<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant [X] Filed by a party other than the registrant [ ] Check
the appropriate box: [ ] Preliminary proxy statement [ ] Confidential, for Use
of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GIGA-TRONICS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid
<PAGE> 2
previously. Identify the previous filing by registrations statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 3
[LOGO]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
June 25, 1999
To Our Shareholders:
I cordially invite you to attend the annual meeting of Giga-tronics
Incorporated shareholders to be held at 9:00 a.m. on Thursday, August 12, 1999,
at the Giga-tronics facility, 4650 Norris Canyon Road, San Ramon, California.
At the meeting, you will be asked to elect four directors and ratify the
appointment of independent certified public accountants. Information about these
matters is set forth in the attached Notice and Proxy Statement.
The Company counts on your continued interest, and I hope you will be
able to attend the meeting. However, regardless of whether you plan to attend in
person, it is important that your vote be counted. I urge you to vote your
shares by signing and returning the accompanying proxy card.
Sincerely,
/s/ George H. Bruns, Jr.
George H. Bruns, Jr.
Chairman and Chief Executive Officer
<PAGE> 4
[LOGO]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of Giga-tronics Incorporated will be
held at 9:00 a.m., local time, on Thursday, August 12, 1999, at the Giga-tronics
facility, 4650 Norris Canyon Road, San Ramon, California, for the following
purposes:
1. Elect four directors for the ensuing year;
2. Ratify the appointment of independent certified public accountants;
3. Transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on June 15, 1999,
will be entitled to vote at this meeting, or any adjournment thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL
MEETING REGARDLESS OF THE NUMBER YOU HOLD. PLEASE DATE, SIGN, VOTE AND
RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED, PREPAID ENVELOPE.
By Order of the Board of Directors,
/s/ Mark H. Cosmez, II
Mark H. Cosmez, II
Secretary
San Ramon, California
June 25, 1999
<PAGE> 5
[LOGO]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 12, 1999
This Proxy Statement is submitted by the Board of Directors of
Giga-tronics Incorporated ("Giga-tronics" or the "Company"), a California
corporation, in connection with the solicitation of proxies for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held on August 12,
1999, in accordance with the foregoing notice, and at any adjournment thereof.
The Board of Directors has fixed June 15, 1999 as the record date for the
meeting. Only shareholders of record on the record date are entitled to notice
of and to vote at the meeting. A majority of the shares of common stock will
constitute a quorum for the transaction of business at the Annual Meeting. On
the record date, there were 4,361,902 shares of Common Stock of the Company
issued and outstanding, each of which is entitled to one vote as to each matter
to be acted on at the meeting. However, each shareholder will be entitled to
cumulate his votes in the election of directors provided that notice of an
intention to cumulate votes is given at the meeting prior to voting for the
election of directors. Under cumulative voting, a shareholder is allowed one
vote per share multiplied by the number of directors to be elected (four at this
meeting) and may use the total number of votes for one nominee or may distribute
such number among as many nominees as such shareholder chooses.
Shares represented by properly executed proxies received by Giga-tronics
will be voted at the meeting in accordance with the instructions thereon. It is
intended that shares represented by proxies received by Giga-tronics which are
not limited to the contrary will be voted FOR all proposals set forth in the
notice of meeting.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before its exercise. A shareholder giving
a proxy may revoke it before its exercise by filing with the Secretary of
Giga-tronics either an instrument revoking the proxy or a duly executed proxy
bearing a later date. A proxy will be revoked automatically if the shareholder
who executed it is present at the meeting and votes in person. Attendance at the
meeting will not, in and of itself, constitute the revocation of a proxy. The
granting of a proxy shall give the proxy holder authority to cumulate votes if
cumulative voting is elected.
So far as is presently known, there is no business to be transacted at
the meeting other than that referred to in the Notice of Annual Meeting of
Shareholders, and it is not anticipated that other matters will be brought
before the meeting. If, however, other matters should be brought before the
meeting, it is intended that the proxy holders may vote or act in accordance
with their judgment on such matters.
An affirmative vote of a majority of the shares present or represented
and entitled to vote at the meeting is required for approval of all items being
submitted to the shareholders for their consideration. An automated system
administered by the Company's transfer agent tabulates shareholder votes.
