<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
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
/x/ Definitive proxy statement Commission only (as permitted
/ / Definitive additional materials by Rule 14a-6(e)(2))
/ / Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
Digital Microwave Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
June 23, 1995
To the Stockholders of
DIGITAL MICROWAVE CORPORATION:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Digital Microwave Corporation (the "Company") on
July 26, 1995, at 3:00 p.m., local time, which will be held at the Santa Clara
Marriott Hotel, 2700 Mission College Blvd., Santa Clara, California.
Details of business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote FOR each such
proposal.
We hope that you will attend the Annual Meeting. In any event, after
reading the Proxy Statement, please mark, date, sign and return the enclosed
proxy card in the accompanying reply envelope. If you decide to attend the
Annual Meeting, please notify the Secretary of the Company if you wish to vote
in person and your proxy will not be voted.
A copy of the Company's 1995 Annual Report to Stockholders has been
mailed concurrently herewith to all stockholders entitled to notice of and to
vote at the Annual Meeting.
Sincerely yours,
/s/ CLIFFORD H. HIGGERSON
Clifford H. Higgerson
Co-Chairman of the Board and
Co-Chief Executive Officer
<PAGE> 3
DIGITAL MICROWAVE CORPORATION
170 Rose Orchard Way
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
- ----------------------------------------------------------------------------
The Annual Meeting of Stockholders of Digital Microwave Corporation
(the "Company") will be held at the Santa Clara Marriott Hotel, 2700 Mission
College Blvd., Santa Clara, California, on Wednesday, July 26, 1995, at 3:00
p.m., local time, to:
1. Elect four directors to serve until the next Annual Meeting
and until their successors have been elected and qualified.
2. Ratify the selection of Arthur Andersen LLP as independent
public accountants for fiscal year 1996.
3. Transact any other business which may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement that accompanies this Notice.
Stockholders of record at the close of business on June 1, 1995, will
be entitled to notice of and to vote at the Annual Meeting and at any
continuation or adjournment thereof.
All stockholders are cordially invited and encouraged to attend the
Annual Meeting. In any event, to ensure your representation at the Annual
Meeting, please carefully read the accompanying Proxy Statement which describes
the matters to be voted on at the Annual Meeting and sign, date and return the
enclosed proxy card in the reply envelope provided. Should you receive more
than one proxy because your shares are registered in different names and
addresses, each proxy should be returned to assure that all your shares will be
voted. If you attend the Annual Meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the Annual Meeting will be counted.
The prompt return of your proxy card will assist us in preparing for the Annual
Meeting.
We look forward to seeing you at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CLIFFORD H. HIGGERSON
Clifford H. Higgerson
Co-Chairman of the Board and
Co-Chief Executive Officer
San Jose, California
June 23, 1995
<PAGE> 4
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
DIGITAL MICROWAVE CORPORATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Digital Microwave Corporation, a Delaware
corporation ("DMC" or the "Company"), of proxies for the Company's Annual
Meeting of Stockholders to be held at 3:00 p.m., local time, on July 26, 1995,
and at any adjournments or postponements thereof. This Proxy Statement was
first mailed to stockholders on or about June 23, 1995.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in a subsequent
section of this Proxy Statement.
VOTING
Only holders of record of the Common Stock of the Company ("Common
Stock") at the close of business on June 1, 1995, will be entitled to vote at
the Annual Meeting and any continuations or adjournments thereof. Each share
entitles the holder to one vote on each matter to come before the Annual
Meeting. On June 1, 1995, there were 13,509,985 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting, held by 414
stockholders of record.
If any stockholder is unable to attend the Annual Meeting, such
stockholder may vote by proxy. The enclosed proxy is solicited by the DMC
Board of Directors ("Board of Directors"), and, when returned properly
completed, will be voted as you direct on your proxy card. In the absence of
contrary instructions, shares represented by such proxies will be voted FOR the
proposals discussed herein. In the discretion of the proxy holder, shares
represented by such proxies will be voted upon any other business as may
properly come before the Annual Meeting. Abstentions and broker non-votes are
each included in the number of shares present for quorum purposes.
Abstentions, which may be specified on all proposals other than the election of
Directors, are counted in tabulations of the votes cast on proposals presented
to stockholders; whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivery to the Secretary of the
Company of a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, proxies may also be solicited by Directors,
officers and employees of the Company who will not receive additional
compensation for such solicitation. Brokerage firms and other custodians,
nominees and fiduciaries will be reimbursed by the Company for their reasonable
expenses incurred in sending proxy material to beneficial owners of the Common
Stock.
