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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Ortel Corporation
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
ORTEL CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 1997
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The 1997 Annual Meeting of the Stockholders of Ortel Corporation (the
"Company") will be held at 9:00 a.m., local time, on September 26, 1997, at the
offices of the Company at 2015 West Chestnut Street, Alhambra, California 91803,
for the following purposes:
1. To elect three directors to serve for a term of three years or until
their respective successors have been duly elected and qualified or
until they resign, become disqualified, disabled or are otherwise
removed;
2. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountants; and
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on August 4, 1997, of
the Company's Common Stock will be entitled to notice of, and to vote at, the
1997 Annual Meeting and any adjournment or postponement thereof.
By order of the Board of Directors,
Nadav Bar-Chaim
Vice President and Secretary
Alhambra, California
August 11, 1997
ORTEL CORPORATION
2015 WEST CHESTNUT STREET
ALHAMBRA, CALIFORNIA 91803
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 1997
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PROXY STATEMENT
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SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
Ortel Corporation (the "Company") for use at the 1997 Annual Meeting of
Stockholders (the "Meeting") to be held at the offices of the Company at 2015
West Chestnut Street, Alhambra, California 91803, on September 26, 1997, at 9:00
a.m., local time, and at any and all adjournments or postponements thereof.
All shares represented by each properly executed, unrevoked proxy received
in time for the Meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by the Company,
the proxy will be voted FOR (i) the election of the three nominees listed in the
proxy for election to the Board of Directors and (ii) the ratification of the
selection of KPMG Peat Marwick LLP.
Any stockholder has the power to revoke his or her proxy at any time before
it is voted. A proxy may be revoked by delivering a written notice of
revocation to the Secretary of the Company at the address set forth above, by
presenting at the Meeting a later-dated proxy executed by the person who
executed the prior proxy, or by attendance at the Meeting and voting in person
by the person who executed the proxy (although attendance at the Meeting will
not in and of itself constitute a revocation of a proxy).
This proxy statement is being mailed to the Company's stockholders on or
about August 11, 1997. The expense of soliciting proxies will be borne by the
Company. Expenses include reimbursement paid to brokerage firms and others for
their expenses incurred in forwarding solicitation material regarding the
Meeting to beneficial owners of the Company's Common Stock. Solicitation of
proxies will be made by mail. Further solicitation of proxies may be made by
telephone or oral communication with stockholders by the Company's regular
employees who will not receive additional compensation for the solicitation.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 11,539,593 shares of Common Stock outstanding
at the close of business on the record date, August 4, 1997, will be entitled to
notice of, and to vote at, the Meeting or any adjournment or postponement
thereof. On each matter to be considered at the Meeting, each stockholder will
be entitled to cast one vote for each share of Common Stock held of record by
such stockholder on August 4, 1997.
In order to constitute a quorum for the conduct of business at the Meeting,
a majority of the outstanding shares of the Common Stock entitled to vote at the
Meeting must be represented at the Meeting. Shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Meeting. Accordingly, abstentions or broker non-
votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. All other proposals to come before
the Meeting require the approval of a majority of the shares of stock having
voting power present. Abstentions as to a particular proposal will have the
same effect as votes against such proposal. Broker non-votes, however, will be
treated as unvoted for purposes of determining approval of such proposal and
will not be counted as votes for or against such proposal.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
The following table sets forth as of August 4, 1997, the amount and
percentage of the outstanding shares of the Common Stock which, according to the
information supplied to the Company, are beneficially owned by (i) each of the
directors of the Company (three of whom, Drs. Bar-Chaim and Tyler and Mr.
Iorillo, are also nominees for re-election as directors of the Company), (ii)
each of the Named Officers (as defined on page 5), (iii) all directors and
executive officers of the Company as a group and (iv) each person or entity who
is known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock. Except to the extent indicated in the footnotes to
the following table, each of the persons or entities listed has sole voting and
sole investment power with respect to the shares which are deemed beneficially
owned by such person or entity.
OUTSTANDING AGGREGATE PERCENT OF
OPTIONS OUTSTANDING SHARES OF
OUTSTANDING EXERCISABLE COMMON STOCK COMMON STOCK
COMMON WITHIN BENEFICIALLY BENEFICIALLY
STOCK(1) 60 DAYS OWNED(1) OWNED
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NAME OF BENEFICIAL OWNER(2):
- ----------------------------
Nadav Bar-Chaim.............................. 579,610 104,325 683,935 5.9%
Tatsutoku Honda(3)........................... 0 22,258 22,258 *
Anthony J. Iorillo........................... 0 38,908 38,908 *
Raymond H. Kaufman........................... 42,751 21,828 64,579 *
Hal M. Krisbergh............................. 0 20,430 20,430 *
William J. Moore(4).......................... 76,900 51,168 128,068 1.1 %
Wim H J. Selders(5).......................... 255,356 151,708 407,064 3.5 %
Wayne L. Tyler............................... 500 36,958 37,458 *
Israel Ury(6)................................ 579,360 75,075 654,435 5.6 %
Stephen K. Workman........................... 44,008 85,924 129,932 1.1%
Amnon Yariv(7)............................... 445,775 22,258 468,033 4.0%
Ronald L. Young.............................. 102,893 22,258 125,151 1.0%
All directors and executive officers as a 2,127,153
group (12 persons)........................ 653,098 2,780,251 22.8%
BENEFICIAL OWNERS-5% OR MORE:
Sumitomo Osaka Cement Co., Ltd.(8)........... 2,349,964 0 2,349,964 20.4%
1 Kanda, Mitoshiro-cho
Chiyoda-ku, Tokyo, 101
Japan
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* Represents ownership of less than 1.0%.