Abstentions are included in determining the number of shares present and voting
at the Annual Meeting, and each is tabulated separately. Abstentions are counted
in tabulations of the votes cast on proposals presented to shareholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
1
<PAGE> 6
The Annual Report of the Company for the fiscal year ended March 27,
1999 is being mailed with this mailing of the Notice of Annual Meeting and Proxy
Statement to all shareholders entitled to notice of and to vote at the Annual
Meeting.
The costs of solicitation of proxies, including the printing, handling
and mailing of the proxy material, will be paid by Giga-tronics. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians to be forwarded to beneficial owners of shares held in their names,
and Giga-tronics will reimburse them for their expenses.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will be sent to Giga-tronics shareholders is July 12, 1999.
The executive offices of Giga-tronics are located at 4650 Norris Canyon
Road, San Ramon, California 94583, and the telephone number is (925) 328-4650.
2
<PAGE> 7
ELECTION OF DIRECTORS
At the annual meeting four (4) directors are to be elected to serve
until the next annual meeting and until their successors are elected and
qualified. The following are the nominees of the Board of Directors for election
as directors. There are no family relationships among the nominees or between
any nominee and any executive officer of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND PRINCIPAL OCCUPATION SINCE: AGE
- ----------------------------- ------ ---
<S> <C> <C>
George H. Bruns, Jr. 1980 80
Chief Executive Officer since January, 1995,
Chairman of the Board and a Director of the
Company. One of the founders of the Company
in 1980 and has been a Director since
inception. Mr. Bruns is General Partner of
The Bruns Company, a private venture
investment and management consulting firm.
Mr. Bruns is Director of Testronics Inc. of
McKinney, Texas.
James A. Cole 1994 57
General Partner of Windward Ventures, General
Partner of Spectra Enterprise Associates and
a Partner of New Enterprise Associates.
Founder and President of Amplica, Inc. and
presently a Director of Vitesse Semiconductor
Corp., Spectrian Corp., and several private
companies.
William E. Wilson 1998 59
President and Chief Executive Officer of
Microwave Technology, Inc. from May 1989
through present.
Robert C. Wilson 1991 79
Chairman of Wilson & Chambers, a private
investment firm. Mr. Wilson is currently a
Director of Storage Technology Corporation,
SyQuest Technology, Inc., Southwall
Technologies Inc., ReSound Corp., Andros
Inc., and Carco Electronics.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED.
3
<PAGE> 8
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
MEETINGS
There were five regularly scheduled meetings and one special
teleconference meeting of the Board of Directors during the last fiscal year.
COMMITTEES
Giga-tronics' Board of Directors has an Audit Committee and a
Compensation Committee.
During fiscal 1999, the Audit Committee consisted of independent
non-employee directors James A. Cole and Robert C. Wilson. The Audit Committee
serves to monitor the effectiveness of the independent audit, as well as the
Company's accounting, financial controls and financial reports. The Audit
Committee held one meeting during the past fiscal year.
During fiscal 1999, the Compensation Committee consisted of independent
non-employee directors James A. Cole, William E. Wilson and Robert C. Wilson. It
formulates recommendations to the Board of Directors regarding levels of
compensation for management. In addition, in order to recognize the expected
future contributions of key employees and provide an additional incentive for
them to remain with the Company over the long-term, the Committee awards options
to purchase shares of the Company's stock. The Compensation Committee reviews
and approves all stock options and executive compensation as part of the Board
of Director meetings.
The Company does not have a nominating committee or any committee
performing such functions. All of the directors attended all the regularly
scheduled meetings of the Board and all the committees on which they sat.
COMPENSATION OF DIRECTORS
Each of Giga-tronics' directors who is not employed by the Company
receives an annual director's fee of $6,000 and $750 for attendance at each
Board meeting. Outside directors serving on committees of the Board receive $500
for attendance at each committee meeting.
The Company has entered into indemnification agreements with all of its
officers and directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers, and holders of more
than 10% of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors, and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Mr. Curt M. Berggren, an officer of the company, filed a late Form 4
for the sale of 15,377 shares during October 1998.
Based solely on a review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that during the fiscal year ended March 27, 1999, except for the above,
all filing requirements applicable to its officers, directors and greater than
10% shareholders were complied with.