The Annual Report of the Company for the fiscal year ended March 31,
1995, has been mailed concurrently with the mailing of the Notice of Annual
Meeting and Proxy Statement to all stockholders entitled to notice of and to
vote at the Annual Meeting.
<PAGE> 5
PROPOSAL 1:
ELECTION OF DIRECTORS
At the Annual Meeting, four Directors (constituting the entire board)
are to be elected to serve until the next Annual Meeting and until their
successors are elected and qualified, or until the death, resignation, or
removal of such Director. It is intended that the proxies will be voted for
the election as Directors of the four nominees named below unless authority to
vote for any such nominee is withheld. The four nominees receiving the highest
number of votes will be elected. In the unanticipated event that a nominee is
unable or declines to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee named by the current Board of
Directors to fill the vacancy. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a Director. Jack M. Gill is not standing for re-election to the Board
of Directors and will cease to be a Director effective as of the date of the
Annual Meeting.
At the date of this Proxy Statement, the Board of Directors has not
hired a permanent Chief Executive Officer to replace Michael M. Michigami. The
Company is currently engaged in the process of hiring someone to fill that
position. It is currently anticipated that the permanent Chief Executive
Officer will serve as a Director of the Company. If that person is hired after
the date of this Proxy Statement and before the Annual Meeting, the proxies
will be voted for the election of that person as an additional Director of the
Company. In the event that additional persons are nominated, otherwise than by
the Board of Directors, for election as Directors, the proxy holders intend to
vote all proxies received by them for the nominees listed below and any
additional Board of Directors' nominee as described above. The following are
the nominees of the Board of Directors for election as Directors at the date
hereof:
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <C> <C>
Richard C. Alberding Co-Chairman of the Board and 64
Co-Chief Executive Officer
Clifford H. Higgerson Co-Chairman of the Board and 55
Co-Chief Executive Officer
William E. Gibson President, DMC Telecom and 55
Director
Billy B. Oliver Director 70
</TABLE>
Mr. Alberding has served as a Director of the Company since July 1993
and has served as Co-Chairman of the Board and Co- Chief Executive Officer
since September 1994. Mr. Alberding retired from the Hewlett-Packard Company
in 1991, where he served since 1984 as an Executive Vice President with
responsibility for worldwide company sales, support and administration
activities for measurement and computation products, as well as all
corporate-level marketing activities. He also served on the corporate
Executive Committee. Mr. Alberding is a director of the Kennametal
Corporation, a machine tool company, Walker Interactive Systems, a software
company, SCIMED Life Systems, a disposable medical device company, SyBase,
Inc., a computer database and tools company, EP Technologies, a medical device
manufacturer, Paging Network Inc., a paging services company and numerous
private companies. Mr. Alberding has a B.A. degree from Augustana College and
a B.S.E.E. degree from DeVry Technical Institute in Chicago.
Mr. Higgerson has served as a Director of the Company since March 1984
and has served as Co-Chairman of the Board and Co-Chief Executive Officer since
September 1994. Mr. Higgerson has been a partner with Vanguard Associates, a
private venture capital investment partnership, since July 1991 and, since
1986, managing partner of Communications Ventures, a private venture capital
investment partnership. From 1985 to 1986, Mr. Higgerson was a partner with
Hambrecht & Quist Venture Partners and from 1983 to 1985, he was a partner with
L.F. Rothschild, Unterberg, Towbin. From 1974 to 1983, Mr. Higgerson was a
partner of Hambrecht & Quist, an investment banking firm. In addition, Mr.
Higgerson is a director of numerous
2.
<PAGE> 6
private companies. Mr. Higgerson has a B.S.E.E. degree from the University of
Illinois and an M.B.A. degree from the University of California.
Mr. Gibson is a founder of the Company and serves as President, DMC
Telecom, the Company's wholly owned subsidiary. In April 1995, the Company
announced that Mr. Gibson will retire from his position as an officer of the
Company, but will remain as a Director and will continue to be involved with
the Company in a consulting role. Mr. Gibson served as President and Chief
Executive Officer of the Company from the Company's incorporation in January
1984 until May 1991. From 1980 until 1983, Mr. Gibson was Vice President and
General Manager of the Farinon Division of Harris Corporation and from 1968
until 1980, Mr. Gibson held various positions at Farinon Corporation, a
telecommunications equipment manufacturer, including Vice President and General
Manager and Vice President, Manufacturing Operations of the Farinon
Transmission Division of Farinon Corporation. Mr. Gibson has a B.S. degree and
an M.B.A. degree from the College of Notre Dame.
