 1 mile North of the
intersection of Routes 313 and 663), Quakertown, PA 18951 for the following
purposes:
1. To elect eight directors;
2. To consider and vote upon a proposal to amend the Company's 1991 Incentive
Stock Option Plan (the "1991 Plan") to increase the aggregate number of shares
of the Company's Common Stock authorized for issuance under the 1991 Plan from
5,000,000 to 6,000,000 shares; and
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The close of business on August 28, 1997 has been fixed as the record
date for the meeting. All stockholders of record at that time are entitled to
notice of and to vote at the meeting and any adjournment or postponement
thereof.
All stockholders are cordially invited to attend the meeting. The Board
of Directors urges you to date, sign and return promptly the enclosed proxy,
which is solicited by the Board of Directors of the Company, even if you
attend the meeting. The return of the proxy will not affect your right to vote
in person if you do attend the meeting. A copy of the Company's 1997 Annual
Report is also enclosed but is not to be regarded as proxy solicitation
material.
Keith D. Schneck
President
September 24, 1997
<PAGE>
AM COMMUNICATIONS, INC.
100 Commerce Boulevard
Quakertown, PA 18951-2237
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of AM
Communications, Inc. (the "Company"), a Delaware corporation, for use at the
Annual Meeting of Stockholders to be held at Meyers Restaurant, 501 N. West
End Boulevard (Route 309, 1 mile North of the intersection of Routes 313 and
663), Quakertown, PA 18951 on October 17, 1997 at 9:30 a.m., and any
adjournment or postponement thereof. This proxy statement, the foregoing
notice, and the enclosed proxy are being mailed to stockholders on or about
September 24, 1997.
The Board of Directors does not intend to bring any matters before the
meeting for action other than the matters specifically referred to in the
notice of the meeting, nor does the Board of Directors know of any matter
which anyone else proposes to present for action at the meeting. However, if
any other matters properly come before the meeting for action, the persons
named in the accompanying form of proxy, or their duly constituted substitutes
acting at the meeting, will be deemed authorized to vote or otherwise act
thereon in accordance with their judgment in such matters.
In the absence of contrary instructions contained in proxies received by
the Company, the shares represented by proxies will be voted "For" the
nominees of the Board of Directors in the election of directors, "For" the
proposed amendment to the 1991 Plan to increase in the number of shares
available for grant under the 1991 Plan, and in the discretion of the proxy
holders on such other matters as may properly come before the meeting. Any
proxy may be revoked at any time prior to its exercise by notifying the
President of the Company in writing, by delivering a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
Voting Securities and Certain Beneficial Holders Thereof
At the close of business on August 28, 1997, the record date to determine
stockholders entitled to vote at the Annual Meeting, the Company had
31,052,296 outstanding shares of Common Stock, par value $.10 per share, and
25,825 outstanding shares of Senior Convertible Redeemable Preferred Stock,
par value $100 per share.
On August 28, 1997, the aggregate market value of Registrant's
outstanding voting (Common) Stock held by non-affiliates, was $8,326,995
(based on the average between the bid and the asked prices of such stock on
that date).
1
<PAGE>
The presence, in person or by proxy, of stockholders entitled to cast a
majority of the votes which all stockholders are entitled to cast will
constitute a quorum. On all matters voted upon at the meeting and any
adjournment or postponement thereof, each record holder of Common Stock will
be entitled to one vote per share and each record holder of Senior Convertible
Redeemable Preferred Stock will be entitled to 100 votes per share. In the
election of directors, stockholders do not have cumulative voting rights. The
nominees receiving the highest number of votes cast, up to the number of
directors to be elected, shall be elected. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election. Approval of the
proposed amendment to the 1991 Plan requires the affirmative vote of a
majority of the Common Stock and the Senior Convertible Redeemable Preferred
Stock voted at the meeting. Since abstentions are counted in the tabulations
of the votes cast on proposals presented to stockholders, abstentions will
have the same effect as negative votes with respect to this proposal. Broker
non-votes will not be counted for purposes of approval of the proposed
amendment to the 1991 Plan and, thus, will not affect the outcome of this
proposal.