(1) Except for information based on Schedules 13G, as indicated in the
footnotes hereto, beneficial ownership is stated as of August 4, 1997.
(2) The address of the Directors and Officers is c/o Ortel Corporation, 2015
West Chestnut Street, Alhambra, California 91803-1542.
(3) Excludes 2,349,964 shares beneficially owned by Sumitomo Osaka Cement Co.,
Ltd. ("Sumitomo"). Dr. Honda was originally nominated to the Board of
Directors by Sumitomo. Dr. Honda has no voting or investment power with
respect to Sumitomo's shares.
(4) The outstanding shares are held in a family trust of which Mr. Moore is a
Trustee with shared voting and investment power.
2
(5) The outstanding shares are held in the Wim and Ella Selders Trust dated
February 12, 1992, of which Mr. Selders is trustee with shared voting and
investment power. Excludes 40,000 shares owned by The Selders Foundation,
a California nonprofit public benefit corporation. Mr. Selders is the
president of The Selders Foundation and shares voting and investment power.
(6) The outstanding shares are held in a family trust of which Dr. Ury is
trustee with shared voting and investment power.
(7) Also includes 13,500 shares held in a family trust of which Dr. Yariv is
trustee with sole voting and investment power.
(8) According to Schedule 13G filed by Sumitomo Osaka Cement Co., Ltd. on April
24, 1995.
REGISTRATION RIGHTS
The holders of approximately 6,200,000 shares of the Company's Common Stock
(the "Registrable Shares") are entitled to certain rights with respect to the
registration of such shares under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to certain agreements between the Company and the
parties thereto. If the Company proposes to register any of its Common Stock
under the Securities Act, certain holders of Registrable Shares are entitled to
require the Company to include all or a portion of their shares in such
registration, subject to certain marketing and other limitations. In certain
circumstances, the underwriters of such offering have the right to limit the
number of shares included in the registration. In addition, a percentage of the
holders of the Registrable Shares, either 40% or 50% depending on the terms of
the applicable agreement, may demand that the Company file a registration
statement under the Securities Act with respect to such Registrable Shares, on
one to four occasions depending on such agreement. The Company may, in certain
circumstances, defer such registration and the underwriters involved in such
registration have the right to limit the number of shares included in such
registration. In addition, certain holders may request, subject to certain
limitations, that the Company register such holders' shares on Form S-3 at such
time as that form may be used by the Company. All fees, costs and expenses of
all of such registrations, other than underwriting discounts, will be paid by
the Company.
3
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and titles of the executive
officers of the Company as of August 4, 1997.
NAME AGE POSITION
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Wim H.J. Selders 57 President and Chief Executive Officer
Douglas H. Morais 54 Executive Vice President
Nadav Bar-Chaim 51 Vice President, Device Structures and Materials and Secretary
William J. Moore 49 Vice President, Sales
Stephen K. Workman 46 Vice President, Finance, Chief Financial Officer and Treasurer
Israel Ury 41 Chief Technology Officer
Set forth below are descriptions of the backgrounds of the executive
officers of the Company and their principal occupations for the past five years.
For a description of the background of Mr. Selders and Drs. Ury and Bar-Chaim,
see "Proposal 1 - Election Of Directors." The Company is not aware of any
family relationships among any of its directors and executive officers.
Dr. Morais has served as the Company's Executive Vice President since
January, 1997. From February 1993 to December 1996, Dr. Morais served in
various management capacities at California Microwave, Inc., most recently as
Executive Vice President, Business Development and Technology. From October,
1992 to February 1993 Dr. Morais was engaged in private telecommunications
business development and investment. Prior to October 1992, Dr. Morais held
various management positions at Harris Corporation and Digital Microwave
Corporation, with his last position being President and Chief Operating Officer
of Digital Microwave Corporation. Dr. Morais received a B.S. in Electrical
Engineering from the University of Edinburgh in Scotland and an M.S. and Ph.D.,
also in Electrical Engineering, from the University of California at Berkeley
and the University of Ottawa, respectively. He is a senior member of the
Institute of Electrical and Electronic Engineers.
Mr. Moore has served as the Company's Vice President, Sales since September
1990. From September 1988 to September 1990, Mr. Moore served as Director of
Sales for the Company. Prior to September 1988, Mr. Moore held various sales
and marketing positions, with his last position being Corporate Marketing
Manager at Hewlett-Packard. Mr. Moore holds B.S.E.E. and M.S. Operations
Management degrees from Northrop University.
Mr. Workman has served as the Company's Vice President, Finance and Chief
Financial Officer since November 1989 and the Company's Treasurer since
September 1995. From November 1982 to November 1989, Mr. Workman held various
positions at Ibis Systems, a disk drive manufacturing company, most recently as
Controller. Prior to November 1982, Mr. Workman held various finance-related
positions with Ford Motor Company, Parsons Company, an engineering construction
company, and Tiger International, a transportation company. He holds a B.S.
degree in Engineering Science and an M.S. in Industrial Administration from
Purdue University.
4
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended April 30, 1997, 1996 and 1995 of those persons who were
either (i) the chief executive officer during the last completed fiscal year or
(ii) one of the other four most highly compensated executive officers of the
Company as of the end of the last completed fiscal year whose annual salary and
bonuses exceeded $100,000 (the "Named Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
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AWARDS AWARDS OF
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NAME AND FISCAL OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) (SHARES) COMPENSATION(3)
- ------------------ ------- -------- ----------- --------------- ---------- ---------------
Wim H.J. Selders 1997 $224,494 $110,000 -- 20,833 $11,139
President and Chief 1996 218,380 130,000 -- 29,000 10,643
Executive Officer 1995 211,275 195,000 -- 60,000 10,263
Nadav Bar-Chaim 1997 152,502 55,000 12,500 7,874
Vice President, Device 1996 147,108 64,000 -- 17,400 9,073
Structures and Materials 1995 144,116 98,000 -- 22,500 6,338
and Secretary
William J. Moore 1997 170,710 20,000 9,875 7,248
Vice President, Sales 1996 180,472 20,000 -- 13,700 5,830
1995 174,944 20,000 -- 13,500 5,027
Stephen K. Workman 1997 120,290 30,000 12,500 6,111
Vice President, Finance 1996 111,682 40,000 -- 17,400 5,933
and Chief Financial 1995 106,742 57,000 -- 13,500 4,398
Officer
Israel Ury 1997 152,502 55,000 12,500 6,757
Chief Technology Officer 1996 147,108 64,000 -- 17,400 8,103
1995 144,116 98,000 -- 22,500 4,945
(1) Represents bonuses earned during the fiscal year.
(2) Amounts of other annual compensation are not applicable because such
compensation did not exceed the lesser of $50,000 or 10% of the total
salary and bonus of the Named Officer.
(3) For fiscal year 1997, represents matching contributions paid by the Company
under the Company's 401(k) plan of $4,798, $4,782, $4,929, $4,513 and
$3,626 and reimbursements of life insurance premiums of $6,341, $1,975,
$2,945, $2,735 and $2,485 for Mr. Selders, Dr. Ury, Dr. Bar-Chaim, Mr.
Moore and Mr. Workman, respectively. For fiscal 1996 represents matching
contributions paid by the Company under the Company's 401(k) plan of
$4,666, $6,128, $6,128, $3,095 and $3,448 and reimbursements of life
insurance premiums of $5,977, $1,975, $2,945, $2,735 and $2,485 for Mr.
Selders, Dr. Ury, Dr. Bar-Chaim, Mr. Moore and Mr. Workman, respectively.
For fiscal year 1995 represents matching contributions paid by the Company
under the Company's 401(k) plan of $5,206, $3,105, $3,603, $2,542 and
$2,113 and reimbursements of life insurance premiums of $5,057, $1,840,
$2,735, $2,485 and $2,285 for Mr. Selders, Dr. Ury, Dr. Bar-Chaim, Mr.
Moore and Mr. Workman, respectively.
5
The following table sets forth certain information with respect to grants
of options to purchase shares of Common Stock under the Company's 1994 Equity
Participation Plan (the "1994 Plan") to the Named Officers during fiscal year
1997.
OPTION GRANTS IN LAST FISCAL YEAR(1)
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR BASE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE PER EXPIRATION -----------------------------
NAME (SHARES) YEAR SHARE DATE 5% 10%
- ------------------ ------- ------------- ---------------- ---------- -------- --------
Wim H.J. Selders 20,833 3.0% $24.00 06/07/06 $314,442 $796,858
Nadav Bar-Chaim 12,500 1.8 24.00 06/07/06 188,668 478,123
William J. Moore 9,875 1.5 24.00 06/07/06 149,048 377,717
Stephen K. Workman 12,500 1.8 24.00 06/07/06 188,668 478,123
Israel Ury 12,500 1.8 24.00 06/07/06 188,668 478,123
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(1) All options were granted under the 1994 Plan and become exercisable in four
equal annual installments beginning on the first anniversary date of grant.
Under the terms of the 1994 Plan, the Stock Option Committee retains
discretion, subject to certain restrictions, to modify the terms of
outstanding options and to reprice outstanding options. Options are
granted for a term of ten years, subject to earlier termination in certain
events. The exercise price is equal to the closing price of the Common
Stock on the Nasdaq National Stock Market on the date of grant.
(2) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are
provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on stock option exercises
are dependent upon the future financial performance of the Company, overall
market conditions and the option holders' continued employment through the
vesting period. This table does not take into account any appreciation in
the price of the Common Stock from the date of grant to the date of this
Proxy Statement other than the columns reflecting assumed rates of
appreciation of 5% and 10%.
6
The following table sets forth certain information with respect to the
exercise of stock options during fiscal 1997 and the unexercised options to
purchase shares of Common Stock held by the Named Officers as of April 30, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS AS OF IN-THE-MONEY OPTIONS AS OF
ON EXERCISE REALIZED(1) APRIL 30, 1997 APRIL 30, 1997 (2)
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(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ----------- -------------- --------------- ----------- -------------
Wim H.J. Selders 0 0 118,250 96,583 $903,000 $342,000
Nadav Bar-Chaim 5,000 35,000 86,350 51,050 702,000 175,500
William J. Moore 0 0 38,075 37,250 290,250 121,500
Stephen K. Workman 0 0 71,249 42,651 580,500 121,500
Israel Ury 5,000 42,500 56,850 50,550 434,500 173,000
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(1) Market value of underlying securities at exercise date minus the exercise
price.
