<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/ 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 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:
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:
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2) Form Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
AM COMMUNICATIONS, INC.
100 Commerce Boulevard
Quakertown, PA 18951-2237
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 19, 1999
The Annual Meeting of Stockholders of AM Communications, Inc., a Delaware
corporation (the "Company"), will be held on Friday, February 19, 1999 at 9:30
a.m., local time, 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 six directors of the Company to hold office until the next Annual
Meeting of Stockholders or until their respective successors are duly elected
and shall qualify;
2. To consider and vote upon a proposal to ratify the adoption of a new stock
option plan to be designated the "AM Communications, Inc. 1999 Stock Option
Plan"; 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 December 31, 1998 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.
The Proxy Statement accompanying this Notice contains detailed information
concerning matters to be considered and acted upon at the meeting. Please read
it carefully.
All stockholders are cordially invited to attend the meeting. Whether or
not you plan 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. Your proxy may be revoked at any time prior to the
time it is voted and 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 1998 Annual
Report is also enclosed but is not to be regarded as proxy solicitation
material.
By Order of the Board of Directors,
Keith D. Schneck
President and CEO
January 20, 1999
<PAGE>
AM COMMUNICATIONS, INC.
100 Commerce Boulevard
Quakertown, PA 18951-2237
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 19, 1999
The enclosed proxy is solicited by the Board of Directors of AM
Communications, Inc., a Delaware corporation (the "Company"), 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 Friday, February 19, 1999 at 9:30 a.m., local time, and
any adjournment or postponement thereof. This proxy statement, the foregoing
notice, and the enclosed proxy are being mailed to stockholders on or about
January 20, 1999.
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, the shares represented by properly
executed proxies received by the Company will be voted "For" the nominees of the
Board of Directors in the election of six directors, "For" the adoption of the
AM Communications, Inc. 1999 Stock Option Plan (the "1999 Stock Option 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.
The address of the principal executive offices of the Company is 100
Commerce Boulevard, Quakertown, PA 18951-2237.
Outstanding Voting Securities
At the close of business on December 31, 1998, the record date to determine
stockholders entitled to vote at the Annual Meeting, the Company had 31,072,296
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.
1
<PAGE>
On December 31, 1998, the aggregate market value of the Company's
outstanding shares of Common Stock held by non-affiliates was $1,738,962 (based
on the average between the bid and the asked prices of such stock on that date).
The presence, in person or by proxy, at the meeting of stockholders
entitled to cast a majority of the votes which all stockholders are entitled to
cast will constitute a quorum. Abstentions and broker non-votes are counted for
the purpose of determining the presence or absence of a quorum for the
transaction of business at the meeting.
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. Approval of the proposed adoption of the 1999 Stock Option Plan
requires the affirmative vote of a majority of the Common Stock and the Senior
Convertible Redeemable Preferred Stock voted at the meeting. Abstentions will be
counted in the tabulations of the votes cast on proposals presented to
stockholders at the meeting and will have the same effect as negative votes cast
with respect to the election of directors or the approval of the 1999 Stock
Option Plan. Broker non-votes will not be counted for purposes of determining
the election of directors or adoption of the 1999 Stock Option Plan.
Voting Arrangements with Respect to Company Stock
On November 2, 1998, the Alvin Hoffman Revocable Trust UAD 2/28/86 ("the
Hoffman Trust") entered into a Voting Trust and Share Price Participation
Agreement dated November 2, 1998 (the "Voting Trust"), with Javad (Jay) K.
Hassan as voting trustee (the "Voting Trustee"), and pursuant thereto deposited
with the Voting Trustee 14,391,837 shares of the Common Stock of the Company,
constituting 46.3% of the issued and outstanding shares of the Company's Common
Stock. Pursuant to the terms of the Voting Trust, the Voting Trustee is
entitled, for the term of the Voting Trust, to exercise all voting rights with
respect to such shares. Accordingly, management of the Company believes that,
while Alvin Hoffman, the settlor of the Hoffman Trust, remains a beneficial
owner of such shares, the transfer of voting rights with respect to such shares
has resulted in a change in control of the Company from Mr. Hoffman to Mr.
Hassan.
Neither Mr. Hoffman nor the Hoffman Trust received any consideration for
the above-described transfer of voting rights.
Mr. Hassan, on the same date, entered into a Services Agreement with the
Company pursuant to which Mr. Hassan (i) was appointed to the Company's Board of
Directors and elected to serve as its Chairman of the Board, (ii) agreed to
assume the duties and responsibilities described therein, and (iii) was granted,
subject to approval of the 1999 Stock Option Plan by the Company's stockholders,
an option to acquire 5,000,000 shares of the Company's Common Stock, at a per
share exercise price equal to the fair market value of the stock on the date of
grant.