4
<PAGE> 9
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 15, 1999, information
concerning the beneficial ownership of the Company's Common Stock for (a) each
person known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock; (b) each director; (c) each of the executive officers
named in the Summary Compensation Table below; and (d) all directors and
officers of the Company during fiscal 1999 as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
------------------------ --------------------- -------------------
<S> <C> <C>
Curt M. Berggren 86,773 2.0
3380 Montgomery Drive
Santa Clara, Ca 95054
George H. Bruns Jr. 424,553 (1) 9.7
4650 Norris Canyon Road
San Ramon, California 94583
James A. Cole 260,147 (2) 6.0
4491 Valley Spring Drive
Westlake Village, California 91362
Robert D. Geddes 14,392 (3) .3
4650 Norris Canyon Road
San Ramon, California 94583
James R. Koehn 2,300 .1
4650 Norris Canyon Road
San Ramon, California 94583
Jeffery T. Lum 78,364 1.8
47790 Westinghouse Drive
Fremont, California 94539
Robert C. Wilson 18,000 (4) .4
274 Catalpa Drive
Atherton, California 94027
William E. Wilson -- --
145 Sugar Creek Lane
Alamo, California 94507
All officers and directors as a group 1,158,882 26.3
(14 persons including the above)
The Robertson Stephens Orphan Fund 333,772 7.7
555 California Street
San Francisco, California 94104
</TABLE>
(1) Includes 212,650 shares owned by the Bruns Trust, 170,000 registered in
the names of his son and daughter, 22,163 shares owned by The Bruns
Company and 19,740 shares owned directly.
(2) James A. Cole is the Managing General Partner of Spectra Enterprise
Associates (a Venture Partnership), which beneficially owns 260,147
shares over which Mr. Cole has shared voting and dispositive power.
(3) Includes 12,500 shares of currently exercisable options.
(4) All 18,000 shares represent currently exercisable options.
5
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning compensation paid or
accrued by the Company, to or on behalf of the Company's Chief Executive Officer
and each of the four other most highly compensated executive officers during the
last fiscal year, for the fiscal years ended March 27, 1999, March 28, 1998, and
March 29, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAY-OUTS
-------------------------------
NUMBER OF
OTHER SECURITIES ALL OTHER
ANNUAL UNDERLYING COMPEN-
NAME AND FISCAL COMPEN- OPTIONS/ SATION
PRINCIPAL POSITION YEAR SALARY($) BONUS SATION SARS(#)(1) ($)(2)
- ------------------ ------ --------- ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Curt M. Berggren(3) 1999 $111,193 -- -- -- $3,336
President 1998(4) $ 89,135 -- -- -- $3,366
Viking Semiconductor
Equipment Inc.
George H. Bruns Jr. 1999 $124,062 $20,300 -- -- --
Chairman and 1998 $148,000 $17,664 $7,200(5) -- --
Chief Executive Officer 1997 $146,862 -- $7,145(5) 75,000 --
Robert D. Geddes(6) 1999 $105,962 $13,734 -- -- --
Vice President 1998 $105,000 $ 8,503 -- -- --
Sales & Marketing 1997 $ 74,712 $10,000 -- 25,000 --
James R. Koehn 1999 $131,392 -- $55,716(7) 50,000 $1,505
President Giga-tronics
Instruments Division
Jeffrey T. Lum 1999 $113,430 $ 1,633 $869(8) -- $2,007
President 1998 $104,262 -- $522(8) -- $1,918
ASCOR, Inc. 1997 $ 97,409 $29,015 -- 20,000 $1,164
</TABLE>
(1) Stock options granted under the Company's 1990 Stock Option Plan.
(2) Represents contributions made by the Company to the Company's 401(k)
Plan which match in part the pre-tax elective deferral contributions
(included under Salary) made to such plan by the executive officers.
(3) Mr. Curt M. Berggren is no longer an employee of the Company.
(4) Viking merged with Giga-tronics in fiscal 1998.
(5) Other compensation for Mr. George H. Bruns, Jr. represents a car
allowance in 1998 and 1997.
(6) Mr. Robert D. Geddes is no longer an employee of the Company.
(7) Other compensation for Mr. James R. Koehn represents a car allowance of
$6,600 and relocation reimbursements of $49,116.
(8) Other compensation for Mr. Jeffrey T. Lum represents the use of a
company automobile.
6
<PAGE> 11
STOCK OPTIONS
The following table sets forth stock options granted in fiscal 1999 to
each of the Company's executive officers named in the Summary Compensation
Table. No stock appreciation rights were granted during the 1999 fiscal year.