(2) Based on the closing price of Common Stock on the Nasdaq National Stock
Market on April 30, 1997 ($13.00) minus the exercise price of the option.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, dated September 14,
1990, with Wim H.J. Selders, Israel Ury and Nadav Bar-Chaim, providing for
annual salaries that are subject to annual review by the Company's Board of
Directors and an annual increase not less than the Consumer Price Index of the
Bureau of Labor Statistics in return for their services as President and Chief
Executive Officer, Chief Technology Officer and Vice President, Device
Structures of the Company, respectively. Other benefits include an automobile
and, with respect to Mr. Selders, gross-up payments for taxes due upon exercise
of certain non-qualified stock options. Subject to certain limitations, each of
these employment agreements is automatically extended for an additional year
beyond the remaining year on September 1 of each year unless the Company has
given notice by March 1 of that year that it does not wish to extend the
agreement. Each of Mr. Selders', Dr. Ury's and Dr. Bar-Chaim's agreements also
contain a covenant to nominate them to the Board of Directors.
Each of Mr. Selders', Dr. Ury's and Dr. Bar-Chaim's employment agreements
provides that such executive officer may be terminated by the Company for gross
misconduct, willful neglect of duties or disability. The agreements may be
terminated with three months notice to the Company by such executive officers,
in the event of constructive termination or within six months of a change in
control of the Company. In the event that any of such executive officers'
employment is constructively terminated or terminated within six months of a
change in control of the Company, the officers may elect to be paid their
current salary and benefits for two years or to receive a lump sum payment of
85% of such amount. Additionally, such agreements provide for gross-up payments
to such executive officers in the event any parachute payment excise taxes under
the Internal Revenue Code of 1986, as amended, are levied upon the amounts paid
to such officers on termination.
The Company and Stephen K. Workman have entered into an agreement which
provides that in the event Mr. Workman is terminated within six months of a
change in control of the Company, Mr. Workman may elect to be paid his current
salary and benefits for two years or to receive a lump sum payment of 85% of
such amount. The agreement provides for gross-up payments to Mr. Workman in the
event any parachute payment excise taxes under the Internal Revenue Code of
1986, as amended, are levied upon the amounts paid to Mr. Workman on
termination.
7
COMPENSATION COMMITTEE REPORT ON COMPENSATION
To: Our Stockholders
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of directors who have never served as officers of the
Company. The Committee provides guidance and overview for all executive
compensation and benefit programs, including basic strategies and policies. The
Committee evaluates the performance of the executive officers and determines
their compensation levels in terms of salary, bonuses, stock options and other
benefits, all subject to approval of the Board of Directors.
COMPENSATION PHILOSOPHY
At the direction of the Board of Directors and pursuant to the charter
of the Compensation Committee, the Committee endeavors to ensure that the
compensation programs for executive officers of the Company are effective in
attracting and retaining key executives responsible for the success of the
Company, and are administered to support the long-term interests of the Company
and its shareholders. The Committee seeks to align total compensation for
senior management with corporate performance. Committee actions related to the
compensation of the Chief Executive Officer of the Company are submitted to the
full Board of Directors for ratification.
The Committee has established a number of objectives which serve as
guidelines in making all compensation decisions, including:
. Integrate compensations programs with the Company's strategic
directions in order to achieve its long-term strategic
objectives;
. Reward annual financial performance through bonus incentives that
reflect Company profitability and team and individual
performance, reinforcing the Company's unique corporate culture;
. Encourage consistent long-term enhancement of stockholder value
by providing multiyear performance incentives through equity
ownership through stock options; and
. Provide a competitive total compensation program which enables
the Company to attract and retain high caliber people, and reward
performance.
Each employee receives an annual performance appraisal based on
performance factors and the achievement of specific goals. The key performance
factors for executives include:
. Contributions to the Company's growth and profitability;
. Meeting the operating criteria of the executive's primary
function, including satisfaction of external and internal
customers;
. Contributions to the corporate culture, including cross-
functional teamwork, care, respect, training, empowerment and
actions to continually improve individual and team performance;
and
. Longer-term contributions, including meeting quarterly and annual
goals, implementing infrastructure for growth, contributing to
the five-year plan and overall excellence.
BASE SALARIES
The Company's basic compensation policy is to pay salaries that are at
the median level of the Company's industry group and size of firm, and to
provide variable performance-based incentive compensation through bonuses and
stock options. The Committee obtains current industry executive salary surveys
each year. The salaries are reviewed annually, and adjusted to reflect industry
changes and sustained individual performance.
8
ANNUAL BONUSES
The Board of Directors establishes an annual bonus pool as a
percentage of pretax profits. The Company then pays supplemental cash bonuses
from this bonus pool based on individual performance. Thus, employees have both
a team incentive to increase profits and reduce costs to increase the total
bonus pool, and an individual incentive to perform at the highest level. The
Committee obtains current industry surveys on executive bonuses.
STOCK OPTIONS
The Company uses stock options to provide long-term incentives for the
performance of the Company and key employees. Stock options are not only a tool
to optimize the Company's performance, but are also essential to attract and
maintain dynamic, talented professionals and managers in a rapidly evolving
company without a defined pension plan. Stock options provide the strong
incentive to work hard, be creative and be personally concerned about the
Company's sustained success.
