<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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 Section 240.14a-12
DIGITAL MICROWAVE CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
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</TABLE>
<PAGE>
[LOGO]
July 10, 2000
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 August 8,
2000, at 3:00 p.m., local time, which will be held at the Company's executive
offices located at 170 Rose Orchard Way, San Jose, 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 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 2000 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/ Charles D. Kissner
Charles D. Kissner
CHAIRMAN OF THE BOARD
170 ROSE ORCHARD WAY, SAN JOSE, CALIFORNIA 95134 PHONE: 408 943-0777
FACSIMILE: 408 944-1770
ISO 9001 CERTIFIED
<PAGE>
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 Company's executive offices located at 170 Rose
Orchard Way, San Jose, California, on Tuesday, August 8, 2000, at 3:00 p.m.
local time, to:
1. Elect eight directors to serve until the next Annual Meeting and until
their successors have been elected and qualified;
2. Approve the name change of the Company from Digital Microwave
Corporation to DMC Stratex Networks, Inc.;
3. Approve the amendment to Article IV of the Restated Certificate of
Incorporation of the Company, as amended, to (i) increase the total number of
shares that the Company has authority to issue from 100,000,000 shares to
155,000,000 shares and (ii) increase the number of shares of Common Stock
authorized for issuance by the Company from 95,000,000 shares to 150,000,000
shares.
4. Ratify the selection of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending March 31, 2001; and
5. Transact any other business which may properly come before the meeting
and 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 19, 2000, 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, mark 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/ Charles D. Kissner
Charles D. Kissner
CHAIRMAN OF THE BOARD
San Jose, California
July 10, 2000
<PAGE>
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 Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held at 3:00 p.m., local time, on
August 8, 2000, and any adjournment or postponement thereof. This Proxy
Statement was first mailed to stockholders on or about July 10, 2000.
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 19, 2000, (the "Record Date") 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 19, 2000, there were 73,024,339 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting, held by 328 stockholders
of record. The presence at the Annual Meeting of a majority, or 36,512,170, of
these shares of Common Stock of the Company, either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. An
automated system administered by the Company's transfer agent will tabulate
votes cast by proxy and an employee of the transfer agent will tabulate votes
cast in person at the Annual Meeting.
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
(the "Board of Directors" or the "Board"), and, when returned properly
completed, will be voted as you direct on your proxy card. 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. Each outstanding
share of Common Stock on the Record Date is entitled to one vote on all matters.
Directors shall be elected by a plurality of the votes cast.
The approval of the name change of the Company and the ratification of the
independent auditors of the Company for the current fiscal year will require the
affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote at the Annual Meeting. Because
abstentions are treated as shares present or represented and entitled to vote
for the purposes of determining whether a matter has been approved by the
stockholders, abstentions have the same effect as negative votes. However,
broker non-votes and shares as to which proxy authority has been withheld with
respect to these matters will not be deemed to be entitled to vote for purposes
of determining whether stockholder approval has been obtained.
The approval of the increase in the number of authorized shares of Common
Stock requires the affirmative vote of a majority of the outstanding shares of
the Common Stock, and thus abstentions will have the same effect as negative
votes. Similarly, broker non-votes and shares as to which proxy authority has
been withheld with respect to the increase in the number of authorized shares
will not be considered as affirmative votes and thus will have the same effect
as negative votes.
1
<PAGE>
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 (i) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or (ii) 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, 2000
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.
2
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors 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 of the eight nominees named below as
directors unless authority to vote for any such nominee is withheld. The eight
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.
In conjunction with Mr. Smookler's appointment as Chief Executive Officer,
in May 2000 the Board amended Article III, Section 1 of the Company's Amended
and Restated Bylaws to increase the number of directors from seven to eight and
appointed Mr. Smookler to the Board. Pursuant to the Company's merger with
Innova Corporation in October 1998, the Company agreed to nominate Mr. Bachow to
serve as a director for a one-year term at each of the annual meetings of
stockholders to be held in 1999, 2000 and 2001.
In the event that additional persons are nominated, other 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>
Charles D. Kissner Chairman of the Board 53
Sam Smookler Chief Executive Officer, 60
President and Director
Richard C. Alberding Director 69
Paul S. Bachow Director 49
John W. Combs Director 53
James D. Meindl Director 67
V. Frank Mendicino Director 67
Howard Oringer Director 58
</TABLE>
Mr. Charles D. Kissner currently serves as Chairman of the Board. Mr.
Kissner joined the Company as President, Chief Executive Officer and was elected
a director of the Company in July 1995 and Chairman of the Board in August 1996.
He served as Chief Executive Officer until May 2000. Prior to joining the
Company, he served as Vice President and General Manager of the Microelectronics
Division of M/A-COM, Inc., a manufacturer of radio and microwave communication
products, from July 1993 to July 1995. Mr. Kissner currently is a director of
Spectrian, Inc., a supplier of high power amplifiers to wireless communications
manufacturers and service providers, and American Flight Support, Inc., a non-
profit medical transportation company. Mr. Kissner also serves on the Board of
Litttlefeet, Inc., a provider of wireless communication products.