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information as of August 28, 1997 with
respect to each person and entity known to the Company to be the beneficial
owner of more than 5% of the outstanding shares of the Company's Common Stock,
each nominee for director of the Company and each executive officer listed in
the cash compensation table who owns shares of Common Stock and all executive
officers and directors of the Company as a group.
Beneficial Ownership of Common Stock
Beneficial Owner (1) (2) Amount Percentage of Class(12)
- --------------------------------------------------------------------------------
Alvin Hoffman 18,097,337(3) 53.7%
Henry I. Boreen 1,655,765(4) 5.2%
Burt Hoffman 1,145,510(5) 3.7%
Keith D. Schneck 402,500(6) 1.3%
Herman O. Benninghoff, II 305,000(7) *
R. Barry Borden 120,000(8) *
Hal Krisbergh 60,000(9) *
Lemuel A. Tarshis 50,000(10) *
All Directors and Executive
Officers as a Group (12 Persons) 23,563,604(11) 63.9%
* Less than one percent.
(1) To the best of the Company's knowledge, all shares of stock are owned
beneficially, and sole voting and investment power is held with respect
thereto, by the persons and entities named, except as otherwise noted. Share
amounts include additional shares issuable pursuant to options or warrants
held by such owners which are exercisable or may become exercisable within 60
days of the date hereof.
(2) The address of all beneficial owners is c/o AM Communications, Inc.,
100 Commerce Boulevard, Quakertown, PA 18951-2237.
2
<PAGE>
(3) The information concerning the beneficial ownership of Mr. Hoffman is
based, in part, upon information furnished by Mr. Hoffman to the Company. The
beneficial ownership indicated represents (i) an aggregate of 14,391,837 shares
of Common Stock currently owned, (ii) 25,825 shares of Senior Convertible
Preferred Stock convertible into 2,582,500 shares of Common Stock, (iii) 50,000
shares issuable pursuant to stock options, and (iv) 1,073,000 shares of Common
Stock currently owned by Mr. Hoffman's wife. Mr. Hoffman disclaims beneficial
ownership of the shares set forth in (iv) above.
(4) Includes 100,000 shares which may be acquired upon the exercise of
warrants and 925,000 shares issuable pursuant to stock options.
(5) Includes 50,000 shares which may be acquired upon the exercise of warrants
and 50,000 shares issuable pursuant to stock options.
(6) Includes 300,000 shares issuable pursuant to stock options.
(7) Includes 210,000 shares issuable pursuant to stock options.
(8) Includes 60,000 shares which may be acquired upon the exercise of warrants
and 50,000 shares issuable pursuant to stock options.
(9) Includes 60,000 shares issuable pursuant to stock options.
(10)Includes 50,000 shares issuable pursuant to stock options.
(11)Includes an aggregate of 17,729,104 shares of Common Stock and 25,825
shares of Senior Convertible Redeemable Preferred Stock (which are presently
convertible into 2,582,500 shares of the Company's Common Stock) currently
owned and 3,225,000 shares of Common Stock which may be acquired upon the
exercise of options and warrants.
(12)The percentages have been calculated on the basis of treating as
outstanding, for a particular holder, all shares of the Common Stock
outstanding on said date and all shares of the Common Stock issuable to such
holder in the event of exercise or conversion of outstanding options, warrants
and convertible securities owned by such holder at said date which are
exercisable or convertible within 60 days of such date.
The table below sets forth certain information as of August 28, 1997 with
respect to each person and entity known to the Company to be the beneficial
owner of more than 5% of the outstanding shares of the Company's Senior
Convertible Redeemable Preferred Stock.
