SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Anaren Microwave, Inc.
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(Name of Registrant as Specified In Its Charter)
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ANAREN MICROWAVE INC.
6635 Kirkville Road
East Syracuse, New York 13057
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on November 2, 1999
To the Holders of the Common Stock
of Anaren Microwave, Inc.:
PLEASE TAKE NOTICE, that the Annual Meeting of Shareholders of Anaren
Microwave, Inc. (the "Company") will be held on November 2, 1999, at 11:00 a.m.
Eastern Standard Time at the Wyndam Hotel, 6302 Carrier Parkway, East Syracuse,
New York 13057, for the following purposes:
(1) To elect nine directors;
(2) To approve amendments to the Company's Certificate of
Incorporation providing for a classified Board of Directors
and related matters; and
(3) To transact such other business as may be properly brought before
the Meeting.
Shareholders of record as of the close of business on September 10,
1999 will be entitled to notice of and to vote at the Meeting.
Enclosed is the annual report for the fiscal year ended June 30, 1999,
along with a proxy statement and proxy. Shareholders who do not expect to attend
the Meeting are requested to sign and return the proxy in the enclosed envelope.
By Order of the Board of Directors
David M. Ferrara
Secretary
Dated: September 29, 1999
East Syracuse, New York
ANAREN MICROWAVE, INC.
6635 Kirkville Road
East Syracuse, New York 13057
This Proxy Statement is being mailed on or about September 29, 1999, to
the Shareholders of Anaren Microwave, Inc. ("Anaren" or the "Company") entitled
to receive the accompanying Notice of Annual Meeting of Shareholders and is
provided, by order of its Board of Directors, in connection with the
solicitation of proxies to be used at the Annual Meeting of Shareholders (the
"Meeting") of the Company to be held on November 2, 1999 at 11:00 a.m. and at
any adjournment or adjournments thereof, for the purposes set forth in the
Notice.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked at any time prior to its exercise by (i) submitting a
subsequently dated proxy; or (ii) filing written notice of such revocation with
the Secretary of the Meeting. The proposals described in this Proxy Statement
will be presented by the Board of Directors of the Company. Where a choice is
specified with respect to a proposal, the shares represented by the proxy will
be voted in accordance with the specifications made. Where a choice is not so
specified, the shares represented by the proxy will be voted to elect the
nominees for director named herein, and to approve the proposed amendments to
the Company's Certificate of Incorporation.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on September 10, 1999, the record date stated
in the accompanying Notice, the Company had outstanding 5,545,092 shares of
common stock, $.01 par value (the "Common Stock"), each of which is entitled to
one vote with respect to each matter to be voted on at the Meeting. A majority
of the issued and outstanding shares of Common Stock present in person or by
proxy, a total of 2,772,547 shares, will be required to constitute a quorum for
the transaction of business at the Meeting. The Company has no class of voting
stock outstanding other than the Common Stock.
Abstentions and broker non-votes (as defined below) are counted as
present for the purpose of determining the presence or absence of a quorum for
the transaction of business. For the purpose of determining the vote required
for approval of matters to be voted on at the Meeting, shares held by
Shareholders who abstain from voting will be treated as being "present" and
"entitled to vote" on the matter and, thus, an abstention has the same legal
effect as a vote against the matter. However, in the case of a broker non-vote
or where a shareholder withholds authority from his proxy to vote the proxy as
to a particular matter, such shares will not be treated as "present" and
"entitled to vote" on the matter. Accordingly, a broker non-vote or the
withholding of a proxy's authority will have no effect on the outcome of the
vote on the matter. A "broker non-vote" refers to shares represented at the
Meeting in person or by proxy by a broker or nominee where such broker or
nominee (i) has not received voting instructions on a particular matter from the
beneficial owner or persons entitled to vote; and (ii) the broker or nominee
does not have discretionary voting power on such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to
persons known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock of the Company, as of September 10, 1999 (except as
otherwise indicated).
Number of Shares
Name and Address of Common Stock Percent
of Beneficial Owner Beneficially Owned (1) of Class
- ------------------- ---------------------- --------
Kern Capital Management, LLC ........... 695,500 12.5%
114 West 47th Street
Suite 1926
New York, NY 10036
Global Securities, Inc. ................ 652,800 11.8%
P.O. Box 560
Sudbury, MA 01776
Trade Street Investment Associates ..... 418,800 7.6%
110 South Tryon Street
Charlotte, NC 38255
Carl W. Gerst, Jr ...................... 322,084(2) 5.8%
c/o Anaren Microwave, Inc.
6635 Kirkville Road
East Syracuse, NY 13057
(1) Except as otherwise indicated, as of September 10, 1999 all of such shares
are owned with sole voting and investment power.
(2) Includes 58,284 shares held in trust for, or owned by, Mr. Gerst's
family and relatives and 18,000 shares which Mr. Gerst has the right to
acquire within 60 days pursuant to outstanding stock options.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of September 10,
1999, with respect to the beneficial ownership of the Company's Common Stock by
(i) each director and nominee for director, (ii) each executive officer of the
Company, and (iii) all directors and executive officers of the Company as a
group.