2
<PAGE>
On the same date, Network Systems and Technologies (P) Ltd. ("NeST"), an
affiliate of Mr. Hassan which is located in Trivandrum, India, entered into a
Consulting Services Agreement with the Company. Pursuant to this Agreement, NeST
will provide technical engineering services to the Company, including without
limitation hardware and software design. The Company has the option of paying
for such services either in cash or in warrants to purchase shares of the
Company's Common Stock.
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information as of December 31, 1998 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, each executive officer listed in the
cash compensation table, and all executive officers and directors of the Company
as a group.
Beneficial Ownership of Common Stock
Beneficial Owner (1) (2) No. of Shares Percentage of Class(10)
- --------------------------------------------------------------------------------
Alvin Hoffman 18,097,337 (4) 53.7%
Javad K. Hassan 14,391,837 (3) 46.3%
Keith D. Schneck 819,166 (5) 2.6%
Hal Krisbergh 110,000 (6) *
R. Barry Borden 110,000 (7) *
Lemuel A. Tarshis 100,000 (8) *
All Directors and Executive
Officers as a Group (8 Persons) 22,046,778 (9) 60.3%
* 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.
(3) As described above under the heading "Voting Arrangements with Respect
to Company Stock", Mr. Hassan, as the Voting Trustee, exercises all voting
rights with respect to 14,391,837 shares of the Common Stock deposited pursuant
to the Voting Trust.
(4) 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) 25,825 shares of Senior
Convertible Redeemable Preferred Stock convertible into 2,582,500 shares of
Common Stock, (ii) 50,000 shares issuable pursuant to stock options, (iii)
1,073,000 shares of Common Stock currently owned by Mr. Hoffman's wife, and (iv)
14,391,837 shares of the Common Stock of the Company which the Hoffman Trust
beneficially owns but over which Javad K. Hassan, as Voting Trustee, exercises
all voting rights. Mr. Hoffman disclaims beneficial ownership of the shares set
forth in (iii) above.
3
<PAGE>
(5) Includes 716,666 shares issuable pursuant to stock options.
(6) Includes 110,000 shares issuable pursuant to stock options.
(7) Includes 100,000 shares issuable pursuant to stock options.
(8) Includes 100,000 shares issuable pursuant to stock options.
(9) Includes (i) 14,391,837 shares of Common Stock beneficially owned by
the Hoffman Trust but over which Javad K. Hassan, as Voting Trustee, exercises
all voting rights, (ii) 25,825 shares of Senior Convertible Redeemable Preferred
Stock convertible into 2,582,500 shares of Common Stock, (iii) 1,073,000 shares
of Common Stock currently owned by Mr. Hoffman's wife, as to which Mr. Hoffman
disclaims beneficial ownership, and (iv) 2,783,333 shares of Common Stock which
may be acquired upon the exercise of outstanding options.
(10) 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 December 31, 1998 with
respect to each person and entity known to the Company to be the beneficial
owner of any of the outstanding shares of the Company's Senior Convertible
Redeemable Preferred Stock.
Beneficial Ownership
Beneficial Owner No. of Shares Percentage of Class
---------------- ------------- -------------------
Alvin Hoffman 25,825 100%
c/o AM Communications, Inc.
100 Commerce Boulevard
Quakertown, PA 18951-2237
1. ELECTION OF DIRECTORS
At the meeting, the stockholders will be asked to elect six 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 properly
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 nomination 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.
4
<PAGE>
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>
Javad K. Hassan, 57 1998 Mr. Hassan joined the Company in November 1998 as Chairman
of the Board. Prior to joining the Company, Mr. Hassan held
senior level positions at AMP, Inc. from 1988 until he was
named President of AMP Communications Systems Business, a
division of AMP, Inc., in 1995. He previously had a 20 year
career at IBM, starting in 1968 as an engineer, and
subsequently promoted to head of the IBM East Fishkill
semiconductor facility and of IBM's Tape Drive Division. He
was instrumental in forming a printed wiring board joint
venture company, AMP-AKZO Corporation of which he has been
chairman since its formation in 1990. Mr. Hassan was also
instrumental in the establishment of Network Systems &
Technologies Ltd. (NeST) in which he is a significant
investor. NeST is a provider of software and system solutions
and electronic manufacturing resources located in India. He
currently serves as Chairman of the Electronic Development
Commission for the Government of Kerala in India.
R. Barry Borden, 58 1996 Mr. Borden has been President of Nettech Systems, Inc. of Princeton,
New Jersey since 1997. 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 Matterhorn Growth Fund, and Chairman of
Scangraphics, a publicly held company.
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.
