SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)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)(1) 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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(3) Filing Party:
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(4) Date Filed:
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ORTEL CORPORATION
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 24, 1999
--------------------------
The 1999 Annual Meeting of the Stockholders of Ortel Corporation (the
"Company") will be held at 9:00 a.m., local time, on September 24, 1999, at The
Ritz-Carlton, Huntington Hotel located at 1401 South Oak Knoll Avenue, Pasadena,
California 91106, 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 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 July 30, 1999, of
the Company's Common Stock will be entitled to notice of, and to vote at, the
1999 Annual Meeting and any adjournment or postponement thereof.
By order of the Board of Directors,
/s/ Nadav Bar-Chaim
Nadav Bar-Chaim
Secretary
Alhambra, California
August 18, 1999
Ortel Corporation
2015 West Chestnut Street
Alhambra, California 91803
ANNUAL MEETING OF STOCKHOLDERS
September 24, 1999
-------------------------------
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 1999 Annual Meeting of
Stockholders (the "Meeting") to be held at The Ritz-Carlton, Huntington Hotel
located at 1401 South Oak Knoll Avenue, Pasadena, California 91106, on September
24, 1999, 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 LLP as the Company's independent public accountants.
Each 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 Company's 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 18, 1999. 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 12,002,296 shares of Common Stock outstanding
at the close of business on the record date, July 30, 1999, 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 July 30, 1999.
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 present in person
or represented by proxy at the Meeting and entitled to vote on the proposal. In
such case, abstentions as to a particular proposal will have the same effect as
votes against such proposal, and broker non-votes will be treated as not
entitled to vote on the proposal and therefore will not be counted as votes for
or against such proposal.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
The following table sets forth as of July 30, 1999, 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, Messrs. Gaulding, Honda and Nussbaum
are also nominees for re-election as directors of the Company), (ii) each of the
Named Officers (as defined on page 6), (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
Name of Beneficial Owner: Stock(1) 60 Days Owned(1) Owned(1)
- ------------------------- -------------- ----------- --------------- ---------------
Nadav Bar-Chaim(2)........................... 560,437 111,383 671,820 5.5%
John R. Gaulding............................. 0 0 0 *
Roger T. Hay................................. 0 0 0 *
George B. Holmes............................. 7,500 3,883 11,383 *
Tatsutoku Honda(3)........................... 0 28,971 28,971 *
Anthony J. Iorillo........................... 7,000 43,771 50,771 *
Douglas H. Morais............................ 0 15,806 15,806 *
Luther J. Nussbaum........................... 0 0 0 *
Stephen R. Rizzone(4)........................ 0 0 0 *
Wim H.J. Selders(5).......................... 250,356 269,873 520,193 4.2%
Wayne L. Tyler............................... 12,392 16,971 29,363 *
Israel Ury(6)................................ 565,860 73,859 639,719 5.3%
Amnon Yariv(7)............................... 421,775 28,971 450,746 3.7%
Ronald L. Young.............................. 102,893 28,971 131,864 1.1%
All directors and executive officers as a
group (18 persons).......................... 2,017,113 677,279 2,694,392 22.3%
Beneficial Owners-5% or more:
Sumitomo Osaka Cement Co., Ltd(8)............ 2,349,964 0 2,349,964 19.6%
1 Kanda, Mitoshiro-cho
Chyioda, Tokyo, 101
Japan
PRIMECAP Management Company(9)............... 1,089,000 0 1,089,000 9.1%
225 So. Lake Avenue, #400
Pasadena, CA 91101-3005
BankAmerica Corporation(10).................. 626,650 0 626,650 5.2%
100 North Tryon St.
Charlotte, N.C. 28255
* 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 July 30, 1999, and as to any
person, includes shares exercisable with 60 days after July 30, 1999 held by
such person as if such shares were outstanding on July 30, 1999.
2
(2) Includes 7,700 shares owned by Dr. Bar-Chaim's children, which Dr. Bar-
Chaim may be deemed to beneficially own.
(3) Excludes 2,349,964 shares beneficially owned by Sumitomo Osaka Cement Co.,
Ltd. ("Sumitomo"). See footnote (8). Dr. Honda was originally nominated to
the Company's Board of Directors by Sumitomo and currently serves as the
Director and General Manager of New Business Development at Sumitomo. Dr.
Honda has no voting or investment power with respect to Sumitomo's shares.
(4) Excludes 600,000 shares subject to options granted June 18, 1999, since the
first installment of these options vests June 18, 2000.
(5) The outstanding shares are held in the Wim and Ella Selders Trust dated
February 12, 1992, of which Mr. Selders is a 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.
Reflects accelerated vesting of options that occurred in connection with
Mr. Selders' retirement from the Company.
(6) The outstanding shares are held in a family trust of which Dr. Ury is a
trustee with shared voting and investment power.
(7) Includes 13,500 shares held in a family trust of which Dr. Yariv is a
trustee with sole voting and investment power.
(8) According to Schedule 13G filed by Sumitomo Osaka Cement Co., Ltd. on April
24, 1995.
(9) According to Schedule 13G filed by PRIMECAP Management Company ("PRIMECAP")
on February 11, 1999, PRIMECAP has sole voting and dispositive power as to
379,000 shares, and shared dispositive power as to 710,000 shares.