The Company has established basic stock option grade levels for
managers and professionals, with target dollar amounts of stock options for each
level. The options are vested over as specified period, normally four to five
years, and the number of shares and price per share are determined by the
closing price on the National Stock Market on the designated date of grant. The
Committee approves the specific grants to individuals.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In establishing the fiscal 1998 compensation for the Company's Chief
Executive Officer and President, Mr. Wim H. J. Selders, the Committee followed
its established compensation philosophy and process described above. In
particular, the Committee noted that: (1) he maintained and expanded the
Company's strengths, despite an anticipated slowdown in domestic spending for
the broadband industry; and (2) increased investments in research and
development, and sales and marketing to position the Company to play a growing
role in the evolving broadband industry, as well as in the wireless industry for
the cost-effective deployment of PCS and other wireless networks. The Company's
revenues grew by 43% to $82.6 million and net income per share increased to
$.67. The Company continued to perform well compared to its peer group of
manufacturers.
Based on these results and other objectives pre-established for the
year, the Committee evaluated Mr. Selders' personal performance and applied an
appropriate performance multiplier to this industry average bonus factor and the
Board established bonus pool (approximately the same as last year), to determine
his bonus. Mr. Selders' fiscal year 1997 bonus, paid after the end of the
fiscal year, was $110,000, or 48.9% of his base salary, reflecting his
achievements during the year. The Company contributed $4,798 to Mr. Selders'
401(k) account, or 2.1% of his salary.
Based on the Company's above policy on base salaries, the Committee
increased Mr. Selders' base salary in fiscal year 1998 by 4%.
Compensation Committee:
Anthony J. Iorillo
Wayne L. Tyler
Ronald L. Young
Date: August 4, 1997
The above report of the Compensation Committee will not be deemed to
be incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates the same by
reference.
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, which is responsible for the compensation
policies of the Company with respect to its executive officers, is comprised of
Mr. Iorillo and Drs. Tyler and Young, none of whom are employees of the Company.
PERFORMANCE GRAPH(1)
The following line graph compares the quarterly cumulative total
stockholder return on the Common Stock against the Nasdaq Broad Market Index and
the Radio and Television Communications Equipment Industry Index for the period
from October 20, 1994 (the date of the Company's initial public offering) to
April 30, 1997.
Label A B C
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RADIO & TV COMM.
Label ORTEL CORPORATION EQUIP. INDUST. INDEX NASDAQ MARKET
- --------------------------------------------------------------------------------
1 1994 100.00 100.00 100.00
2 1995 109.62 99.54 102.95
3 1996 119.23 111.85 143.7
4 1997 100.00 97.51 153.17
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(1) Assumes $100 invested on October 20, 1994 and reinvestment of all
dividends. Also assumes the Company's initial public offering price was
the closing price on the day immediately prior to the Company's initial
public offering.
CERTAIN TRANSACTIONS
During fiscal 1997, the Company loaned $20,000 to Dr. Bar-Chaim in
connection with the exercise of 5,000 stock options at an exercise price of
$4.00 per share. This loan is full recourse and is secured by those shares of
Common Stock resulting from such exercise. The loan to this officer is payable
in full on March 7, 2001, with interest payable annually at a rate of 6.85% in
accordance with Internal Revenue Service guidelines on such loans.
During fiscal year 1996, the Company loaned $120,000 to each of Mr. Selders
and Dr. Ury in connection with the exercise of an aggregate of 60,000 stock
options at an exercise price of $4.00 per share. These loans were full recourse
and were secured by those shares of Common Stock resulting from such exercises.
The loans to these officers were payable in full on October 20, 1999, with
interest payable annually at a rate of 6.3% in accordance with Internal Revenue
Service guidelines on such loans. Mr. Selders repaid $75,000 of his outstanding
loan balance in December 1995 and repaid the remaining $45,000 of this loan
balance in July 1996. In July 1996, Dr. Ury repaid all of his outstanding loan.
10
As of August 4, 1997, the Company had outstanding loan balances of $20,000,
$150,000, $416,000 and $214,535 with Dr. Bar-Chaim, Mr. Selders, Mr. Moore and
Mr. Workman, respectively, related to the exercise of stock options and
alternative minimum taxes thereon. These loans are payable in full from April
19, 1999 to April 1, 2003, with interest payable annually at rates ranging from
5.07% to 7.34% according to IRS guidelines for such loans at the time they were
extended. The loans are full recourse and are secured by the underlying shares
of Common Stock resulting from such exercise totaling 5,000, 31,756, 76,900 and
44,008 shares for Dr. Bar-Chaim, Mr. Selders, Mr. Moore and Mr. Workman,
respectively.
The Company has entered into consulting agreements with Dr. Yariv for the
purpose of obtaining technical advice and counseling concerning systems,
components and markets relevant to the Company's business. In fiscal year 1997,
the Company paid Dr. Yariv $130,902 under these consulting agreements. See
"Proposal 1 - Election of Directors - Director Compensation."