Lemuel A. Tarshis, Ph.D., 57 1996 Dr. Tarshis is a private consultant and has been associated with
Assessment Alternatives, Inc., a management consulting firm
since 1992. He also has been 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.
Keith D. Schneck, 43 1995 Mr. Schneck joined the Company in April 1995 as President and Chief
Financial Officer and assumed the position of Chief Executive
Officer in January 1998. He 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.
Hal Krisbergh, 50 1995 Mr. Krisbergh has been President of WorldGate Communications
located in Rydal, PA since 1995 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.
</TABLE>
5
<PAGE>
Section 16(a) 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 Company's
securities with the Securities and Exchange Commission (the "SEC"). Officers,
directors, and greater than ten percent (10%) stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
required for those persons, the Company believes that during its fiscal year
ended on March 28, 1998 all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were timely
satisfied.
Information Concerning Meetings, Committees and Directors' Compensation
The Board of Directors held four regular meetings during the fiscal year
ended March 28, 1998 and acted twice by unanimous consent in writing in
accordance with Delaware law. During fiscal 1998, 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 Company's 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. During
fiscal 1998, the Audit Committee consisted of Messrs. Benninghoff, B. Hoffman,
and Tarshis, and met once during such fiscal year.
The Compensation and Stock Option Committee is responsible for the
administration of the Company's Stock Options Plans and is authorized to select
recipients of options pursuant to said plans and to determine the terms of their
options, subject to the provisions of the applicable plan. In addition, the
Committee reviews and approves employee compensation plans and such other
benefits as it deems advisable. During fiscal 1998, the Compensation and Stock
Option Committee consisted of Messrs. Borden, Boreen, A. Hoffman, and Krisbergh,
and met once during such fiscal year.
The Company does not have a Nominating Committee.
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 stock options covering 50,000 shares of the
Company's Common Stock, pursuant to the Company's 1991 Stock Option Plan. The
exercise price for such options is equal to the fair market value of the Common
Stock on the date of grant and the options are fully exercisable at the time of
grant. Grants to non-employee directors were not made during July, 1998.
6
<PAGE>
Executive Officers
<TABLE>
<CAPTION>
Became
Name & Age Director Principal Occupation and Business During Last Five Years
- ---------- -------- --------------------------------------------------------
<S> <C> <C>
Keith D. Schneck, 43 1995 President and Chief Financial Officer since joining the Company
in April, 1995. Since January 1998, he has served as Chief
Executive Officer. 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.
Michael L. Quelly, 44 1989 Vice President, Engineering from 1989 to present, except for the
period from October 1990 through March 1995 when he also was
Executive Vice President. He has been employed by the Company
since 1982.
Joseph D. Rocci, 50 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.
</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 during any such
year, and (b) stock options granted during the last three fiscal years to each
such individual.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual and Long Term Compensation
Name & Principal Fiscal Stock Options Other
Position Year Salary Awarded Compensation
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Keith D. Schneck 1998 $ 133,000 450,000 (1) $ 7,982 (2)
President and CEO 1997 116,000 400,000 2,876
1996 87,000 450,000 660
- -----------------------------------------------------------------------------------------------------
Robert J. Vogel * 1998 $ 107,000 300,000 (1) $ 5,578 (3)
Vice President, Strategic 1997 89,000 250,000 1,395
Development 1996 15,000 300,000 ---
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Mr. Vogel began his employment with the Company in fiscal year 1996. He
resigned as an officer and an employee of the Company on May 8, 1998.
(1) Repriced stock options previously issued in fiscal year 1996. See
discussion below.
(2) Represents $403 and $291 in group life insurance premiums paid by the
Company in fiscal 1998 and 1997, respectively, and $7,579, $2,576, and $660
in matching contributions under the Company's 401(k) plan paid by the
Company in fiscal 1998, 1997, and 1996, respectively.
(3) Represents $403 and $259 in group life insurance premiums paid by the
Company in fiscal 1998 and 1997, respectively, and $5,175 and $1,136 in
matching contributions under the Company 401(k) plan paid by the Company in
fiscal 1998 and 1997, respectively.
7
<PAGE>
All of the Company's group life, health, hospitalization and medical
reimbursement plans, if any, do not discriminate in scope, terms, or operation
in favor of the executive officers or directors of the Company and are generally
available to all salaried employees.
During fiscal 1998, the Compensation and Stock Option Committee determined
that the goals of the Company's 1991 Incentive Stock Option Plan and the
Company's 1982 Incentive Stock Option Plan (the "Plans"), to provide equity
incentives for employees, executive officers, and directors of the Company,
would not be achieved since a significant number of the then outstanding options
had exercise prices above the then current fair market value of the Company's
Common Stock. Therefore, the Compensation and Stock Option Committee determined
that it was in the best interests of the Company and its stockholders to reprice
those options.