All option exercise prices would have been based on market price on the date of
grant. The table also sets forth the hypothetical gains that would exist for the
options at the end of their five year terms, assuming compound annual rates of
stock appreciation of 5% and 10%. These numbers are calculations based on the
requirements promulgated by the Commission and do not reflect the Company's
estimate of future stock price growth. The actual future value of all options
will depend on the market value of the Company's Common Stock.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
NO. OF TOTAL OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES PRICE APPRECIATION
DATE OF OPTIONS IN FISCAL EXERCISE EXP. FOR OPTION TERM
NAME GRANT GRANTED (#) 1999 PRICE ($/SH) DATE 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
James R. Koehn 5/19/1998 50,000(1) 12.5 $5.375 5/19/2003 $74,250 $164,100
</TABLE>
(1) These options were regranted and repriced. See Option Repricing on page
9 of this Proxy Statement.
7
<PAGE> 12
OPTIONS EXERCISES AND FISCAL YEAR END VALUE TABLE
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during fiscal 1999 and
unexercised options held as of the end of the fiscal year. No stock appreciation
rights were exercised by such individuals during fiscal 1999. No stock
appreciation rights were outstanding at the end of such fiscal year.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY OPTIONS
SHARES OPTIONS AT MARCH 27,1999(#) AT MARCH 27, 1999 (1)
ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Curt M. Berggren -- -- -- -- $ -- --
President, Viking
Semiconductor Equipment,
Inc.
George H. Bruns, Jr. -- -- -- 75,000 $ -- $30,188
Chairman and Chief
Executive Officer
Robert D. Geddes -- -- 12,500 12,500 $ --(2) $ -- (2)
Vice President, Sales &
Marketing
James R. Koehn -- -- -- 50,000 $ -- $20,125
President,
Giga-tronics Instruments
Jeffery T. Lum -- -- -- 20,000 $ -- $ 8,050
President, ASCOR, Inc.
</TABLE>
(1) Equal to the fair market value of the option shares on March 27, 1999
($2.50 per share), less the aggregate option price payable for such
shares. Options are in-the-money if the market value of the shares is
greater than the option exercise price. These calculations reflect the
current exercise price of the options after repricing. See Option
Repricing on page 9 of this Proxy Statement.
(2) Options are out of the money.
8
<PAGE> 13
OPTION REPRICING
The Company implemented an option/regrant program to all of the
Company's executive officers and employees that had options outstanding on
December 9, 1999. The options for the outside members of the Board of Directors
were not available for regrant. The cancellation regrant was effected on
December 9, 1999, and 405,250 options held by these employees and executive
officers were cancelled and a new option for the same number of shares were
granted with an exercise price of $2.09375, the market price of the Common Stock
on the date of the regrant. The vesting schedule for these options were reset to
start at the date of regrant. The following table provides information, with
respect to the named executive officers, concerning the repricing of stock
options during the ten year period ending in fiscal 1999.
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES ORIGINAL
UNDERLYING MARKET PRICE OPTION TERM
OPTIONS / OF STOCK AT EXERCISE PRICE REMAINING
SARS TIME OF AT TIME OF NEW AT DATE OF
REPRICED REPRICING OR REPRICING OR EXERCISE REPRICING
NAME DATE OR AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) OR AMENDMENT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Curt M. Berggren -- -- -- -- -- --
President, Viking
Semiconductor
Equipment, Inc.
George H. Bruns, Jr. 12/9/98 75,000 $2.0938 $9.3500 $2.0938 0.7 Years
Chairman and
Chief Executive Officer
Robert D. Geddes -- -- -- -- -- --
Vice President,
Sales & Marketing
James R. Koehn 12/9/98 50,000 $2.0938 $5.3750 $2.0938 4.4 Years
President,
Giga-tronics,
Instruments
Jeffrey T. Lum 12/9/98 20,000 $2.0938 $8.5000 $2.0938 2.4 Years
President,
ASCOR, Inc.
</TABLE>
LONG-TERM INCENTIVE PLAN (LTIP) AWARDS TABLE
There were no long-term incentive plan awards made during fiscal 1999 to
the Company's executive officers.