Mr. Oliver has served as a Director of the Company since February
1987. Since 1985, Mr. Oliver has been a private communications consultant.
From 1942 to 1985, Mr. Oliver held various engineering and management positions
with AT&T, including Vice President, Planning and Design from 1972 until 1985.
Mr. Oliver is also a director of Communications Network Enhancements and Local
Area Telecommunications, Inc., both of which are telecommunications service
companies. In addition, Mr. Oliver is a director of a private company. Mr.
Oliver has a B.S.E.E. degree from North Carolina State University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF
THE ABOVE NOMINEES FOR ELECTION AS DIRECTORS.
BOARD MEETINGS AND COMMITTEES
During the year ended March 31, 1995, the Board of Directors held
thirteen (13) meetings. During the same period, all Directors attended at
least 75% of the aggregate of (i) the total number of meetings of the Board and
(ii) the total number of meetings held by all Committees of the Board on which
such Director served. There are no family relationships among executive
officers or directors of the Company.
The Company currently has an Audit Committee and a Compensation
Committee of the Board of Directors. The Audit Committee is primarily
responsible for approving the services performed by the Company's independent
accountants and reviewing the Company's accounting practices and system of
internal accounting controls. This committee, which consisted of Mr. Alberding
and Mr. Higgerson, held two (2) meetings during the year ended March 31, 1995.
The Compensation Committee is responsible for recommending and reviewing the
compensation of the Company's executive officers and for administering the
Company's incentive plans. This committee, which consisted of Messrs.
Alberding, Gill and Oliver, held three (3) meetings during the year ended March
31, 1995.
During the year ended March 31, 1995, the Company had a Nominating
Committee. The Nominating Committee was responsible for identifying and
proposing to the Board of Directors nominees for election to the Board. This
Committee, which consisted of Messrs. Alberding, Higgerson and Michigami, held
one (1) meeting during the year ended March 31, 1995 in connection with the
1994 Annual Meeting. The Company does not currently have a Nominating
Committee.
3.
<PAGE> 7
COMPENSATION OF DIRECTORS
During the year ended March 31, 1995 the Company paid each
non-employee Director $1,000 in fees for each in-person meeting and $500 per
telephone meeting, a retainer of $3,000 per quarter, and committee meeting fees
of $500 for each in-person committee meeting and $250 per telephone committee
meeting unless, in either case, such committee meeting was held in conjunction
with a Board meeting. Directors were also reimbursed for their out-of-pocket
expenses incurred in attending meetings of the Board and Committees thereof.
The Company also pays Board consulting fees of $1,000 per day, in one half day
increments, for Board approved projects (including transportation time) plus
reimbursement of all expenses. In addition to the fees paid in connection with
serving as Directors, the Company paid consulting fees of $43,500 for the
services of Mr. Alberding during fiscal 1995 as special consultant to the
executive management committee and for serving as Co-Chief Executive Officer
and $20,000 for the services of Mr. Higgerson during fiscal 1995 as special
consultant to the executive management committee and for serving as Co-Chief
Executive Officer.
Pursuant to the Company's 1994 Stock Incentive Plan, each new
non-employee Board member, upon his or her initial appointment or election to
the Board, receives an automatic option grant for 15,000 shares with an
exercise price equal to the fair market value of the option shares on the grant
date. Each individual re-elected as a non-employee Board member at an annual
stockholders meeting, and who has not received any prior automatic option
grants during the two immediately preceding calendar years, receives an option
grant at that time for 5,000 shares, and similar 5,000-share option grants are
made to each continuing non-employee Board member at successive three-year
intervals over his or her period of Board service. Each initial or periodic
option grant is immediately exercisable for all the option shares, but the
shares purchased under the option will be subject to repurchase by the Company,
at the option exercise price, upon the optionee's cessation of Board service.
The optionee vests in the option shares, and the Company's repurchase right
lapses, in three equal annual installments over the optionee's period of Board
service, measured from the grant date. However, upon certain changes in
control of the Company, the option shares immediately vest in full. Each
option grant has a maximum term of ten years, subject to earlier termination
upon the optionee's cessation of Board service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors has been
comprised of three members of the Board: Richard C. Alberding, Jack M. Gill
and Billy B. Oliver. Mr. Alberding has acted as Co-Chairman of the Board and
Co-Chief Executive Officer of the Company while the Company seeks to hire a
permanent Chairman of the Board and Chief Executive Officer. No other member
of this committee is a present or former officer or employee of the Company or
any of its subsidiaries.