On August 4, 1997, the Company automatically adjusted to the average of the
bid and asked price of the Company's Common Stock on such date ($0.53 per share)
the exercise price of all outstanding options issued under the Plans with an
exercise price exceeding $0.53 per share. This repricing included all such
options held by the Company's employees, executive officers, and directors.
The following table sets forth certain information pertaining to the grant
of options during the Company's last completed fiscal year to the individuals
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Summary Option Grant Table
% of Total
No. of Securities Options Granted Exercise
Fiscal Underlying Options to Employees Price Expiration
Year Granted in Fiscal Year ($/Share) Date
---- ------------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Keith D. Schneck 1998 450,000 --- $.53 3/16/05
Robert Vogel (1) 1998 300,000 --- $.53 8/08/98
</TABLE>
(1) Mr. Vogel resigned as an officer and an employee of the Company on
May 8, 1998.
The following table sets forth certain information pertaining to the stock
options held by the individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Fiscal 1998 Year End Option Values
----------------------------------
Number of Value of
Unexercised Options In-the-Money Options
At Fiscal Year End at March 28, 1998(1)
------------------- --------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Keith D. Schneck 583,334 266,666 $59,417 $33,333
Robert J. Vogel (2) 283,335 266,665 $29,417 $30,333
</TABLE>
(1) Value is based upon the closing price of the stock on March 28, 1998, less
the exercise price.
(2) Mr. Vogel resigned as an officer and an employee of the Company on May 8,
1998.
There were no stock options exercised by Mr. Schneck or Mr. Vogel during
fiscal 1998. The Company does not maintain any long term incentive plans for its
officers.
8
<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
In June 1997, the Company received a $200,000 short-term loan, with
interest payable at 8%, from its principal stockholder, Alvin Hoffman, to
support inventory requirements related to the Company's increased sales backlog.
This loan was repaid in September, 1997. In July 1998, the Company received a
$250,000 commitment from its primary shareholder, Alvin Hoffman, to provide
working capital through July 1999 at 10% interest and payment of outstanding
borrowings due by September 30, 1999.
On November 2, 1998, Javad (Jay) K. Hassan entered into a Services
Agreement with the Company pursuant to which Mr. Hassan (i) was appointed to the
Company's Board of Directors and elected to serve as its Chairman of the Board,
(ii) agreed to assume the duties and responsibilities described therein, and
(iii) was granted, subject to approval of the 1999 Stock Option Plan by the
Company's stockholders, an option to acquire 5,000,000 shares of the Company's
Common Stock, at a per share exercise price equal to the fair market value of
the stock on the date of grant.
On the same date, Network Systems and Technologies (P) Ltd. ("NeST"), an
affiliate of Mr. Hassan which is located in Trivandrum, India, entered into a
Consulting Services Agreement with the Company. Pursuant to this Agreement, NeST
will provide technical engineering services to the Company, including without
limitation hardware and software design. The Company has the option of paying
for such services either in cash or in warrants to purchase shares of the
Company's Common Stock.
2. ADOPTION OF 1999 STOCK OPTION PLAN
The Board of Directors of the Company has deemed it to be in the best
interests of the Company to establish and maintain a stock option plan in order
to 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 shares of the Company's Common Stock. The Board of
Directors believes that the equity stake in the growth and success of the
Company which is provided by stock options provides such key individuals with an
incentive to continue to energetically apply their talents within the Company.
Accordingly, the Board of Directors has adopted the AM Communications, Inc. 1999
Stock Option Plan (the "1999 Stock Option Plan"), subject to stockholder
approval. Adoption of the 1999 Stock Option Plan by the Company requires the
affirmative vote of a majority of the voting stock of the Company which is
present, in person or by proxy, at a duly organized meeting of stockholders.
9
<PAGE>
The Company has previously adopted a 1982 Stock Option Plan and a 1991
Stock Option Plan. Options to acquire 635,000 shares of the Company's Common
Stock are outstanding under the 1982 Stock Option Plan as of the date hereof. No
additional options may be granted under the 1982 Stock Option Plan. Options to
acquire 4,433,333 shares of the Company's Common Stock are outstanding under the
1991 Stock Option Plan as of the date hereof. No additional options may be
granted under the 1991 Stock Option Plan.
The key provisions of the 1999 Stock Option Plan are briefly summarized
below. The complete text of the 1999 Stock Option Plan is attached hereto as
Exhibit A and reference is made to such Exhibit for a complete statement of the
provisions of the 1999 Stock Option Plan:
1. Type of Options: The 1999 Stock Option Plan would enable the Company to
grant either "non-qualified options' or "incentive stock options."