SUMITOMO COMMON STOCK PURCHASE AGREEMENT AND RELATED AGREEMENTS
Pursuant to the Common Stock Purchase Agreement entered to in connection
with the purchase of 2,349,964 shares of Common Stock by Sumitomo in March 1990,
and as amended in July 1995, the Company granted to Sumitomo certain rights
including (i) the exclusive right to distribute Ortel standard products in
Japan, subject to meeting certain required targets, and (ii) if the Company
chooses to engage a manufacturing partner, the right of first refusal to
participate in the establishment of any manufacturing facility in Japan, Taiwan,
Singapore, Korea, Hong Kong, Australia, Indonesia, Thailand, Vietnam, Cambodia,
China, India, the Philippines or New Zealand and to be the majority joint
venture partner in any manufacturing facility in Japan. In addition, the
Company agreed to treat Sumitomo as a prime supplier, but not a sole supplier,
if Sumitomo is competitive with other Ortel vendors regarding price, performance
and other factors. The Company also agreed to reasonably consider joint
development projects with and paid for by Sumitomo, and support, to the extent
that the Company's resources are sufficient and capable of doing so, the sale of
Sumitomo products in the United States and Canada. These rights terminate if
Sumitomo holds less than 10% of the outstanding equity of the Company excluding
certain issuances of shares in which Sumitomo is not offered the right to
participate or sells any of its Common Stock of the Company to a competitor of
the Company. In addition, Sumitomo's rights terminate three years after a merger
of the Company or other such change of control. Dr. Honda, a director of the
Company, is an executive officer of Sumitomo.
In connection with Sumitomo's investment in the Company, Sumitomo and Wim
H.J. Selders, Amnon Yariv, Nadav Bar-Chaim and Israel Ury, all of whom are
directors or executive officers of the Company, have agreed not to acquire
additional shares of the Company's equity securities such that any such
stockholder would be able to elect a majority of the Board or would hold more
than 40% of the outstanding equity of the Company unless such stockholder
offered to purchase all of the outstanding equity securities of the Company at
either a price approved or accepted by the holders of at least two thirds of the
outstanding equity of the Company or a price equal to, or in excess of, the fair
market value of such securities, provided that such price was at least equal to,
or greater than, the greater of $6.00 per share or three times the book value of
such securities. The agreement terminates upon agreement of Sumitomo and the
stockholders party to such agreement.
COMPLIANCE WITH SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten (10)
percent of a registered class of the Company's equity securities (collectively,
"Insiders"), to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "Commission") and the
Nasdaq National Stock Market. Insiders are required by regulation of the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1997, or written representations from certain reporting
persons, the Company believes that its Insiders complied with all Section 16(a)
filing requirements, except that Mr. Morais failed to timely file his Form 3
upon appointment as Executive Vice President in January 1997.
11
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Company's By-Laws provide that the Board of Directors will consist of a
minimum of seven and maximum of eleven directors, divided into three classes.
The authorized number of directors is currently fixed at ten, with two classes
comprised of three directors and one class comprised of four directors. One
class is elected each year for a three-year term, expiring at the Annual
Meeting. The foregoing notwithstanding, directors will serve until their
successors have been duly elected and qualified, unless they resign, become
disqualified, disabled or are otherwise removed.
Each of the Company's three nominees for election to the Board of Directors
is currently serving as a director of the Company and was elected to his present
term of office by the stockholders of the Company. Directors will be elected by
a favorable vote of a plurality of the shares of voting stock present and
entitled to vote, in person or by proxy, at the Meeting. Accordingly,
abstentions or broker non-votes as to the election of directors will not affect
the election of the candidates receiving the plurality of votes. Unless
instructed to the contrary, the shares represented by the proxies will be voted
FOR the election of the three nominees named herein as directors. Although it
is anticipated that each nominee will be able to serve as a director, should any
nominee become unavailable to serve, the proxies will be voted for such other
person or persons as may be designated by the Company's Board of Directors.
Set forth below are the names and descriptions of the backgrounds of the
directors of the Company (including the nominees) and their principal
occupations for the past five years. Each of the nominees first became a
director of the Company in the year set forth below and has continually served
as a director of the Company since that date.
NOMINEES FOR ELECTION TO SERVE UNTIL 2000
NAME AGE POSITION
- ---- --- --------
Nadav Bar-Chaim 51 Director, Vice President and Corporate Secretary
Anthony J. Iorillo 59 Director
Wayne L. Tyler 60 Director
Dr. Bar-Chaim, a member of the Board of Directors of the Company since co-
founding the Company in April 1980, has served as the Company's Vice President,
Device Structures and Materials and Corporate Secretary since July 1980. Prior
to co-founding the Company, Dr. Bar-Chaim was a Research Fellow in Applied
Physics at the California Institute of Technology and an Electronics Instructor
and Teaching Assistance in Physics at Tel-Aviv University. Dr. Bar-Chaim holds
a Ph.D. in Electrical Engineering and an M.S. degree in Physics (solid state)
from Tel-Aviv University, and a B.S. in Mathematics and Physics from the Hebrew
University of Jerusalem.
Mr. Iorillo has served as a member of the Board of Directors of the Company
since April 1993. From July 1991 to May 1994, Mr. Iorillo served as a Senior
Vice President and President of the Telecommunications and Space Sector of
Hughes Aircraft Company. From 1986 to July 1991, Mr. Iorillo served as a Vice
President of Hughes. Mr. Iorillo joined Hughes in 1959 as a Hughes Masters
Fellow. He has also served as Chairman of the Board of Directors of American
Mobile Satellite Corporation, a satellite communications company, from April
1994 to August 1996. Mr. Iorillo has been Director of Electromagnetic Sciences
Corporation since 1995. Mr. Iorillo holds a B.S. degree in Mechanical
Engineering and an M.S. in Aeronautics from the California Institute of
Technology.