No executive officer of the Company served on 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in beneficial ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent (10%)
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1995, there was
compliance with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent beneficial owners.
4.
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of June 1, 1995, by (i) each
person known by the Company to own beneficially more than five percent (5%) of
the outstanding Common Stock of the Company, (ii) the Co-Chief Executive
Officers of the Company, (iii) each of the four other most highly compensated
executive officers of the Company (determined at March 31, 1995), (iv) each
Director of the Company, and (v) all Directors and executive officers as a
group. All shares are subject to the named person's sole voting and investment
power except where otherwise indicated.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED
---- ------------ ------------
<S> <C> <C>
Kopp Investment Advisors, Inc. 4,738,315(2) 35.1%
6600 France Avenue South, Suite 672
Edina, Minnesota 55435
Richard C. Alberding 10,000(3) *
William E. Gibson and Kahala Ann Trask 633,000(4) 4.7%
Gibson, as community property
Jack M. Gill 15,000(5) *
Clifford H. Higgerson 274,590(5) 2.0%
Michael M. Michigami -- --
Billy B. Oliver 18,500(3) *
Michael J. McCloskey -- --
Mark A. Byington 74,970(6) *
John P. O'Neil 10,667(7) *
Timothy R. Hansen 13,165(8) *
All Directors and Executive Officers as a 1,089,073(9) 8.0%
Group (13 persons)
- ---------------
</TABLE>
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options currently exercisable or exercisable on or before
August 31, 1995, are deemed outstanding for computing the percentage of
the person holding such options but are not deemed outstanding for
computing the percentage of any other person.
(2) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission dated February 10, 1995, Kopp Investment Advisors, Inc. has
reported sole dispositive power over all of the shares and no voting power
with respect to any of the shares.
(3) Includes 10,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
(4) Includes 12,000 shares of Common Stock held in trust and 40,000 shares of
Common Stock subject to options held by Mr. Gibson which are currently
exercisable or will become exercisable on or before August 31, 1995.
(5) Includes 15,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
(6) Includes 53,334 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
(7) Includes 10,677 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
(8) Includes 13,165 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
(9) Includes 196,367 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 31,
1995.
5.
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company whose
total annual salary and bonus for the fiscal year ended March 31, 1995 exceeded
$100,000 for services rendered in all capacities to the Company and its
subsidiaries for the fiscal years ended March 31, 1995, 1994 and 1993. In
addition, information concerning compensation earned by the Company's former
Chief Executive Officer and former Executive Vice President and Chief Financial
Officer for services rendered in all capacities to the Company and its
subsidiaries for the fiscal years ended March 31, 1995, 1994 and 1993 is
included (collectively the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
----------------------------------------- -----------------------
Other
Name and Principal Fiscal Annual Com-
Position Year Salary ($) Bonus ($) pensation ($) Options
----------------------- ---- ---------- --------- ------------- -------
<S> <C> <C> <C> <C> <C>
Richard C. Alberding 1995 64,000(1) -- -- --
Co-Chairman of the Board 1994 32,500(2) -- -- 15,000
and Co-Chief Executive 1993 -- -- -- --
Officer
Clifford H. Higgerson 1995 38,250(1) -- -- --
Co-Chairman of the Board 1994 15,000(3) -- -- --
and Co-Chief Executive 1993 1,000(3) -- -- 15,000
Officer
Michael M. Michigami 1995 289,879(4) -- 6,000(5) 50,000(6)
Former Chairman of the 1994 261,165 75,000 35,321 --
Board and Chief 1993 162,426(7) 160,000 102,369(8) 302,000
Executive Officer
William E. Gibson 1995 250,008 -- 13,200(5) --
President, DMC 1994 246,883 50,033 16,992 --
Telecom 1993 240,633 -- -- 42,500
Michael J. McCloskey 1995 177,024(9) -- 13,200(5) 40,000(10 )
Former Executive Vice 1994 159,952 45,000 12,699 --
President and Chief 1993 65,433(11) 35,000 18,200(12) 101,500
Financial Officer
Mark A. Byington 1995 153,001 -- 9,000(5) 35,000
Vice President 1994 136,275 25,000 461 --
Engineering 1993 119,550 16,900 -- 78,200
John P. O'Neil 1995 126,050 -- 9,000(5) 20,000
Vice President, Personnel 1994 110,000 18,000 -- 10,000
1993 -- -- -- --
Timothy R. Hansen 1995 100,000 -- 750(5) 5,000
Vice President, SPECTRUM(TM) 1994 94,716 5,000 -- 5,000
Business Unit 1993 74,475 -- --
</TABLE>
_______________________
(1) Represents compensation earned as a Director of the Company and includes
consulting fees earned as a special consultant to the executive
management committee and for serving as Co-Chief Executive Officer of the
Company. See "Compensation of Directors."