2. Number of Shares: The aggregate maximum number of shares for which options
may be issued under the 1999 Stock Option Plan will be 10,000,000 shares of
the Company's Common Stock, par value $.10, subject to antidilution
adjustments in the event of any changes in the Company's capitalization.
The aggregate market value of such shares as of December 31, 1998 (based on
the average of the bid and the asked prices of the Company's Common Stock
on such date) was $1,200,000. Stockholders of the Company will have no
preemptive rights with regard to shares allotted to the 1999 Stock Option
Plan.
3. Administration: The 1999 Stock Option Plan will be administered by a
committee (the "Committee") appointed by the Board of Directors of the
Company, which Committee shall consist of not less than two (2) directors
who shall not be employees of the Company.
4. Eligibility: Optionees of the 1999 Stock Option Plan shall be selected by
the Committee from among the directors and employees of the Company and
other individuals who provide services to or otherwise have a relationship
with the Company or its subsidiaries. Optionees will be selected on the
basis of demonstrated ability to contribute substantially to the success of
the Company. The Committee will determine the identity and the number of
optionees under the 1999 Stock Option Plan. Employees of the Company,
including employees who are also directors of the Company, will be eligible
to receive incentive stock options under the 1999 Stock Option Plan. All
other eligible individuals, including non-employee directors of the
Company, will be eligible to receive non-qualified stock options under the
1999 Stock Option Plan.
5. Effective Date of the 1999 Stock Option Plan: The 1999 Stock Option Plan
shall become effective on February 19, 1999, if approved by the
stockholders of the Company on such date.
10
<PAGE>
6. Expiration and Termination of the 1999 Stock Option Plan: The 1999 Stock
Option Plan may be abandoned or terminated at any time by the Board of
Directors except with respect to any option then outstanding under the 1999
Stock Option Plan. No stock option shall be granted pursuant to the Plan
after ten (10) years from the effective date of the 1999 Stock Option Plan.
7. Term of Option: All options will lapse on the earlier of the: (a)
expiration of the option terms specified by the Committee, but in no event
shall incentive stock options be exercisable after the expiration of 10
years from the date such option is granted (five years for optionees who
own more than 10% of the total combined voting power of all classes of the
stock of the Company or its parent or subsidiary corporation or
corporations), (b) expiration of three months from the date the employee's
employment terminates for any reason other than disability or death, or (c)
expiration of twelve months from the date the employee's employment
terminates by reason of the employee's disability or death.
8. Option Price: The exercise price for each stock option issued under the
1999 Stock Option Plan shall be set by the Board of Directors at the time
the option is granted but, for incentive stock options granted under the
1999 Stock Option Plan, such exercise price shall not be less than 100% of
the fair market value of the Common Stock on the date the option is
granted. In the case of the grant of an incentive stock option to an
optionee who owns more than 10% of the total combined voting power of all
classes of stock of the Company or its subsidiaries, the option price of
such option shall be at least 110% of the fair market value of the Common
Stock on the date the option is granted.
9. Maximum Grant: In any calendar year, the aggregate fair market value of the
shares (as determined at the time the option is granted) for which all
incentive stock options held by an optionee are exercisable for the first
time in such calendar year cannot exceed the sum of $100,000.
10. Payment: The exercise of any option shall be contingent upon receipt by the
Company of a certified or official bank check or the equivalent thereof
acceptable to the Company, shares of the Company's Common Stock, or any
combination of the foregoing, in an amount equal to the full option price
of the shares being purchased. Proceeds received by the Company from
optioned shares will be used by the Company for general corporate purposes.
11. Federal Income Tax Matters. The Company believes that, under currently
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), an optionee will not be deemed to receive any income for Federal
tax purposes upon the grant of an option under the 1999 Stock Option Plan,
nor will the Company be entitled to a tax deduction at that time. However,
upon the exercise of an option, the tax consequences are as follows:
(a) Upon the exercise of a non-qualified option, the optionee
will have ordinary income in an amount equal to the excess of
the value of the shares on the exercise date over the
exercise price. The Company will be allowed an income tax
deduction at that time in the same amount.
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(b) Upon the exercise of an incentive stock option, no income is
recognized by the optionee. If the stock is held at least one
(1) year following the date of transfer of the stock to him
and at least two (2) years from the date of grant of the
option, the optionee will realize a long-term capital gain or
loss upon a sale of the underlying stock, measured by the
difference between the option exercise price and the sale
price. If either of these holding period requirements is not
satisfied, and thus a "disqualifying disposition" has
occurred, ordinary income tax treatment will apply to the
difference between the option exercise price and the fair
market value of the stock on the date of exercise of the
option. If the actual gain on the sale of stock 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. No income tax deduction will be
allowed the Company with respect to shares purchased by an
optionee upon the exercise of an incentive stock option, if
such shares are held for the required periods as described
above. If a disqualifying disposition occurs, the Company
will be allowed an income tax deduction equal to the amount
of ordinary income recognized by the optionee upon the
disposition. If the amount which the optionee realizes on the
disqualifying disposition would result in a loss if the rules
regarding disqualifying dispositions applied, the amount of
ordinary income which the optionee would recognize (and the
amount of the Company's deduction) is the excess of the
amount realized on the sale over the basis of such stock.