Number of Shares
Name and Address of Common Stock Percent
of Beneficial Owner Beneficially Owned (1) of Class
- ------------------- ---------------------- --------
Lawrence A. Sala .................... 57,200(2) 1.0%
Hugh A. Hair ........................ 53,850(3) *
Carl W. Gerst, Jr. .................. 322,084(4) 5.8%
Gert R. Thygesen .................... 33,600(5) *
Joseph E. Porcello .................. 24,490(6) *
Stanley S. Slingerland .............. 34,559(7) *
Abraham Manber ...................... 2,500(8) *
Dale F. Eck ......................... 12,500(9) *
Herbert I. Corkin ................... 11,000(10) *
Dr. David Wilemon ................... 12,500(11) *
Matthew Robison ..................... 10,000(12) *
Brian P. Kelly ...................... 0 *
All Directors, Nominees and
Officers as a Group (12 persons) .... 574,283(13) 10.1%
* Indicates less than 1%
2
(1) Except as otherwise indicated, as of September 10, 1999 all of such
shares are owned with sole voting and investment power.
(2) Includes 52,000 shares which Mr. Sala has the right to acquire within
60 days pursuant to outstanding stock options.
(3) Includes 29,800 shares owned by Mr. Hair's wife.
(4) Includes 58,284 shares held in trust for, or owned by, Mr. Gerst's
family and relatives and 18,000 shares which Mr. Gerst has the right to
acquire within 60 days pursuant to outstanding stock options.
(5) Includes 25,600 shares which Mr. Thygesen has the right to acquire
within 60 days pursuant to outstanding stock options.
(6) Includes 17,500 shares which Mr. Porcello has the right to acquire
within 60 days pursuant to outstanding stock options.
(7) Includes 34,559 shares held by Mr. Slingerland jointly with his wife.
(8) Includes 2,500 shares which Mr. Manber has the right to acquire within
60 days pursuant to outstanding stock options.
(9) Includes 12,500 shares which Mr. Eck has the right to acquire within 60
days pursuant to outstanding stock options.
(10) Includes 1,000 shares owned by The Entwistle Company, of which Mr.
Corkin is Chairman, Chief Executive Officer and a majority shareholder.
Does not include 652,800 shares owned by Global Securities, Inc.
("Global"), as to which Mr. Corkin, the owner of 24% of the capital
stock of Global, disclaims beneficial ownership. Also includes 2,500
shares which Mr. Corkin has the right to acquire within 60 days
pursuant to outstanding stock options.
(11) Includes 12,500 shares which Dr. Wilemon has the right to acquire
within 60 days pursuant to outstanding stock options.
(12) Includes 10,000 shares which Mr. Robison has the right to acquire
within 60 days pursuant to outstanding stock options.
(13) Includes 153,100 shares which all directors and officers as a group
have the right to acquire within 60 days pursuant to outstanding stock
options.
3
ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors proposes the election of the nominees listed
below at the Meeting. If the Classified Board Amendments described in Item Two
are approved, the nominees set forth below will be placed in three classes to
serve terms as specified on page 13.
The shares represented by the enclosed proxy will be voted for the
nominees for directors set forth herein who shall constitute the entire Board of
Directors. If any nominee for director should be unavailable to serve, it is
intended that the persons named in the accompanying form of proxy will vote the
shares represented by such proxy for another person duly nominated by the Board
of Directors in such nominee's stead or if no other person is so nominated, will
vote such shares only for the remaining nominees. All nominees for director set
forth herein have consented to serve, and the Company's Board of Directors
believes they will serve, as directors.
Certain Information Concerning Nominees for Directors
Set forth below is certain information concerning the nominees for
election as directors. The information has been furnished to the Company by such
persons.
Name, Age, Nature of Year First
Positions and Offices Became Principal Occupation,
Held with the Company Director Experience and Other Directorships
- --------------------- -------- ----------------------------------
Hugh A. Hair, 64 1968 Mr. Hair has been actively engaged in the Company's
Chairman of the Board business since its founding in 1967. Mr. Hair served
as President of the Company from its founding until
May 1995 and as Chief Executive Officer from its
founding until September 1997. Mr. Hair has served as
Chairman of the Board for more than the past five
years.
Carl W. Gerst, Jr., 62 1968 Mr. Gerst has been actively engaged in the Company's
Chief Technical Officer, Treasurer, business since its founding in 1967. Mr. Gerst served
Vice Chairman as Executive Vice President from the Company's
founding until May 1995 when he became Chief
Technical Officer and Vice Chairman of the Board. Mr.
Gerst has also served as Treasurer since May 1992.
Lawrence A. Sala, 36 1995 Mr. Sala has been President of the Company since May
President, Chief Executive Officer and 1995 and has served as Chief Executive Officer since
Director September 1997. Prior to May 1995, Mr. Sala served
as Vice President of Marketing.
Abraham Manber, 70 1971 Mr. Manber has been President of Ad Connect, Inc., an
Director advertising and promotional imprint sales firm, since
January 1998. Mr. Manber was President of Amtech
Patent Licensing Corp. from 1979 until his retirement
from Amtech in March 1993.
4
Name, Age, Nature of Year First
Positions and Offices Became Principal Occupation,
Held with the Company Director Experience and Other Directorships
- --------------------- -------- ----------------------------------
Herbert I. Corkin, 77 1989 Mr. Corkin has been Chairman of the Board of The
Director Entwistle Company, a defense contractor, since 1959.
Mr. Corkin also served as the President of The
Entwistle Company from 1959 through December 1993 and
has served as its Chief Executive Officer since
December 1993.