(2) Represents compensation earned as a Director of the Company and includes
consulting fees earned as a special consultant to the executive
management committee.
(3) Represents compensation earned as a Director of the Company.
6.
<PAGE> 10
(4) Mr. Michigami resigned from his position as Chief Executive Officer of
the Company effective August 30, 1994. See "Employment and Termination
Arrangements."
(5) Represents car allowances.
(6) Cancelled upon termination of employment on August 30, 1994. See
"Employment and Termination Arrangements."
(7) Represents salary paid for eleven months of fiscal 1993.
(8) Includes $94,367 in relocation expense reimbursement.
(9) Mr. McCloskey resigned from his position as Executive Vice President and
Chief Financial Officer of the Company effective February 17, 1995.
Salary includes consulting services of approximately $10,000. See
"Employment and Termination Arrangements."
(10) Cancelled options to purchase 32,000 shares upon termination of
employment on February 17, 1995. See "Employment and Termination
Arrangements."
(11) Represents salary paid for six months of fiscal 1993.
(12) Includes $15,000 in relocation expense reimbursement.
7.
<PAGE> 11
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made under the Company's 1984 Stock Option Plan and the 1994 Stock
Incentive Plan to the Named Officers during the fiscal year ended March 31,
1995. No stock appreciation rights were granted during such fiscal year to the
Named Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term($)(1)
-------------------------------------------------------------------------- ----------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise of
Options in Fiscal Base Price Expiration
Name Granted (#) Year ($/Share) Date 5% 10%
---- ----------- ----------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Alberding -- -- -- -- -- --
Clifford H. Higgerson -- -- -- -- -- --
Michael M. Michigami 50,000(2) 5.8 9.88 4/29/04 -- --
William E. Gibson -- -- -- -- -- --
Michael J. McCloskey 40,000(3) 4.7 9.88 4/29/04 68,600 173,800
Mark A. Byington 10,000 1.2 9.88 4/29/04 85,700 217,200
25,000 2.9 14.06 11/03/04 214,300 543,100
John P. O'Neil 20,000 2.3 9.88 4/29/04 171,400 434,500
Timothy R. Hansen 5,000 .6 9.88 4/29/04 42,900 108,600
- ----------------------
</TABLE>
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There is
no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock does in
fact appreciate over the option term, no value will be realized from the
option grants made to the executive officers.
(2) Cancelled upon termination of employment on August 30, 1994.
(3) Cancelled options to purchase 32,000 shares upon termination of employment
on February 17, 1995. Potential realizable value calculated on vested
shares of 8,000.
8.
<PAGE> 12
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Officers concerning their exercise of stock options during the fiscal year
ended March 31, 1995 and the unexercised options held by them as of the end of
that fiscal year. No stock appreciation rights were exercised during such
fiscal year or were outstanding as of the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised in-the-
Number of Securities Money Options at Fiscal Year-
Underlying Unexercised End (market price of shares
Value Realized Options at Fiscal at Fiscal Year-End ($13.63)
(market price at Year-End (#) less exercise price)($)(1)
Shares Acquired exercise date less -------------------------- ---------------------------
Name on Exercise (#) exercise price)($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Alberding -- -- 5,000 10,000 11,900 23,800
Clifford H. Higgerson -- -- 10,000 5,000 73,800 36,900
Michael M. Michigami 262,050 2,305,365 -- -- -- --
William E. Gibson 2,500 9,375 26,665 13,335 196,789 98,412
Michael J. McCloskey 33,333 330,900 16,334 -- 99,879 --
Mark A. Byington -- -- 53,334 33,000 196,904 208,680
John P. O'Neil -- -- 10,667 19,333 17,553 61,347
Timothy R. Hansen -- -- 2,000 8,000 -- --
- -----------------------
</TABLE>
(1) "In-the-money" options are options with an exercise price less than the
market price of the Company's Common Stock on March 31, 1995, the last day
of the 1995 fiscal year.
EMPLOYMENT AND TERMINATION ARRANGEMENTS
The Company does not have any existing employment agreements or
arrangements with its Named Officers.
Effective August 30, 1994, Mr. Michael M. Michigami resigned from his
positions as Chairman of the Board and Chief Executive Officer after serving in
such capacity since 1992. In connection with Mr. Michigami's resignation, the
Company entered into a settlement agreement with Mr. Michigami which, among
other things, provided for certain payments and other financial compensation.
Pursuant to the settlement agreement, the Company agreed to pay Mr. Michigami's
monthly base salary of $25,000 per month through February 28, 1995 and provided
continued health coverage to Mr. Michigami for this period. The Company agreed
to continue to vest the June 25, 1992 stock option, of which 75,000 shares were
unvested at August 30, 1994, over the six-month period of salary continuation
described above at the rate of 8,333 shares per month plus one additional share
for a total of 50,000 shares vested; however, the Company canceled Mr.
Michigami's April 19, 1995 stock option for 50,000 shares. Mr. Michigami
agreed that for a one-year period beginning on September 1, 1994, he would
provide no services nor act as an employee or consultant for or on behalf of
any entity that competes with the Company.
Effective February 17, 1995, Mr. Michael J. McCloskey resigned from
his positions as the Company's Executive Vice President and Chief Financial
Officer. In connection with Mr. McCloskey's resignation, the Company entered
into a letter agreement with Mr. McCloskey which, among other things, provided
for Mr. McCloskey's agreement to provide consulting services to the Company for
a period of 90 days following
9.
<PAGE> 13
Mr. McCloskey's resignation. Through May 31, 1995, Mr. McCloskey was paid
approximately $10,000 under the consulting arrangement and was also provided
continued health coverage. Mr. McCloskey's stock option grants continued
to vest on a monthly basis until May 17, 1995 and such options remained
exercisable pursuant to their original terms. An additional 16,334 shares
vested during this period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Compensation Committee") has the authority and responsibility for approving
the overall compensation strategy for the Company, administering the Company's
annual and long-term compensation plans, and reviewing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation. The Compensation Committee is comprised of
independent, non-employee Board members, except that Mr. Alberding has acted as
a Co-Chief Executive Officer of the Company since the resignation of Michael M.
Michigami in August, 1994.
GENERAL COMPENSATION POLICY. The Compensation Committee's overall
policy is to offer the Company's executive officers competitive compensation
opportunities. The Compensation Committee utilizes competitive data and
summaries provided by Radford Associates, Alexander & Alexander Consulting
Group and the American Electronics Association to develop compensation
recommendations competitive with other companies in the communications
industry. The Compensation Committee's objectives are (i) to create a
performance-oriented environment with variable compensation based upon the
achievement of annual and longer-term business results; (ii) to focus
management on maximizing stockholder value through stock-based compensation
aligned to stockholder return; and (iii) to provide compensation opportunities
dependent upon the Company's performance relative to its competitors and
changes in its own performance over time.
The Compensation Committee is authorized (i) to establish and maintain
compensation guidelines for salaries and merit pay increases throughout the
Company; and (ii) to make specific recommendations to the Board of Directors
concerning the compensation of executive officers of the Company, including the
Chief Executive Officer. The Compensation Committee also administers the
Company's stock option plans and the Company's retirement and savings plan.
FACTORS. The primary factors considered in establishing the
components of each executive officer's compensation package for the fiscal year
ended March 31, 1995 are summarized below. The Committee may in its discretion
apply entirely different factors, such as different measures of financial
performance, for future fiscal years.
- BASE SALARY. The base salary for each officer is set on the basis
of personal performance, the salary levels in effect for comparable
positions with other companies in the industry, and internal
comparability considerations. Generally, Company performance and
profitability are not taken into account in establishing base salary.
Salaries paid to the Company's executive officers for the fiscal year
ended March 31, 1995 ranged from the 50th percentile at the low end to
the 75th percentile at the high end of the compensation data surveyed
for the industry. A number of adjustments were made to the surveyed
compensation data for the industry to reflect differences in
management style, organizational structure and corporate culture,
geographic location, product development stage and market
capitalization between the Company and the surveyed entities. As a
result of these adjustments, there is not a meaningful correlation
between the companies in the industry which were taken into account
for comparative compensation purposes and the companies included in
the Industry Group Index which appears later in this Proxy Statement
for purposes of evaluating the price performance of the Company's
Common Stock.
10.