Each optionee should consult with his or her tax advisor as to other tax issues
associated with respect to the options as they may apply to his or her
particular situation.
12. Amendments to the 1999 Stock Option Plan: The Board of Directors is able to
amend the 1999 Stock Option Plan without further approval by the
stockholders of the Company, except insofar as such approval is required by
law, or the Internal Revenue Code in the case of incentive stock options.
Other than as set forth in the table below, no determination has been made
with respect to future recipients of options under the 1999 Stock Option Plan,
and it is not possible to specify the names or positions of the individuals to
whom options may be granted, or the number of shares, within the limitations of
the 1999 Stock Option Plan, to be covered by such options.
Name and Position Dollar Value No. of Options
----------------- ------------ --------------
Javad K. Hassan, Chairman $600,000 (1) 5,000,000
(1) Based on the average of the bid and the asked prices of the Company's
Common Stock on December 31, 1998, less the aggregate exercise price for
such options.
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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 1999 fiscal
year. A representative of KPMG Peat Marwick LLP is expected to be present at the
meeting.
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.
Stockholder Proposals for 1999 Annual Meeting of Stockholders
It is presently anticipated that the 1999 Annual Meeting of the Company's
Stockholders will be held on October 31, 1999. Stockholder proposals intended to
be considered at the 1999 Annual Meeting of Stockholders and which the proponent
would like to have included in the proxy materials distributed by the Company in
connection with such meeting, pursuant to Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), must be received
at the principal executive offices of the Company no later than June 2, 1999.
Such proposals may be included in next year's proxy materials if they comply
with certain rules and regulations promulgated by the Securities and Exchange
Commission.
Stockholder proposals intended to be considered at the 1999 Annual Meeting
of Stockholders and for which the proponent does not intend to seek inclusion of
the proposal in the proxy materials to be distributed by the Company in
connection with such meeting must be received at the principal executive offices
of the Company no later than August 16, 1999. Any stockholder proposal received
after such date will not be considered to be timely submitted for purposes of
the discretionary voting provisions of Rule 14a-4 promulgated under the 1934
Act. In accordance with Rule 14a-4(c), the holders of proxies solicited by the
Board of Directors of the Company in connection with the Company's 1999 Annual
Meeting of Stockholders may vote such proxies in their discretion on certain
matters as more fully described in such Rule, including without limitation on
any matter coming before the meeting as to which the Company does not have
notice on or before August 16, 1999.
Solicitation of Proxies
Expenses incurred in connection with the solicitation of proxies for the
meeting to which this proxy statement pertains 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 (none of whom will receive
additional compensation therefor) may solicit proxies personally, by telephone,
or by mail, if deemed appropriate. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
materials to the beneficial owners of stock, and reimbursement for expenses
incurred in connection therewith may be made by the Company.
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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 1998 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 and CEO
January 20, 1999
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Exhibit A
AM COMMUNICATIONS, INC.
1999 STOCK OPTION PLAN
1. Purpose
The purpose of the 1999 Stock Option Plan (referred to herein as the
"Plan") of AM Communications, Inc. (the "Company") is to provide a means by
which certain employees and directors of, and others providing services to or
having a relationship with, the Company and its subsidiaries (as such term is
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code")) may be given an opportunity to purchase common stock of the Company
("Common Stock"). The Plan is intended to promote the interests of the Company
by encouraging stock ownership on the part of such individuals, by enabling the
Company and its subsidiaries to secure and retain the services of highly
qualified persons, and by providing such individuals with an additional
incentive to advance the success of the Company and its subsidiaries.
2. Administration
The Plan shall be administered by a Committee consisting of not less
than two directors (the "Committee") to be appointed from time to time by the
Board of Directors. Membership on the Committee shall in any event be limited to
those members of the Board who are "Non-Employee Directors" as defined in the
regulations promulgated by the Securities Exchange Commission pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall have the power to select optionees, to establish the
number of shares and other terms applicable to each such option, to construe the
provisions of the Plan, and to adopt rules and regulations governing the
administration of the Plan. All power and authority granted hereunder to the
Committee may, at the discretion of the Board of Directors, be exercised by the
Board. The members of the Board of Directors or the Committee shall not be
liable for any action or determination made in good faith with respect to the
Plan or to any option granted pursuant thereto.