Dale F. Eck, 56 1995 Mr. Eck was Vice President of Finance and Treasurer
Director of The Entwistle Company, a defense contractor, from
1978 until his retirement in February 1997. Mr.
Eck has also served as a Director of The Entwistle
Company since 1978 and continues to serve that company
in such capacity. Mr. Eck has provided consulting
services to the Company since March 1997.
Dr. David Wilemon, 62 1997 Dr. Wilemon has been a Professor of Marketing and
Director Innovation Management at the Syracuse University
School of Management since 1966. He has also
served as Director of the Synder Innovation
Management Program at the University since 1980 and
as Co-Director of the Entrepreneurship and Emerging
Enterprises Program there, since 1993. Dr. Wilemon
has also been a frequent speaker at the University of
Wisconsin - College of Engineering Professional
Development since 1978.
Matthew Robison, 38 1999 Mr. Robison has been Vice President Senior
Director Analyst-Technology of Ferris, Baker Watts
Incorporated since January 1999. Mr. Robison
previously served as a General Partner and Analyst
of Botti Brown Asset Management from January 1997
until January 1999, and as Vice President and
Analyst for Montgomery Securities from October 1994
until January 1997.
Brian P. Kelly, 39 --- Mr. Kelly is a co-founder of Telergy, Inc., a
Nominee for Director regional integrated telecommunications provider, and
has served as Chairman of the Board of Directors
and Chief Executive Officer of Telergy since its
inception in April 1995. From 1986 until 1995 Mr.
Kelly served as President of Telecommunications
Management Systems, a telecommunications billing
services provider specializing in the health care
industry.
5
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain information with respect to
compensation, received in all capacities in which they served for the fiscal
years ended June 30, 1997, June 30, 1998 and June 30, 1999, for the Company's
Chief Executive Officer and each of the four other most highly compensated
officers during the most recent fiscal year.
Summary Compensation Table
Long Term
Compensation
Securities All Other
Name and Annual Compensation Underlying Compen-
Principal Salary Bonus Options(6) sation(7)
Position Year ($) ($) (#) ($)
- -------- ---- ------ ----- ---------- ---------
Lawrence A. Sala 1999 $230,847 $97,925 50,000 $17,231
President and 1998 207,693 60,008 15,000 11,592
Chief Executive 1997 161,827 0 35,000 10,878
Officer(1)
Hugh A. Hair 1999 225,000 25,000 10,000 21,996
Chairman of the 1998 225,000 25,000 0 14,011
Board(2) 1997 225,000 0 0 12,876
Carl W. Gerst, Jr. 1999 225,000 25,000 10,000 19,029
Chief Technical 1998 225,000 25,000 0 11,180
Officer, Vice 1997 225,000 0 0 10,146
Chairman and
Treasurer(3)
Gert R. Thygesen, 1999 129,923 29,043 10,000 3,739
Vice President of 1998 125,127 20,323 3,000 3,307
Operations(4) 1997 120,462 0 2,500 2,739
Joseph E. 1999 102,339 15,255 5,000 1,615
Porcello, Vice 1998 97,885 5,334 2,500 1,468
President of 1997 92,683 0 2,500 1,390
Finance(5)
- ------------
(1) Mr. Sala was elected President of the Company in May 1995. He was named
Chief Executive Officer in September 1997.
(2) Mr. Hair also served as the Company's President until May 1995 and as
the Company's Chief Executive Officer until September 1997.
(3) Mr. Gerst served as the Company's Executive Vice President until May
1995 when he was elected to the position which he currently holds, Vice
Chairman, Chief Technical Officer and Treasurer.
(4) Mr. Thygesen served as one of the Company's Program Managers from 1990
through 1992 and as the Company's Operations Manager from 1992 until
May 1995 when he was elected to the position which he currently holds,
Vice President of Operations.
(5) Mr. Porcello served as the Company's Director of Finance from prior to
1990 until May 1995 when he was elected to the position which he
currently holds, Vice President of Finance.
(6) The table reflects the number of shares which are subject to incentive
stock options granted pursuant to the Company's Incentive Stock Option
Plan.
(7) All Other Compensation consists of contributions to the Company's
401(k) Salary Savings Plan and, with respect to Messrs. Hair, Gerst and
Sala, reimbursement for premiums on life insurance policies owned by
executive officers.
6
Fiscal Year Option Grants
The following table sets forth certain information regarding options
granted by the Company during the last fiscal year to the individuals named in
the above compensation table, including information as to potential realizable
value of such options at assumed annual rates of stock price appreciation for
the ten-year terms of the options.
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to for Option Term(1)
Options Employees in Exercise or Base Expiration ---------------------------
Name Granted Fiscal Year Price ($/sh) Date 5%($) 10%($)
---- ------- ----------- ------------ ---- ------- --------
Lawrence A. Sala 50,000 32.5% $17.1875 11/19/08 $540,456 $1,369,622
Hugh A. Hair 10,000 6.5 17.1875 11/19/08 108,091 273,924
Carl W. Gerst, Jr. 10,000 6.5 17.1875 11/19/08 108,091 273,924
Gert R. Thygesen 10,000 6.5 17.1875 11/19/08 108,091 273,924
Joseph E. Porcello 5,000 3.2 17.1875 11/19/08 54,046 136,962
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on arbitrarily assumed rates of stock price
appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
The following table sets forth certain information for the named
executive officers with respect to (i) stock options exercised in fiscal year
1999, (ii) the number of stock options held at the end of fiscal year 1999, and
(iii) the value of in-the-money stock options at the end of fiscal year 1999.