<PAGE> 14
- ANNUAL INCENTIVE COMPENSATION. For the fiscal year ended March 31,
1995, specific financial and organizational objectives, including
earnings per share, revenue and gross margin targets, were established
as the basis for the incentive bonuses to be paid to the executive
officers of the Company.
Specific bonus awards, set as a target percentage of salary, were
established for each officer's position and were to be earned on the
basis of achieving the specified corporate goals and the
accomplishment of specific individual objectives. The financial
objectives for the fiscal year 1995 were not met, and no incentive
bonus was paid to any officer of the Company for such fiscal year.
- LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Generally, the
Compensation Committee awards stock options to each of the Company's
executive officers following the initial hiring and from time to time
thereafter. The option grants are designed to align the interests of
the executive officer with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. In
furtherance of this policy, the Company has implemented the 1994 Stock
Incentive Plan to serve as a comprehensive equity incentive program
for the Company's executive officers and other key employees.
Generally, the size of the option grant made to each executive officer
is set at a level which the Committee deems appropriate to create a
meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but there is also taken into
account comparable awards to individuals in similar positions in the
industry, as reflected in external surveys, the individual's potential
for future responsibility and promotion, the individual's performance
in recent periods and the number of unvested options held by the
individual at the time of the grant. The relative weight given to
each of these factors will vary from individual to individual in the
Committee's discretion. Each of the Named Officers, except Messrs.
Alberding, Gibson and Higgerson, received a stock option grant in
fiscal 1995.
Each grant allows the officer to acquire shares of the Company's
Common Stock at a fixed price per share (the market price on the grant
date) over a specified period of time (up to 10 years). The option
will generally become exercisable in installments over a five-year
period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return to
the executive officer only if he or she remains in the Company's
employ, and then only if the market price of the Company's Common
Stock appreciates over the option term.
CEO COMPENSATION. Mr. Michigami resigned his position of Chairman and
Chief Executive Officer on August 30, 1994. The Committee established Mr.
Michigami's base salary with the objective of maintaining the competitiveness
of Mr. Michigami's base salary with salaries paid to similarly situated chief
executive officers. With respect to Mr. Michigami's base salary, it was the
Committee's intent to provide him with a level of stability and certainty each
year and not have this particular component of compensation affected to any
significant degree by Company performance factors. Mr. Michigami's base salary
for the 1995 fiscal year was set at the 50th percentile of the salary data
surveyed for other chief executive officers in the industry.
Mr. Michigami did not receive additional compensation from the Company
except as described under "Employment and Termination Arrangements."
Messrs. Alberding and Higgerson have served as Co-Chairman of the
Board and Co-Chief Executive Officers since August 30, 1994, during the search
for a permanent Chief Executive Officer. They have been compensated pursuant
to the Company's Director consulting compensation policy described under
"Compensation of Directors" and are not eligible to receive stock option
grants other than as non-employee Directors or to receive bonuses.
11.
<PAGE> 15
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
As a result of Section 162(m) of the Internal Revenue Code, which was
enacted into law in 1993, the Company will not be allowed a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any one year. This
limitation will be in effect for each fiscal year of the Company beginning after
December 31, 1993 and will apply to all compensation paid to the covered
executive officers which is not considered to be performance based. Compensation
which does qualify as performance-based compensation will not have to be taken
into account for purposes of this limitation. At the 1994 Annual Meeting, the
stockholders approved the implementation of the 1994 Stock Incentive Plan under
which the number of shares of Common Stock for which any one executive officer
may be granted stock options, stock appreciation rights or direct stock
issuances is limited to 500,000 shares. As a result of this limitation and
certain other administrative provisions of the 1994 Stock Incentive Plan, any
compensation deemed paid to an executive officer in connection with the exercise
of stock options granted under the 1994 Stock Incentive Plan with an exercise
price equal to the market price of the option shares on the grant date will
qualify as performance-based compensation.
The Compensation Committee does not expect that the compensation to be
paid to the Company's executive officers for the 1996 fiscal year will exceed
the $1 million limit per officer. Accordingly, until final Treasury regulations
are issued with respect to the new $1 million limitation, the Compensation
Committee will defer any decision on whether or not to restructure one or more
components of the compensation paid to the executive officers so as to qualify
those components as performance-based compensation that will not be subject to
the $1 million limitation.
Submitted by the Compensation Committee of the Company's Board of Directors:
Richard C. Alberding
Jack M. Gill
Billy B. Oliver
12.