3. Eligibility
The persons who shall be eligible to participate in this Plan and
receive options hereunder shall be the Company's directors and such employees
and other individuals who provide services to or otherwise have a relationship
with the Company or its subsidiaries as the Committee shall from time to time
determine to be key individuals to the success of the Company.
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4. Allotment of Shares
A maximum of Ten Million (10,000,000) authorized but unissued shares of
the Common Stock, $0.10 par value, of the Company will be allotted to the Plan.
Shares that by reason of the expiration of an option or otherwise are no longer
subject to purchase pursuant to an option granted under the Plan may be
re-optioned under the Plan.
5. Effective Date and Term of Plan
The effective date of the Plan is the date on which it is approved by
the affirmative vote of shareholders owning a majority of the Common Stock of
the Company. The Plan shall terminate on the tenth anniversary of its effective
date, but the Board of Directors may terminate the Plan at any time prior
thereto. Termination of the Plan shall not alter or impair, without the consent
of the optionee, any of the rights or obligations of any option theretofore
granted under the Plan.
6. Terms and Conditions
A. All Options
Stock options granted pursuant to this Plan shall be evidenced
by agreements in such form as the Committee shall from time to time approve.
Nothing in this Plan or any option granted hereunder shall govern the employment
rights and duties between the optionee and the Company or subsidiary. Neither
this Plan, nor any grant or exercise pursuant thereto, shall constitute an
employment agreement among such parties. The following shall also apply to all
options granted under the Plan:
(i) Option Price
The option price per share for each stock option
shall be determined by the Committee, consistent with the
provisions of this Plan.
(ii) Time of Exercise of Option
Except as otherwise set forth herein, the Committee
shall establish the option period and time or times within the
option period when the stock option may be exercised in whole
or in such parts as may be specified from time to time by the
Committee. No option shall be exercisable until after the
expiration of six months from the date of grant. With respect
to an optionee whose employment with the Company is about to
terminate (for whatever reason), the Committee may in its
discretion accelerate the time or times when any particular
stock option held by said optionee may be so exercised so that
such time or times are earlier than those
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<PAGE>
originally provided in said option. In all cases exercise of a
stock option granted to an employee shall be subject to the
provisions of Section 6A(v).
(iii) Payment and Manner of Exercise
The entire option price shall be paid at the time the
option is exercised. 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 full
number of shares with respect to which the option is being
exercised and the time of delivery thereof, in accordance with
such administrative procedures as may from time to time be
specified by the Committee. Such notice of exercise shall be
accompanied by full payment for the shares by: (1) certified
or official bank check or the equivalent thereof acceptable to
Company; (2) by tendering to the Company shares of Common
Stock, or requesting the Company to accept shares to be
acquired by exercising the option, having an aggregate fair
market value, determined by the Company at the date of
payment, equal to the option price; or (3) any combination of
the foregoing. Upon exercise, the Company shall deliver to the
optionee (or other person entitled to exercise the option), at
the principal office of the Company, or such other place as
shall be mutually agreed upon, a certificate or certificates
for such shares; provided, however, that the time of delivery
may be postponed by the Company for such periods as may be
required for it with reasonable diligence to comply with any
requirements of law; and provided further that in the event
the Common Stock issuable upon exercise is not registered
under the Securities Act of 1933 (the "Act"), then the Company
may require that the registered owner deliver an investment
representation in form acceptable to the Company and its
counsel and the Company will place a legend on the certificate
for such Common Stock restricting the transfer of same. There
shall be no obligation or duty for the Company to register
under the Act at any time the Common Stock issuable upon
exercise of the options. If the optionee (or other person
entitled to exercise the option) fails to accept delivery, the
optionee's payment shall be returned and the right to exercise
the option with respect to such undelivered shares shall be
terminated.
(iv) Non-Transferability of Option
An option by its terms shall not be transferable by
the optionee otherwise than by will or by the laws of descent
and distribution.
(v) Rights after Termination of Employment
In the event of termination of employment due to any
cause other than death or disability, rights to exercise the
stock option shall terminate three months following cessation
of employment. In the event of termination of employment due
to disability (within the meaning of Section 22(e)(3) of the
Code) or death, such
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optionee or executor, administrator or devisee of an optionee,
shall have the right to exercise such option (to the extent
otherwise exercisable) at any time within one year after
cessation of employment by reason of such disability or death.
(vi) Effect of Termination of Directorship
An option granted to a director shall not be affected
solely due to the fact that the holder ceases, for whatever
reason, to serve on the Board of Directors.
(vii) Adjustment in Event of Recapitalization of the
Company
In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other change in the
corporate structure or shares of the Company, the Board of
Directors shall make such adjustment as it may deem equitably
required, in the number and kind of shares authorized by and
for the Plan, in the number and kind of shares covered by the
options granted, and in the option price.