9
<PAGE> 14
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CHANGE-IN-CONTROL ARRANGEMENTS
All outstanding options will automatically accelerate and become
exercisable for fully vested shares upon a change in control of the Company,
whether effected through merger, sale of substantially all of the Company's
assets, the successful completion of a hostile tender offer for 30% or more of
the Company's outstanding Common Stock, or a change in the majority of the Board
as a result of one or more contested elections for Board membership.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the 1999 fiscal year, the Compensation Committee of the Board was
comprised of Messrs. James A.Cole, William E. Wilson and Robert C.Wilson.
No executive officer of the Company serves as a member of the Board of
Directors or Compensation Committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL COMPENSATION POLICY
Giga-tronics' executive compensation philosophy rests on two fundamental
principles. First, the program is intended to provide fully competitive levels
of compensation - at expected levels of performance - in order to attract,
motivate and retain talented executives. Secondly, the program is intended to
create an alignment of interest between the Company's executives and its
shareholders such that a significant portion of each executive's compensation is
linked directly to the creation of shareholder value.
The Executive Compensation Program is intended to place heavy emphasis on
the variable pay (pay that varies with performance) and less focus on fixed base
salary. The incentive pay programs are intended to reward performance that is
directly relevant to the Company's short term and long term success. The three
primary components of the program include base salary, annual incentive
(performance based bonus), and long term incentives (stock options).
FACTORS
The process involved and the factors considered in the executive
compensation determination for fiscal year 1999 are summarized below. It is
expected that this process will remain the same in fiscal year 2000. However,
the Committee may, at its discretion, apply a different set of factors in
setting executive compensation in the future in order to further enhance the
basic concept of "pay-for-performance."
BASE SALARY
Base salaries are based primarily on individual performance, and each
individual's role in the Company. Employees with higher levels of sustained
performance over time and/or those assuming greater responsibilities will be
paid correspondingly higher salaries.
10
<PAGE> 15
On the basis of its knowledge of the industry, this Committee believes that
the base salary levels in effect for the Company's executive officers are
competitive with the companies within and without the industry with which the
Company competes for executive talent. However, the Committee did not, through
one or more external salary surveys for the industry, independently confirm the
specific percentiles at which the base salary levels in effect for the Company's
executive officers stood in relation to other companies in the industry.
Salaries are reviewed annually based on individual performance, overall
financial results and the general level of increases in the marketplace. Salary
increases are granted within a pay-for-performance framework.
ANNUAL PERFORMANCE (NON-STOCK) BASED INCENTIVE COMPENSATION
Giga-tronics' annual incentive bonus plan is intended to (1) reward key
employees based upon company and individual performance, (2) motivate, and (3)
provide competitive cash compensation opportunities. Incentive awards are paid
annually based upon achievement of individual performance objectives for the
most recently completed fiscal year.
Bonus payments of approximately $2,000 in the aggregate were earned in
fiscal 1999.
LONG-TERM (STOCK BASED) INCENTIVE COMPENSATION
Giga-tronics has always believed that stock ownership or stock option
participation was the most effective way of aligning management and shareholder
interests. Options are generally issued at 100% of market value, for 5 year
terms, exercisable 25% per year after the first year. The right to exercise
options expires 60 days after termination of employment, except in case of death
when optionee's estate would have six months to exercise.
Options outstanding in FY 1997 were 7.8% of total shares outstanding,
options outstanding at the end of FY 1998 were 9.0% of total shares outstanding,
and options outstanding at the end of FY 1999 were 14.7% of total shares then
outstanding.
CEO COMPENSATION
The CEO compensation is based on the same considerations as any other
senior executive. Base rates are determined by market factors. Other
compensation factors (salary increases, incentive bonus, option participation)
are performance-based and long-term incentive compensation.
Mr. Bruns' compensation for 1999 was $124,000.
Mr. Bruns holds 75,000 options and owns, directly and through family,
424,553 shares comprising of 9.7% of the Company's stock.
Based upon the company's performance, Mr. Bruns elected to reduce his
salary. The Compensation Committee reviewed and approved.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Effective January 1, 1994, Section 162(m) of the IRS Code limits federal
income tax deductions for compensation paid to the Chief Executive Officer and
the four other most highly compensated officers of a public company to $1
million per individual per year, but contains an exception for performance-based
compensation that satisfies certain conditions.
11
<PAGE> 16
The 1990 Stock Option Plan was amended in 1994 to restrict the maximum
number of shares of Common Stock for which any one participant may be granted
stock options and stock appreciation rights to 200,000 shares, and the
stockholders approved this amendment at the 1994 Annual Meeting. As a result,
stock options granted to the Company's executive officers with an exercise price
not less than the fair market value of the underlying shares on the grant date
will qualify as performance-based compensation which is not subject to the $1
million limitation.