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage changes in the
cumulative total stockholder return on the Company's Common Stock with the
cumulative total return on the Dow Jones Equity Market Index and the Dow Jones
Communications Technology Index during the five fiscal years ended March 31,
1995. The comparison assumes $100 was invested on March 31, 1990 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
COMPARISON OF 5-YEAR CUMULATIVE RETURN
AMONG
DIGITAL MICROWAVE CORPORATION,
DOW JONES EQUITY MARKET INDEX AND
DOW JONES COMMUNICATIONS TECHNOLOGY INDEX
Research Data Group Total Return -- Data Summary
DMIC
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------
3/90 3/91 3/92 3/93 3/94 3/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Digital Microwave Corp DMIC 100 66 27 39 49 45 05/24/95
D J EQUITY MARKET INDEX IDOW 100 115 129 149 151 173 03533DOW
D J COMMUNICTNS TECHNLGY ICMT 100 86 107 159 166 178 03533CMT
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 which might incorporate future filings made by the Company
under those statutes, the preceding Compensation Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated
by reference into any of those prior filings; nor will are such report or graph
be incorporated by reference into any future filings made by the Company under
those statutes.
13.
<PAGE> 17
PROPOSAL 2:
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee, pursuant to authority granted to it by the Board
of Directors, appointed Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ended March 31, 1996.
Although the appointment of Arthur Andersen LLP is not required to be
submitted to a vote of the stockholders, the Board of Directors believes it
appropriate as a matter of policy to request that the stockholders ratify the
appointment of the independent public accountants for the fiscal year ended
March 31, 1996. In the event a majority of the votes cast at the meeting are
not voted in favor of ratification, the adverse vote will be considered as a
direction to the Board of Directors of the Company to select other auditors for
the fiscal year ended March 31, 1996.
The Company anticipates that a representative of Arthur Andersen LLP
will be present at the Annual Meeting. The representative will be given the
opportunity to make a statement if he desires to do so, and is expected to be
available to respond to questions submitted either orally or in writing at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDED MARCH 31, 1996.
14.
<PAGE> 18
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the meeting. Should any other matter requiring a vote
of the stockholders arise, the enclosed proxy card gives authority to the
persons listed on the card to vote at their discretion in the best interest of
the Company.
STOCKHOLDER PROPOSALS
The deadline for stockholder proposals intended to be considered for
inclusion in the Company's Proxy Statement for next year's Annual Meeting of
Stockholders is expected to be March 1, 1996. Such proposals may be included in
next year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CLIFFORD H. HIGGERSON
Clifford H. Higgerson
Co-Chairman of the Board and
Co-Chief Executive Officer
Dated: June 23, 1995
15.
<PAGE> 19
PROXY
DIGITAL MICROWAVE CORPORATION
170 ROSE ORCHARD WAY, SAN JOSE, CA 95134
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Carl Thomsen and John O'Neil, and each
of them, with full power of substitution, the proxies of the undersigned to vote
all shares of Common Stock of Digital Microwave Corporation which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of Digital
Microwave Corporation to be held at the Santa Clara Marriott Hotel, 2700 Mission
College Blvd., Santa Clara, California, on July 26, 1995 at 3:00 p.m., local
time, and at any adjournment or postponements thereof, with the same force and
effect as the undersigned might or could do if personally present thereat:
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 20
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 Proposals 1 and 2 and, in the discretion of the proxy, on any other business
that may properly come before the meeting and any adjournments or postponements
thereof.
1. ELECTION OF DIRECTORS.
FOR all nominees WITHHOLD
listed (except AUTHORITY
as marked to vote for all
to the contrary) nominees listed
/ / / / -----------------------------------
(The Board of Directors recommends a vote FOR.)
NOMINEES: RICHARD C. ALBERDING; CLIFFORD H. HIGGERSON; WILLIAM E. GIBSON;
BILLY B. OLIVER
In addition, this proxy will be voted in the Election of Directors in the manner
described in the Proxy Statement for the Annual Meeting of Stockholders.
(INSTRUCTION: To withhold authority to vote for one or more individual nominees,
write such name or names in the space provided below.)
2. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDED MARCH 31, 1996. (The Board of Directors
recommends a vote FOR.)
FOR AGAINST ABSTAIN
/ / / / / /
3. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
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
partnership name by authorized person.
Dated: , 1995
------------------------------------
STOCKHOLDER
------------------------------------------------
(Please print name of record holder
as it appears on share certificate)
By:
---------------------------------------------
(Signature)
------------------------------------------------
(Please print name and title
of signatory, if applicable)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