Mr. Sam Smookler currently serves as Chief Executive Officer and President
of the Company and is also a director. Mr. Smookler was appointed Chief
Executive Officer and as a director in May 2000. Prior to such appointment, he
served as President and Chief Operating Officer from October 1999. He previously
served as President, New Business from October 1998 to October 1999. Mr.
Smookler joined the Company as President and Chief Operating Officer in January
1998. From February 1997 to December 1997, Mr. Smookler was President and Chief
Operating Officer of Signal Technology Corporation, a manufacturer of electronic
components and subsystems. From November 1994 to February 1997, Mr. Smookler
served as Vice President and General Manager of the Interconnection Products
Division of
3
<PAGE>
Augat Corporation, a manufacturer of telecommunications connection products.
From February 1992 to November 1994, Mr. Smookler served as General Manager of a
division of M/A-COM, a manufacturer of RF and microwave devices, components, and
systems. Mr. Smookler holds a BS Degree in Engineering Science from Long Island
University in Brookville, New York.
Mr. Richard C. Alberding has served as a director of the Company since July
1993 and served as Co-Chairman of the Board and Co-Chief Executive Officer from
September 1994 to July 1995. Mr. Alberding retired from Hewlett-Packard Company
in 1991, where he had 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 Kennametal Corporation, a machine tool
company, Walker Interactive Systems, a software company, SyBase, Inc., a
computer database and tools company, Paging Network, Inc., a paging services
company, JLK Direct Distribution, a metalworking consumables distribution
company, PCTEL, a computer components supplier, and several private companies.
Mr. Paul S. Bachow has served as a director of the Company since October
1998. He served as a director of Innova Corporation from January 1993 until
October 1998, when the merger of the Company and Innova was consummated. Mr.
Bachow has served as President of Bachow & Associates, Inc., a venture capital
investment company, since its formation in December 1989. Mr. Bachow also acts
as President of the General Partner of each of Paul S. Bachow Co-Investment
Fund, L.P., and Bachow Investment Partners III, L.P. Mr. Bachow serves as a
director of Anadigics, Inc., a publicly traded manufacturer of gallium arsenide
chips for use in a broad array of communications devices.
Mr. John W. Combs has served as a director of the Company since May 1997.
Since September 1999, Mr. Combs has served as President and Chief Executive
Officer of Internet Connect, an internet systems provider. From June 1993 to
September 1999, Mr. Combs served as President, Southwest Area for Nextel
Communications, Inc., a digital communications system provider. From March 1990
to June 1993, he served as Executive Vice President of Sales, Marketing and
Customer Care of Los Angeles Cellular Telephone Company, a provider of wireless
telecommunications services. In addition, Mr. Combs also serves as a director of
Hello Direct, Inc., a direct marketer of telecommunications products.
Dr. James D. Meindl has served as a director of the Company since November
1995. Since 1993, Dr. Meindl has held the Joseph M. Pettit Chaired Professorship
in Microelectronics at the Georgia Institute of Technology. Prior to his
professorship at the Georgia Institute of Technology, Dr. Meindl served as
Senior Vice President for Academic Affairs and Provost at Rensselaer Polytechnic
Institute from 1986 to 1993. Dr. Meindl serves as a director of SanDisk Corp.,
which designs, develops and markets flash memory data storage products, and
Zoran Corp., a semiconductor and related devices company.
Mr. V. Frank Mendicino has served as a director of the Company since October
1998. Mr. Mendicino served as a director of Innova Corporation from July 1989
and as its Chairman from February 1992 until October 1998, when the merger of
the Company and Innova was consummated. Since 1983, Mr. Mendicino has served as
a General Partner of Woodside Fund, Woodside Fund II and Woodside Fund III, each
of which is a private investment fund. Since 1999 Mr. Mendicino has been
managing director of Access Venture Partners, a private investment fund. He also
has served as a director of over 15 private companies.
Mr. Howard Oringer has served as a director of the Company since March 1998.
Mr. Oringer has been Managing Director of Communications Capital Group, a
management consulting firm, since November 1993. From February 1986 to November
1993, Mr. Oringer was the President, Chief Executive Officer and Chairman of the
Board of Directors of TeleSciences, Inc., a manufacturer of telecommunications
equipment. Mr. Oringer serves as a director of Tekelec, which designs,
manufactures and markets network switching solutions and diagnostic systems,
Verilink Corporation, which develops, manufactures and
4
<PAGE>
markets access products for telecommunications network service providers and
corporate end users, and Vertel, a provider of software for telecommunications
management systems.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
OF THE ABOVE NOMINEES AS DIRECTORS.