12
Dr. Tyler has served as a member of the Board of Directors of the Company
since October 1989. Dr. Tyler is co-owner of MESA Company, a consulting firm in
technology programs, and has served as senior engineer of MESA Company since
1985. From June 1981 to October 1984, Dr. Tyler served as Colonel and Chief
Executive of Advanced Technology Programs at the U.S. Air Force Weapons
Laboratory. Dr. Tyler served in many senior and staff positions in Air Force
units at several United States, European and Far Eastern locations from 1958 to
1984. Dr. Tyler holds M.S. and Ph.D. degrees in Industrial Engineering from
Stanford University, and a B.S. degree in Chemical Engineering from the
University of Wisconsin.
DIRECTORS CONTINUING TO SERVE UNTIL 1998
NAME AGE POSITION
- ---- --- --------
Wim H.J. Selders 57 Director, Chief Executive Officer and President
Amnon Yariv 67 Chairman of the Board
Raymond H. Kaufman 71 Director
Mr. Selders, a member of the Board of Directors of the Company since
September 1985, has served as the Company's Chief Executive Officer since
September 1985, and the Company's President since August 1986. From 1977 to
September 1986, Mr. Selders occupied various management positions at TEC
Incorporated, a manufacturer of computer peripherals and electronic components,
with his last position being Executive Vice President/General Manager. Mr.
Selders was educated in the Netherlands and holds degrees in computer
automation, business administration, and economics from AMBI, Praehep College,
and RRR College, respectively.
Dr. Yariv has served as Chairman of the Board of Directors of the Company
since co-founding the Company in April 1980. In 1964, Dr. Yariv joined the
California Institute of Technology, and in 1980 became the Thomas G. Myers
Professor of Electrical Engineering and Applied Physics at the California
Institute of Technology, a position he currently holds. Dr. Yariv is one of the
founders of the field of Optoelectronics and is a member of the National Academy
of Engineering as well as the National Academy of Sciences. He holds B.S., M.S.
and Ph.D. degrees in Electrical Engineering from the University of California,
Berkeley.
Dr. Kaufman has served as a member of the Board of Directors of the Company
since December 1981. Since 1973, Dr. Kaufman has been a Professor at Baylor
College of Medicine. From 1969 to January 1993, Dr. Kaufman served as Chairman
of the Department of Obstetric Gynecology at Baylor College of Medicine. He
holds an M.D. degree from the University of Maryland School of Medicine and had
his undergraduate schooling at the University of North Carolina and the College
of William and Mary.
DIRECTORS CONTINUING TO SERVE UNTIL 1999
NAME AGE POSITION
- ---- --- --------
Tatsutoku Honda 57 Director
Hal M. Krisbergh 50 Director
Israel Ury 41 Director, Chief Technology Officer
Ronald L. Young 58 Director
Dr. Honda has served as a member of the Board of Directors of the Company
since September 1990. Since June 1990, Dr. Honda has served as the Director and
General Manager of New Business Development at Sumitomo Osaka Cement Co., Ltd.,
a Japanese manufacturer of cement and related products. From October 1987 to
June 1990, Dr. Honda served as General Manager of the Optoelectronics
Development Department at Sumitomo Cement Co., Ltd. From February 1984 to
January 1987, Dr. Honda served as General Manager of the Development Department
of OITDA. Dr. Honda holds B.E. and Ph.D. degrees in Electrical Engineering from
Nihon University, Tokyo.
13
Mr. Krisbergh has served as a member of the Board of Directors of the
Company since August 1995. Since March 1995, Mr. Krisbergh has served as
Chairman and Chief Executive Officer of WorldGate Communications, Inc., a
supplier of Internet access equipment. From 1981 until 1994, Mr. Krisbergh held
various positions at General Instrument Corporation, the world's largest
supplier of broadband telecommunications equipment for the cable TV, satellite
and telephone industries, his last position being that of Corporate Vice
President. Mr. Krisbergh holds a Master's Degree in Business Administration with
honors from Boston University and an undergraduate degree in Electrical
Engineering from The City College of New York. Mr. Krisbergh also serves on the
boards of Digital Cable Radio, Next Level Communications and AM Communications.
Dr. Ury, a member of the Board of Directors of the Company since co-
founding the Company in April 1980, has served as the Company's Chief Technology
Officer since September 1985. From April 1980 to August 1986, Dr. Ury served as
the Company's President and Chief Financial Officer. Prior to co-founding the
Company, Dr. Ury was a Research Assistant in Applied Physics at the California
Institute of Technology. Dr. Ury holds a Ph.D. in Applied Physics from the
California Institute of Technology and M.S. and B.Sc. degrees in Engineering
from the University of California, Los Angeles.
Dr. Young has served as a member of the Board of Directors of the Company
since December 1981. Since 1975, Dr. Young has served as an Associate Professor
at Baylor College of Medicine. Dr. Young holds M.D. degrees from Baylor College
of Medicine and the University of Basel, Switzerland and degrees from the
University of Rhode Island and Cornell University.
The Company is not aware of any family relationships among any of the
foregoing directors and its executive officers. The Certificate of
Incorporation and Bylaws of the Company contain provisions eliminating or
limiting the personal liability of directors for violations of a director's
fiduciary duty to the extent permitted by the Delaware General Corporation Law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
April 30, 1997. Each director attended at least 70% of the aggregate of the
total number of meetings of the Board of Directors held during fiscal 1997 and
the total number of meetings held during fiscal 1997 by all committees of the
Board of Directors on which that director served.
The Company has standing Audit, Compensation and Nominating Committees.
During fiscal 1997, Drs. Tyler and Kaufman comprised the Audit Committee. The
Audit Committee met four times during the fiscal year ended April 30, 1997. The
Audit Committee's responsibilities include recommending the selection of the
Company's independent public accountants to the Board of Directors, reviewing
the plans and results of the audit engagement with the independent public
accountants and management, approving professional services provided by the
independent public accountants, reviewing the adequacy of the Company's internal
accounting controls, reviewing the independence of the independent public
accountants and considering the range of audit and non-audit fees charged by the
independent public accountants. During fiscal 1997, Mr. Iorillo and Drs. Tyler
and Young comprised the Compensation Committee. The Compensation Committee met
two times during fiscal 1997. The Compensation Committee's responsibilities
include reviewing and approving the compensation of the Company's directors,
officers and employees and administering the Company's Stock Option Plans. The
Nominating Committee, comprised of Messrs. Selders and Iorillo and Dr. Yariv,
met once during fiscal 1997. The Nominating Committee's responsibilities
include nominating and screening candidates for the Board of Directors, training
and orienting members of the Board of Directors, evaluating the performance of
the Board of Directors and overseeing general coordination of the Board of
Directors' agenda and meeting schedules and committee membership.
DIRECTOR COMPENSATION
Each non-employee director of the Company except Dr. Yariv is entitled to
receive compensation of $500 for each Board of Directors meeting attended. Drs.
Tyler and Iorillo and Mr. Krisbergh are each entitled to receive on an annual
basis $13,000 for serving on the Company's Board of Directors. Each member of
the Audit and Compensation Committees is entitled to receive $500 for each
committee meeting attended on a day the Board of Directors is not
14
otherwise meeting. Each director is reimbursed for certain expenses incurred in
connection with attendance at Board of Directors and committee meetings. Prior
to the 1997 Annual Meeting, each non-employee director received an annual grant
of non-qualified stock options to purchase 1,720 shares of the Company's Common
Stock pursuant to the 1994 Plan. The number of shares of this annual grant is
based on $40,000 divided by the closing price of the Company's Common Stock on
the date of grant.
The Company has entered into consulting agreements with Dr. Yariv, dated as
of March 2, 1990, as amended, and January 3, 1994, for the purpose of obtaining
technical advice and counseling concerning systems, components and markets
relevant to the Company's business. Telor Corporation, a company owned by Dr.
Yariv, is paid $10,960 per month for his services under these agreements. The
agreements are renewable annually for a yearly term expiring on June 10th of the
following year. In fiscal year 1997, the Company paid Dr. Yariv $130,902 under
these consulting arrangements.
In addition, certain of the Company's directors who are also employees of
the Company are party to employment agreements with the Company. See "Executive
Compensation--Employment Agreements."
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP, the Company's independent public
accountants for the fiscal year ended April 30, 1997, was selected by the Board
of Directors, upon recommendation of the Audit Committee, to act in the same
capacity for the fiscal year ending April 30, 1998, subject to ratification by
the stockholders by an affirmative vote of a majority of the outstanding shares
of the Company's Common Stock present or represented at the Meeting. Neither
the firm nor any of its members has any relationship with the Company or any of
its affiliates, except in the firm's capacity as the Company's independent
public accountants.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting and will have the opportunity to make statements if they so desire and
respond to appropriate questions from the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Company, at the address of the Company set forth on the first
page of this Proxy Statement, by April 15, 1998 if they are to be considered for
possible inclusion in the Proxy Statement and form of proxy used in connection
with such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters which may be presented for consideration at the Meeting. However,
if any other matter is presented properly for consideration and action at the
Meeting, or any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
Nadav Bar-Chaim
Vice President and Secretary
Dated: August 11, 1997
15
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ORTEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 26, 1997
The undersigned hereby appoints Wim H. J. Selders and Nadav Bar-Chaim and
each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes either of them to act and vote at the annual meeting of
stockholders of Ortel Corporation ("Ortel") to be held on September 26, 1997,
and at any adjournments or postponements thereof, as indicated upon all matters
referred to on this proxy card and described in the Proxy Statement for the
meeting, and, in their discretion, upon any other matters which may properly
come before the meeting.
Shares represented by all properly executed proxies will be voted in
accordance with the instructions appearing on this proxy card and in the
discretion of the proxy holders as to any other matter that may properly come
before the meeting. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE
VOTED FOR ITEMS 1 AND 2.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ORTEL CORPORATION
SEPTEMBER 26, 1997
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
WITHHOLD
FOR ALL AUTHORITY
NOMINEES FOR ALL NOMINEES
1. Elect members [ ] [ ] Nominees: Nadav Bar-Chaim
of the Ortel Anthony J. Iorillo
Board of Wayne L. Tyler
Directors.
(Instruction: To WITHHOLD AUTHORITY to vote for any
Individual nominee, draw a line through (or otherwise
strike out the nominee's name in the list at right.)
- -----------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the selection of KPMG Peat [ ] [ ] [ ]
Marwick LLP as Ortel's independent
public accountants.
Signature(s) Date:
---------------------------------------------- ----------------
NOTE: Please sign as name(s) appears on this proxy card, and date this proxy
card. If a joint account, each joint owner must sign. If signing for a
corporation or a partnership as agent, attorney or fiduciary, indicate the
capacity in which you are signing.
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