(10) According to Schedule 13G filed by BankAmerica Corporation ("BankAmerica")
and its subsidiaries on January 29, 1999, BankAmerica has shared voting
power and dispositive power over all of these shares as a result of
BankAmerica being the direct or indirect parent company of the following
holders: (i) TradeStreet Investment Associates has sole voting and
dispositive power as to 546,600 shares; (ii) NationsBank NA has sole voting
and dispositive power as to 74,400 shares; and (iii) Bank of America NT&SA
has sole voting and dispositive power as to 5,650 shares.
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 July 30, 1999.
Name Age Position
- ---- --- --------
Stephen R. Rizzone 50 President, Chief Executive Officer and Chairman of the Board
George M. Pontiakos 40 Senior Vice President, Operations
Nadav Bar-Chaim 53 Senior Vice President, Engineering and Secretary
Sandra A. Caraveo 57 Vice President, Human Resources
Roger Hay 50 Vice President, Finance, Chief Financial Officer and Treasurer
George B. Holmes 36 Vice President, Worldwide Sales
William J. Moore 51 Vice President, Strategic Business Development
Jeffrey S. Rittichier 39 Vice President, Marketing
Israel Ury 43 Chief Technology Officer
Wim H.J. Selders, the former President and Chief Executive Officer of the
Company, retired from his service as an officer and a director of the Company
effective July 16, 1999. Stephen K. Workman served as the Vice President,
Finance, Chief Financial Officer and Treasurer of the Company until March 5,
1999. Douglas H. Morais served as an executive officer of the Company until
June 4, 1999. Lyle Boarts served as the Vice President, Administration of the
Company until July 30, 1999. The Company is not aware of any family
relationships among any of its directors and executive officers.
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. Rizzone and Dr. Bar-Chaim, see
"Proposal 1--Election Of Directors."
Mr. Pontiakos has served as the Company's Senior Vice President, Operations
since June 18, 1999. From July 1996 to June 1999, Mr. Pontiakos served as
Senior Vice President, Product Development and Operations of NetVantage, a
provider of ethernet workgroup switches to the OEM marketplace. Mr. Pontiakos
served as Vice President and General Manager of Wavetek, Inc., a test and
measurement manufacturer for commercial and military applications, from January
1995 to July 1996, and as LAN Business Unit Director of AscomTimeplex, Inc., a
manufacturer of local and wide area network data communication equipment, from
February 1988 to January 1995. Prior to 1988, Mr. Pontiakos held various senior
management positions with Rowe International, a provider of commercial vending
equipment, GMI Electronics, a provider of contract manufacturing services, and
ITT Avionics, a provider of electronic warfare to the U.S. government. Mr.
Pontiakos holds a B.S. in Business Management from Fairleigh Dickinson
University.
Ms. Caraveo has served as the Company's Vice President, Human Resources
since August 2, 1999. Prior to her service with the Company, Ms. Caraveo served
as the Western Division Director of Human Resources for Cabletron Systems, a
provider of networking and communication solutions from September, 1998 to July
1999. Prior to Cabletron Systems, Ms. Caraveo served as Director, Human
Resources for NetVantage, Inc., a subsidiary of Cabletron Systems, from March
1997 to September 1998. Ms. Caraveo also served six years in human resources
management with Xircom, Inc., a manufacturer and OEM supplier of connectivity
solutions for mobile computing. Ms. Caraveo holds a B.S. in Business Management
from the University of Phoenix.
4
Mr. Hay has served as the Company's Vice President, Finance, Chief
Financial Officer and Treasurer since March 8, 1999. From December 1997 to
March 1999, Mr. Hay served as Vice President and Chief Financial Officer of
Eltron International, a manufacturer and distributor of bar code label and card
printers. Mr. Hay served as Executive Vice President Finance and Chief
Financial Officer of Pinnacle Micro, a manufacturer of external disk drives,
from June 1996 to August 1997, as Senior Vice President Finance and Chief
Financial Officer of Titan Corporations, a provider of information systems, from
January 1994 to June 1996, and as Executive Vice President, Finance and Chief
Financial Officer of International Rectifier, a provider of semiconductors, from
October 1989 until December 1993. Prior to 1993, Mr. Hay held various
accounting and financial management positions with computer and peripheral
equipment manufacturers. Mr. Hay holds a B.S. in Accounting from the Dundee
College of Commerce, Dundee, Scotland and is a Fellow of the Institute of
Financial Accountants.
Mr. Holmes has served as the Company's Vice President, Worldwide Sales
since November 1997 and was promoted to an executive officer in June 1998. From
July 1997 to November 1997, Mr. Holmes served as the Company's Vice President of
Broadband Sales. From November 1996 to June 1997, Mr. Holmes was the Vice
President of Worldwide Sales for Aval Communications, a wireless base station
company. From August 1994 to November 1996, Mr. Holmes was the Vice President
of Worldwide Sales for Level One Communications, a communications and
semiconductor company. Prior to 1994, Mr. Holmes held various sales, marketing,
operations and finance positions with SymmetriCom, with his last position being
Assistant Vice President of Business Development. Mr. Holmes holds a B.A. in
Business from the University of Puget Sound and a diploma in International
Business from Nijenrode University in The Netherlands.
Mr. Moore has served as the Company's Vice President, Strategic Business
Development since June 1999, and from January 1998 until June 1999, he served as
Vice President and General Manager of the Broadband Business Group. From
September 1990 to January 1998, Mr. Moore served as the Company's Vice
President, Sales. 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. Rittichier joined the Company in April 1999 as the Vice President of
Marketing for Broadband Communications, and was promoted to Vice President of
Marketing in July 1999. From June 1994 to April 1999, Mr. Rittichier held
various management positions, including Director of Marketing and Sales and
Director of Manufacturing, for Etec Systems, a manufacturer of semiconductor
generators and laser direct imaging systems. From April 1991 to June 1994, Mr.
Rittichier held various management positions with Cymbolic Sciences
International, a manufacturer of imagining equipment, and from April 1990 to
April 1991, Mr. Rittichier was Vice President of Marketing for GTX Corporation,
a developer of CAD and document management software. From June 1984 to April
1990, Mr. Rittichier held various management positions with Gerber Systems Corp,
a manufacturer of equipment for imaging and machine vision applications. Prior
to 1984, Mr. Rittichier was a sales engineer with Hewlett Packard. Mr.
Rittichier holds a B.S.M.E. from Ohio State University.
Dr. Ury has served as the Company's Chief Technology Officer since
September 1985. Dr. Ury has also been a member of the Board of Directors of the
Company since co-founding the Company in April 1980. 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.S.
degrees in Engineering from the University of California, Los Angeles.
5
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, 1999, 1998, and 1997 of those persons who were
either (i) the chief executive officer during the last completed fiscal year,
(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, or (iii) any other executive officer who would have
qualified under sections (i) or (ii) of this paragraph but for the fact that the
individual was not serving as an executive officer of the Company at the end of
the 1999 fiscal year (collectively, the "Named Officers"):
Summary Compensation Table
Long-term
Annual Compensation Compensation
------------------- --------------
Name and Fiscal Awards of Stock All Other
Principal Position Year Salary(1) Bonus Options(#)(2) Compensation(3)
- ------------------ -------------- ---------------- ----------------- ------------------ ------------------
Wim H.J. Selders,(4) 1999 $271,432 $ 0 90,160 $ 14,237
President and Chief 1998 235,108 25,000 24,793 14,364
Executive Officer 1997 224,494 110,000 20,833 11,139
George B. Holmes,(5) 1999 275,826 0 90,884 30,724
Vice President,
Worldwide Sales
Douglas H. Morais,(6) 1999 233,904 0 50,000 8,306
President, Wireless Group 1998 225,000 9,000 6,612 181,352
1997 64,038 0 100,000 11,561
Nadav Bar-Chaim, 1999 179,745 0 60,310 7,971
Senior Vice President 1998 158,362 12,500 14,876 7,962
and Secretary 1997 152,502 55,000 12,500 7,874
Israel Ury, 1999 169,644 0 50,213 6,671
Chief Technology Officer 1998 158,362 10,000 14,876 6,977
1997 152,502 55,000 12,500 6,757
- --------------------------
(1) Amounts include commission-based compensation.
(2) Includes options granted in connection with the cancellation of existing
options with an exercise price in excess of $13.00 for options granted at
the fair market value on the date of cancellation, December 14, 1998, of
$9.625. See "Board of Directors Report on Repricing."
(3) For fiscal year 1999, represents matching contributions paid by the Company
under its 401(k) Plan of $5,476, $4,152, $5,216, $4,806, $4,491 and
reimbursements of life insurance premiums of $8,761, $1,017, $3,090, $3,165,
$2,180 for Messrs. Selders, Holmes and Morais and for Drs. Bar-Chaim and
Ury, respectively. For fiscal year 1998, represents matching contributions
paid by the Company under its 401(k) plan of $4,820, $1,731, $4,797, and
$4,797, and reimbursements of life insurance premiums of $9,544, $3,075,
$3,165 and $2,180 for Messrs. Selders and Morais and for Drs. Bar-Chaim and
Ury, respectively. For fiscal year 1997, represents matching contributions
paid by the Company under its 401(k) plan of $4,798, $0, $4,929, and $4,782,
and reimbursements of life insurance premiums of $6,341, $0, $2,945, and
$1,975 for Messrs. Selders and Morais and for Drs. Bar-Chaim and Ury,
respectively. Includes $25,555 in relocation expenses paid in fiscal 1999
for Mr. Holmes, and $176,546 in relocation expenses paid in fiscal 1998 to
Mr. Morais.
(4) Mr. Selders retired from employment with the Company effective July 16,
1999.
(5) Mr. Holmes was promoted to an executive officer in June 1998; compensation
reported is for the full fiscal year commencing May 1, 1998.
(6) Mr. Morais became an employee and executive officer in January 1997;
compensation reported includes the full fiscal year ended April 30, 1997.
6
The following table sets forth certain information with respect to grants
of options to purchase shares of Common Stock under the Company's 1994 Equity
Participation Plan, as amended (the "1994 Plan") to the Named Officers during
fiscal year 1999.
Option Grants in Fiscal Year 1999(1)
Percentage of Potential Realizable Value at
Total Options Assumed Annual Rates of Stock
Granted to Exercise or Price Appreciation
Options Employees Base for Option Term(2)
Granted in Fiscal Price per Expiration -------------------------------
Name (Shares) Year Share ($) Date 5% 10%
- ---- ------- ------------- ------------- ---------- ------------ ------------
Wim H.J. Selders 15,534 0.6% $12.875 06/05/08 $125,779 $ 318,749
74,626 3.1 9.625 12/14/08 451,719 1,144,746
George B. Holmes 15,534 0.6 12.875 06/05/08 125,779 318,749
50,350 2.1 9.625 12/14/08 304,774 772,357
25,000 1.0 8.00 12/29/08 125,779 318,748
Douglas H. Morais 50,000 2.1 9.625 12/14/08 302,656 766,989
Nadav Bar-Chaim 15,534 0.6 12.875 06/05/08 125,779 318,749
44,776 1.9 9.625 12/14/08 271,034 686,854
Israel Ury 5,437 0.2 12.875 06/05/08 44,023 111,564
44,776 1.9 9.625 12/14/08 271,034 686,854
- --------------------
(1) Includes options granted in connection with the cancellation of existing
options with an exercise price in excess of $13.00 for options granted at
the fair market value on the date of cancellation, December 14, 1998, of
$9.625. See "Board of Directors Report on Repricing." All options were
granted under the 1994 Plan and, except for the repriced options, become
exercisable in four equal annual installments beginning on the first
anniversary date of grant. The vesting schedule for the repriced options is
delayed one year from the original vesting schedule, provided, however, that
no options may be exercise prior to December 14, 1999, except in the case of
death, disability or retirement. 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 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%.
7
The table below sets forth certain information with respect to the exercise
of stock options during fiscal 1999 and the unexercised options to purchase
shares of Common Stock held by the Named Officers as of April 30, 1999.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of Securities Underlying Value of Unexercised
Unexercised Options as of In-the-Money Options as of
Acquired April 30, 1999 April 30, 1999(2)
on Exercise Value -------------------------------- ----------------------------
(Shares) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
------------ ----------- --------------- -------------- ------------ -------------
Wim H.J. Selders 0 0 165,000 90,160 $288,750 $0
George B. Holmes 0 0 0 90,884 0 0
Douglas H. Morais 12,500 $62,663 14,153 79,959 0 0
Nadav Bar-Chaim 0 0 103,001 64,809 233,750 0
Israel Ury 0 0 72,500 50,213 137,500 0
- -----------------------------------
(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 Market on
April 30, 1999 ($6.75) minus the exercise price of the option.
Employment Agreements
The Company previously entered into an employment agreement dated September
14, 1990 with Wim H.J. Selders which has been superceded by an Agreement dated
June 25, 1999. This Agreement was entered into in connection with Mr. Selders
retirement from the Company and provides, in material part, for the (i) payment
of severance to Mr. Selders in the amount of two years of base salary
($530,025), plus automobile allowance ($28,800) and the value of 401(k) Company
matching contributions ($8,000), (ii) the continuation of health and life
insurance benefits for two years, (iii) the forgiveness of Mr. Selders'
outstanding promissory note to the Company, obtained in connection with option
exercises, in the principal amount of $150,000, (iv) the acceleration of vesting
and extension of the exercise period to the remainder of the option term for all
options granted to Mr. Selders after November 1994, (v) the extension of a five-
year, interest-free, secured, recourse loan to Mr. Selders to be used in
connection with his exercise of options granted before November 1994, and (vi)
reimbursement of taxes incurred by Mr. Selders in connection the exercise of
options granted before November 1994 and the cancellation of the promissory note
referenced above.
The Company entered into employment agreements, dated September 14, 1990,
with 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, plus provision of an automobile allowance. 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 these employment agreements also 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.
Each of the Company's key employees, including Mr. Holmes, entered into a
letter agreement with the Company upon commencement of employment, providing
generally for base salary, relocation expenses, commission compensation (if
applicable), stock option awards, fringe benefits, and conflicts of interest and
confidentiality agreements. In addition, Dr. Morais has a letter agreement with
the Company entitling him to certain incentive payments tied to his services as
President of, and the sale of, the Company's Wireless Group.
8
The Company has entered into separate severance agreements with its
executive officers, including Messrs. Holmes and Morais, which, in each case,
provides that in the event the executive officer is terminated within six months
of a change in control of the Company, he 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 agreements also provide for gross-up payments to the 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 them on
termination.
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.
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 compensation 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 multi-year performance incentives through equity ownership
using stock options; and
. Provide a competitive total compensation program which enables the
Company to attract and retain high caliber people, and reward
performance.
Each executive 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.
9
Base Salaries. The Company's basic compensation policy is to pay salaries
that are at the mean 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.
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 which increases the total
bonus pool, and an individual incentive to perform at the highest level. The
Committee obtains current industry surveys on executive bonuses. No bonuses were
paid for fiscal 1999.
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 a specified period, normally four to five years, and
the number of shares and price per share are determined by the closing price on
the Nasdaq National Market on the designated date of grant. The Committee
oversees the specific grants to individuals.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
of 1986, as amended, currently imposes a $1 million limitation on the
deductibility of certain compensation paid to the Company's five highest paid
executives. Excluded from the limitation is compensation that is "performance
based." For compensation to be performance based, it must meet certain criteria,
including being based on predetermined objective standards approved by
stockholders. The Committee intends to design the Company's compensation to
conform to Section 162(m) of the Code and related regulations so that total
compensation paid to any employee will not exceed $1 million in any one year,
except for compensation payments which qualify as "performance based." The
Company may, however, pay compensation which is not deductible when sound
management of the Company so requires.
Compensation of the Chief Executive Officer
In establishing the fiscal 1999 compensation for the Company's then Chief
Executive Officer and President, Wim H.J. Selders, the Committee followed its
established compensation philosophy and process described above. The Committee
noted the Company's results for fiscal year 1998. They also noted his several
initiatives to focus and adapt the Company's strengths to the very dynamic
market conditions of fiscal year 1998. These included a continued delay in the
ramp-up of domestic spending for the broadband industry, and a sudden downturn
in the Asian economies that adversely impacted the Company's international
sales. The continued investment in research and development, roll-out of new
broadband products, improvements in the international marketing and sales
structure, and new strategic partnerships should position the Company for a
strong market position in high bandwidth analog and digital communications links
for the broadband cable television and telecommunications industries. He
focused corporate development on the Company's core strengths as a technological
leader in innovative products. The Company performed well compared to its peer
group of manufacturers. Based on the foregoing, the Committee increased Mr.
Selders' base salary for fiscal year 1999 by 12.1%, bringing his salary
approximately to the industry mean found in the executive salary survey.
To establish the fiscal 2000 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 February
1999, the Company announced that Mr. Selders intended to retire from the
Company, and the board of directors began a search for his replacement. As a
result, no change was made to Mr. Selder's base salary for fiscal year 2000. On
June 18, 1999, the Company hired Stephen R. Rizzone as its Chief Executive
Officer, President and Chairman of the Board. Mr. Selders retired effective July
16, 1999.
10
There was no bonus pool created in fiscal year 1999 due to the company's
financial performance. Accordingly no bonus was paid to Mr. Selders, compared
to a $25,000 bonus or 10.6% of his base salary for fiscal 1998. The Company
contributed $5,476 to Mr. Selders' 401(k) account, or 2% of his salary.
In connection with his employment, Mr. Rizzone received a non-qualified
stock option to purchase 600,000 shares of the Company's common stock, with an
exercise price per share equal to $9.4375. These options were not granted under
the Company's 1994 Equity Participation Plan, but under a separate agreement
with Mr. Rizzone. As a result, these options do not qualify for the
"performance based" exception to Internal Revenue Code Section 162 (m)
limitations on deductions, and the Company may thus be limited in the deduction
it can take upon the exercise of these options. Mr. Rizzone's salary was set at
$300,000 per year plus a guaranteed bonus for 1999 of $150,000, with an
opportunity to earn up to an additional $35,000.
Date: June 30, 1999 Compensation Committee:
Anthony J. Iorillo
Wayne L. Tyler
Ronald L. Young
BOARD OF DIRECTORS REPORT ON REPRICING
To: Our Stockholders
On December 14, 1998, this Board of Directors determined that in order to
incentivize the Company's employees, including the Company's senior management
who were charged with developing and implementing a revitalized strategic vision
for the Company, that it would be in the best interests of the Company and its
stockholders to reprice approximately 1,332,000 options then outstanding with an
exercise price in excess of $13.00 per share. The repricing was accomplished
through the exchange of old options for new options granted at the fair market
value of the Company's stock on the date of grant, December 14, 1998, of $9.625.
In making its determination, the Board considered that many of the Company's
employees were the subject of frequent job offers from competitors and that
employee moral was low, making it increasingly difficult to retain the Company's
talented employees. The vesting schedule for the repriced options is delayed
one year from the original vesting schedule, provided, however, that no options
may be exercised prior to December 14, 1999, except in the case of death,
disability or retirement.
The following table sets forth certain information with respect to
repricing of options held by any executive officer of the Company during the
last ten fiscal years, excluding, however, any repricings that may have been
effected prior to the Company becoming a reporting company under the Securities
Exchange Act of 1934, as amended.
11
Ten Year Option/SAR Repricings
Number of Market Length of
Securities Price of Original Option
Underlying Stock at Exercise Price Term Remaining
Options Time of at Time of New Exercise at Date of
Name(1) Date Repriced Repricing Repricing Price Repricing(2)
- ------- -------- ------------- ------------- -------------- ----------------- ------------------
Wim H.J. Selders 12/14/98 29,000 $9.625 $17.25 $9.625 78
12/14/98 20,833 9.625 24.00 9.625 90
12/14/98 24,793 9.625 15.13 9.625 102
George B. Holmes 12/14/98 50,350 9.625 17.88 9.625 114
Douglas H. Morais 12/14/98 50,000 9.625 22.25 9.625 97
Nadav Bar-Chaim 12/14/98 17,400 9.625 17.25 9.625 78
12/14/98 12,500 9.625 24.00 9.625 90
12/14/98 14,876 9.625 15.13 9.625 102
Israel Ury 12/14/98 17,400 9.625 17.25 9.625 78
12/14/98 12,500 9.625 24.00 9.625 90
12/14/98 14,876 9.625 15.13 9.625 102
Lyle Boarts 12/14/98 2,857 9.625 14.00 9.625 82
William J. Moore 12/14/98 13,700 9.625 17.25 9.625 78
12/14/98 9,875 9.625 24.00 9.625 90
12/14/98 11,752 9.625 15.13 9.625 102
Stephen Workman 12/14/98 17,400 9.625 17.25 9.625 78
12/14/98 12,500 9.625 24.00 9.625 90
12/14/98 14,876 9.625 15.13 9.625 102
- ---------------------------------
(1) Excludes Messrs. Rizzone, Pontiakos, Hay and Rittichier and Ms. Caraveo,
who were not employed with the Company on December 14, 1998.
(2) Expressed in number of months.
Date: December 14, 1998 Board of Directors:
Nadav Bar-Chaim Wim H.J. Selders
Tatsutoku Honda Wayne L. Tyler
Anthony J. Iorillo Israel Ury
Hal M. Krisbergh Amnon Yariv
Ronald L. Young
The above reports of the Compensation Committee and the Board of Directors
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.
12
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 was comprised
during the fiscal year ended April 30, 1999 of Mr. Iorillo and Drs. Tyler, and
Young, none of whom is an employee of the Company. Effective as of July 1,
1999, the Compensation Committee was comprised of Dr. Tyler and Messrs. Gaulding
and Nussbaum, none of whom is an employee 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, 1999.
[PERFORMANCE GRAPH APPEARS HERE]
COMPANY/INDEX/MARKET 10/21/94 4/28/95 4/30/96 4/30/97 4/30/98 4/30/99
Ortel Corp 100.00 58.16 63.27 53.06 55.36 27.55
Radio, TV Communication Equip 100.00 99.54 111.85 97.51 109.25 153.23
NASDAQ Market Index 100.00 102.95 143.70 153.17 227.51 300.44
- ---------------------------
(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.
13
CERTAIN TRANSACTIONS
During the fiscal year ended April 30, 1999, the maximum outstanding loan
balances of Messrs. Selders, Moore and Workman, executive officers of the
Company, were $150,000, $416,000 and $582,835, respectively. These loans were
extended by the Company in connection with each officer's exercise of stock
options and the payment of alternative minimum taxes thereon. During the 1999
fiscal year, the Board extended the maturity date of all outstanding loans
issued in connection with option exercise. Mr. Moore's loans have varying
maturity dates no later than February 1, 2005, and Mr. Workman's loans mature
on September 5, 2000. Interest is payable annually by Messrs. Moore and Workman
at rates ranging from 4.71% to 7.34% according to IRS guidelines for such loans
at the time they were extended. The outstanding balances of Messrs. Moore's
and Workman's loans as of July 30, 1999 were $416,000 and 497,802, respectively.
All loans are full recourse and are secured by the underlying shares of Common
Stock resulting from such exercise. In connection with the retirement of Mr.
Selders, effective as of July 16, 1999, the Company cancelled Mr. Selders'
$150,000 indebtedness and agreed to lend an additional amount to him, prior to
August 25 1999, to enable Mr. Selders to exercise his outstanding options
granted before November 1994. This loan will have a five-year maturity, will be
interest-free, full recourse and secured by the shares of Company stock obtained
by Mr. Selders in connection with such exercise.
The Company is currently paying Dr. Yariv, a member of the Company's Board
of Directors, approximately $100,000 per year for certain consulting services on
an "at will" basis.
Sumitomo Common Stock Purchase Agreement and Related Agreements
Pursuant to certain agreements entered into 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 were
directors or executive officers of the Company at the time of the investment,
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.
14
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 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 and the Nasdaq National
Market, and 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 the Company
with respect to fiscal 1999, or written representations from certain reporting
persons, the Company believes that its Insiders have complied with all Section
16(a) filing requirements.
Proposal 1
ELECTION OF DIRECTORS
General
The Company's Bylaws provide that the Board of Directors will consist of a
minimum of seven and maximum of eleven directors, divided into three classes.
One class is elected each year for a three-year term, expiring at the annual
meeting. The foregoing notwithstanding, directors serve until their successors
have been duly elected and qualified, unless they resign, become disqualified,
disabled, or are otherwise removed.
On September 25, 1998, at the end of his term, Raymond H. Kaufman retired
from service as a member of the Board of Directors. On March 15, 1999, Hal
Krisbergh resigned from service as a member of the Board of Directors due to his
management responsibilities at WorldGate Communications, Inc. John R. Gaulding
and Luther J. Nussbaum were appointed to serve on the Board of Directors on
March 5, 1999 and March 15, 1999, respectively. On September 25, 1999, at the
end of their terms, Dr. Israel Ury and Dr. Ronald Young will retire from their
dedicated service as members of the Board of Directors for over 18 years. We
would like to take this opportunity to thank Dr. Ury, Dr. Young and Mr.
Krisbergh for serving on the Board. Dr. Ury will remain with the Company as
Chief Technology Officer. In connection with his retirement from service as the
Chief Executive Officer and President of the Company, Wim H.J. Selders retired
from service as a member of the Board of Directors on July 16, 1999. And, on
June 18, 1999, in connection with his employment as Chief Executive Officer and
President of the Company, Stephen R. Rizzone was appointed a Director and
Chairman of the Board of Directors.
Effective as of the Meeting date, the Board of Directors has fixed the
authorized number of directors at eight. The Nominating Committee of the Board
of Directors has nominated Tatsutoku Honda, John R. Gaulding and Luther J.
Nussbaum for re-election to the Board of Directors at this Meeting to serve
until the 2002 Annual Meeting of Stockholders. The remaining classes of the
Board are composed of Amnon Yariv and Stephen R. Rizzone in Class I (with a term
expiring in 2001), and Nadav Bar-Chaim, Wayne L. Tyler and Anthony J. Iorillo in
Class III (with a term expiring in 2000).
Each of the Company's three nominees for election to the Board of Directors
is currently serving as a director of the Company; Dr. Honda was elected to his
present term of office by the stockholders of the Company, and Messrs. Gaulding
and Nussbaum were appointed to the Board in March 1999. 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 two 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.
15
Set forth below are the names and descriptions of the backgrounds of the
directors of the Company (including the nominees) and their principal
occupations
Nominees for Re-Election at the Meeting
Term Continuing until 2002
Name Age Position
---- --- --------
John R. Gaulding 54 Director
Tatsutoku Honda 59 Director
Luther J. Nussbaum 52 Director
Mr. Gaulding has served as a member of the Board of Directors of the
Company since March 1999. In 1996, Mr. Gaulding formed Gaulding & Co., a
private investment and consulting firm for information services and new media
companies, and serves as its President and Chief Executive Officer. From 1990
to 1996, Mr. Gaulding served as President and Chief Executive Officer of ADP
Claims Solutions Group, a provider of auto and medical claims adjudication
services; from 1986 to 1990, Mr. Gaulding served as President and Chief
Executive Officer of Pacific Bell Directory, Inc., a subsidiary of Pacific Bell,
Inc.; from 1984 to 1986 Mr. Gaulding served as Corporate Vice President,
Strategy and Development of Pacific Telesis Corporation, a telecommunications
company; and from 1976 to 1984 Mr. Gaulding was a senior partner in Theodore
Barry & Associates and The MAC Group, providing strategy and operations
consulting services to various industries. Mr. Gaulding has a B.S. in
Engineering from the University of California, Los Angeles and a M.B.A. (with
honors ) from University of Southern California. Mr. Gaulding also serves as a
director of TMP Worldwide, Inc., a marketing services, communications and
executive search company.
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.
Mr. Nussbaum has served as a member of the Board of Directors of the
Company since March 1999. Since October 1998, Mr. Nussbaum has served as the
Chief Executive Officer and President of First Consulting Group, a provider of
information technology consulting to the healthcare and pharmaceutical
industries. From 1995 to October 1998, Mr. Nussbaum served as Executive Vice
President of First Consulting Group. From 1993 to 1995, Mr. Nussbaum was the
principle of Nussbaum & Associates, private investor and consultant, and from
1989 to 1992, Mr. Nussbaum served as President, Chief Executive Officer, and
Chairman of the Board of Evernet Systems, Inc., a network systems integration
company. From 1986 to 1989, Mr. Nussbaum served as President, Chief Operating
Officer and Director of Ashton-Tate Corporation, a personal computer software
company. Prior to 1986, Mr. Nussbaum held the positions of Vice President for
Businessland, Inc. and for Cummins Engine Company, a diesel engine company. Mr.
Nussbaum also taught at the Memphis University School from 1968 to 1970. Mr.
Nussbaum has a B. A. in Economics from Rhodes College and a M.B.A. from Stanford
University. Mr. Nussbaum is also a director of First Consulting Group, a
technology consulting firm.
Directors Continuing to Serve until 2001
Name Age Position
- --- --- --------
Steve Rizzone 50 Chairman of the Board, President and Chief Executive Officer
Amnon Yariv 69 Director
Mr. Rizzone has served as the Company's Chairman of the Board, President
and Chief Executive Officer since June 18, 1999. From September 1998 to June
1999, Mr. Rizzone was an Entrepreneur in Residence at Crosspoint Venture
Partners, a venture capital firm. Mr. Rizzone served as the President, Chief
Executive Officer and Chairman of the Board of NetVantage, Inc., a provider of
ethernet workgroup switches to the OEM marketplace, from November 1995 to
September 1998, and as Senior Vice President, Worldwide Field Operations for
Retix, Inc., a provider of multi-protocol routers, ethernet switches and fiber
transport products, from February 1995 to November 1995. From April 1990 to
February 1995, Mr. Rizzone was Senior Vice President of MAKE Systems, Inc., a
software developer of
16
computer aided network design and simulation tools for the LAN/WAN
communications industry. From April 1988 to April 1990, Mr. Rizzone was a
Corporate Vice President and Division General Manager for 3Com Corporation, a
manufacturer of Local Area Networking Systems, personal computer workgroups and
enterprice networking products. Prior to April 1988, Mr. Rizzone was Vice
President of Sales for Bridge Communicators, a local area networking company,
and Timeplex, Inc., a wide-area networking company, and the Western Division
General Manager for Ricoh of America, a manufacturer of facsimile systems and
office copiers. Mr. Rizzone holds a B.A. in Public Administration from
California State University at Fullerton.
Dr. Yariv has served as a member of the Board of Directors of the Company
since co-founding the Company in April 1980 and from April 1980 until June 1999,
he served as Chairman of the Board. In 1964, Dr. Yariv joined the California
Institute of Technology, and currently holds the position of the Martin and
Eileen Summerfield Professor of Applied Physics and Professor of Electrical
Engineering. He formerly held the position of the Thomas G. Myers Professor of
Electrical Engineering and Applied Physics at the California Institute of
Technology. 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.
Directors Continuing to Serve until 2000
Name Age Position
---- --- --------
Nadav Bar-Chaim 53 Director, Senior Vice President, Engineering and
Secretary
Anthony J. Iorillo 61 Director
Wayne L. Tyler 62 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 Senior Vice
President, Operations and Secretary from June 1998 to June 1999 and Senior Vice
President, Engineering and Secretary since June 1999. Prior to June 1, 1998,
Dr. Bar-Chaim 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
Assistant 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 was Director of Electromagnetic Sciences
Corporation from 1995 to 1998. Mr. Iorillo holds a B.S. degree in Mechanical
Engineering and an M.S. in Aeronautics from the California Institute of
Technology.
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.
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.
17
Board Meetings and Committees
The Board of Directors held six meetings (including one special telephonic
meeting) and took action by written consent three times during the fiscal year
ended April 30, 1999. Each director attended at least 75% of the aggregate of
the total number of meetings of the Board of Directors held during fiscal 1999
and the total number of meetings held during fiscal 1999 by all committees of
the Board of Directors on which that director served.
The Company has standing Audit, Compensation and Nominating Committees.
During fiscal 1999, Drs. Tyler and Kaufman comprised the Audit Committee until
Dr. Kaufman's retirement in September 1998, at which point Dr. Young was
appointed to replace Dr. Kaufman. On June 4, 1999, Dr. Young resigned and Mr.
Nussbaum was appointed as his replacement on the Audit Committee. Thus the
Audit Committee is currently comprised of Dr. Tyler and Mr. Nussbaum. The Audit
Committee met four times during the fiscal year ended April 30, 1999. 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 1999, Mr. Iorillo and Drs. Tyler and Young
comprised the Compensation Committee. The Compensation Committee met twice
during fiscal 1999. 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. Effective as
of July 1, 1999, the Compensation Committee was recomprised of Dr. Tyler and
Messrs. Gaulding and Nussbaum. During fiscal 1999, the Nominating Committee was
comprised of Messrs. Selders and Iorillo and Dr. Yariv, and met three times
during that period. 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. In connection
with his retirement, Mr. Selder's retired from service on the Nominating
Committee on July 16, 1999.
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.
Messrs. Gaulding, Iorillo and Nussbaum and Dr. Tyler 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 otherwise meeting. Each director is reimbursed for certain expenses
incurred in connection with attendance at Board of Directors and committee
meetings. Pursuant to the terms of the Company's 1994 Plan, each non-employee
director receives an annual grant of non-qualified stock options to purchase a
number shares of the Company's Common Stock equal to the quotient of $40,000
divided by the closing price of the Company's Common Stock on the date of the
annual meeting. Mr. Iorillo and Drs. Yariv, Honda and Tyler are eligible to
receive grants under the 1994 Plan at this Meeting. Pursuant to the terms of
the 1994 Plan, Messrs. Gaulding and Nussbaum received grants in March 1999 in
connection with their respective appointments to the Board, and thus are not
eligible to receive additional grants until the 2000 Annual Meeting of
Stockholders.
The Company is currently paying Dr. Yariv approximately $100,000 per year
for certain consulting services on an "at will" basis.
In addition, Dr. Bar-Chaim, who is also an employee of the Company, is a
party to an employment agreement with the Company. See "Executive
Compensation--Employment Agreements."
18
Proposal 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG LLP, the Company's independent public accountants for the
fiscal year ended April 30, 1999, 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, 2000, 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 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 LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company expects to hold the 2000 Annual Meeting of Stockholders on
September 22, 2000. Stockholder proposals to be included in the proxy statement
for the 2000 Annual Meeting of Stockholders must be received by the Company's
Secretary not later than April 20, 2000.
Also, the Company's Certificate of Incorporation provides that for a
stockholder proposal (including nomination of a person for election to the Board
of Directors) to be acted upon at an annual meeting of stockholders, the
stockholder must provide written notice to the Company no later than 60 days
prior to the scheduled annual meeting. This notice must contain information
required by the Certificate of Incorporation. Copes of the Certificate of
Incorporation may be obtained from the Company's Secretary.
These advance notice provisions are in addition to, and separate from, the
requirements which a stockholder must meet in order to have a proposal included
in the proxy statement under the rules of the Securities and Exchange
Commission.
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,
/s/ Nadav Bar-Chaim
Nadav Bar-Chaim
Secretary
Dated: August 18, 1999
19
ORTEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 24, 1999
The undersigned hereby appoints Nadav Bar-Chaim as proxy, with the power to
appoint his substitute, and hereby authorizes him to act and vote at the annual
meeting of stockholders of Ortel Corporation ("Ortel") to be held on September
24, 1999, 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 ALL NOMINEES AND FOR ITEM 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 24, 1999
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 FOR AGAINST ABSTAIN
1. Elect [ ] [ ] Nominees: 2. Approval of the selection of KPMG [ ] [ ] [ ]
members of John R. Gaulding LLP as Ortel's independent public
the Ortel Tatsutoku Honda accountants.
Board of Directors Luther J. Nussbaum
(Instruction: To WITHHOLD AUTHORITY to vote
for any individual nominees, draw a line
through (or otherwise strike out the nominees
name in the list at right.)
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.