5
<PAGE>
PROPOSAL 2:
APPROVAL OF NAME CHANGE
In May 2000 the Board adopted a resolution changing the name of the Company
from "Digital Microwave Corporation" to "DMC Stratex Networks, Inc." subject to
approval by the stockholders at the Annual Meeting. The Board has determined
that the name change is in the best interests of the Company and its
stockholders as a powerful new name identifying the Company's advances into
ultra-high-capacity solutions for the telecommunications market and identifying
the Company as ready to innovate, develop, deliver, partner and thrive in the
ongoing global telecommunications revolution. The affirmative vote of a majority
of the shares of Common Stock present or represented and entitled to vote at the
Annual Meeting is required to approve the name change. Accordingly, abstentions
will have the same effect as negative votes. However, broker non-votes and
shares as to which proxy authority has been withheld with respect to the name
change will not be deemed to be entitled to vote for purposes of determining
whether stockholder approval of the name change has been obtained.
THE BOARD RECOMMENDS THAT HOLDERS OF SHARES OF THE COMPANY'S COMMON STOCK
VOTE FOR APPROVAL OF THE NAME CHANGE.
6
<PAGE>
PROPOSAL 3:
AMENDMENT TO ARTICLE IV OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF STOCK
AND THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's stockholders are asked to act upon a proposal to approve an
amendment to Article IV of the Company's Restated Certificate of Incorporation,
as amended, to (i) increase the total number of shares of stock that the Company
is authorized to issue from 100,000,000 shares to 155,000,000 shares and (ii)
increase the number of authorized shares of Common Stock from 95,000,000 shares
to 150,000,000 shares. In June 2000, the Board approved this amendment to the
Restated Certificate of Incorporation, as amended, subject to stockholder
approval.
Following is the text of the first paragraph of Article IV of the Restated
Certificate of Incorporation, as proposed to be amended to effect the increase
in the total number of authorized shares of stock and the number of authorized
shares of Common Stock of the Company:
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Preferred Stock" and "Common Stock." The
total number of shares that this Corporation is authorized to issue is
One Hundred Fifty Five Million (155,000,000). Five million (5,000,000)
shares shall be Preferred Stock, consisting of 200,000 shares designated
Series A Junior Participating Preferred Stock, and One Hundred Fifty
Million (150,000,000) shares shall be Common Stock. The Preferred Stock
shall have a par value of $.01 per share; the Common Stock shall have a
par value of $.01 per share.
If this proposal is approved at the Annual Meeting, the amendment to Article
IV of the Restated Certificate of Incorporation would be effected on the soonest
practicable date following the Annual Meeting. If the amendment is not effected,
the Board of Directors will take action to abandon the amendment pursuant to
Section 242(c) of the Delaware General Corporation Law.
PURPOSES AND EFFECTS OF THE INCREASE IN THE TOTAL NUMBER OF AUTHORIZED SHARES OF
STOCK AND THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
On June 19, 2000, the Company had 73,024,339 shares of Common Stock and no
shares of Preferred Stock outstanding. In addition, as of the same date,
approximately 12,166,743 shares of Common Stock were reserved for issuance under
stock option plans and for other purposes. With only approximately 9,808,918
shares of authorized but unissued and unreserved Common Stock remaining, the
Board believes the proposed increase in the authorized number of shares of
Common Stock is necessary to provide the Company with the flexibility to meet
business needs as they arise, to take advantage of favorable opportunities and
to respond to a changing corporate environment. The authorized shares of Common
Stock in excess of those outstanding or reserved will be available for issuance
at such times and for such purposes as the Board of Directors may deem advisable
without further action by the Company's stockholders, except as may be required
by applicable laws or regulations, including stock exchange rules. These
purposes may include additional stock dividends, stock splits, retirement of
indebtedness, employee benefit programs, corporate business combinations,
acquisitions of property, funding of product programs or businesses, issuance of
securities convertible into Common Stock or other corporate purposes. The Board
of Directors has no current plans to issue any shares of Common Stock for any
such purposes and does not intend to issue any stock except on terms or for
reasons which the Board deems to be in the best interests of the Company.
Increasing the number of authorized shares of stock to a number that provides
for a substantial number of additional authorized but unissued and unreserved
shares of stock is a common occurrence among publicly held companies.
7
<PAGE>
The additional shares of Common Stock that would become available for
issuance if the proposed amendment is adopted could also be used by the Company
to delay, defer or prevent a change of control of the Company or other
transaction that might involve a premium price for holders of Common Stock or
otherwise be in their best interest. For example, in the event of a hostile
attempt to take over control of the Company, the Company could issue additional
shares of the Common Stock, thereby diluting the voting power of the other
outstanding shares and increasing the potential cost to acquire control of the
Company. The Board of Directors is not aware of any attempt to take control of
the Company and the Board of Directors has not presented this proposal with the
intent that it be utilized as an anti-takeover device.
Each additional share of Common Stock authorized by the amendment to Article
IV of the Restated Certificate of Incorporation described in this proposal would
have the same rights and privileges under the Restated Certificate of
Incorporation, as amended, as each share of Common Stock currently authorized.
The proposed amendment to Article IV of the Restated Certificate of
Incorporation does not alter the Company's existing power to issue up to
5,000,000 shares of Preferred Stock.
The approval of the increase in the number of total shares of authorized
stock and number of authorized shares of Common Stock requires the affirmative
vote of a majority of the outstanding shares of Common Stock and thus
abstentions will have the same effect as negative votes. Similarly, broker non-
votes and shares as to which proxy authority has been withheld with respect to
the increase in the number of authorized shares will not count as affirmative
votes and thus will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO ARTICLE IV OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF STOCK AND THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK.