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Options at June 30, 1999(#) Options at June 30, 1999(1)($)
Acquired on Value ----------------------------- ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Lawrence A. Sala 0 $ 0 52,000 93,000 $775,781 $652,109
Hugh A. Hair 0 0 0 10,000 0 36,875
Carl W. Gerst, Jr. 22,000 438,625 18,000 10,000 351,000 36,875
Gert R. Thygesen 5,200 36,400 25,600 19,900 416,647 160,845
Joseph E. Porcello 6,000 33,000 17,500 12,500 282,547 108,508
(1) Amount represents the difference between the aggregate exercise price
of the options and a $20.875 market price of the underlying Common Stock
on June 30, 1999.
Pension Plan
The Company maintains a non-contributory Pension Plan for the benefit
of all employees over the age of 23 who have completed one year of service and
who are not covered by any other retirement plan. The Company pays all amounts
required to provide retirement income benefits. The Pension Plan provides fixed
benefits to be paid upon retirement at a specific age. Pension expense,
including amortization of prior service cost over 30 years, was $130,982 for
fiscal 1999.
7
The table below illustrates the estimated aggregate annual benefit that
would be payable to executive officers of the Company who are at least 65 years
of age at retirement, based on the formula in effect after June 30, 1992 and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") limits on
compensation and benefits after 15, 20, 25, 30 and 35 credited years of service;
for illustration purposes, the table assumes all years of service under the
current Pension Plan formula.
PENSION PLAN TABLE
Estimated Annual Pension Payable
Final Based on Years of Service Indicated
Average Annual -----------------------------------------------------------------------------------
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -----------------------------------------------------------------------------------
$100,000 $11,250 $15,000 $18,750 $22,600 $26,250
125,000 14,063 18,750 23,438 28,125 32,813
150,000 16,875 22,500 28,125 33,750 39,375
160,000 18,000 24,000 30,000 36,000 42,000
175,000 18,000 24,000 30,000 36,000 42,000
200,000 18,000 24,000 30,000 36,000 42,000
225,000 18,000 24,000 30,000 36,000 42,000
250,000 18,000 24,000 30,000 36,000 42,000
275,000 18,000 24,000 30,000 36,000 42,000
Under the terms of the Pension Plan, each member who is at least 65
years of age at his retirement is entitled to a Normal Retirement Benefit (as
defined under the Pension Plan). The compensation used in determining the
Pension Plan benefit for executive officers is based upon their annual salary as
shown on the Summary Compensation Table above. The Normal Retirement Benefit is
the aggregate of:
A. 0.60% of average of highest five consecutive years
compensation from date of employment to June 30, 1992
multiplied by Benefit Service (as defined under the Pension
Plan) to June 30, 1992; plus
B. 0.75% of compensation for each year of Benefit Service
thereafter;
but not less than the accrued benefit under the prior plan at June 30, 1992.
Employees who have attained at least twelve years of service and are at
least 55 years of age can retire and receive a proportionately reduced benefit.
Under ERISA, the maximum annual benefit payable at age 65 is $125,000.
The maximum compensation that could be considered for all participants,
including Messrs. Hair, Gerst, Sala, Thygesen and Porcello, is $160,000 for
1999. These benefit and compensation limits are indexed to increases in the
Consumer Price Index.
The credited years of service as of June 30, 1999 under the Pension
Plan for each of Messrs. Hair and Gerst are 26, and for Messrs. Sala, Thygesen
and Porcello are 14, 18 and 22, respectively.
8
Management Incentive Plan
The Company has a Management Incentive Plan ("Incentive Plan") that is
designed to provide a meaningful annual financial incentive to management
employees to reward them for their contribution toward the Company's
profitability. Eligibility in the plan is limited to key members of management
who, because of their position, have the ability to substantially impact the
profitability and overall success of the Company. Individual participants in the
Incentive Plan are selected by the President on an annual basis, subject to
approval of the Board of Directors.
Under the Incentive Plan, each participant has a "target" bonus
opportunity in an amount equal to a specified percentage of his or her base
salary. Awards under the Incentive Plan are based on corporate, functional and
individual performance measured against pre-established targeted goals.
Corporate performance goals, which are set by the President and are subject to
Board approval, are based on factors including but not limited to earnings,
revenue, appreciation in stock value and order targets. Functional and
individual performance goals are based on each participant's functional
responsibilities, and are jointly established by the Company and the participant
prior to the beginning of the fiscal year. Fulfillment of corporate performance
goals must carry a weighting of at least 50% of the total incentive opportunity
for each employee, and participants who are officers of the Company may not
receive any bonus payment unless the specified corporate performance goals are
attained.
Bonus payments under the Incentive Plan are made on or about September
1st following the end of the fiscal year for which the bonus is earned. Bonus
amounts reflected in the Summary Compensation Table on page 6 for Messrs. Sala,
Thygesen and Porcello represent amounts awarded pursuant to the Incentive Plan.
Compensation of Directors
The Company currently pays each director who is not an operating
officer of the Company $7,500 per year and reimburses each such director for the
reasonable expenses incurred in attending meetings of the Board of Directors.
