<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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
M-WAVE, INC.
- -------------------------------------------------------------------------------
(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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
M-WAVE, INC.
216 Evergreen Street
Bensenville, Illinois 60106
To Our Stockholders:
You are invited to attend the Annual Meeting of Stockholders of M-Wave, Inc.
to be held at the Union League Club, 65 West Jackson, Chicago, Illinois, on
Wednesday, June 4, 1997 at 10:00 a.m. local time. We are pleased to enclose
the notice of our annual stockholders meeting, together with a Proxy Statement,
a Proxy and an envelope for returning the Proxy.
Please carefully review the Proxy Statement and then complete, date and sign
your Proxy and return it promptly. If you plan to attend the meeting, please
so indicate by marking the box on the Proxy. If you attend the meeting and
decide to vote in person, you may withdraw your Proxy at the meeting.
If you have any questions or need assistance in how to vote your shares,
please call Investor Relations at (630) 860-9542. Your time and attention to
this letter and the accompanying Proxy Statement and Proxy is appreciated.
Sincerely,
Joseph A. Turek
Chairman and Chief Executive Officer
May 5, 1997
<PAGE> 3
[M-Wave Logo]
M-WAVE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of M-Wave, Inc., a Delaware corporation
(the "Company"), will be held on Wednesday, June 4, 1997 at 10:00 a.m. local
time, at the Union League Club, 65 West Jackson, Chicago, Illinois, for the
following purposes:
1. To elect one Class II Director for a term expiring in 2000;
2. To consider and vote on the approval of the Company's Amended and Restated
1992 Stock Option Plan;
3. To ratify the appointment of Deloitte & Touche LLP as auditors of the
Company for the 1997 fiscal year; and
4. To transact such other business that is properly brought before the
meeting.
Only holders of Common Stock of record on the books of the Company at the
close of business on April 21, 1997 will be entitled to vote at the Annual
Meeting.
The Board of Directors' nominee for Director is set forth in the accompanying
Proxy Statement.
YOUR VOTE IS IMPORTANT. ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL
MEETING IN PERSON. HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, PLEASE MARK, DATE AND SIGN YOUR PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. If you plan to attend the Annual Meeting, please so
indicate by marking the box on the Proxy. Any stockholder attending the Annual
Meeting may vote in person even if the stockholder returned a Proxy.
By Order of the Board of Directors
Paul H. Schmitt
Secretary
Chicago, Illinois
May 5, 1997
THE ENCLOSED PROXY, WHICH IS BEING SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY,
CAN BE RETURNED IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 4
M-WAVE, INC.
216 Evergreen Street
Bensenville, Illinois 60106
PROXY STATEMENT
Proxies in the accompanying form are being solicited by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders on
Wednesday June 4, 1997, or at any adjournment thereof. The Annual Meeting will
be held at the Union League Club, 65 West Jackson, Chicago, Illinois, at 10:00
a.m. local time. The Proxy Statement and the form of Proxy are being mailed to
stockholders commencing on or about May 5, 1997.
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any stockholder who executes and returns a Proxy may revoke the same at any
time before it is exercised by filing with the Secretary of the Company written
notice of such revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in and of itself constitute revocation of a Proxy.
RECORD DATE
Stockholders of record at the close of business on April 21, 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 3,049,806 shares of Common Stock, $.01 par value of the
Company (the "Common Stock"), were issued and outstanding.
VOTING AND SOLICITATION
Holders of Common Stock of record as of the close of business on the Record
Date are entitled to one vote per share of Common Stock. The Company's
Certificate of Incorporation does not provide for cumulative voting rights.
A plurality of the votes cast at the Annual Meeting is required to elect
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present (either in person or by proxy) and entitled to vote at the
Annual Meeting is required to (i) approve the Company's Amended and Restated
1992 Stock Option Plan and (ii) ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for 1997. In accordance with Delaware
law and the Company's Certificate of Incorporation and Bylaws, (i) for the
election of directors, which requires a plurality of the votes cast, only
proxies and ballots indicating votes "FOR" or "WITHHELD" are counted to
determine the total number of votes cast, and broker non-votes are not counted,
and (ii) for the adoption of all other proposals, which are decided by a
majority of the shares of the stock of the Company present in person or by
proxy and entitled to vote, only proxies and ballots indicating votes "FOR",
"AGAINST", or "ABSTAIN" on the proposal or providing the designated proxies
with the right to vote in their judgment and discretion on the proposal are
counted to determine the number of shares present and entitled to vote, and
broker non-votes are not counted.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses
<PAGE> 5
in forwarding solicitation material to such beneficial owners. Proxies may
also be solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, personally or by telephone or
telecopier.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders which are intended to be presented by such
stockholders at the Company's next annual meeting of stockholders to be held in
1998 must be received by the Company no later than January 4, 1998 in order
that they may be included in the proxy statement and form of proxy relating to
that meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 28, 1997 by (i)
each person known to the Company to beneficially own 5% or more of the
Company's Common Stock, (ii) each of the Directors and executive officers of
the Company, and (iii) all executive officers and directors of the Company as a
group. The number of shares of Common Stock shown as owned below assumes the
exercise of all currently exercisable options held by the applicable person or
group, and the percentage shown assumes the exercise of such options and
assumes that no options held by others are exercised. Unless otherwise
indicated below, the persons named below have sole voting and investment power
with respect to the number of shares set forth opposite their respective names.
For purposes of the following table, each person's "beneficial ownership" of
the Company's Common Stock has been determined in accordance with the rules of
the Securities and Exchange Commission ("SEC").
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
Beneficially Beneficially
Name of Beneficial Holder Owned Owned
------------------------- ------------ ------------
<S> <C> <C>
Joseph A. Turek(1) . . . . . . . . . . . . 797,000 25.7
First Chicago Entities(2) . . . . . . . . . 875,000 28.7
Heartland Advisors, Inc.(3) . . . . . . . . 395,400 13.0
Eric C. Larson(4) . . . . . . . . . . . . . 87,500 2.9
Timothy A. Dugan(4) . . . . . . . . . . . . 87,500 2.9
Michael Bayles . . . . . . . . . . . . . . 18,181 *
Paul Schmitt(5) . . . . . . . . . . . . . . 25,000 *
Lavern D. Kramer(6) . . . . . . . . . . . . 11,500 *
All Directors and executive officers as
a group (7 persons)(7) . . . . . . . . 939,181 30.0
</TABLE>
- ---------------------
* Less than 1%.
-2-
<PAGE> 6
(1) Includes 50,000 shares of Common Stock which may be acquired upon the
exercise of immediately exercisable options.
(2) Based on a Schedule 13D and Schedule 13G filed with the SEC, the shares
listed as owned by the "First Chicago Entities" are held of record and
beneficially by the following entities in the following amounts: First
Chicago Equity Corporation ("First Chicago") (787,500 shares); and Cross
Creek Partners II ("Cross Creek") (87,500 shares). First Chicago has the
sole power to vote 787,500 shares of Common Stock and to dispose of 694,464
shares of Common Stock. First Chicago is a wholly-owned subsidiary of
First Chicago NBD Corporation. Messrs. Larson and Dugan are general
partners of Cross Creek.
(3) Based on a Schedule 13G filed with the SEC with respect to 395,400 shares
of Common Stock which Heartland Advisors, Inc., in its capacity as
investment advisor, may be deemed to beneficially own.