8
<PAGE>
PROPOSAL 4:
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending March 31, 2001.
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 ending
March 31, 2001. 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 ending March 31, 2001. Accordingly, abstentions have the same
effect as negative votes. However, broker non-votes and shares as to which proxy
authority has been withheld with respect to the ratification will not be deemed
to be entitled to vote for purposes of determining whether stockholder approval
of the selection of accountants has been obtained.
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 ENDING MARCH 31, 2001.
9
<PAGE>
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 19, 2000, 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) each of the Company's
directors; (iii) the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company, determined for the year
ended March 31, 2000 (collectively, the "Named Executive Officers"); and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED(2)
------------------------------------------------------------ ----------------- ------------
<S> <C> <C>
Kopp Investment Advisors, Inc............................... 11,030,827(3) 15.1%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Charles D. Kissner.......................................... 179,101(4) *
Richard C. Alberding........................................ 34,000(5) *
Paul S. Bachow.............................................. 354,908(6) *
John W. Combs............................................... 51,699(7) *
James D. Meindl............................................. 38,345(8) *
V. Frank Mendicino.......................................... 105,284(9) *
Howard Oringer.............................................. 28,691(10) *
Frank Carretta, Jr.......................................... 90,582(11) *
Frank Grenon................................................ 5,000(12) *
Sam Smookler................................................ 17,763(13) *
Carl A. Thomsen............................................. 86,556(14) *
Paul Kennard................................................ 78,477(15) *
All directors and executive officers as a group (15
persons).................................................. 1,156,268(16) 1.58%
</TABLE>
------------------------
* Less than 1%
(1) To the Company's knowledge, except as set forth in the footnotes to this
table, and subject to applicable community property laws, each person named
in this table has sole voting and investment power with respect to the
shares set forth opposite such person's name.
(2) 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 18,
2000, 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. On June 19, 2000, there were 73,024,339
shares of the Company's Common Stock outstanding. Options granted to
directors under the Company's 1994 Stock Incentive Plan are immediately
exercisable; however, any shares purchased under such options are subject to
repurchase by the Company, upon the director's cessation of Board service
prior to vesting in those shares. Such options vest, and the Company's
repurchase rights lapse, annually over a period of three years commencing on
the first anniversary of the grant date.
(3) Pursuant to a Schedule 13G/A, dated February 4, 2000, filed with the
Securities and Exchange Commission, Kopp Investment Advisors, Inc. reported
shared dispositive power over 7,960,827 shares, sole dispositive power over
3,070,000 shares, sole voting power over 3,939,000 shares and aggregate
beneficial ownership of 11,030,827 shares. According to such filing, Kopp
Investment Advisors, Inc. is wholly owned by Kopp Holding Company, which
reported aggregate beneficial ownership of 11,030,827 shares. The filing
also states that Kopp Holding Company is wholly owned by Leroy C.
10
<PAGE>
Koop, who on such filing reported sole voting power over 490,000 shares,
sole dispositive power over 490,000 shares and aggregate beneficial
ownership of 11,520,827 shares.
(4) Includes 179,101 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000.
(5) Includes 28,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, 14,000 of which are subject to repurchase rights.
(6) Includes 52,500 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, of which 28,000 shares are subject to repurchase rights, and 404
shares subject to repurchase rights. Also includes 93,408 shares subject to
repurchase.
(7) Includes 42,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, and 404 shares subject to repurchase rights.
(8) Includes 37,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, 14,000 of which are subject to repurchase rights, and 202 shares which
are subject to repurchase rights.
(9) Includes 52,500 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, of which 28,000 shares are subject to repurchase rights and 404 shares
subject to repurchase rights.
(10) Includes 28,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000, none of which are subject to repurchase rights, and 404 shares subject
to repurchase rights.
(11) Includes 56,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000.
(12) Includes 5,000 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000.
(13) Includes 17,263 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000. Also includes 500 shares held by Mr. Smookler's spouse in her personal
account.
(14) Includes 86,556 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000.
(15) Includes 70,127 shares of Common Stock subject to options which are
currently exercisable or will become exercisable on or before August 18,
2000. Also includes 8,350 shares held of record by a trust for Mr. Kennard's
children of which Mr. Kennard is the trustee.
(16) See Footnotes (4) through (15). Includes 723,419 shares of Common Stock
subject to options which are currently exercisable or will become
exercisable on or before August 18, 2000, of which 84,000 shares are subject
to repurchase rights, and 1,818 shares of Common Stock that are subject to
repurchase.
11
<PAGE>
COMPENSATION OF DIRECTORS
AND CERTAIN EXECUTIVE OFFICERS
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 for the
fiscal year ended March 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS COMPENSATION(2)
----------------------------- -------- -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Kissner........... 2000 $440,315 $67,150 -- 75,000 $1,579
Chairman of the Board(3) 1999 363,742 -- -- 612,936 2,592
1998 380,000 321,480 -- 100,000 2,592
Sam Smookler................. 2000 323,963 47,393 -- 60,000 4,252
Chief Executive Officer and 1999 325,684 -- $36,347(5) 110,893 3,483
President(4) 1998 --(6) -- -- -- --
Frank Carretta, Jr........... 2000 251,609 140,000 -- 20,000 1,778
Senior Vice President, 1999 232,221 -- -- 42,659 2,326
Worldwide Sales 1998 225,001 237,990 -- 40,000 2,056
Frank Grenon................. 2000 186,160(8) 100,000 -- 25,000 135
President, Narrowband 1999 113,571(9) 100,000 -- 308,000 --
Products(7) 1998 -- -- -- -- --
Carl A. Thomsen.............. 2000 239,671 28,751 -- 25,000 1,730
Senior Vice President, Chief 1999 219,097 -- 75,735 2,221
Financial Officer and
Secretary 1998 216,000 118,368 -- 40,000 2,164
Paul Kennard................. 2000 212,435 24,589 -- 25,000 1,089
Chief Technical Officer 1999 183,282 -- -- 81,127 3,454
1998 180,000 110,120 -- 40,000 1,053
</TABLE>
------------------------
(1) The Company's executive officers are eligible for annual cash bonuses. Such
bonuses are generally based upon achievement of individual, as well as
corporate, performance objectives determined by the Company's Compensation
Committee.
(2) Represents compensation paid in the form of premiums for group life
insurance.
(3) Mr. Kissner served as Chief Executive Officer throughout fiscal 2000 and
until Mr. Smookler was appointed Chief Executive Officer in May 2000.
(4) Mr. Smookler was appointed Chief Executive Officer in May 2000. Prior to
such appointment, he served as President and Chief Operating Officer from
October 1999 and as President, New Business from October 1998 to October
1999.
(5) Represents relocation expense reimbursements.
(6) Mr. Smookler became an executive officer of the Company in January 1998.
(7) Mr. Grenon resigned from the Company as an officer and employee in January
2000 and currently serves as a part-time consultant.
(8) Represents Mr. Grenon's salary for the partial fiscal year until resigning
as an officer in January 2000.
(9) Represents Mr. Grenon's salary for the partial fiscal year since joining the
Company in October 1998.
12
<PAGE>
STOCK OPTIONS
The following table contains information concerning stock option grants made
to each of the Named Executive Officers during the fiscal year ended March 31,
2000. No stock appreciation rights were granted during such fiscal year to the
Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 2000(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------------ AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(3)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED (#) 2000 FISCAL YEAR(2) ($/SHARE) DATE 5% 10%
------------------------ ------------- ------------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Kissner...... 75,000 5.27% $12.125 05/03/09 $571,897 $1,449,300
Sam Smookler............ 35,000 2.46% 12.125 05/03/09 266,885 676,340
25,000(4) 1.76% 13.25 10/22/09 134,819 314,250
Frank Carretta, Jr...... 20,000 1.41% 12.125 05/03/09 152,506 386,480
Frank Grenon............ 25,000 1.76% 12.125 05/03/09 190,632 483,100
Carl A. Thomsen......... 25,000 1.76% 12.125 05/03/09 190,632 483,100
Paul Kennard............ 25,000 1.76% 12.125 05/03/09 190,632 483,100
</TABLE>
------------------------
(1) All options granted, except as specifically noted, had ten-year terms and
vest ratably over five years.
(2) Based on a total of 1,423,325 options granted.
(3) The 5% and 10% annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission. There is no
assurance provided to any Named 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 Named Executive Officers.
(4) These options, granted pursuant to the Company's 1999 Stock Incentive Plan,
have a seven year term and vest 25% per year over four years beginning on
the first anniversary of the grant date.
13
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named Executive
Officers concerning their exercise of stock options during the fiscal year ended
March 31, 2000, and the unexercised options held by them as of March 31, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
AND OPTION VALUES AT MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
NUMBER OF SECURITIES MONEY OPTIONS AT MARCH 31,
UNDERLYING UNEXERCISED 2000 (MARKET PRICE OF SHARES
VALUE REALIZED OPTIONS AT MARCH 31, 2000 AT MARCH 31, 2000 OF $33.875
(MARKET PRICE AT (#) 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>
Charles D. Kissner... 368,343 $6,218,394 343,600 380,001 $8,817,500 $9,836,289
Sam Smookler......... 150,630 2,515,313 263 220,000 7,002 4,659,375
Frank Carretta, Jr... 58,659 1,822,493 37,000 88,000 836,250 2,027,500
Frank Grenon......... 710,022 20,093,419 0 265,000 0 7,998,750
Carl A. Thomsen...... 71,553 1,612,972 56,608 110,946 1,426,795 2,692,117
Paul Kennard......... 105,000 1,767,977 42,127 109,000 1,062,929 2,637,750
</TABLE>
------------------------
(1) "In-the-money" options are options with an exercise price less than the
closing price of the Company's Common Stock on March 31, 2000.
14
<PAGE>
EMPLOYMENT AND TERMINATION AGREEMENTS
Mr. Kissner, Mr. Carretta, Mr. Smookler, Mr. Thomsen and Mr. Kennard each
have written employment agreements with the Company. Mr. Grenon had an
employment agreement that was terminated when he left the Company in January
2000, and he now has a consulting agreement with the Company pursuant to which
he provides consulting services on a part-time basis.
In August 1998, Mr. Kissner entered into a renewed and restated employment
agreement with the Company. The terms of this agreement extend until terminated
by either the Company or Mr. Kissner. The Agreement provides that if Mr. Kissner
is terminated without cause or as a result of a disability, he is entitled to
receive (a) severance payment equal to the amount of 36 months of his then base
salary, paid in the form of a salary continuation over the course of a 36-month
period, (b) payment equal to the average annual incentive bonus received by Mr.
Kissner for the previous three fiscal years multiplied by three, (c) a proration
of his incentive bonus, if earned, for the then current fiscal year based on the
number of months he was employed during the year by the Company, (d) payment of
Mr. Kissner's share of health insurance premiums for a period of up to 36
months, unless he and his family become entitled to enroll in a group health
insurance plan of another company or organization as defined by COBRA
Regulations, and (e) continued vesting of all new and future stock options for a
period of 36 months.
Mr. Kissner may also terminate his employment with the Company if one of the
following events takes place without his consent: (a) Mr. Kissner's position
changes, which results in a significant reduction of his title or
responsibilities, (b) Mr. Kissner's compensation is reduced by more than five
percent, or (c) Mr. Kissner's principal place of employment is relocated by more
than 50 miles. If Mr. Kissner terminates his employment in any of these
scenarios, he will receive the same severance payments and benefits that he is
entitled to receive if the Company were to terminate his employment without
cause as described above. Additionally, if Mr. Kissner is terminated by the
Company or a "Surviving Legal Entity" following a "Change of Control," each as
defined in the employment agreement, Mr. Kissner will receive the same severance
payments and benefits that he is entitled to receive if the Company were to
terminate his employment without cause as described above.
Mr. Smookler, Mr. Carretta, Mr. Thomsen and Mr. Kennard have entered into
renewed and restated employment agreements with the Company, effective as of
December 1998. The term of each of these four agreements extends until
terminated by either the Company or the officer. The employment agreement for
each of these officers includes the following provisions: (1) if the officer is
terminated without cause he shall be entitled to receive (a) severance pay for
12 months at his normal monthly salary; (b) the continuation of vesting of his
stock options for one year from the date of his termination; and (c) a proration
of his incentive bonus, if earned, for the then current fiscal year based on the
number of months he was employed during the year by the Company; or (2) if the
Company is merged or acquired in a transaction in which there is a Change of
Control of the Company, then the officer shall be entitled to receive (i)
severance pay in the amount of two times his base annual salary; (ii) a bonus
payment equal to that of the total of the bonuses paid to him in the last two
fiscal years; and (iii) a proration of his incentive bonus, if earned, for the
then current fiscal year based on the number of months he was employed during
the year by the Company. In the event of a Change of Control, the officer shall
receive full vesting of all stock option grants in accordance with the Company's
stock option agreements.
BOARD MEETINGS AND COMMITTEES
During the year ended March 31, 2000, the Board of Directors held six
meetings. During the same period, each director attended at least 75% of the
aggregate of (i) the total number of meetings of the Board held during the
period for which he was a director and (ii) the total number of meetings by all
Committees of the Board on which such director served held during the period for
which he was a director. There are no family relationships among any of the
executive officers or directors of the Company.
15
<PAGE>
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 public accountants
and reviewing the Company's accounting practices and system of internal
accounting controls. The Audit Committee, which currently consists of Mr.
Alberding, Mr. Oringer and Mr. Bachow, held four meetings during the year ended
March 31, 2000. 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 currently
consists of Dr. Meindl, Mr. Combs and Mr. Mendicino, held five meetings during
the year ended March 31, 2000.
The Company does not currently have a Nominating Committee. Although there
are no formal procedures for stockholders to recommend nominees for election to
the Board, the Board will consider recommendations from stockholders, which
should be addressed to Ms. Carol A. Goudey, the Company's Assistant Secretary,
at the Company's address set forth above.
COMPENSATION OF DIRECTORS
During the first two quarters of the fiscal year ended March 31, 2000, the
Company paid each non-employee director $1,000 in fees for each in-person
meeting and $500 per telephone meeting. During the final two quarters of fiscal
year 2000, the Company paid each non-employee director $1,250 in fees for each
in-person meeting and $625 per telephone meeting. In the first three quarters of
fiscal year 2000, the Company paid each director a retainer of $3,000 per
quarter in cash with an option to receive in lieu of such payment $3,500 in
stock. In the final quarter of fiscal 2000, the Company paid each director a
retainer of $3,500 per quarter in cash with an option to receive in lieu of such
payment $4,000 in stock. During fiscal 2000 the Company paid committee meeting
fees of $750 for each in-person committee meeting and $375 for each 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 paid during fiscal 2000 consulting fees to
members of the Board of $1,000 per day, in one half day increments, for Board
approved projects (including transportation time) plus reimbursement of all
expenses.
During the first two quarters of the fiscal year ended March 31, 2000, each
new non-employee Board member, upon his initial appointment or election to the
Board, was eligible to receive an automatic option grant for 42,000 shares with
an exercise price equal to the fair market value of the option shares on the
grant date. During the final two quarters of the 2000 fiscal year, each new
non-employee Board member, upon his initial appointment or election to the
Board, was eligible to receive an automatic option grant for 30,000 shares with
an exercise price equal to the fair market value of the option shares on the
grant date. Each individual reelected as a non-employee Board member at the 1999
annual meeting of stockholders, and who had been a Board member for the three
prior years, received an option grant at that time for 14,000 shares. Mr.
Alberding and Mr. Meindl received such grants. Each individual reelected as a
non-employee Board member at the upcoming Annual Meeting, and who will have been
a Board member for the three prior years, will receive an option grant for
10,000 shares. Each initial or periodic option grant is immediately exercisable
for all the option shares, but the shares purchased under the option are subject
to repurchase by the Company, at the option exercise price, upon the optionee's
cessation of Board service. The option shares vest, and the Company's repurchase
right lapses with respect to option shares, 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 Company's
repurchase rights immediately lapse in full. Each option grant under the 1994
Stock Incentive Grant has a maximum term of ten years, subject to earlier
termination upon the optionee's cessation of Board service. Future grants under
the 1999 Stock Incentive Grant will have a maximum term of ten years, subject to
earlier termination upon the optionee's cessation of Board service.
Pursuant to the Stock Fee Program of the Company's 1994 Incentive Plan and
1999 Stock Incentive Plan, non-employee directors may elect to apply all or any
portion of their annual retainer fee and/or
16
<PAGE>
meeting fees otherwise payable in cash to the acquisition of shares of Common
Stock. For the 2000 calendar year, Mr. Bachow, Mr. Combs, Mr. Mendicino and Mr.
Oringer have chosen to participate in such program and have elected to receive
Common Stock in lieu of their annual retainer fee. Each of these directors
received 691 shares of Common Stock at a purchase price of $23.125 per share. In
addition, Mr. Meindl has chosen to receive one half of his annual retainer fee
in shares of Common Stock and he received 345 shares at a purchase price of
$23.125 per share. Shares received by these directors in lieu of fees vest
monthly during the year after receipt; provided that the director continues to
serve on the Board through these dates. The shares will be held in escrow by the
Company and the appropriate vested amounts released in equal installments on
June 30, 2000 and December 31, 2000.
In May 2000 Mr. Kissner was granted an option for 500,000 shares of Common
Stock pursuant to the 1999 Stock Incentive Plan. These options vest in five
years, but vesting will be accelerated if the Company's share price increases
substantially to meet certain defined targets. This option grant is consistent
with Mr. Kissner's focus as Chairman of the Board on the long-term strategic
growth of the Company and increasing the value of the Company's stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
three members of the Board: John W. Combs, James D. Meindl and Mr. Frank
Mendicino. No 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.
17
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has the authority and responsibility to approve
the overall compensation strategy for the Company, administer the Company's
annual and long-term compensation plans, and review and make 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.
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, Aon Consulting and the American
Electronics Association to develop compensation recommendations competitive with
other companies in the communications industry. The Compensation Committee's
objectives are to (i) create a performance oriented environment with variable
compensation based upon the achievement of annual and longer-term business
results; (ii) focus management on maximizing stockholder value through
stock-based compensation aligned to stockholders' return; and (iii) 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, 2000 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, 2000
ranged from the 72nd percentile at the low end to the 94th 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. See "Stock Performance Graph."
- ANNUAL INCENTIVE COMPENSATION. For the fiscal year ended March 31, 2000,
specific financial and organizational objectives, including earnings per
share, revenue and orders targets and return on equity, 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 corporate goals for
the fiscal year 2000 were partially met, and incentive bonuses were paid
to officers of the Company for such fiscal year based on this plan.
- 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
18
<PAGE>
from time to time thereafter. The option grants are designed to align the
interests of the executive officer with those of the stockholders and to
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 Incentive
Plan and the 1999 Incentive Equity 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 Compensation Committee deems appropriate to create
a meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but the Compensation Committee also
takes 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 Executive Officers, Mr. Kissner, Mr. Smookler, Mr. Carretta,
Mr. Grenon, Mr. Thomsen and Mr. Kennard received stock option grants in
fiscal year 2000.
Each grant allows the executive 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 under the 1994
Incentive Equity Plan and 7 years under the 1999 Incentive Equity Plan).
Options granted during fiscal year 2000 under the 1994 Stock Option Plan
will generally become exercisable in installments over a five-year period,
contingent upon the executive officer's continued employment with the
Company. Options granted under the 1999 Stock Option Plan will generally
become exercisable in installments over a four-year period, contingent upon
the executive officer's continued employment with the Company. Accordingly,
the options 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. The Compensation Committee established Mr. Kissner's base
salary with the objective of maintaining the competitiveness of Mr. Kissner's
base salary with salaries paid to similarly situated chief executive officers.