(viii) Change in Control
Notwithstanding any other provision of this Plan, if
there is a Change in Control of the Company, all then
outstanding stock options shall immediately become
exercisable. For purposes of this Section (viii), a "Change in
Control" shall be deemed to have occurred in the event of a
change in control of the Company which would be required to be
reported in response to Item 1 of Form 8-K promulgated under
the Exchange Act; provided that a Change in Control shall in
no event be deemed to have occurred for the purposes hereof
solely due to the grant of voting rights (including by the
entering into of a voting trust), or the termination or
modification of such grant of voting rights, by any individual
who, at the time of adoption of this Plan, owns in excess of
30% of the Common Stock of the Company.
B. Non-Qualified Stock Options
The Committee may, in its discretion, grant options under the
Plan which, in whole or in part, do not qualify as incentive stock options under
Section 422 of the Code ("Non-Qualifying Options"). The terms and conditions of
the Non-Qualifying Options shall be governed by Section 6A above.
C. Incentive Stock Options
The Committee may, in its discretion, grant options under the
Plan which qualify, in whole or in part, as incentive stock options under
Section 422 of the Code. In addition to the terms
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and conditions set forth in Section 6A above, the following terms and conditions
shall govern any incentive stock option issued under the Plan:
(i) Maximum Fair Market Value of Incentive Stock Options
No optionee may have incentive stock options which
become exercisable for the first time in any calendar year
(under all incentive stock option plans of the Company and its
subsidiary corporations) with an aggregate fair market value
(determined as of the time such option is granted) in excess
of One Hundred Thousand Dollars ($100,000).
(ii) Option Price
The option price per share for each incentive stock
option shall be 100% of the fair market value of the Common
Stock on the date the option is granted; except, in the case
of the grant to an optionee who owns Common Stock of the
Company possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its
subsidiaries, the option price of such option shall be at
least 110% of the fair market value of the Common Stock on the
date the option is granted. The fair market value shall be
determined as prescribed by the Code and regulations
promulgated thereunder.
(iii) Period of Option
Each incentive option shall expire ten years from the
date it is granted or at the end of such shorter period as may
be designated by the Committee on the date of grant; except,
in the case of the grant of an incentive stock option to an
optionee who owns Common Stock of the Company possessing more
than 10% of the total combined voting power of all classes of
stock of the Company or its subsidiaries, such option shall
not be exercisable after the expiration of five years from the
date it is granted.
(iv) Eligible Participants
Incentive stock options may be issued only to
employees of the Company or its parent or subsidiary
corporation or corporations.
7. Amendment of Plan
The Board, within its discretion, shall have authority to amend the
Plan and the terms of any option issued hereunder; provided, that no such action
of the Board of Directors, without the approval of the Shareholders of the
Company, shall:
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(a) materially increase the benefits accruing to optionees
under the Plan;
(b) increase the number of securities which may be issued
under the Plan; or
(c) materially modify the requirements as to eligibility for
participation under the Plan.
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<TABLE>
<CAPTION>
<S> <C>
P R O X Y
AM Communications, Inc. This Proxy is Solicited on Behalf of the Board of Directors
100 Commerce Boulevard
Quakertown, PA 18951-2237 The undersigned hereby appoints Keith D. Schneck and Patricia A. Eynon,
and each of them, 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 February 19, 1999 at 9:30 a.m. or any adjournment or
postponement thereof.
- -----------------------------------------------------------------------------------------------------------
1. Election of Directors. ___ FOR all six nominees listed (except as marked to the contrary below).
___ WITHHOLD AUTHORITY to vote for all six nominees listed below.
(To withhold authority to vote for any individual nominee, strike a line through the nominee's name listed below.)
Nominees: R. Barry Borden Javad K. Hassan Alvin Hoffman
Hal Krisbergh Keith D. Schneck Lemuel A. Tarshis
2. Proposal to adopt the AM Communications, Inc. 1999 Stock Option Plan ___ 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
</TABLE>
<PAGE>
Whether or not you plan to attend the meeting in person, you are urged to sign
and return your proxy without delay in the return envelope provided for that
purpose which requires no postage if mailed in the United States. 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 six nominees for directors, FOR the adoption of the AM
Communications, Inc. 1999 Stock Option Plan, and as the Proxies deem advisable
on such other matters as may properly come before the meeting. This proxy may be
revoked at any time prior to the time it is voted.
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 herewith.
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.
Dated: ,1999
------------------------------
- ------------------------------------------ ---------------------------
Stockholder's Signature, if held jointly Stockholder's Signature
Please mark, sign, date, and return the proxy card promptly using the enclosed
envelope.