Beneficial Ownership
Beneficial Owner Amount Percentage of Class
- --------------------------------------------------------------------------------
Alvin Hoffman 25,825 100%
3
<PAGE>
1. ELECTION OF DIRECTORS
At the meeting, the stockholders will be asked to elect eight directors,
to hold office until the next annual meeting or until their respective
successors have been duly elected and qualified. It is expected that proxies
executed on the enclosed form will be voted, in the absence of other
instructions, for the election of the persons named below, each of whom is
presently serving as a director of the Company. Should any one or more of
these nominees become unavailable to accept nominations or election as a
director, the persons named in the enclosed proxy will vote the shares which
they represent for the election of such other persons as the Board of
Directors may recommend, unless the Board of Directors reduces the number of
directors.
The nominees for directors, together with certain information with
respect to them, are as follows:
<TABLE>
<CAPTION>
Became
Name & Age Director Principal Occupation and Business During Last Five Years
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Henry I. Boreen, 70 1985 Mr. Boreen has served as Chairman and Chief Executive Officer
of the Company since 1990. He also served as Chief Financial Officer and
President from 1990 through April 1995. He has been Chief Executive Officer
and a director of HIB International, Inc., which participates in high
technology joint ventures, since 1985. Mr. Boreen is also Chairman of
Integrated Circuit Systems, Inc. a publicly held company.
Keith D. Schneck, 42 1995 Mr. Schneck joined the Company in April 1995 as President and
Chief Financial Officer and became a director in June 1995. From 1987 until he
joined the Company, Mr. Schneck held senior management positions at Integrated
Circuit Systems, Inc. including Chief Operating Officer and Senior Vice
President, Finance.
Herman O. Benninghoff, II, 66 1988 Mr. Benninghoff has served as Chairman of Philadelphia Pipe Bending Co.
and D Kay Fabricators, Inc. since 1977. He is also a director and
principal in Philadelphia Pipe Bending Co., Philadelphia, PA.
Alvin Hoffman, 68 1995 Mr. Hoffman is a private investor and has been a registered broker with
Makefield Securities in Boca Raton, FL since 1982.
Hal Krisbergh, 49 1995 Mr. Krisbergh is President of WorldGate Communications located in Rydal, PA
and is also a director of Ortel Corporation, a publicly held company.
He previously served as President of the Communications Division of
General Instrument Corporation from 1981 to 1994.
Burt Hoffman, 43 1996 Mr. B. Hoffman is an investment manager and a broker with Makefield
Securities since 1985 and the son of Mr. Alvin Hoffman.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Lemuel A. Tarshis, Ph.D., 56 1996 Dr. Tarshis has been associated with Assessment Alternatives,
Inc., a management consulting firm since 1992. He also is a
director and research professor at Stevens Institute of
Technology since 1991. Prior to 1992, Dr. Tarshis held
vice president positions with General Instrument Corporation.
R. Barry Borden, 57 1996 Mr. Borden is President of LMA Group, Inc., a general management
consulting firm since 1984. He previously has held executive level
positions with other high technology companies including Mergent
International, Cricket Software Inc., Franklin Computer Corporation
and Delta Data Systems. Mr. Borden is also a director of Opcode Systems,
Matterhorn Growth Fund and Scangraphics, a publicly held company.
</TABLE>
Section 16(b) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of its
common stock, to file reports of ownership and changes in ownership of the
Common Stock with the Securities and Exchange Commission. The Company believes
that all filing requirements applicable to its other officers, directors and
greater than 10% beneficial owners have been timely satisfied.
Information Concerning Meetings, Committees and Directors' Compensation
The Board of Directors held four regular meetings during the fiscal year
ended March 29, 1997 and acted twice by unanimous consent in writing in
accordance with Delaware law. During fiscal 1997, all directors attended at
least 75% of the total number of meetings of the Board of Directors and
committees of the Board on which they served.
The Audit Committee is responsible for reviewing audit activities,
recommending to the Board of Directors the engagement of independent auditors,
and reviewing the professional services rendered by the independent auditors
including the scope of the audit, their fees, and the results of their
engagement. No member of the committee is an employee of the Company. The
Audit Committee consisting of Messrs. Benninghoff, Borden, A. Hoffman, and B.