Certain Agreements with Directors and Executive Officers
The Company has an employment agreement, dated July 1, 1997, with
Lawrence A. Sala, President and (as of September 1997) Chief Executive Officer
of the Company providing for Mr. Sala's employment as President of the Company
until November 30, 2001 or such earlier date as may result pursuant to the terms
of the agreement. The agreement provides for a base annual salary of $180,000 or
such greater amount as the Board of Directors may determine, plus annual
incentive bonuses and participation in certain insurance plans. The agreement
terminates automatically in the event of Mr. Sala's death and the Company may
terminate the agreement for specified cause as defined in the agreement.
The Company's arrangements with Mr. Sala provide that in the event Mr.
Sala's employment with the Company is terminated other than for cause, the
Company will be obligated to pay severance to Mr. Sala in an amount equal to the
greater of (i) two years' base salary plus payments in lieu of incentive bonus
payments in the aggregate amount of $100,000 or (ii) Mr. Sala's base salary for
the balance of the term of the agreement. In addition, the Company must defray
certain costs associated with obtaining new employment and relocation in
connection with such termination.
9
In the event that Mr. Sala's employment continues for the entire term
of the agreement and the Company and Mr. Sala are unable to negotiate a new
employment agreement, the Company will be obligated to pay severance to Mr. Sala
in an amount equal to two years' base salary at such date plus payments in lieu
of incentive bonus payments in the aggregate amount of $100,000.
The Company also has an employment agreement, dated October 6, 1997,
with Hugh A. Hair, providing for his continuing employment by the Company until
June 30, 2000 or such earlier date provided in the agreement. Pursuant to the
agreement, Mr. Hair is to continue to serve as Chairman of the Company's Board
of Directors, subject to re-election by the Company's Shareholders and the Board
of Directors, and will provide counsel to the Company's President and Chief
Executive Officer. The agreement provides for a base annual salary of $225,000
or such greater amount as the Board may determine, and Mr. Hair is also eligible
for incentive bonuses and participation in certain insurance plans. In addition,
the agreement requires the Company to pay Mr. Hair deferred compensation equal
to $65,000 per fiscal year, beginning July 1, 2000 and continuing through June
30, 2015. The agreement terminates automatically in the event of Mr. Hair's
death, and the Company may terminate the agreement for specified cause as
defined in the agreement. In the event that Mr. Hair's employment with the
Company is terminated other than for cause, the Company will be obligated to pay
Mr. Hair his base salary through June 30, 2000, plus the deferred compensation
benefits described above.
The Company has a consulting arrangement with Dale F. Eck, pursuant to
which Mr. Eck has agreed to provide financial and management consulting services
to the Company for a period of five years from March 1, 1997. The agreement
provides that Mr. Eck shall devote up to two days per month to the Company and
shall receive a monthly fee of $1,666.66 plus reimbursement of reasonable
business expenses incurred in activities undertaken on behalf of the Company.
The agreement is terminable by either party upon 12 months' prior notice.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee ("Committee") recommends to the Board of
Directors the compensation to be paid to the Company's executive officers on an
annual basis. The Committee has implemented an executive compensation philosophy
that seeks to relate executive compensation to corporate performance, individual
performance and creation of shareholder value. Historically, this has been
achieved through compensation programs which focus on both short and long-term
results.
In accordance with the Committee's executive compensation philosophy,
the major components of executive compensation have been base salary and stock
option grants. Option grants have been made pursuant to the Company's Incentive
Stock Option Plan which was approved by the Shareholders of the Company at the
1995 Annual Meeting held on December 6, 1995, with amendments approved by the
Shareholders at the 1998 Annual Meeting held on November 19, 1998. Beginning in
fiscal year 1998, executive officers were also eligible to receive bonuses
pursuant to the Company's performance based Management Incentive Plan.
Salaries and incentive bonuses for executive officers are based on
current individual and organizational performance, affordability and competitive
market trends. For purposes of informing the Committee of competitive trends
within the electronics industry, the compensation data from the American
Electronics Association Compensation Survey is made available to the Committee.
The Committee also has access to compensation data from other comparable public
companies in the wireless and satellite communications markets. The salary trend
data used represents companies whose size and performance with respect to
revenue, earnings per share and stock price are similar to those of the Company.
The Company's executive officer salary ranges are positioned consistent with
industry averages.
10
Section 162(m) ("Section 162") of the Internal Revenue Code of 1986, as
amended (the "Code"), generally limits federal income tax deductions for
compensation paid after 1993 to the chief executive officer and the four other
most highly compensated officers of a company to $1 million per year, but
contains an exception for performance-based compensation that satisfies certain
conditions. The Company has not adopted an absolute policy regarding Section 162
as it does not anticipate its executive compensation to reach such levels in the
foreseeable future. Nevertheless, the Company is studying the implications of
Section 162 on its compensation programs. In making compensation decisions, the
Company will consider the net cost of compensation to it and whether it is
practicable and consistent with other compensation objectives to qualify the
Company's incentive compensation under the applicable exemption of Section 162.
The Company recognizes that deductibility of compensation payments must be one
among a number of factors used in ascertaining appropriate levels or modes of
compensation, and that the Company will make its compensation decisions based
upon an overall determination of what it believes to be in the best interests of
its Shareholders.