BY THE COMPENSATION COMMITTEE
James A. Cole
Robert C. Wilson
William E. Wilson
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GIGA-TRONICS INC., THE S&P 500 INDEX
AND THE NASDAQ TELECOMMUNICATIONS STOCKS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
S&P 500 Nasdaq
Date Gigatronics Inc. Index Telecom Stocks
<S> <C> <C> <C>
3/25/95 100.00 100.00 100.00
3/30/96 140.00 132.36 131.38
3/29/97 160.00 162.27 121.56
3/28/98 131.26 233.96 236.87
3/27/99 50.00 278.51 380.01
</TABLE>
* $100 INVESTED ON 3/27/93 OR INDEX, INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING 3/28/98.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has re-appointed the firm of KPMG LLP as the
Company's independent accountants for the fiscal year ending March 25, 2000 and
to perform other appropriate services. Ratification by the shareholders will be
sought for this appointment.
Representatives of KPMG LLP are expected to be present at the Company's
Annual Meeting with the opportunity to make a statement, if they desire to do
so, and they are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
KPMG LLP.
12
<PAGE> 17
SHAREHOLDERS' PROPOSALS
To be considered for presentation to the Annual Meeting of Shareholders to
be held in 2000, a shareholder proposal must be received by the Company no later
than February 29, 2000. Proposals should be addressed to the Corporate
Secretary, Giga-tronics Incorporated, 4650 Norris Canyon Road, San Ramon, CA
94583.
The Annual Report of the Company for the fiscal year ended March 27, 1999
is being mailed with this mailing of the Notice of Annual Meeting and Proxy
Statement to all shareholders entitled to notice of and to vote at the Annual
Meeting. The Company will mail Annual Report on Form 10K to any shareholder who
so requests. Requests should be sent to the Corporate Secretary as noted above
for proposals.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof in accordance with the judgments of the persons voting the
proxies. Regardless of whether you intend to be present at the Annual Meeting,
you are urged to complete, date, sign and return your proxy promptly.
By order of the Board of Directors,
George H. Bruns, Jr.
Chairman and Chief Executive Officer
San Ramon, California
June 25, 1999
13
<PAGE> 18
GIGA-TRONICS INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
George H. Bruns, Jr. and Mark H. Cosmez II, or either of them are hereby
constituted and appointed the lawful attorneys and proxies of the undersigned,
each with full power of substitution, to vote and act as proxy with respect to
all shares of Common Stock of Giga-tronics Incorporated ("Giga-tronics")
standing in the name of the undersigned on the books of Giga-tronics at the
close of business on June 15, 1999, at the Annual Meeting of Shareholders to be
held at 9:00 A.M., on August 12, 1999, at Giga-tronics' Facilities at 4650
Norris Canyon Road, San Ramon, CA 94583, or at any adjournment or postponement
thereof.
THE POWERS HEREBY GRANTED MAY BE EXERCISED BY BOTH OF SAID ATTORNEYS OR PROXIES
OR THEIR SUBSTITUTES PRESENT AND ACTING AT THE ANNUAL MEETING OF SHAREHOLDERS OR
ANY ADJOURNMENT OR POSTPONEMENT THEREOF OR, IF ONLY ONE BE PRESENT AND ACTING,
THEN BY THAT ONE. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES HERETOFORE
GIVEN BY THE UNDERSIGNED TO VOTE AT SAID MEETING.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- FOLD AND DETACH HERE -
FOR ALL NOMINEES LISTED (EXCEPT AS WITHHELD IN ONE SPACE BELOW).
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED.
Elect four Directors for the ensuing year.
Nominees: George H. Bruns, Jr., James A. Cole, Robert C. Wilson,
William E. Wilson.
INSTRUCTION: To withhold authority to vote for one or more individual nominees,
(write such name or names in the space provided below.)
- --------------------------------------------------------------------------------
2. Ratify the appointment of independent certified public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Signature(s) Dated: , 1999
---------------------------------------- --------
Please sign exactly as the name appears printed hereon. 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 President or other authorized
officer. If a partnership, please sign in full partnership name by authorized
person. Receipt is acknowledged of the Proxy Statement for the meeting.
- FOLD AND DETACH HERE -