Hoffman did not formally meet during fiscal 1997.
The Compensation and Stock Option Committee is responsible for the
administration of the 1991 Plan which committee is authorized to select
recipients of options and determine the terms of their options, subject to the
provisions of the 1991 Plan. In addition, the Committee reviews and approves
employee compensation plans and such other benefits as it deems advisable. The
Compensation and Stock Option Committee consists of Messrs. Boreen, A.
Hoffman, and Krisbergh. The Committee met twice during the last fiscal year.
The Company does not have a Nominating Committee.
5
<PAGE>
Directors who are not employees of the Company are paid $500 for each
Board of Directors meeting and Committee meeting attended. In addition, each
director, who is not an employee of the Company, is entitled to receive, on
July 1 of each year, an automatic grant of annual incentive stock options
covering 50,000 shares of the Company's Common Stock, pursuant to the 1991
Incentive Stock Option Plan.
Executive Officers
<TABLE>
<CAPTION>
Became
Name & Age Officer Position with the Company and Business During Last Five Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Henry I. Boreen, 70 1990 Chairman and Chief Executive Officer since October, 1990. Served
as Chief Financial Officer and President from 1990 to 1995.
Keith D. Schneck, 42 1995 President and Chief Financial Officer since joining the Company
in April, 1995. He held senior management positions at Integrated
Circuit Systems, Inc. including Chief Operating Officer and Senior
Vice President, Finance from 1987 until he joined the Company.
David L. DeLane, 57 1988 Vice President, Sales since joining the Company in 1988.
Joseph D. Rocci, 49 1988 Vice President, Product Technology of the Company since 1989.
Served as Vice President, Product Operations of the Company from
1988 to 1989. He has been employed by the Company since 1983.
Michael L. Quelly, 43 1989 Vice President, Engineering from 1989 to present and Executive Vice
President from 1990 to 1995. He has been employed by the Company
since 1982.
Robert Vogel, 37 1996 Senior Vice President, Sales and Marketing of the Company since
January, 1997. He joined the Company in January 1996 as Vice President,
Marketing. From 1993 to December, 1995 he had been employed as a senior
product director at General Instrument Corporation. Prior 1993, Mr. Vogel
was a principal owner for seven years of Integrated System Consulting Group,
a software and integration consulting firm.
</TABLE>
Executive Compensation
The following tables set forth certain information concerning (a) the
cash remuneration paid by the Company during each of the last three fiscal
years to the Company's Chief Executive Officer and to each executive officer
of the Company whose cash compensation exceeded $100,000 per annum
6
<PAGE>
during any such year, and (b) stock options granted during the last three
fiscal years to each such individuals.
Summary Compensation Table
--------------------------
Annual and Long Term Compensation
Name & Principal Fiscal Stock Options
Position Year Salary Awarded
- --------------------------------------------------------------------------------
Henry I. Boreen 1997 --- 50,000
Chairman and CEO 1996 --- 10,000
1995 --- ---
- --------------------------------------------------------------------------------
Keith D. Schneck 1997 $116,000 400,000
President and CFO 1996 90,000 450,000
1995 * --- ---
* Mr. Schneck began his employment with the Company in fiscal year 1996.
The following table sets forth certain information pertaining to the
grant of options during the Company's last completed fiscal year to the
individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Summary Option Grant Table
--------------------------
% of Total
No. of Securities Options Granted Exercise
Fiscal Underlying Options to Employees Price Expiration
Year Granted in Fiscal Year ($/Share) Date
------ ------------------ --------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Henry I. Boreen 1997 40,000 2% $.50 1/03/07
Keith D. Schneck 1997 400,000 24% $.50 1/03/07
</TABLE>
The following table sets forth certain information pertaining to the
stock options held by the individuals named in the Summary Compensation Table:
Fiscal 1997 Year End Option Values
----------------------------------
Number of Value of
Unexercised Options In-the-Money Options
At Fiscal Year End at March 29, 1997(1)
------------------ --------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----- ----------- ------------- ----------- -------------
Henry I. Boreen 925,000 --- $110,500 ---
Keith D. Schneck 300,000 550,000 --- ---
(1) Value is based upon the closing price of the stock on March 29, 1997,
less the exercise price.