The members of the Compensation Committee are:
Abraham Manber Dr. David Wilemon
Dale F. Eck
11
Performance Graph
The following performance graph compares the total shareholder return
of the Company's Common Stock to The Nasdaq Stock Market (US) Index and the
Nasdaq Electronics Components Index. The graph assumes that $100 was invested in
the Company's Common Stock and each Index on June 30, 1994 and that all
dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ANAREN, THE NASDAQ STOCK MARKET (US) INDEX
AND THE NASDAQ ELECTRONICS COMPONENTS INDEX
[GRAPHIC PRESENTATION OF PERFORMANCE GRAPH]
Cumulative Total Return
6/30/94 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99
Anaren Microwave, Inc. 100 250 270 530 600 835
Nasdaq Stock Market (U.S.) 100 133 171 208 274 393
Nasdaq Electronic Components 100 206 218 358 356 638
* $100 INVESTED ON 6/30/94 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
Notwithstanding anything set forth in any of the Company's previous filings
under the Securities Act of 1933 or the Securities Exchange Act of 1934 which
might incorporate future filings, including this Proxy Statement, in whole or in
part, the preceding performance graph and the report of the Compensation
Committee shall not be deemed incorporated by reference into any such filings.
12
ITEM TWO
APPROVAL OF CLASSIFIED BOARD OF DIRECTORS AND
OTHER MATTERS RELATING TO DIRECTORS
The Board of Directors is recommending that the Shareholders take
action at the Meeting to amend the Company's Certificate of Incorporation to
provide for a classified Board of Directors and certain related matters (the
"Classified Board Amendments"). The Classified Board Amendments would (1)
classify the Board of Directors into three classes as nearly equal in number as
possible, each of which, after an interim arrangement, will serve for three
years with one class being elected each year; (2) provide that directors may be
removed by the Shareholders only for cause upon the affirmative vote of holders
of 75% of the outstanding Common Stock; and (3) provide that the Classified
Board Amendments may be amended or repealed only by the affirmative vote of
holders of 75% of the outstanding Common Stock. If the Classified Board
Amendments are approved by the Shareholders, corresponding amendments will be
made to the Company's Bylaws.
Under existing provisions of the Company's Certificate of Incorporation
and Bylaws, directors of the Company are elected annually for terms of one year
and may be removed from office without cause by majority vote of the
Shareholders.
Classified Board
The Classified Board Amendments will divide the Board into three
approximately equal classes. The directors of each class will serve three-year
terms and the term of one class will expire each year. To implement the
classified Board, the amendments would permit Class I, Class II and Class III
directors initially to be elected at the Meeting for terms of one year, two
years and three years, respectively. If the Classified Board Amendments are
adopted, Class I directors elected at the Meeting will hold office until the
2000 annual meeting; Class II directors elected at the Meeting will hold office
until the 2001 annual meeting; and Class III directors elected at the Meeting
will hold office until the 2002 annual meeting (and, in each case, until their
successors are duly elected and qualified or until earlier death, resignation or
removal). At each annual meeting commencing with the 2000 annual meeting,
directors elected to succeed those in the class whose terms then expire will be
elected for three-year terms so that the terms of one class of directors will
expire each year. Thus, after 1999, Shareholders will elect only one third of
the directors at each annual meeting.
For information regarding the nominees for election to the Board of
Directors at the Meeting see Item One, "Election of Directors," above. The
classes in which the nominees will initially serve if the Classified Board
Amendments are approved are as follows:
Class I - Carl W. Gerst, Jr., Abraham Manber and Brian P. Kelly
Class II - Hugh A. Hair, Herbert I. Corkin and Matthew Robison
Class III - Lawrence A. Sala, Dr. David Wilemon and Dale F. Eck
Advantages of a Classified Board. The Board of Directors believes that
dividing the Board into three classes is advantageous to the Company and its
Shareholders because providing that directors will serve three-year terms rather
than one-year terms will enhance the likelihood of continuity and stability in
the policies formulated by the Board. While the Company has not experienced any
problems with continuity in the past, it wishes to ensure that this experience
will continue, and believes that the staggered election of directors will
promote continuity because only one third of the directors
13
will be subject to election each year. In addition, staggered terms would
guarantee that approximately two thirds of the directors at any one time would
have at least one year's experience as directors of the Company.
In addition, the Classified Board Amendments would significantly extend
the time required to make any change in control of the Board, and may tend to
discourage hostile takeover bids for the Company. Presently, a change in control
of the Board can be made by the holders of a majority of the outstanding Common
Stock at a single annual meeting. Under the proposed amendments, it will take at
least two annual meetings for such Shareholders to make a change in control of
the Board, since only a minority of the directors will be elected at each
meeting. By impeding hostile takeover bids, the Classified Board Amendments will
encourage potential acquirors to negotiate with the Board and management,
thereby enabling the Board to protect the interests of the Shareholders.
Disadvantages of a Classified Board. The Classified Board Amendments
will make it more difficult for the Shareholders to change the composition of
the Board, even if the Shareholders believe that such a change would be
desirable. Also, because of the additional time required to change control of
the Board, the amendments may tend to perpetuate incumbent management. Since the
amendments will increase the amount of time required for a takeover bidder to
obtain control of the Company without the cooperation of the Board (even if the
takeover bidder were to acquire a majority of the outstanding Common Stock), it
will tend to discourage certain tender offers, perhaps including some tender
offers which Shareholders might feel would be in their best interests. As a
result, Shareholders may be deprived of opportunities to sell some or all of
their shares in a tender offer which might otherwise involve a purchase price
higher than the current market price. The amendment could also discourage open
market purchases by a potential takeover bidder which might otherwise increase
the market price of the Company's stock and enable Shareholders to sell their
shares at a price higher than that which would otherwise prevail. Finally, there
is a possibility that the amendments could decrease the market price of the
Company's common stock by making the stock less attractive to persons who invest
in securities in anticipation of an increase in price if a takeover attempt
develops.