(4) Messrs. Larson and Dugan do not own any shares individually; however, by
reason of their positions as general partners of Cross Creek, each may be
deemed to beneficially own all of the shares owned by Cross Creek, with
shared voting and investment power over those shares. Each of Messrs.
Larson and Dugan disclaims beneficial ownership of all such shares.
(5) Includes 25,000 shares of Common Stock which may be acquired upon the
exercise of immediately exercisable options.
(6) Includes 10,000 shares of Common Stock which may be acquired upon the
exercise of immediately exercisable options.
(7) Includes 85,000 shares which may be acquired by directors and executive
officers of the Company upon the exercise of immediately exercisable
options. See footnotes 1, 4, 5, 6, and 7.
The addresses of the persons shown in the table above who are beneficial owners
of more than 5% of the Company's Common Stock are: Mr. Turek, c/o M-Wave, Inc.,
216 Evergreen Street, Bensenville, Illinois 60106; First Capital and Cross
Creek, c/o First Chicago NBD Corporation, Three First National Plaza, Chicago,
Illinois 60670-0610; and Heartland Advisors, Inc., 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
The First Chicago Entities and Joseph A. Turek are parties to a
Shareholders Agreement dated July 21, 1993 (the "Shareholders Agreement").
Pursuant to the Shareholders Agreement, Mr. Turek has agreed to vote his shares
of Common Stock in favor of the election to the Company's Board of Directors of
the greater of two, or one third of the total number of Directors of the
Company, designated by the First Chicago Entities. The First Chicago Entities
have also agreed to vote all of the shares of Common Stock they purchased from
Mr. Joel Dryer, former Chairman of the Company, in favor of the election of Mr.
Turek to the Board of Directors of the Company. Messrs. Eric C. Larson and
Timothy A. Dugan are directors of the Company who have been designated by the
First Chicago Entities pursuant to the Shareholders Agreement.
In addition, subject to certain exceptions, Mr. Turek has agreed in
the Shareholders Agreement not to sell or otherwise transfer, in the aggregate,
in excess of that number of shares of Common Stock which is achieved by
multiplying 100,000 by the sum of one plus the number of full years elapsed
since July 21, 1993 (except for sales made in connection with a registered
offering in which the First Chicago
-3-
<PAGE> 7
Entities also participate), unless the First Chicago Entities have previously
disposed of in excess of such amount, in which case Mr. Turek is entitled to
dispose of that number of shares of Common Stock as shall have been previously
been sold by the First Chicago Entities less that number of shares of Common
Stock previously sold by Mr. Turek in accordance with the Shareholders
Agreement. Pursuant to the Shareholders Agreement, Mr. Turek has the right to
participate in any registered sale of Common Stock effected by the First
Chicago Entities in accordance with the Registration Rights Agreement (as
defined below) or in any other sale effected by the First Chicago Entities,
subject to certain limitations. Each of Mr. Turek and the First Chicago
Entities are granted rights of first refusal under the Shareholders Agreement
with respect to shares of Common Stock proposed to be sold by the other. The
Shareholders Agreement terminates at such time as the First Chicago Entities
shall hold less than 25% of the Common Stock originally acquired by them from
Mr. Dryer on July 21, 1993.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than 10% of the Company's outstanding Common Stock, to file reports of
ownership and changes in ownership of such securities with the SEC. Officers,
directors and greater-than-10% beneficial owners are required to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon a
review of the copies of the forms furnished to the Company, and/or written
representations from certain reporting persons that no other reports were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and 10% during or with respect to the
year ended December 31, 1996 were met.
1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each of whose
members serve for a staggered three-year term. The Board is comprised of two
Class I Directors (Eric C. Larson and Timothy A. Dugan), one Class II Director
(Joseph A. Turek) and one Class III Director (Lavern D. Kramer). The current
term of the Class II Director ends upon the election of directors at this
Annual Meeting. The terms of the Class III Director and the Class I Directors
end upon the election of directors at the annual meeting of stockholders in
1998 and 1999, respectively.
The Board of Directors has nominated Mr. Joseph A. Turek to stand for
reelection as a Class II Director for a three-year term ending upon the
election of directors at the 2000 annual meeting of stockholders.
At the Annual Meeting, the shares of Common Stock represented by
Proxies in the form accompanying this Proxy Statement, unless otherwise
specified, will be voted to reelect Mr. Turek as a Class II Director. Mr.
Turek has agreed to serve if elected. However, if Mr. Turek becomes unable or
unwilling to serve if elected, the Proxies will be voted for the election of
the person, if any, recommended by the Board of Directors or, in the
alternative, for holding a vacancy to be filled by the Board of Directors. The
Board of Directors has no reason to believe that Mr. Turek will be unable or
unwilling to serve.
-4-
<PAGE> 8
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH STOCKHOLDER VOTE "FOR" ITS
NOMINEE.
NOMINEE FOR ELECTION AT THE ANNUAL MEETING
JOSEPH A. TUREK is the founder of the Company and has served as
Chairman of the Board and Chief Executive Officer since June 1993 and as a
director of the Company since 1988. Mr. Turek served as President of the
Company from 1988 to February 1997. Mr. Turek served for more than five years
in various positions at West-Tronics, Inc., a manufacturer of low frequency
circuit boards and a contract assembler of electronic products, with his last
position as President in 1987 and 1988. West-Tronics entered into an
assignment for the benefit of creditors in December 1988 pursuant to which the
Company purchased the assets and assumed certain liabilities of West-Tronics,
Inc. He received a B.S.E.E. degree from the University of Notre Dame and a
M.B.A. degree from Northwestern University.
DIRECTORS CONTINUING IN OFFICE UNTIL 1998 ANNUAL MEETING
LAVERN D. KRAMER has been a director of the Company since April 1992.
Mr. Kramer has been the President of Kester Solder, a division of Litton
Industries, since 1970. He is a member of the Board of Directors and Executive
Committee of the Lead Industries Association. Mr. Kramer received a B.S.C.
degree from International College.
DIRECTORS CONTINUING IN OFFICE UNTIL 1999 ANNUAL MEETING
ERIC C. LARSON has been a director of the Company since November 1993.
Mr. Larson has been employed by The First National Bank of Chicago and its
affiliates in various capacities since May 1984. Since January 1991, he has
served as a Managing Director in First Chicago Equity Capital. Prior thereto
Mr. Larson served as an Investment Manager with First Chicago Venture Capital.
Mr. Larson is also a General Partner of Cross Creek Partners, an investment
partnership comprised of the managers of First Chicago Equity Capital. He is a
director of Daka International, Inc. Mr. Larson received a B.A. degree from
Harvard College, an M.A. degree from the University of Michigan and an M.B.A.
degree from the University of Chicago.
TIMOTHY A. DUGAN has been a director of the Company since November
1993. Mr. Dugan has been employed by The First National Bank of Chicago in
various capacities since July 1987. Since July 1990, he has served as Vice
President of First Chicago Equity Capital. Mr. Dugan is also a General Partner
of Cross Creek Partners, an investment partnership comprised of the managers of
First Chicago Equity Capital. He is a member of the Board of Directors of Daka
International, Inc., Dealers Monitoring Alliance Corporation, Inc. and Pacer
Propane, Inc. Mr. Dugan received B.S.E.E. and B.A. degrees from Stanford
University and an M.B.A. degree from the University of Chicago.
2. APPROVAL OF THE AMENDED AND RESTATED M-WAVE, INC. 1992 STOCK OPTION
PLAN
The Company's 1992 Stock Option Plan was adopted by the Board of
Directors of the Company and approved by the Company's stockholders in February
1992. The Board of Directors subsequently adopted an amendment and restatement
of the Company's 1992 Stock Option Plan (as so amended and restated, the
"Existing Plan") in April 1995, and the Existing Plan was approved by the
Company's
-5-
<PAGE> 9
stockholders in June 1995. The Board of Directors has unanimously approved an
amendment and restatement to the Existing Plan (as so amended and restated, the
"Restated Plan"), subject to stockholder approval. The principal changes that
would result from the Restated Plan are: (i) an increase in the aggregate
number of shares of Common Stock of the Company available for the exercise of
options granted under the Plan from 500,000 to 750,000; and (ii) an increase in
the limit on the number of shares as to which options may be granted to any
grantee in any calendar year from 75,000 to 215,000.
The summary of the Restated Plan that appears below is qualified in
its entirety by reference to the full text of the Restated Plan, the text of
which is set forth in its entirety in Exhibit A.
PURPOSE OF THE RESTATED PLAN
The primary purpose of the Restated Plan is to encourage key employees
and directors of the Company and its subsidiaries to acquire and maintain stock
ownership, thereby strengthening their commitment to the success of the Company
and its subsidiaries and their desire to remain employed by, or a director of,
the Company and its subsidiaries. The Restated Plan is also intended to
attract, employ and retain key employees and directors and to provide such
directors and employees with additional incentive and reward opportunities
designed to encourage them to enhance the profitable growth of the Company and
its subsidiaries.
SHARES AVAILABLE UNDER THE RESTATED PLAN
Under the Existing Plan, there are currently 500,000 shares of Common
Stock reserved for issuance on account of the exercise of non-qualified stock
options. Under the Restated Plan, the number of shares available for issuance
is increased to 750,000. If and to the extent an option expires or terminates
for any reason without having been exercised in full, the shares of the
Company's Common Stock associated with such option will become available for
other options under the Restated Plan. The Restated Plan provides that the
stock option committee of the Company's Board of Directors (the "Committee")
may make equitable adjustments to the aggregate number of shares of the
Company's Common Stock available pursuant to the Restated Plan, the limit on
the number of shares as to which options may be granted to any grantee in any
calendar year, the number of shares covered by an option and the exercise price
of options to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization, or similar event, of or by the Company.
The Existing Plan currently provides that a maximum of 75,000 shares
of Common Stock may be subjected to options granted to any particular
individual in any calendar year. Under the Restated Plan, the maximum number
of shares as to which options may be granted to any particular individual in
any calendar year is increased to 215,000.
INTERESTED PARTIES
All of the Company's directors and executive officers have a potential
interest in the proposed Restated Plan in that they are eligible to receive
options under the Restated Plan. Effective February 3, 1997, in connection
with the approval of a new employment agreement with Mr. Michael Bayles, the
Company's President and Chief Operating Officer, by the Board of Directors (see
"Executive Officers' Compensation--Employment Agreements" below) , the
Compensation Committee of the Board granted to Mr. Bayles an option to purchase
210,000 shares of Common Stock (representing approximately 8% of the
then-outstanding shares of Common Stock), subject to the approval of the
proposed Restated Plan
-6-
<PAGE> 10
by the Company's stockholders. As described in the table below, the option
becomes exercisable in three annual installments commencing on February 3, 1998
at the exercise prices set forth below. As of April 29, 1997, the closing price
of the Common Stock on the NASDAQ National Market was $2-5/8.
# of Shares Date Exercise
Subject First Price
to Option Exercisable Per Share
--------- ----------- ---------
20,000 2/3/98 $ 2.75
28,000 2/3/98 $ 7.50
36,000 2/3/98 $10.00
17,500 2/3/99 $ 2.75
24,500 2/3/99 $ 7.50
31,500 2/3/99 $10.00
12,500 2/3/00 $ 2.75
17,500 2/3/00 $ 7.50
22,500 2/3/00 $10.00
The option expires on February 3, 2007.
The table below sets forth, in the format required by the rules of the
SEC, all specific grants that the Company has made, subject to stockholder
approval of the proposed Restated Plan, or presently proposes to make if the
Restated Plan is approved by stockholders. Additional grants may be made from
time to time in the future.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
Number
Name and Position Dollar Value ($) of Units
--------------------- ---------------- --------
<S> <C> <C>
Joseph A. Turek
(Chairman and CEO) . . . . . . . . . . . . . -0- -0-
Michael Bayles
(President and Chief Operating Officer) . . . Indeterminate* 210,000
All current executive officers as a group . . Indeterminate* 210,000
All current directors who are not executive
officers as a group . . . . . . . . . . . -0- -0-
</TABLE>
-7-
<PAGE> 11
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
<S> <C> <C>
All employees, including all current
officers who are not executive officers,
as a group . . . . . . . . . . . . . . . -0- -0-
- ------------------------------------
</TABLE>
* Dollar value will be realized only to the extent that the market value
of the Common Stock on the date the option is exercised exceeds the
exercise price of the option.
GRANTS
Under the Existing Plan, as of February 3, 1997, authority existed to
grant options with respect to an additional 181,250 shares of Common Stock
(subject to adjustment as discussed above). Effective on February 3, 1997, the
Board of Directors granted to Mr. Bayles an option to purchase 210,000 shares
of Common Stock, subject to stockholder approval of the Restated Plan. No
other option grants have been made since February 3, 1997. Therefore, after
giving effect to the increase in the number of shares of Common Stock available
for exercise of options granted under the Restated Plan from 500,000 to
750,000, the Committee would have authority to grant options with respect to an
additional 221,250 shares of Common Stock (subject to adjustment as discussed
above).
ADMINISTRATION OF THE RESTATED PLAN
The Committee, which consists of at least two members of the Board of
Directors of the Company, administers and interprets the Restated Plan.
Subject to the terms of the Restated Plan, the Committee has the
authority: (i) to grant options; (ii) to determine when options may be granted,
the option price and the individuals to whom options shall be granted; (iii) to
interpret the Restated Plan and to make all determinations necessary or
advisable for the administration of the Restated Plan; (iv) to prescribe,
amend, and rescind rules relating to, and consistent with, the Restated Plan;
(v) to determine the terms and provisions of the written agreements by which
all options shall be granted and, with the consent of the grantee, to modify
any such option agreement at any time; (vi) to accelerate the exercisability
of, and to accelerate or waive any or all of the restrictions and conditions
applicable to, any option; (vii) to make adjustments or modifications to
options to grantees employed outside the United States; and (viii) to impose
such additional conditions, restrictions, and limitations upon the grant,
exercise or retention of options as the Committee may deem appropriate.
ELIGIBLE PARTICIPANTS IN THE RESTATED PLAN
Options may be granted to any employee or director of the Company or
any of its subsidiaries. To date, a total of 44 employees and 3 directors have
been granted options under the Existing Plan.
-8-
<PAGE> 12
TERMS OF OPTIONS
The exercise price of each non-qualified stock option granted under
the Restated Plan must at least equal 80% of the fair market value of the
underlying shares of Common Stock on the date of grant, and the maximum term of
such an option may not exceed 10 years.
No option granted under the Restated Plan is transferable by the
holder other than by will or the laws of descent and distribution, and each
option is exercisable during the lifetime of the holder only by such holder.
The Restated Plan provides that any option granted under the Restated Plan
terminates (i) on the date of grantee's termination of employment with the
Company or any subsidiary for Cause (as defined) or (ii) 30 days after a
grantee's termination of employment with the Company or any subsidiary other
than by reason of Cause; provided that the Committee has discretion to extend
the exercisability of options after a grantee's termination of employment
(other than by reason of Cause) beyond 30 days to any longer period up to the
full remaining term of the option.
The exercise price of any option granted under the Restated Plan may
be paid in cash or with shares of Common Stock valued at their fair market
value on the date they are tendered. The Restated Plan terminates on February
28, 2002, unless earlier terminated by the Board of Directors. The Restated
Plan permits the Committee to grant substitute options for any canceled options
granted under the Restated Plan. If the Committee cancels any option, and a
new option is substituted therefor, then the Committee may, in its discretion,
determine the terms and conditions of such new option subject to the express
provisions of the Restated Plan relating to new option grants.
The Restated Plan provides that each option granted is exercisable in
one or more installments commencing not less then six months after the grant
date unless otherwise determined by the Committee and that the Committee, in
its sole discretion, has the authority to accelerate the exercisability of
outstanding options. The Restated Plan also provides for the automatic
acceleration of the exercisability of all outstanding options (regardless of
when granted) in the event of a Change of Control of the Company. For this
purpose, a "Change of Control" would include certain acquisitions or holdings
of beneficial ownership of 40% or more of the outstanding Common Stock; certain
changes in the composition of a majority of the Board of Directors; and
stockholder approval of certain extraordinary corporate transactions, including
mergers involving the Company which result in less than 60% of the surviving
entity being owned by the stockholders of the Company.
MODIFICATIONS OF THE RESTATED PLAN
The Board of Directors of the Company is authorized to amend or modify
the Restated Plan without the approval of the stockholders of the Company,
except as such stockholder approval may be required under the listing
requirements of any national securities exchange or national market system on
which any of the Company's equity securities are listed.
FEDERAL INCOME TAX IMPLICATIONS OF THE RESTATED PLAN
The following discussion summarizes certain federal income tax
consequences of participation in the Restated Plan based on the law in effect
on April 28, 1997. This summary of certain federal income tax consequences of
participation in the Restated Plan does not cover federal employment tax or
other
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<PAGE> 13
federal tax consequences that may be associated with the Restated Plan, nor
does it cover state, local or non-U.S. taxes.
Stock Options. All of the options granted under the Restated Plan are
non-qualified stock options for Federal income tax purposes. Accordingly, an
optionee will not realize income upon the grant of such an option; however, in
any year in which an optionee exercises a part or all of such option, the
excess, if any, of the fair market value of the shares at the date of exercise
over the option price will be taxed as compensation at ordinary income tax
rates, and the Company will be entitled to a tax deduction for a like amount in
the same year.
Withholding. The Company is required to withhold income taxes with
respect to income received upon the exercise of a non-qualified stock option.
With the approval of the Committee and subject to conditions specified in the
Restated Plan, the grantee can elect to have the Company retain, upon option
exercise, shares sufficient to satisfy such grantee's tax obligations with
respect to the option exercise.
The Company's Federal income tax deduction as discussed above is
subject to the limitations of Section 162(m) of the Internal Revenue Code. In
general, Internal Revenue Code Section 162(m), subject to certain exceptions,
denies the Company a deduction for compensation payable to its Chief Executive
Officer and its other four highest-paid executive officers named in the
Company's proxy statement, if any, to the extent that such compensation
(including taxable "spread" realized upon the exercise of non-qualified stock
options) exceeds $1 million in any taxable year. For this purposes "spread"
means the excess of the market value of the Common Stock on the date the option
is exercised over the exercise price of the option. Option spread generally
does not count as compensation for the purpose of determining whether an
executive officer has received compensation in excess of $1 million in a year
if (i) the option plan has been approved by holders of a majority of the shares
voted with respect thereto, (ii) the plan limits the number of shares as to
which options may be granted in a specific period to any individual; and (iii)
the amount of compensation an individual could receive from the option is based
solely on an increase in the value of stock after the date the options are
granted. Although the Compensation Committee has no present intention to do
so, the Restated Plan permits the grant of an option with an exercise price
less than 100% of the market value of the Common Stock on the date of grant.
The spread on such an option would count as compensation for purposes of the $1
million limit. Moreover, a portion of spread in connection with the exercise
of an option the exercisability of which has been accelerated in connection
with a change of control may not be deductible by the Company and may result in
the optionee becoming subject to a 20% excise tax on a portion of the spread.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RESTATED PLAN
The Board of Directors believes that the adoption of the Restated Plan
will promote the interests of the Company and its stockholders and help the
Company to attract, motivate and retain employees. Accordingly, the Board of
Directors has approved the Restated Plan and recommends that stockholders vote
"FOR" the Restated Plan. Proxies solicited by the Board of Directors will be
so voted unless stockholders specify otherwise.
Mr. Joseph A. Turek and the First Chicago Entities, which beneficially
own in the aggregate approximately 54% of the Company's outstanding Common
Stock, have agreed with Mr. Michael Bayles, the Company's President and Chief
Operating Officer, to vote in favor of the approval of the Restated Plan. See
"Executive Officers' Compensation-Employment Agreements."
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<PAGE> 14
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven meetings during 1996.
The Board of Directors also has an Audit Committee and a Compensation
Committee. The Audit Committee held two meetings and the Compensation
Committee held one meeting during 1996. The Committees received their
authority and assignments from the Board of Directors and report to the Board
of Directors. Other than Mr. Irwin Katz, no Director attended fewer than 75%
of the aggregate number of meetings of the Board of Directors and the
Committees on which he served during the period for which he was a member of
the Board.
Messrs. Kramer and Larson are members of the Audit Committee.
The Audit Committee recommends the engagement of the Company's independent
auditors and is primarily responsible for approving the services performed by
the Company's independent auditors. The Committee also reviews and evaluates
the Company's accounting principles and its system of internal accounting
controls.
Messrs. Dugan and Kramer are the members of the Compensation
Committee. The Compensation Committee reviews and approves the Company's
executive compensation policy, makes recommendations concerning the Company's
employee benefit policies, and has authority to administer the Plan.
COMPENSATION OF DIRECTORS
The Company does not pay any direct compensation to Directors. Mr.
Kramer, who is a non-employee director of the Company, received stock options
in April 1992 for 10,000 shares of Common Stock under the Plan.
EXECUTIVE OFFICERS' COMPENSATION
The following table shows the compensation paid by the Company to the
Company's Chief Executive Officer during 1996. No other executive officer of
the Company had a total annual salary and bonus for 1996 which exceeded
$100,000.
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<PAGE> 15
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
--------------------------------------------- ---------------- ---------
Restricted Securities
Name and Other Annual Stock Underlying LTIP
Principal Salary Bonus Compensation Award(s) Options/ Payouts
Position Year ($) ($) ($)(1) ($) SARs (#) ($)
--------- ---- ------- ----- ----- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Turek 1996 $120,000 none none none none none
(Chairman and CEO) 1995 $120,000 none none none 75,000 none
1994 $ 46,000(2) none none none none none
</TABLE>
- ---------------------------
(1) Other annual compensation did not exceed the lesser of $50,000 or 10%
of the total salary and bonus.
(2) Mr. Turek received prepaid compensation during 1992 in the amount of
$44,000 for services performed in 1994.
On February 3, 1997, the Company entered into an employment agreement
(the "Bayles Employment Agreement") with Mr. Michael Bayles that provides for
Mr. Bayles to serve as President and Chief Operating Officer of the Company.
For a description of the Bayles Employment Agreement, see "Employment
Agreements" below.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement (the "Turek Employment
Agreement") with Mr. Turek that provides for Mr. Turek to serve as Chairman of
the Board and Chief Executive Officer of the Company through December 31, 1997
(the "Term"). Under the Turek Employment Agreement, Mr. Turek is entitled to:
a base annual salary in 1995 of $120,000, subject to adjustment in each of 1996
and 1997 for inflation; an annual bonus of up to 100% of his base salary based
on the Company's performance relative to annual goals to be established by the
Compensation Committee; and participation in any employee plans or other
perquisites which are available to other executives of the Company.
The Turek Employment Agreement also provides that upon Mr. Turek's
termination of employment for any reason other than by the Company for cause or
a voluntary termination by Mr. Turek, he will be entitled to receive: (i) his
base salary throughout the remainder of the Term or one year, whichever is
greater; and (ii) medical coverage for himself and his dependents during his
lifetime comparable to the coverage offered from time to time to senior
executives of the Company, with the cost of such coverage to be paid by the
Company throughout the remainder of the Term and one year thereafter. Mr.
Turek and his dependents are also entitled to medical coverage as described in
clause (ii) of the preceding sentence if Mr. Turek's employment is not
terminated during the Term. The Company has also agreed that upon expiration
of the Term or upon termination of employment for any reason other than by the
Company for cause or a voluntary termination by Mr. Turek, it will transfer to
Mr. Turek the ownership and beneficiary of the $1,000,000 whole life insurance
policy covering Mr. Turek, which is currently owned by the Company with the
Company as beneficiary.
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<PAGE> 16
The Bayles Employment Agreement provides for Mr. Bayles to serve as
President and Chief Operating Officer of the Company. Under the Bayles
Employment Agreement, Mr. Bayles is entitled to an annual base salary of
$190,000 and, if he remains employed by the Company until February 3, 1998, a
signing bonus on such date equal to $47,500. Mr. Bayles is also entitled to an
annual bonus of up to 50% of his base salary (25% for 1997) based on the
Company's performance relative to annual financial targets. In addition, Mr.
Bayles is entitled to participate in the benefit programs currently available
to senior management employees of the Company.
The Bayles Employment Agreement continues until the first to occur of
his death, disability or termination of employment for any reason. If Mr.
Bayles is terminated by the Company without Cause (as defined therein), then
Mr. Bayles is entitled to receive his base salary and health insurance premiums
for six months or, if earlier, the date on which he obtains alternative
employment.
In connection with the Bayles Employment Agreement, Mr. Bayles
received an option to purchase 210,000 shares of Common Stock, subject to the
approval of the Restated Plan by the Company's stockholders. See "2. Approval
of the Amended and Restated M-Wave, Inc. 1992 Stock Option Plan--Interested
Parties." Mr. Bayles also purchased 18,181 shares of Common Stock from the
Company at $2.75 per share, the fair market value of the Common Stock on the
purchase date. The Bayles Employment Agreement provides that if Mr. Bayles is
terminated for Cause or for Underperformance (as defined therein), the Company
will be entitled to repurchase any Common Stock owned by Mr. Bayles on the date
of termination which he received as a result of his exercise of stock options
at the price he paid for such Common Stock, and any unexercised options will be
cancelled. The Bayles Employment Agreement also provides for certain
participation rights and obligations of Mr. Bayles relating to any future
transactions in which either or both of Mr. Turek or the First Chicago Entities
sells all or substantially all of his or their Common Stock.
BONUS PLAN
Although there is no formal written plan, it is the Company's practice
to grant discretionary cash bonuses to the Team Leaders other than the Chief
Executive Officer on an annual basis. The Compensation Committee has the
discretion to award performance bonuses. No bonuses were awarded to the
Company's employees in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during 1996 was comprised of non-employee
Directors of the Company, Messers. Dugan and Kramer. For a description of
transactions between the Company and entities affiliated with such members, see
"Certain Relationships and Related Transactions."
No executive officer of the Company served on the Compensation
Committee of another entity or on any other Committee of the Board of Directors
of another entity performing similar functions during 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
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<PAGE> 17
Executive Compensation Policies.
The Compensation Committee bases its review and recommendations
regarding the Company's executive compensation with the goal of attaining the
following objectives: (1) to attract, motivate and retain the highest quality
executives, (2) to align both the short-term and the long-term interest of
executives with those of the Company's stockholders, and (3) to encourage
executives to achieve their assigned tactical and strategic business objectives
as well as overall corporate financial results. During 1996, the executive
compensation program was generally comprised of base salary and, with respect
to executives other than the Chief Executive Officer, variable bonus awards
based on current corporate and individual performance.
As described above under "Employment Agreements", the Company has an
employment agreement with Mr. Turek for the Term (January 1, 1995 through
December 31, 1997). Under the Turek Employment Agreement, Mr. Turek's
compensation during the Term consists of a base salary and a variable annual
bonus. In addition, Mr. Turek was granted an option in April 1995 to purchase
75,000 shares of Common Stock in connection with the approval of the Employment
Agreement by the Board of Directors. The Committee believes that this
compensation arrangement best serves the interests of stockholders by ensuring
that Mr. Turek is compensated in a manner which provides incentives based upon
both the short-term and long-term performance of the Company. The compensation
for Mr. Turek during the Term will involve a significant proportion of pay
which is at risk: the variable annual bonus and stock options (which directly
relate a portion of Mr. Turek's long-term remuneration to stock price
appreciation realized by the Company's stockholders).
The discussion below regarding Mr. Turek pertains to his compensation
during 1996.
Base Salary.
Mr. Turek's base salary of $120,000 as Chief Executive Officer for
1996 was based on his prior employment agreement with the Company. The salary
of the other executive officer of the Company during 1996, Mr. Schmitt, the
Company's Chief Financial Officer, was based upon subjective factors such as
the level of experience and competence and complexity of the duties performed
by such executive officer.
Bonus.
The Compensation Committee also reviews and approves bonus
compensation for Team Leaders, other than the Chief Executive Officer, on an
annual basis as described above. During 1996, no bonuses were paid to any
executive officers or Team Leaders due to the Company's financial performance.
Stock Options.
The Company's long-term incentives are in the form of stock option
awards. The objective of these awards is to advance the longer-term interests
of the Company and its stockholders and complement incentives tied to annual
performance. These awards provide rewards to executives upon the creation of
incremental stockholder value and the attainment of
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<PAGE> 18
long term earnings goals. Stock options only produce value to executives if
the price of the Company's stock appreciates, thereby directly linking the
interest of executives with those of stockholders. During 1996, no options
were granted to any executive officers due to the Company's financial
performance.
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 public companies for compensation over
$1 million paid to the corporation's Chief Executive Officer or four other
most-highly compensated executive officers named in the proxy statement. The
Compensation Committee has reviewed the possible effect on the Company of
Section 162(m), and it does not believe that such section will be applicable to
the Company in the foreseeable future, but will review compensation practices
as circumstances warrant. To this effect, the Plan makes it possible for the
Company to satisfy the conditions for an exemption from Section 162(m)'s
deduction limit. However, other characteristics of a grant effect whether or
not compensation received from a stock option is counted in determining whether
an executive officer has received compensation in excess of $1 million.
COMPENSATION COMMITTEE
Timothy A. Dugan
Lavern D. Kramer
PERFORMANCE INFORMATION
The following graph compares the performance of the Company with the
performance of the NASDAQ Composite Index and the average performance of a
group consisting of the Company's peer corporations which are industry
competitors for the period from April 1, 1992, the day when the Company's
Common Stock began publicly trading on the NASDAQ National Market, to December
31, 1996. The corporations making up the peer companies group are Advance
Circuits Inc., Electronic Fab Technology Corp., Merix Corp., Norris
Communications Corp., Talomar Med Technologies Inc. and Parlex Corp. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at April 1, 1992 and that all dividends, if any, were
reinvested.
<TABLE>
[GRAPH]
01-Apr-92 30-Jun-92 31-Dec-92 30-Jun-93 31-Dec-93 30-Jun-94 31-Dec-94 30-Jun-95 31-Dec-95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
M-Wave Inc. 100 73 129 193 179 215 252 96
Peer Group 100 67 50 37 35 46 53 52 56
Nasdaq Composite
Index 100 93 113 138 130 119 127 158 180
<CAPTION>
30-Jun-96 31-Dec-96
<S> <C> <C>
M-Wave Inc. 65 36
Peer Group 74 41
Nasdaq Composite
Index 203 228
</TABLE>
CERTAIN TRANSACTIONS
The Company and the First Chicago Entities are parties to a
Registration Rights Agreement dated July 21, 1993 (the "Registration Rights
Agreement"). Pursuant to the
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<PAGE> 19
Registration Rights Agreement, the Company granted to the First Chicago
Entities certain registration rights with respect to the shares of Common Stock
acquired by the First Chicago Entities in July, 1993. The Registration Rights
Agreement provides the First Chicago Entities with the right to require the
Company, subject to certain limitations, to effect two registrations (or three
in the event of a proration in connection with the second registration) of such
shares under applicable securities laws upon demand by the First Chicago
Entities; provided that the First Chicago Entities are only entitled to one
such registration prior to July 21, 1996. The First Chicago Entities are also
entitled to request that such shares be included in any registration of shares
of Common Stock initiated by the Company. In connection with the Registration
Rights Agreement, the Company and the First Chicago Entities have agreed to
indemnify each other against certain liabilities under the Securities Act of
1933 or other applicable securities laws.
3. INDEPENDENT AUDITORS
The Board of Directors recommends that stockholders ratify the
appointment of Deloitte & Touche LLP by voting "FOR" ratification of Deloitte &
Touche LLP as the Company's auditors for 1997. In the event such selection is
not ratified, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
since 1989. Representatives of Deloitte & Touche LLP are expected to be
present at the meeting with the opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate questions.
4. OTHER MATTERS
The Board of Directors of the Company is not aware that any matter
other than those listed in the Notice of Meeting is to be presented for action
at the Annual Meeting. If any of the Board's nominees is unavailable for
election as a Director or any other matter should properly come before the
meeting, it is intended that votes will be cast pursuant to the Proxy in
respect thereto in accordance with the best judgment of the person or persons
acting as proxies.
May 5, 1997
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<PAGE> 20
EXHIBIT A
AMENDED AND RESTATED
M-WAVE, INC.
1992 STOCK OPTION PLAN
The Plan. The M-Wave, Inc. 1992 Stock Option Plan, as established by
M-Wave, Inc., a Delaware corporation (the "Company"), effective February 28,
1992, and as previously amended and restated effective as of April 24, 1995, is
hereby further amended and restated as set forth herein effective
February 3, 1997 (as so amended and restated, the "Plan"), subject to the
approval of the holders of a majority of the shares of Stock (as defined below)
present or represented and entitled to vote at the Company's 1997 annual
meeting of stockholders. Notwithstanding any other provision of this Plan, no
option granted subject to the approval of this amendment and restatement may be
exercised before such stockholder approval is obtained and, if such approval is
not obtained, all such outstanding options shall become void and no further
grants shall be made pursuant to this Plan.
1. Purpose. The primary purpose of the Plan is to encourage key
employees and directors of the Company and its Subsidiaries (as defined below)
to acquire and maintain stock ownership, thereby strengthening their commitment
to the success of the Company and its Subsidiaries and their desire to remain
employed by, or a director of, the Company and its Subsidiaries. The Plan also
is intended to attract, employ and retain key employees and directors and to
provide such directors and employees with additional incentive and reward
opportunities designed to encourage them to enhance the profitable growth of
the Company and its Subsidiaries.
2. Definitions.
As used in the Plan, the terms set forth below shall have the
following meanings (such meanings to be equally applicable in both the singular
and plural forms):
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) the commission by the Grantee of any felony or
other crime involving dishonesty, fraud or moral turpitude, or (ii) the
Grantee's gross negligence in the performance of his or her duties or (iii) the
willful engagement by the Grantee in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise.
(c) "Change of Control" means any one or more of the following:
(i) the acquisition or holding by any person, entity or "group"
within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act
(other than by the Company, any Subsidiary, any employee benefit plan
of the Company or a Subsidiary, Mr. Joseph A. Turek, First Capital
Corporation of Chicago or its affiliates, or Cross Creek Partners II
or its affiliates) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of 40% or more of either the
then-outstanding Stock or the
<PAGE> 21
combined voting power of the Company's then-outstanding voting
securities entitled to vote generally in the election of directors
("Voting Power"); except that no such person, entity or group shall be
deemed to own beneficially any securities held by the Company or a
Subsidiary or any employee benefit plan (or any related trust) of the
Company or a Subsidiary; provided, however, that no Change of Control
shall be deemed to have occurred solely by reason of any such
acquisition by a corporation with respect to which, after such
acquisition, more than 60% of both the then-outstanding common shares
and the Voting Power of such corporation are then-beneficially owned,
directly or indirectly, by the persons who were the beneficial owners
of the Stock and voting securities of the Company immediately before
such acquisition in substantially the same proportions as their
respective ownership, immediately before such acquisition, of the
then-outstanding Stock or the Voting Power of the Company, as the case
may be; or
(ii) individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided that any individual who
becomes a director after the Effective Date whose election or
nomination for election by the Company's stockholders was approved by
at least a majority of the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of the directors of the Company (as such terms are used
in Rule 14a-11 under the 1934 Act)) shall be deemed to be members of
the Incumbent Board; or
(iii) approval by the stockholders of the Company of (A) a
merger, reorganization or consolidation with respect to which persons
who were the respective beneficial owners of the Stock and Voting
Power of the Company immediately before such merger, reorganization or
consolidation do not, immediately thereafter, beneficially own,
directly or indirectly, more than 60% of, respectively, the then-
outstanding common shares and the Voting Power of the corporation
resulting from such merger, reorganization or consolidation, (B) a
liquidation or dissolution of the Company or (C) the sale or other
disposition of all or substantially all of the assets of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
(d) "Committee" means the committee of the Board appointed pursuant
to Section 4.
(e) "Company" -- see the introductory paragraph.
(f) "Disability" means a mental or physical condition which, in the
opinion of the Committee, renders a Grantee unable or incompetent to carry out
the job responsibilities which such Grantee held or the tasks to which such
Grantee was assigned at the time the disability was incurred, and which is
expected to be permanent or for an indefinite duration.
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<PAGE> 22
(g) "Effective Date" means February 28, 1992.
(h) "Fair Market Value" of any security of the Company or any other
issuer means, as of any applicable date:
(i) if a security is listed on national securities exchange or
authorized for quotation on the National Association of Securities
Dealers Inc.'s NASDAQ National Market ("NASDAQ/NMS"), the closing
price, regular way, of the security on such exchange or NASDAQ/NMS, as
the case may be, or if no such reported sale of the security shall
have occurred on such date, on the next preceding date on which there
was such a reported sale, or
(ii) if a security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the
average of the closing bid and asked prices as reported by the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or, if no such prices shall have been so reported for such
date, on the next preceding date for which such prices were so
reported, or
(iii) if the security is not listed for trading on a national
securities exchange or is not authorized for quotation on NASDAQ/NMS
or NASDAQ, the fair market value of the security as determined in good
faith by the Committee.
(i) "Grant Date" means the date of grant of an option determined in
accordance with Section 6.
(j) "Grantee" means an individual who has been granted an option.
(k) "including" means "including, without limitation".
(l) "1934 Act" means the Securities Exchange Act of 1934. References
to a particular section of, or rule under, the 1934 Act include references to
successor provisions.
(m) "Option Price" means the per share purchase price of Stock
subject to an option.
(n) "Plan" -- see the introductory paragraph.
(o) "SEC" means the Securities and Exchange Commission.
(p) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
(q) "Stock" means the common stock, par value of $.01 per share, of
the Company.
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<PAGE> 23
(r) "Subsidiary" means a corporation as defined in Section 424(f) of
the Code (with the Company being treated as the employer corporation for
purposes of this definition).
(s) "Termination of Employment" occurs the first day an individual is
for any reason entitled to severance payments under the personnel policies of,
or an employment agreement with, the Company or a Subsidiary or is no longer
employed by the Company or any of its Subsidiaries, or, with respect to an
individual who is an employee of a Subsidiary, the first day the Company no
longer owns voting securities possessing at least 50% of the aggregate voting
power of such Subsidiary's outstanding voting securities, or with respect to a
director of the Company who is not an employee, the first day the person ceases
to be a director of the Company.
3. Scope of the Plan.
(a) An aggregate of 750,000 shares of Stock is hereby made available
and is reserved for delivery on account of the exercise of options. Such
shares may consist of either treasury shares or newly-issued shares. The
number of shares for which options may be granted to any Grantee in any
calendar year shall not exceed 215,000.
(b) If and to the extent an option shall expire or terminate for any
reason without having been exercised in full (including a cancellation and
regrant of an option pursuant to Section 14), the shares of Stock associated
with such option shall become available for other options under the Plan.
4. Administration.
(a) Subject to Section 4(b), the Plan shall be administered by a
committee ("Committee") which shall consist of not less than two persons. The
number of members of the Committee shall from time to time be increased or
decreased, and shall be subject to such conditions, in each case as the Board
deems appropriate to permit transactions in Shares pursuant to the Plan to
satisfy such conditions of Rule 16b-3 and Code Section 162(m) as then in
effect.
(b) The Board may, in its discretion, delegate to another committee
of the Board any or all of the authority and responsibility of the Committee
with respect to options to Grantees who are not Section 16 Grantees at the time
any such delegated authority or responsibility is exercised. Such other
committee may consist of one or more directors who may, but need not be,
officers or employees of the Company or a Subsidiary. To the extent that the
Board delegates the authority and responsibility of the Committee to such other
committee, all references to the "Committee" in the Plan shall be to such other
committee.
(c) The Committee shall have full and final authority, in its
discretion, but subject to all provisions of the Plan, as follows:
(i) to grant options,
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<PAGE> 24
(ii) to determine when options may be granted, the Option Price
and the individuals to whom options shall be granted,
(iii) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan,
(iv) to prescribe, amend and rescind rule relating to, and
consistent with, the plan,
(v) to determine the terms and provisions of the written
agreements by which all options shall be granted ("Option Agreements")
and, with the consent of the Grantee, to modify any such Option
Agreement at any time,
(vi) to accelerate the exercisability of, and to accelerate or
waive any or all of the restrictions and conditions applicable to, any
option,
(vii) to make such adjustments or modifications to options to
Grantees employed outside the United States as are necessary and
advisable to fulfill the purposes of the Plan, and
(viii) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of options as the
Committee may, before or concurrently with the grant thereof, deem
appropriate, including limiting the percentage of options which may
from time to time be exercised by a Grantee.
The determination of the Committee on all matters relating to the Plan
or any Option Agreement shall be conclusive and final. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option.
5. Eligibility. Options may be granted to any employee or director
of the Company or any Subsidiary. In selecting the employees or directors to
whom options may be granted, as well as in determining the number of shares of
Stock subject to, and the other terms and conditions applicable to, each
option, the Committee shall take into consideration such factors as it deems
relevant in promoting the purposes of the Plan.
6. Conditions to Grants.
(a) General Conditions.
(i) The Grant Date of an option shall be the date on which the
Committee grants the option or such later date as specified in advance
by the Committee.
(ii) The term of each option shall be a period of not more than
10 years from the Grant Date, and shall be subject to earlier
termination as herein provided.
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<PAGE> 25
(b) Grant of Options and Option Price. The Option Price of an option
granted shall be determined by the Committee no later than the Grant Date of
the option and shall not be less than 80% of the Fair Market Value of the Stock
on the Grant Date.
7. Company Right to Terminate. No obligation of the Company or any
Subsidiary as to the length of any Grantee's employment shall be implied by the
terms of the Plan, any grant of an option hereunder or any Option Agreement.
The Company and its Subsidiaries reserve the same rights to terminate the
employment of any Grantee as existed before the Effective Date.
8. Non-transferability. Each option granted hereunder is not
assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order (as defined by
the Code).
9. Exercise.
(a) Exercise of Options. Subject to Sections 4(c)(vi), 9(b) and 13
and such terms and conditions as the Committee may impose, each option granted
shall be exercisable in one or more installments commencing not less than six
months after its Grant Date unless otherwise determined by the Committee. Each
option shall be exercised by delivery to the Company of written notice of
intent to purchase a specific number of shares of Stock subject to the option.
The Option Price of any shares of Stock as to which an option shall be
exercised shall be paid in full at the time of the exercise. Payment may, at
the election of the Grantee, be made in any one or any combination of (i) cash,
or (ii) Stock valued at its Fair Market Value on the business day next
preceding the date of exercise, including with the consent of the Committee, by
pyramiding (i.e., paying the Option Price with shares of Stock simultaneously
acquired by option exercise).
(b) Acceleration of Exercisability. The Committee, in its sole
discretion, but subject to Section 9(c), shall have the authority to accelerate
on an individual-by-individual basis or group basis, the time at which
outstanding options or any part thereof become exercisable to such earlier date
or dates as determined by the Committee. The exercisability of an option may
be accelerated at any time (including after a Termination of Employment) before
its termination or the expiration of its term. In the event of a Change of
Control, all unvested options (regardless of when granted) shall automatically
become immediately vested and exercisable.
10. Election under Section 83(b). The Committee may, in its
discretion, require on the Grant Date or any later date, a Grantee, in
connection with the exercise of any option, to make the election permitted
under Section 83(b) of the Code to include in such Grantee's gross income in
the year of transfer the amounts specified in such Section and such Grantee
shall notify the Company of such election within 10 days of filing notice of
the election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of
Section 83(b) of the Code.
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11. Mandatory Withholding Taxes.
(a) Whenever under the Plan, shares of Stock are to be delivered upon
exercise of an option, the Company shall be entitled to require as a condition
of delivery (i) that the Grantee remit an amount sufficient to satisfy all
federal, state, and local withholding tax requirements related thereto, (ii)
the withholding of such sums from compensation otherwise due to the Grantee or
from any shares of Stock due to the Grantee under the Plan or (iii) any
combination of the foregoing.
(b) If any election described in Section 10 is made, then the person
making such election shall remit to the Company an amount sufficient to satisfy
all federal, state, and local withholding taxes thereby incurred; provided
that, in lieu of or in addition to the foregoing, the Company shall have the
right to withhold such sums from compensation otherwise due to the Grantee or
from any shares of Stock due to the Grantee under the Plan.
12. Elective Share Withholding.
(a) Subject to Section 12(b), a Grantee who is an employee may elect
the withholding ("Share Withholding") by the Company of a portion of the shares
of Stock otherwise deliverable to such Grantee upon the exercise of an option
(a "Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required federal,
state, or local withholding tax liability attributable to the Taxable
Event; or
(ii) with the Committee's prior approval, a greater amount, not
to exceed the estimated total amount of such Grantee's tax liability
with respect to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be subject to
the following restrictions:
(i) any Grantee's election shall be subject to the Committee's
right to revoke such election of Share Withholding by such Grantee at
any time before the Grantee's election if the Committee has reserved
the right to do so in the Option Agreement;
(ii) the Grantee's election must be made before the date (the
"Tax Date") on which the amount of tax to be withheld is determined;
and
(iii) the Grantee's election shall be irrevocable.
13. Termination of Employment. If the Grantee has a Termination of
Employment for Cause, any unexercised option shall terminate immediately upon
the Grantee's Termination of Employment. If the Grantee has a Termination of
Employment for any reason other than Cause, then any unexercised option may be
exercised, in whole or in part, to the extent exercisable on
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<PAGE> 27
the date of the Grantee's Termination of Employment, not later than the 30th
day following the Grantee's Termination of Employment unless the Committee in
its discretion provides otherwise in the Option Agreement or in an amendment
thereto.
14. Substituted Awards. If the Committee cancels with the consent of
the Grantee any option granted to the grantee (granted under this Plan, or any
plan or any entity acquired by the Company or a Subsidiary), and a new option
is substituted therefor, then the Committee may, in its discretion, determine
the terms and conditions of such new option subject to the express provisions
of the plan relating to new option grants.
15. Securities Law Matters.
(a) If the Committee deems necessary to comply with the Securities
Act of 1933, the Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If based upon the advice of counsel for the Company, the
Committee determines that the exercise of any option would cause the Company to
violate any applicable provision of (i) federal or state securities law or (ii)
the listing requirements of any national securities exchange or quotation
system on which are listed or quoted any of the Company's equity securities,
then the Committee may postpone any such exercise, but the Company shall use
all reasonable efforts to cause such exercise to comply with all such
provisions at the earliest practicable date.
16. No Employment Rights. Neither the establishment of the Plan, nor
the granting of any option shall be construed to (a) give any Grantee the right
to remain a director or employed by the Company or any Subsidiary or to any
benefits not specifically provided by the Plan or (b) in any manner modify the
right of the Company or any Subsidiary to modify, amend, or terminate any of
its employee benefit plans.
17. Rights as a Stockholder. A Grantee shall not, by reason of any
option have any right as a stockholder of the Company with respect to the
shares of Stock which may be deliverable upon exercise of such option until
such shares have been delivered to him.
18. Nature of Payments. Any and all grants or deliveries of shares
of Stock hereunder shall constitute special incentive payments to the Grantee
and shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any Subsidiary or (b) any agreement between the Company or any
Subsidiary, on the one hand, and the Grantee, on the other hand, except as such
plan or agreement shall otherwise expressly provide.
19. Non-Uniform Determinations. Neither the Committee's nor the
Board's determinations under the Plan need be uniform and may be made by the
Committee or the Board selectively among persons who receive, or are eligible
to receive, options (whether or not such
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<PAGE> 28
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, to enter into non-uniform and
selective Option Agreements as to (a) the identity of the Grantees, and (b) the
terms and provisions of options. Notwithstanding the foregoing, the
Committee's interpretation of Plan provisions shall be uniform as to similarly
situated Grantees.
20. Adjustments. The Committee shall make equitable adjustment of:
(a) the aggregate number of shares of Stock available and the
calendar year limit as described in Section 3(a),
(b) the number of shares of Stock subject to each option, and
(c) the Option Price of each option,
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization, or similar event, of or by the Company.
21. Amendment of the Plan. The Board may from time to time in its
discretion amend or modify the Plan without the approval of the stockholders of
the Company, except as such stockholder approval may be required under the
listing requirements of any national securities exchange or national market
system on which are listed any of the Company's equity securities.
22. Termination of the Plan. The Plan shall terminate on the tenth
(10th) anniversary of the Effective Date or at such earlier time as the Board
may determine. Any termination, whether in whole or in part, shall not affect
any option then outstanding under the Plan.
23. Controlling Law. The law of the State of Illinois, except its
law with respect to choice of law, shall be controlling in all matters relating
to the Plan.
24. Severability. If all or any part of the plan is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the plan not declared
to be unlawful or invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will
give effect to the terms of such Section or part of a Section to the fullest
extent possible while remaining lawful and valid.
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<PAGE> 29
PROXY M-WAVE, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 4, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints Joseph A. Turek and Paul H. Schmitt
and each of them as Proxy holders and attorneys, with full power of
substitution, to appear and vote all of the shares of Common Stock of M-Wave,
Inc. which the undersigned shall be entitled to vote at the Annual Meeting of
Stockholders of the Company, to be held at the Union League Club, 65 W.
Jackson, Chicago, Illinois, on Wednesday, June 4, 1997 at 10:00 a.m. local
time, and at any adjournments thereof, hereby revoking any and all proxies
heretofore given and (ii) authorizes and directs said Proxy holders to vote all
of the shares of Common Stock of the Company represented by this Proxy as
follows, with the understanding that if no directions are given below, said
shares will be voted "FOR" the election of the Director nominated by the Board
of Directors and "FOR" the proposals to: (i) approve the Company's Amended and
Restated 1992 Stock Option Plan and (ii) ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
/ / Check Box if you plan to attend the meeting. (Continued and to be
signed on reverse side.)
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For Withhold
1. ELECTION OF DIRECTOR:
Nominee: Joseph A. Turek / / / /
For Against Abstain
2. Approval of the Amended and Restated 1992 / / / / / /
Stock Option Plan.
For Against Abstain
3. Ratify appointment of independent auditors. / / / / / /
4. In their discretion to act on any other matters
which may properly come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ABOVE PROPOSALS.
Dated:__________________, 1997
Signature(s)___________________________________________________________________
_______________________________________________________________________________
Your signature to this Proxy form should be exactly the same as the name
imprinted herein. Persons signing as executors, administrators, trustees or in
similar capacities should so indicate. For joint accounts, the name of each
joint owner must be signed.
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- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