There were no stock option or stock appreciation rights exercised by Mr.
Boreen or Mr. Schneck during the last fiscal year. The Company does not
maintain any long term incentive plans for its officers.
7
<PAGE>
The Company does not have any employment contracts or arrangements with
any of its executive officers.
The Company does not have, and during the past five fiscal years has not
had, any other plans providing cash or non-cash compensation to officers or
employees, other than the Company's 1982 and 1991 Incentive Stock Option
Plans, 401K retirement plan, and group life, health or relocation plans
available generally to all salaried employees that do not discriminate in
scope, terms or operation in favor of officers or directors.
Certain Relationships and Related Transactions
During April 1995, warrants held by Messrs. Hoffman, Boreen, Bastian,
Benninghoff along with those held by Keystone Venture II, L.P. were exercised.
The exercise price was paid in cash except for $850,803 which was satisfied by
a note receivable, bearing 8% interest, from Mr. Hoffman. The note was due and
paid on June 30, 1995.
In July 1996, the Company loaned its principal stockholder, Mr. Alvin
Hoffman, a total of $655,000 under a note receivable, bearing 8% interest, due
September 28, 1996. The note was collateralized with the shares of the
Company's Senior Convertible Redeemable Preferred Stock owned by Mr. Hoffman.
The note was paid in full by October, 1996.
In June 1997, the Company received a short term loan of $200,000 from its
principal stockholder.
2. PROPOSAL TO INCREASE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER 1991 INCENTIVE STOCK
OPTION PLAN
The Company's 1991 Incentive Stock Option Plan (the "1991 Plan") was
adopted in 1991. The 1991 Plan originally authorized the grant of options to
purchase up to an aggregate of 2,000,000 shares of Common Stock to all
employees and directors of the Company. In 1993, the 1991 Plan was amended to
increase the shares authorized for issuance under the 1991 Plan from 2,000,000
to 4,000,000. In 1996, the Plan was amended to increase the shares authorized
for issuance under the 1991 Plan from 4,000,000 to 5,000,000. In August, 1997,
the Board of Directors of the Company amended the 1991 Plan, subject to
stockholder approval, to increase the aggregate number of shares of the
Company's Common Stock available for issuance thereunder from 5,000,000 to
6,000,000. Options to purchase an aggregate of 4,671,333 shares of the
Company's Common Stock are currently outstanding under the 1991 Plan.
8
<PAGE>
The following table sets forth information concerning stock options
granted under the 1991 Plan to the Company's Chief Executive Officer, to all
executive officers as a group, to certain current directors who are not
executive officers as a group, each nominee for election as a director, and
all other employees as a group:
Name of Individual and Position Number of
or Number in Group Option Shares Held
-------------------------------------------- ------------------
Henry I. Boreen, Chairman and CEO (1) 710,000
Keith D. Schneck, President and Director (1) 850,000
All Current Executive Officers, as a group
(including Mr. Boreen) (6 persons) 2,900,000
Certain Current Directors Who are Not Executive
Officers, as a group (6 persons) 320,000
Herman O. Benninghoff, II, Director (1) 60,000
Alvin Hoffman, Director (1) 50,000
Hal Krisbergh, Director (1) 60,000
Burt Hoffman, Director (1) 50,000
Lemuel A. Tarshis, Ph.D., Director (1) 50,000
R. Barry Borden, Director (1) 50,000
All Other Employees, As a Group (75 persons) 1,209,333
(1) Nominee for Election as a Director
The following is a brief summary of certain significant provisions of
the Plan:
1. Administration. The 1991 Plan is administered by the Compensation
and Stock Option Committee (the "Committee") appointed by the Board of
Directors. The Committee interprets the 1991 Plan and has discretion to select
participants, establish the manner in which options are granted and exercised,
cancel and modify options in certain situations and otherwise prescribe all of
the terms and provisions of options granted under the 1991 Plan.
2. Participants. The Committee selects participants from among the
six executive officers, six directors, and 75 other employees of the Company.
The aggregate fair market value (determined as of the time such option is
granted) of the Common Stock for which any participant may have options which
become exercisable for the first time in any calendar year may not exceed
$100,000. No determination has been made with respect to future recipients of
options under the 1991 Plan and it is not possible to specify the names or
positions of the individuals to whom options may be granted in the future, or
the number of shares, within the limitations of the 1991 Plan, to be covered
by such options.
9
<PAGE>
3. Exercise Price. The price per share for each option granted under
the 1991 Plan is determined by the Committee, but it cannot be less than the
fair market value of the Common Stock on the date of grant. Furthermore,
options may not be granted to any participant who at the time such an option
is granted owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company unless the purchase price of such
shares of Common Stock issuable upon exercise of each option is not less than
110 percent (110%) of the fair market value of such shares on the date such
option is granted.
4. Period of Option. Unless otherwise provided by the Committee, each
option granted under the 1991 Plan becomes exercisable in one third increments
per year commencing upon the first anniversary of the date of grant.
5. Term of Option. Options granted under the 1991 Plan may not be
exercised after the earliest to occur of the following: (a) the expiration of
ten (10) years from the date such option was granted (five (5) years if the
option holder owned more than ten percent (10%) of the total combined voting
power of all classes of stock); (b) three (3) months from the date the
participant's employment terminates for any reason other than cause,
disability, or retirements; or (c) twelve (12) months from the date the
participant's employment terminates by reason of disability or death. In the
event of termination of employment of a participant by the Company "for cause"
(as such term is defined in the 1991 Plan), all options granted to the
participant under the 1991 Plan terminate immediately.
6. Expiration and Termination of the Plan. The 1991 Plan may be
abandoned or terminated at any time by the Board of Directors except with
respect to any incentive stock option then outstanding under the 1991 Plan. No
options may be granted pursuant to the 1991 Plan after its termination date of
December 10, 2001.
7. Federal Income Tax Matters. The following discussion is only a
summary of certain aspects of the federal income tax rules generally
applicable to an individual participating in an incentive stock plan and does
not deal with other taxes which may affect such an individual, such as state
and foreign taxes.
No taxable income will be recognized by the optionee upon either the
grant or exercise of the option. The Federal income tax consequences to the
participant on disposition of the stock received depend primarily on the
optionee's holding period of the stock. If the optionee disposes of the stock
more than two years after the option is granted and has held the stock for
more than one year after exercise, any gain or loss recognized by the optionee
on such disposition will constitute a long term capital gain or loss, measured
as the difference between the option exercise price and the sale price.
Generally, if the optionee disposes of the stock before the holding
periods set forth above are satisfied, the optionee will recognize ordinary
income at the time of disposition equal to the difference between the option
exercise price and the lesser of the sale price or the fair market value of
10
<PAGE>
the stock on the date the option was exercised. If the actual gain exceeds the
amount of ordinary income, the excess will be considered short-term or
long-term capital gain depending on how long the shares are actually held.
There are no Federal tax consequences to the Company upon the grant
or exercise of an option. However, if an optionee disposes of the stock
acquired without satisfying the holding period requirements set forth above,
the Company will be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee upon disposition. There is no charge against
the Company in connection with the grant of an option under the 1991 Plan or
the exercise of an option for cash.
Each participant in the 1991 Plan should consult his or her tax
advisor as to alternative minimum tax consequences or other specific tax
issues created with respect to the options as they may apply to his or her
particular situation.
The Board of Directors has deemed it to be in the best interests of
the Company to increase the aggregate number of shares of Common Stock
issuable pursuant to the 1991 Plan from 5,000,000 to 6,000,000. This increase
would provide a means by which certain directors, employees and other persons
responsible for significant contributions to the Company's business may be
given an opportunity to purchase the Company's Common Stock. The Board of
Directors believes that the equity stake in the growth and success of the
Company afforded by stock options provides such key employees with an
incentive to continue to energetically apply their talents within the Company.
For adoption of the proposed amendment to the 1991 Plan, it will be necessary
that it be approved by the affirmative vote of a majority of the Common Stock
and the Senior Convertible Redeemable Preferred Stock voted at the meeting.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the 1991 Plan.
ADDITIONAL INFORMATION
Relationship with Independent Public Accountants
KPMG Peat Marwick LLP, which has served as the Company's independent
public accountants for the last fiscal year, has been selected by the Board of
Directors as the independent public accountants for the Company's current
fiscal year. A representative of KPMG Peat Marwick LLP is expected to be
present at the meeting with the opportunity to make a statement if he desires
to do so and will be available to respond to appropriate questions from
stockholders.
The Board of Directors approved the appointment of the Company's
independent public accountants to perform the audit services normally rendered
by public accounting firms.
11
<PAGE>
Stockholder Proposals
Proposals of stockholders intended to be presented at the Annual Meeting
of Stockholders in 1998 must be received by the Company by May 27, 1998, in
order to be considered for inclusion in the Company's proxy statement and form
of proxy relating to the meeting.
Solicitation of Proxies
Expenses in connection with the solicitation of proxies will be paid by
the Company. Solicitation of proxies will be principally by mail. In addition,
some of the directors, officers or other employees of the Company may solicit
proxies personally, by telephone, or by mail, if deemed appropriate.
Annual Report on Form 10-KSB
The Company will provide without charge to each person solicited by this
proxy statement, on the written request of any such person, a copy of the
Company's Annual Report on Form 10-KSB, including the financial statements and
the schedules thereto, as filed with the Securities and Exchange Commission
for its 1997 fiscal year. Such written requests should be directed to the
Shareholder Relations Department, AM Communications, Inc., 100 Commerce
Boulevard, Quakertown, PA 18951-2237.
Keith D. Schneck
President
September 24, 1997
12
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P R O X Y This Proxy is Solicited on Behalf of the Board of
AM Communications, Inc. Directors. The undersigned hereby appoints Keith D.
100 Commerce Boulevard Schneck and Patricia A. Eynon, and each of them,
Quakertown, PA 18951-2237 proxy for the undersigned, with full power of
substitution, to vote all shares of Common Stock
and Senior Convertible Redeemable Preferred Stock
of AM Communications, Inc. which the undersigned is
entitled to vote at the Annual Meeting of
Stockholders to be held on October 17, 1997 at 9:30
a.m. or any adjournment thereof.
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1. Election of Directors. / / FOR all eight nominees listed (except as
marked to the contrary below).
/ / WITHHOLD AUTHORITY to vote for all eight
nominees listed below.
(To withhold authority to vote for any individual nominee, strike a line through
the nominee's name listed below.)
Nominees: Herman O. Benninghoff, II R. Barry Borden
Burt Hoffman Hal Krisbergh
Henry I. Boreen Alvin Hoffman
Keith D. Schneck Lemuel A. Tarshis
2. Proposal to amend the Company's 1991 Incentive Stock Option Plan to increase
the aggregate number of shares of the Company's Common Stock authorized for
issuance under the 1991 Plan from 5,000,000 to 6,000,000 shares.
/ / For / / Against / / Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
NOT VALID UNLESS DATED AND SIGNED ON REVERSE SIDE
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This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of all eight nominees for directors, and FOR Proposal
2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by duly authorized officer. If a partnership,
please sign in partnership name by authorized person.
The undersigned hereby revokes all previous proxies for such meeting, and
hereby acknowledges receipt of the Notice of the Meeting, the Proxy Statement,
and the Annual Report of AM Communications, Inc. furnished therewith.
Dated: ,1997
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Stockholder's Signature
_________________________________________
Stockholder's signature, if held jointly.
Please mark, sign, date, and return the proxy card promptly using the enclosed
envelope.