Removal of Directors and Amendments
The proposed Classified Board Amendments provide that directors may be
removed from office by the Shareholders only for "cause" upon the affirmative
vote of holders of 75% of the outstanding Common Stock, and that the amendments
may be amended or repealed only by an affirmative vote of holders of 75% of the
outstanding Common Stock. While "cause" has not been conclusively defined by the
New York courts, actions such as embezzlement, disclosure of trade secrets, or
other violations of fiduciary duty have been found to constitute cause for
removal. Courts have indicated that the desire to take over management of a
company or the failure to cooperate in management's plans for a company do not
constitute cause for removal.
Advantages of Provisions Concerning Removal of Directors and
Amendments. The primary purpose of the proposed amendments is to preclude the
removal of directors by a takeover bidder or otherwise, unless removal is
warranted for reasons other than control of the Board. For a takeover bidder to
obtain effective control of the Company, it presently would need to control at
least a majority of the Board votes. One popular method for a takeover bidder to
obtain control is to acquire a majority of the outstanding shares of a company
through a tender offer or open market purchases and to use that voting power to
remove the existing directors and replace them with persons chosen by the
takeover bidder. Requiring
14
cause in order to remove a director would defeat this strategy, thereby
encouraging potential takeover bidders to obtain the cooperation of the existing
Board before attempting a takeover. Under the proposed amendments directors can
still be removed by the Shareholders, but only by a vote of holders 75% of the
Common Stock at an annual meeting or a special meeting of the Shareholders
called for such purpose, and only for cause. In addition, directors may be
removed for cause by majority vote of the remaining directors. The Board
believes that the amendments will properly condition a director's continued
service upon his ability to serve, rather than his position relative to a
dominant shareholder. The proposal is not being made as a result of any prior
effort to remove a director.
The Classified Board Amendments can only be amended or repealed by a
vote of holders of 75% of the outstanding Common Stock. This provision is
designed to prevent a takeover bidder from eliminating the protections of the
Classified Board Amendments by a majority vote in the course of a takeover
attempt. The Board believes that this 75% vote requirement is an essential part
of the protection provided by the Classified Board Amendments.
Disadvantages of Provisions Concerning Removal of Directors and
Amendments. The Classified Board Amendments will make the removal of a director
more difficult, even if such removal is believed by the Shareholders to be in
their best interests, and will eliminate the Shareholders' ability to remove a
director at will. Since the amendments will make the removal of directors more
difficult, it will increase the directors' security in their positions and,
since the Board has the power to retain and discharge management, could
perpetuate incumbent management. In addition, the proposed amendments would
impede, and could discourage, an attempt to acquire control of the Company that
might be desired by a majority of the Shareholders.
Board Recommendation; Vote Required for Approval
The Classified Board Amendments are intended to facilitate continuity
and to encourage persons seeking to acquire control of the Company to initiate
such an acquisition through arms-length negotiations with the Company's
management and Board of Directors. The Board of Directors believes that under
the current provisions of the Certificate of Incorporation, if a tak
eover bidder
were to purchase a significant or controlling interest in the Company, the
bidder's ability to remove the Company's directors and obtain control of the
Board would severely curtail the Company's ability to negotiate effectively with
the bidder. The threat of obtaining control of the Board would deprive the Board
of the time and information necessary to evaluate the proposal or transaction,
to study alternative proposals, and to help ensure that the best price is
obtained in any transaction involving the Company which may ultimately be
undertaken.
As discussed above, the Board of Directors believes the Classified
Board Amendments, taken together, would effectively reduce the possibility that
a third party could effect a sudden or surprise change in majority control of
the Board without the support of the incumbent Board. The Board believes that
this would serve to ensure that the Board and management, if confronted by a
surprise proposal from a third party who has acquired a block of the Common
Stock, will have sufficient time to review the proposal and to attempt to
negotiate a better transaction for the Shareholders. The Board also believes
that adoption of the Classified Board Amendments will serve to encourage any
person intending to attempt such a takeover to first try to negotiate with the
Board and management of the Company, and that the Board and management will
therefore be better able to protect the interests of all Shareholders.
15
The affirmative vote of the holders of the majority of the outstanding
shares of Common Stock is required for the approval of the proposed Classified
Board Amendments.
The Board of Directors recommends that Shareholders vote FOR this
proposal. Proxies solicited by the Board of Directors will be voted in favor of
the proposal unless Shareholders specify otherwise.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file with the SEC
initial reports of ownership and reports of changes in ownership of the Common
Stock. Such persons are required by regulations of the SEC to furnish the
Company with copies of all such filings. Based on its review of the copies of
such filings received by it and written representations of Reporting Persons
with respect to the fiscal year ended June 30, 1999, the Company believes that
all Reporting Persons complied with all Section 16(a) filing requirements in the
fiscal year ended June 30, 1999, except for the following: Messrs. Corkin and
Manber each inadvertently filed one late report showing the exempt grant of
stock options under the Company's 1989 Non-Statutory Stock Option Plan that
occurred during November 1998.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
During the fiscal year ended June 30, 1999, KPMG LLP, the Company's
independent accountant, was retained by the Board of Directors to perform the
annual examination of the consolidated financial statements of the Company and
its subsidiaries. The Board also retained KPMG LLP to provide assistance in the
preparation of federal income and state franchise tax returns.