With respect to Mr. Kissner's base salary, it was the Compensation 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. Kissner's base salary for the 2000
fiscal year was set at the 82nd percentile of the salary data surveyed for other
chief executive officers in the industry. In addition, Mr. Kissner received
grants of 75,000 stock options in the 2000 fiscal year.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the Company's executive officers. The limitation
applies only to compensation which is not considered to be performance-based.
The non-performance-based compensation paid to the Company's executive officers
in fiscal year 2000 did not exceed the $1 million limit per officer. At the 1994
Annual Meeting, the stockholders approved the implementation of the 1994
Incentive Plan under which the number of shares of Common Stock for which any
one individual participating in the 1994 Incentive Plan may be granted stock
options, stock appreciation rights or direct stock issuances is limited to
1,000,000 shares over the term of the plan. As a result of this limitation and
certain other administrative provisions of the 1994 Incentive Plan, any
compensation deemed paid to a covered executive officer in connection with the
exercise of stock options or stock appreciation rights granted under the 1994
Incentive Plan with an exercise price equal to the market price of the shares
covered by the option or stock appreciation right on the grant date will qualify
as performance-based compensation.
19
<PAGE>
The 1999 Incentive Plan also contains limits on the number of stock options
a participant may receive in any fiscal year, as well as certain other
administrative provisions, so that the compensation attributable to the exercise
of stock options under the 1999 Incentive Plan will qualify as performance-based
compensation.
The Compensation Committee does not expect that the compensation to be paid
to the Company's covered executive officers for the 2001 fiscal year will exceed
the $1 million limit per officer. The Compensation Committee is aware of the
limitations imposed by Section 162(m), and the exemptions available therefrom,
and will address the issue of deductibility when and if circumstances warrant
and may use such exemptions in addition to the exemption contemplated under the
Company's 1994 Incentive Plan and 1999 Stock Incentive Plan.
Submitted by the Compensation Committee of the Company's Board of Directors:
John W. Combs
James D. Meindl
Frank Mendicino
20
<PAGE>
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, 2000. The
comparison assumes $100 was invested on March 31, 1995 in the Company's Common
Stock and in each of the foregoing indices and assumes reinvestment of any
dividends.
COMPARISON OF 5-YEAR CUMULATIVE RETURN
AMONG
DIGITAL MICROWAVE CORPORATION,
DOW JONES EQUITY MARKET INDEX AND
DOW JONES COMMUNICATIONS TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOW JONES
<S> <C> <C> <C>
DIGITAL DOW JONES COMMUNICATIONS
MICROWAVE CORPORATION EQUITY MARKET TECHNOLOGY
3/95 $100 $100 $100
3/96 $66 $133 $123
3/97 $141 $159 $113
3/98 $217 $235 $186
3/99 $123 $278 $316
3/00 $497 $329 $654
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, 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 such report
or graph be incorporated into any future filings made by the Company under those
statutes.
21
<PAGE>
OTHER MATTERS
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%) beneficial owners 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, 2000, all of the
Company's officers, directors and greater than ten percent beneficial owners
complied with applicable Section 16(a) filing requirements during the 2000
fiscal year.
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 9, 2001. 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.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual 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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles D. Kissner
Charles D. Kissner
CHAIRMAN OF THE BOARD
San Jose, California
July 10, 2000
22
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THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF DIGITAL MICROWAVE CORPORATION
FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 8, 2000
The undersigned stockholder of DIGITAL MICROWAVE CORPORATION, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated July 5, 2000, and the 2000
Annual Report to Stockholders, and hereby appoints Sam Smookler, Carl A.
Thomsen and Carol A. Goudey or any one of them, proxies, with full power to
each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 2000 Annual Meeting of Stockholders of
DIGITAL MICROWAVE CORPORATION to be held on August 8, 2000 at 3:00 p.m.,
local time, at the Company's executive offices located at 170 Rose Orchard
Way, San Jose, California, and at any adjournment or adjournments thereof,
and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set
forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE NAME CHANGE
OF THE COMPANY, FOR THE INCREASE IN THE NUMBER OF AUTHORIZED SHARES, FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS OF DIGITAL MICROWAVE CORPORATION, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF OFFICERS
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY to vote for
(except as indicated) all nominees listed below
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.
CHARLES D. KISSNER
SAM SMOOKLER
RICHARD C. ALBERDING
PAUL S. BACHOW
JOHN W. COMBS
JAMES D. MEINDL
V. FRANK MENDICINO
HOWARD ORINGER
2. PROPOSAL TO CHANGE THE COMPANY'S NAME FROM "DIGITAL MICROWAVE
CORPORATION" TO "DMC STRATEX NETWORKS, INC.":
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE>
3. PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 95,000,000 TO 150,000,000:
___ FOR ___ AGAINST ___ ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF DIGITAL MICROWAVE CORPORATION FOR FISCAL
2001:
___ FOR ___ AGAINST ___ ABSTAIN
DATED: _____________________, 2000
____________________________________
Signature
____________________________________
Signature
This Proxy should be marked, dated and signed by the stockholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.