The independent certified public accountant selected by management to
audit the Company's books and records for the current fiscal year is the firm of
KPMG LLP, 113 South Salina Street, Syracuse, New York, which firm has been the
Company's principal accountant for over 25 years. It is anticipated that a
representative of KPMG LLP will be present at the Annual Meeting of Shareholders
and will have an opportunity to make a statement and to answer questions of
Shareholders.
BOARD MEETINGS AND COMMITTEES
During the Company's last fiscal year, the Board of Directors of the
Company held 7 meetings. No current director attended fewer than 75% of the
aggregate number of meetings of the Board and of any Committees on which he
served during such period.
The Company's Compensation Committee consists of Dale F. Eck, Abraham
Manber and Dr. David Wilemon. The function of the Compensation Committee is to
recommend to the Board of Directors competitive compensation plans for officers
and key employees. During the fiscal year ended June 30, 1999, the Compensation
Committee held 2 meetings.
The Company's Audit Committee consists of Carl W. Gerst, Jr., Dale F.
Eck and Herbert I. Corkin. The function of the Audit Committee is to review the
Company's annual audit with the Company's independent accountant. During the
fiscal year ended June 30, 1999, the Audit Committee held 1 meeting.
The Company's Nominating Committee consists of Lawrence A. Sala and
Matthew Robison. David M. Ferrara, the Company's Secretary, serves as an ex
officio member of the Committee. The function of the Nominating Committee is to
make recommendations to the Board for nominees to serve as directors.
16
The Nominating Committee will consider written recommendations from Shareholders
for nominees to serve on the Board that are sent to the Secretary of the Company
at the Company's main office. During the fiscal year ended June 30, 1999, the
Nominating Committee held 2 meetings.
MISCELLANEOUS
Other Matters
As of the date of this Proxy Statement, management has no knowledge of
any business which will be presented for consideration at the Meeting other than
that described herein. Should any other matter properly come before the Meeting,
it is the intention of the persons named in the accompanying proxy to vote such
proxy in accordance with their best judgment.
Solicitation of Proxies
The entire expense of preparing, assembling and mailing the Proxy
Statement, form of proxy and other material used in the solicitation of proxies
will be paid by the Company. In addition to the solicitation of proxies by mail,
arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxy material to their principals, and the Company will
reimburse them for expenses in so doing. To the extent necessary to ensure
sufficient representation, officers and regular employees of the Company may
request, without additional compensation therefor, the return of proxies
personally by telephone or telegram. The extent to which this will be necessary
depends entirely on how promptly proxies are received, and Shareholders are
urged to send their proxies without delay.
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for inclusion in
the Company's Proxy Statement relating to the 2000 Annual Meeting of
Shareholders, such proposal must be received by the Company by June 1, 2000.
David M. Ferrara
Secretary
Date: September 29, 1999
Syracuse, New York
17
PROXY ANAREN MICROWAVE, INC. PROXY
6635 Kirkville Road
East Syracuse, New York 13057
THIS IS YOUR PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ANAREN MICROWAVE,
INC.
The undersigned hereby (1) acknowledges receipt of the notice of the Annual
Meeting of Shareholders of Anaren Microwave, Inc. (the "Company") to be held at
the Wyndam Hotel, 6302 Carrier Parkway, East Syracuse, New York on Tuesday,
November 2, 1999 at 11:00 A.M., local time and of the Proxy Statement in
connection therewith and (2) appoints Hugh A. Hair and Lawrence A. Sala and each
of them as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the shares
of common stock, $.01 par value, of Anaren Microwave, Inc. held of record by the
undersigned on September 10, 1999 at the Annual Meeting of Shareholders, or any
adjournment thereof. If any nominee for director should be unavailable to serve,
it is intended that all of the shares will be voted for such substitute nominee
as may be determined by the Board of Directors. The undersigned directs that
this Proxy be voted as follows:
ITEM 1: ELECTION OF DIRECTORS
For election to hold office for staggered terms or, if Item
Two is not approved, to hold office until the next annual
meeting of shareholders.
FOR all nominees listed below (except as marked to the contrary). [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below. [ ]
Nominees: Hugh A. Hair, Carl W. Gerst, Jr. Abraham Manber, Lawrence A. Sala,
Herbert I.Corkin, Dale F. Eck, David Wilemon, Matthew Robison and Brian P.Kelly.
(Instruction: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the above list.)
ITEM 2: APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO PROVIDE FOR
CLASSIFIED BOARD OF DIRECTORS AND RELATED MATTERS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
(Continued and to be dated and signed on the reverse)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, AND FOR ITEM 2.
IMPORTANT. Please sign exactly as name appears on this card. Each joint owner
should sign. Executors, administrators, trustees, etc. should give full title.
SIGNATURES:
Dated: __________________________, 19___
-----------------------------------------
Signature
-----------------------------------------
Please Print Name Here
-----------------------------------------
Signature
-----------------------------------------
Please Print Name Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
USING THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED.