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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ] 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
GIGA-TRONICS INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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[LOGO OMITTED]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
July 20, 2001
To Our Shareholders:
I cordially invite you to attend the annual meeting of Giga-tronics
Incorporated shareholders to be held at 9:30 a.m. on Thursday, August 30, 2001,
at the Giga-tronics executive offices, 4650 Norris Canyon Road, San Ramon,
California.
At the meeting, you will be asked to elect four directors, amend the
Employee Stock Purchase plan and ratify the appointment of independent certified
public accountants. Information about these matters is set forth in the attached
Notice and Proxy Statement.
Giga-tronics counts on your continued interest, and I hope you will be
able to attend the meeting. However, regardless of whether you plan to attend in
person, it is important that your vote be counted. I urge you to vote your
shares by signing and returning the accompanying proxy card.
Sincerely,
George H. Bruns, Jr.
Chairman and Chief Executive Officer
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[LOGO OMITTED]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of Giga-tronics Incorporated will be
held at 9:30 a.m., local time, on Thursday, August 30, 2001, at the Giga-tronics
executive offices, at 4650 Norris Canyon Road, San Ramon, California, for the
following purposes:
1. Elect four directors for the ensuing year;
2. Amend the Employee Stock Purchase Plan;
3. Ratify the appointment of independent certified public accountants;
4. Transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on July 2, 2001, will
be entitled to vote at this meeting, or any adjournment of this meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL
MEETING REGARDLESS OF THE NUMBER YOU HOLD. PLEASE DATE, SIGN, VOTE AND
RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED, PREPAID ENVELOPE.
By Order of the Board of Directors,
Mark H. Cosmez, II
Secretary
San Ramon, California
July 20, 2001
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[LOGO OMITTED]
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
(925) 328-4650
July 20, 2001
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
AUGUST 30, 2001
This proxy statement is submitted by the board of directors of
Giga-tronics Incorporated ("Giga-tronics" or the "Company"), a California
corporation, in connection with the solicitation of proxies for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held on August 30,
2001, in accordance with the notice to shareholders, and at any adjournment
thereof.
Our board of directors has fixed July 2, 2001 as the record date for the
Annual Meeting. Only shareholders of record on the record date are entitled to
notice of and to vote at this meeting. A majority of the shares of common stock
will constitute a quorum for the transaction of business at the Annual Meeting.
On the record date, there were 4,573,694 shares of Giga-tronics common stock
issued and outstanding. Each share outstanding on the record date is entitled to
one vote as to each matter to be acted on at this meeting. However, each
shareholder will be entitled to cumulate his votes in the election of directors
provided that notice of an intention to cumulate votes is given at this meeting
by at least one shareholder before voting for the election of directors. Under
cumulative voting, a shareholder is allowed one vote per share multiplied by the
number of directors to be elected and may cast the total number of votes for one
nominee or may distribute the total number of votes among as many nominees as
the shareholder chooses. Four directors will be elected at this meeting.
Shares represented by properly executed proxies received by Giga-tronics
will be voted at the Annual Meeting according to with the instructions on the
proxies. It is intended that shares represented by proxies received by
Giga-tronics which are not marked to the contrary will be voted FOR all
proposals included in the notice of this meeting.
Any person giving a proxy in the form accompanying this proxy statement
has the power to revoke it at any time before its exercise. A shareholder giving
a proxy may revoke it before its exercise by filing with the Secretary of
Giga-tronics either an instrument revoking the proxy or a duly executed proxy
bearing a later date. A proxy will be revoked automatically if the shareholder
who executed it is present at the Annual Meeting and votes in person. Attendance
at this meeting will not, in and of itself, constitute the revocation of a
proxy. The granting of a proxy will give the proxy holder authority to cumulate
votes if cumulative voting is elected.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will be sent to Giga-tronics shareholders is July 20, 2001.
In the election of directors, the candidates receiving the highest
number of affirmative votes of the shares entitled to be voted for them up to
the number of directors to be elected by such shares are elected. Votes against
the director and votes withheld have no legal effect. Approval of a majority of
the shares present or represented and voting at the Annual Meeting is required
for all items submitted to the shareholders for their consideration except the
election of directors. An automated system administered by Giga-tronics'
transfer agent tabulates shareholder votes. With regard to the election of
directors, votes may be cast in favor or withheld; votes that are withheld will
be excluded entirely from the vote and will have no effect. Abstentions may be
specified on proposals other than the election of directors and will be counted
as present for purposes of the item on which the abstention is noted, and
therefore counted in the tabulation of the votes cast on a proposal
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with the effect of a negative vote. Broker non-votes are shares which are
represented at the Annual Meeting which a broker or nominee has indicated it
does not have discretionary authority to vote on with respect to a particular
matter. A broker non-vote will not be counted for purposes of determining the
election of directors or ratifying the selection of Giga-tronics' independent
accountants, but for other proposals generally have the effect of a negative
vote.
The Annual Report of Giga-tronics for its fiscal year ended March 31,
2001 is being mailed with this mailing of the Notice of Annual Meeting and Proxy
Statement to all shareholders entitled to notice of and to vote at the Annual
Meeting.
The costs of solicitation of proxies, including the printing, handling
and mailing of the proxy material, will be paid by Giga-tronics. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians to be forwarded to beneficial owners of shares held in their names,
and Giga-tronics will reimburse them for their expenses. The solicitation of
proxies through this proxy statement may be supplemented by telephone, telegram
or personal solicitation by directors, officers or other regular employees of
Giga-tronics and by Georgeson Shareholder. Giga-tronics has retained Georgeson
Shareholder to solicit proxies for a fee of approximately $3,750, plus a
reasonable amount to cover expenses. No additional compensation will be paid to
directors, officers or other employees for such services.
The executive offices of Giga-tronics are located at 4650 Norris Canyon
Road, San Ramon, California 94583, and the telephone number at that location is
(925) 328-4650.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are to be elected to serve until
the next annual meeting and until their successors are elected and qualified.
The nominees of the board of directors for election as directors are listed
below. There are no family relationships among the nominees or between any
nominee and any executive officer of Giga-tronics.
DIRECTOR
NAME AND PRINCIPAL OCCUPATION SINCE AGE
----------------------------- -------- ---
George H. Bruns, Jr. 1980 82
Chief Executive Officer since January, 1995, Chairman of
the Board and a Director of the Company. He provided
seed financing for the Company in 1980 and has been a
Director since inception. Mr. Bruns is General Partner
of The Bruns Company, a private venture investment and
management consulting firm. Mr. Bruns is Director of
Testronics, Inc. of McKinney, Texas.
James A. Cole 1994 59
General Partner of Windward Ventures, General Partner of
Spectra Enterprise Associates and a Partner of New
Enterprise Associates. Founder and President of
Amplica, Inc. and presently a director of Vitesse
Semiconductor Corp., Spectrian Corp., and several
private companies.
William E. Wilson 1998 61
President of Microsource, Inc. since April 2001.
Before joining the Company as the President of
Microsource, Inc., Mr. Wilson was the Chairman and CEO
of Microwave Technology Incorporated of Fremont, CA, a
producer of Microwave Devices and Amplifiers with broad
application to the telecommunications and the test and
measurement industries.
Robert C. Wilson 1991 81
Chairman of Wilson & Chambers, a private investment
firm. Mr. Wilson is currently a director of Storage
Technology Corporation, SyQuest Technology, Inc.,
Southwall Technologies Inc., ReSound Corp., Andros Inc.,
and Carco Electronics.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
NOMINEES NAMED.
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INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
MEETINGS
There were five meetings of the board of directors during the last
fiscal year.
COMMITTEES
Giga-tronics' board of directors has an Audit Committee and a
Compensation Committee.
During fiscal 2001, the Audit Committee consisted of independent (as
determined under the rules of the National Association of Securities Dealers)
non-employee directors, James A. Cole, William E. Wilson and Robert C. Wilson.
The Audit Committee serves to monitor the effectiveness of the independent
audit, as well as the Company's accounting, financial controls and financial
reports. The Audit Committee held four meetings during the past fiscal year.
During fiscal 2001, the Compensation Committee consisted of independent
non-employee directors James A. Cole, William E. Wilson and Robert C. Wilson.
The committee formulates recommendations to the board of directors regarding
levels of compensation for management. In addition, in order to recognize the
expected future contributions of key employees and provide an additional
incentive for them to remain with Giga-tronics over the long-term, the Committee
awards options to purchase shares of our common stock. The Compensation
Committee reviews and approves all stock options and executive compensation as
part of the board of directors meetings.
Giga-tronics does not have a nominating committee or any committee
performing such functions. All of the directors attended all the regularly
scheduled meetings of the board of directors and all the committees on which
they sat.
COMPENSATION OF DIRECTORS
Each of the directors who is not employed by Giga-tronics receives an
annual director's fee of $10,000 and $1,000 for attendance at each board of
directors meeting. Outside directors serving on committees of the board of
directors receive $500 for attendance at each committee meeting held on a day
other than a Board meeting date.
From time to time, Giga-tronics makes discretionary grants of options to
purchase shares of its common stock to directors in consideration for services
as members of the Board they provide to Giga-tronics. Last year each Board
member was granted 7,500 shares at an exercise price equal to market value on
the date of grant.
Giga-tronics has entered into indemnification agreements with all of its
officers and directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, executive officers, and holders of more than 10% of
Giga-tronics' common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission, or SEC. Officers, directors, and
greater than 10% shareholders are required by SEC regulations to furnish
Giga-tronics with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms received by
Giga-tronics, or written representations from certain reporting persons, we
believe that during the fiscal year ended March 31, 2001 its officers, directors
and greater than 10% shareholders complied with all applicable filing
requirements.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below includes information as of July 2, 2001, concerning the
beneficial ownership of Giga-tronics' common stock for: each person known by
Giga-tronics to own beneficially more than 5% of Giga-tronics' outstanding
common stock; each director; each executive officer named in the Summary
Compensation Table below; and all directors and executive officers of
Giga-tronics as a group:
PERCENTAGE OF TOTAL
AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
------------------------ -------------------- ------------
George H. Bruns, Jr. 462,053(1) 10.1%
4650 Norris Canyon Road
San Ramon, California 94583
James A. Cole 28,219(2) 0.6
4491 Valley Spring Drive
Westlake Village, California 91362
Mark H. Cosmez II 56,823(3) 1.2
4650 Norris Canyon Road
San Ramon, California 94583
James R. Koehn 29,318(4) 0.6
4650 Norris Canyon Road
San Ramon, California 94583
Jeffery T. Lum 63,364(5) 1.4
4384 Enterprise Place
Fremont, California 94538
Robert A. Smith 2,453 *
1269 Corporate Center Parkway
Santa Rosa, California 95407
Robert C. Wilson 25,625(6) 0.6
274 Catalpa Drive
Atherton, California 94027
William E. Wilson 8,625(7) 0.2
145 Sugar Creek Lane
Alamo, California 94507
All executive officers and directors as a 739,755 15.8%
group (9 persons, including those above)
Zurich Scudder Investments 239,300(8) 5.2%
345 Park Avenue
New York, New York 10154
* Less than 0.1%
(1) Includes 231,400 shares owned by the Bruns Trust, 170,000 registered in the
names of Mr. Bruns' son and daughter, 22,163 shares owned by The Bruns
Company, 19,740 shares owned directly and 18,750 shares issuable under
options exercisable within 60 days of July 2, 2001.
(2) Includes 5,625 shares issuable under options exercisable within 60 days of
July 2, 2001.
(3) Includes 10,000 shares issuable under options exercisable within 60 days of
July 2, 2001.
(4) Includes 25,000 shares issuable under options exercisable within 60 days of
July 2, 2001.
(5) Includes 10,000 shares issuable under options exercisable within 60 days of
July 2, 2001.
(6) Includes 5,625 shares issuable under options exercisable within 60 days of
July 2, 2001.
(7) Includes 5,625 shares issuable under options exercisable within 60 days of
July 2, 2001.
(8) Zurich Scudder Investments disclaims beneficial ownership.
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EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table provides information concerning compensation paid or
accrued by the Company, to or on behalf of Giga-tronics' chief executive officer
and each of the four other most highly compensated executive officers during the
last fiscal year ended March 31, 2001, and for the fiscal years ended March 25,
2000 and March 27, 1999:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- --------------------------
NUMBER OF
OTHER SECURITIES ALL OTHER
ANNUAL UNDERLYING COMPEN-
NAME AND FISCAL COMPEN- OPTIONS/ SATION
PRINCIPAL POSITION YEAR SALARY($) BONUS SATION SARS(#)(1) ($)(2)
- --------------------------------------------------------------------------------------------------------------------------
George H. Bruns, Jr. 2001 $126,154 -- -- -- $2,000
Chairman and 2000 $120,000 -- -- -- $1,731
Chief Executive Officer 1999 $124,062 $20,300 -- -- --
Mark H. Cosmez II 2001 $118,846 -- -- -- $2,971
Vice President, Finance 2000 $105,000 -- -- 10,000 $2,625
CFO & Secretary 1999 $105,000 $6,867 -- -- $808
James R. Koehn 2001 $162,779 -- $6,600(3) -- $2,778
President, Giga-tronics 2000 $150,000 -- $6,600(3) -- $2,560
Instruments Division 1999 $131,392 -- $55,716(4) 50,000 $1,505
Jeffrey T. Lum 2001 $146,116 $15,562 $600(5) -- $2,100
President, 2000 $124,519 $1,633 $891(5) -- $2,000
ASCOR, Inc. 1999 $113,430 $1,633 $869(5) -- $2,007
Robert A. Smith 2001 $159,963 $35,300 $7,202(6) -- $1,928
President, 2000 $150,000 $878 $7,202(6) 20,000 --
Microsource, Inc. 1999 $66,197 -- $3,047(6) 30,000 --
(1) Stock options granted under Giga-tronics' 1990 Stock Option Plan.
(2) Represents contributions made by Giga-tronics to its 401(k) Plan which
match in part the pre-tax elective deferral contributions included under
Salary made to the 401(k) plan by the executive officers.
(3) Mr. Koehn joined Giga-tronics in May 1998. Other compensation in 2000 and
2001 for Mr. James R. Koehn represents a car allowance.
(4) Other compensation in 1999 for Mr. James R. Koehn represents a car
allowance of $6,600 and relocation reimbursements of $49,116.
(5) Other compensation for Mr. Jeffrey T. Lum represents the use of a company
automobile.
(6) Mr. Smith joined Giga-tronics in October 1998. Other compensation in 1999,
2000 and 2001 for Mr. Smith represents a car allowance.
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STOCK OPTIONS
No stock options were granted in fiscal 2001 to Giga-tronics' executive
officers named in the Summary Compensation Table. No stock appreciation rights
were granted during the 2001 fiscal year.
OPTIONS EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE
The table below provides information for the executive officers named in
the Summary Compensation Table, concerning the exercise of options during fiscal
2001 and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
UNDERLYING UNEXERCISED THE MONEY OPTIONS AT
OPTIONS AT MARCH 31, 2001(#) MARCH 31, 2001(1)
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
George H. Bruns, Jr. 18,750 $92,460 18,750 37,500 $77,929 $155,858
Chairman and Chief
Executive Officer
Mark H. Cosmez II 10,000 $40,234 7,500 22,500 $31,172 $93,281
Vice President,
Finance CFO &
Secretary
James R. Koehn -- -- 25,000 25,000 $103,905 $103,905
President,
Giga-tronics
Instruments
Jeffery T. Lum -- -- 10,000 10,000 $41,562 $41,562
President, ASCOR, Inc.
Robert A. Smith -- -- 20,000 30,000 $82,343 $122,343
President,
Microsource, Inc.
(1) Equal to the fair market value of the option shares on March 31, 2001 which
was $6.25 per share, less the aggregate option price payable for the
shares. Options are in-the-money if the market value of the shares is
greater than the option exercise price.
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EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CHANGE-IN-CONTROL ARRANGEMENTS
All outstanding options will automatically accelerate and become
exercisable for fully vested shares upon a change in control of Giga-tronics,
whether effected through merger, sale of substantially all of Giga-tronics'
assets, the successful completion of a hostile tender offer for 30% or more of
Giga-tronics' outstanding common stock, or a change in the majority of the board
of directors as a result of one or more contested elections for board of
directors membership.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the 2001 fiscal year, the Compensation Committee was comprised of
Messrs. James A. Cole, William E. Wilson and Robert C. Wilson.
No executive officer of Giga-tronics serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of Giga-tronics board of directors or
Compensation Committee.
AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing
independent, objective oversight of Giga-tronics' accounting functions and
internal controls. The audit committee operates under a written charter approved
by the Board of Directors. A copy of the charter is attached to this proxy
statement as Appendix A.
Management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and issuing
a report thereon. The Audit committee's responsibility is to monitor and oversee
these processes.
In connection with these responsibilities, the Audit Committee met with
management to review and discuss the March 31, 2001 financial statements. The
Audit Committee also discussed, with the independent accountants, the matters
required by Statement on Auditing Standards No. 61, Communication with Audit
Committees. The Audit Committee also received written disclosures from the
independent accountants required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and the Audit Committee
discussed with the independent accountants that firm's independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited consolidated financial statements be included in the Company's
Annual Report (Form 10-K) for the year ended March 31, 2001 for filing with the
Securities and Exchange Commission. The Committee has recommended and the Board
has approved that KPMG, LLP be engaged to continue as the Company's auditors for
the current year.
Respectfully submitted,
AUDIT COMMITTEE
Robert C. Wilson, Chair
James A. Cole
William E. Wilson
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COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL COMPENSATION POLICY
Giga-tronics' executive compensation philosophy rests on two fundamental
principles. First, the program is intended to provide fully competitive levels
of compensation - at expected levels of performance - in order to attract,
motivate and retain talented executives. Secondly, the program is intended to
create an alignment of interest between Giga-tronics' executives and its
shareholders such that a significant portion of each executive's compensation is
linked directly to the creation of shareholder value.
The Executive Compensation Program is intended to place heavy emphasis
on the variable pay, which is pay that varies with performance, and less focus
on fixed base salary. The incentive pay programs are intended to reward
performance that is directly relevant to the Company's short term and long term
success. The three primary components of the program include base salary, annual
incentive, which is performance based bonus, and long term incentives such as
stock options.
FACTORS
The process involved and the factors considered in the executive
compensation determination for fiscal year 2001 are summarized below. It is
expected that this process will remain the same in fiscal year 2002. However,
the Committee may, at its discretion, apply a different set of factors in
setting executive compensation in the future in order to further enhance the
basic concept of "pay-for-performance."
BASE SALARY
Base salaries are based primarily on individual performance, and each
individual's role in Giga-tronics. Employees with higher levels of sustained
performance over time and/or those assuming greater responsibilities will be
paid correspondingly higher salaries.
On the basis of its knowledge of the industry, this Committee believes
that the base salary levels in effect for Giga-tronics' executive officers are
competitive with the companies within and without our industry with which
Giga-tronics competes for executive talent. However, the Committee did not,
through one or more external salary surveys for the industry, independently
confirm the specific percentiles at which the base salary levels in effect for
Giga-tronics' executive officers stood in relation to other companies in our
industry.
Salaries are reviewed annually based on individual performance, overall
financial results and the general level of increases in the marketplace. Salary
increases are granted within a pay-for-performance framework.
ANNUAL PERFORMANCE (NON-STOCK) BASED INCENTIVE COMPENSATION
Giga-tronics' annual incentive bonus plan is intended to:
- reward key employees based upon company and individual performance,
- motivate, and
- provide competitive cash compensation opportunities.
Incentive awards are paid annually in cash based upon achievement of individual
performance objectives for the most recently completed fiscal year.
Bonus payments totaling approximately $28,000 were earned in fiscal
2001.
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LONG-TERM (STOCK BASED) INCENTIVE COMPENSATION
Giga-tronics has always believed that stock ownership or stock option
participation was the most effective way of aligning its management and
shareholder interests. Options are generally issued at 100% of market value, for
five year terms, exercisable for 25% of the total grant per year after the first
year. The right to exercise options expires 60 days after termination of
employment, except in case of death when an optionee's estate would have six
months to exercise.
CEO COMPENSATION
The CEO compensation is based on the same considerations as any other
senior executive. Other compensation factors, including salary increases,
incentive bonus and option participation are performance-based.
Based upon Giga-tronics' performance, the Compensation Committee
increased Mr. Bruns' base compensation to $200,000 annually effective March
2001.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Effective January 1, 1994, Section 162(m) of the Internal Revenue Code
limits federal income tax deductions for compensation paid to the chief
executive officer and the four other most highly compensated officers of a
public company to $1 million per individual per year, but contains an exception
for performance-based compensation that satisfies certain conditions.
The 1990 Stock Option Plan was amended in 1994 to restrict the maximum
number of shares of common stock for which any one participant may be granted
stock options and stock appreciation rights to 200,000 shares, and the
stockholders approved this amendment at the 1994 Annual Meeting. As a result,
stock options granted to Giga-tronics' executive officers with an exercise price
not less than the fair market value of the underlying shares on the grant date
will generally qualify as performance-based compensation which is not subject to
the $1 million limitation. The 2000 Stock Option Plan reflects these same
restrictions.
BY THE COMPENSATION COMMITTEE:
James A. Cole
Robert C. Wilson
William E. Wilson
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PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG GIGA-TRONICS
INCORPORATED, THE S & P 500 INDEX AND THE NASDAQ TELECOMMUNICATIONS STOCKS
Giga-tronics Inc. Nasdaq Telecom Stocks S & P 500 Index
March-96 100 100 100
March-97 114.2857 94.63837 119.8885
March-98 93.75 176.8791 169.7041
March-99 35.71429 281.5362 198.7297
March-00 200 534.1279 236.6321
March-01 89.28571 150.0892 179.7568
*$100 INVESTED ON 3/30/96 OR INDEX, INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL
YEAR ENDING 3/31/01.
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PROPOSAL 2
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors on December 11, 1996, approved by the
Company's shareholders on August 5, 1997 and became effective as of January 15,
1997 (the "Effective Date"). The shareholders originally authorized 130,000 to
be issued under the Purchase Plan. As of March 31, 2001, 111,740 shares had been
issued under the Purchase Plan and only 18,260 shares remained for future
issuance. On May 16, 2001, the Board of Directors approved an amendment to the
Purchase Plan to increase the number of available shares by 120,000. In this
Proposal, shareholders are requested to approve this increase in shares.
Should shareholder approval not be obtained, then the Company may sell
only the remaining 18,260 shares under the Purchase Plan.
During the last fiscal year, shares were purchased under the Purchase
Plan by executive officers and other employees of the Company in the amounts and
at the weighted average prices per share as follows:
PURCHASED BY AGGREGATE NUMBER OF SHARES WEIGHTED AVERAGE PURCHASE PRICE
- ------------ -------------------------- -------------------------------
George H. Bruns, Jr. -- --
Chairman and Chief Executive Officer
Mark H. Cosmez II 733 $6.40
Vice President, Finance, CFO &
Secretary
James R. Koehn 1,018 $6.42
President, Giga-tronics Instruments Division
Jeffrey T. Lum -- --
President, ASCOR, Inc.
Robert A. Smith 738 $6.43
President, Microsource, Inc.
All current executive 2,489 $6.42
officers as a group
All current directors who -- --
are not executive officers as a group
All employees (including all current officers who 24,985 $6.48
are not executive officers) as a group
The essential features of the Purchase Plan, as amended, are outlined below:
PURPOSE
The Purchase Plan is intended to provide eligible employees of the
Company and its participating affiliates with the opportunity to acquire a
proprietary interest in the Company through participation in a payroll-deduction
based employee stock purchase plan designed to operate in compliance with
Section 423 of the Internal Revenue Code.
The following is a summary of the principal features of the Purchase
Plan, as proposed to be amended. The summary, however, does not purport to be a
complete description of all the provisions of the Purchase Plan. Any shareholder
of the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the attention of the Corporate Secretary of the Company
at the Company's corporate offices in San Ramon, California.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the
Board. Such committee, as Plan Administrator, will have full authority to adopt
such rules and procedures as it may deem necessary for
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proper plan administration and to interpret the provisions of the Purchase Plan.
All costs and expenses incurred in plan administration will be paid by the
Company without charge to participants.
SHARE RESERVE
Currently, a total of 130,000 shares of Common Stock have been reserved
for issuance over the ten (10) year term of the Purchase Plan of which 18,260
shares remain unsold as of March 31, 2001. In the event any change is made to
the outstanding shares of Common Stock by reason of any recapitalization, stock
dividend, stock split, combination of shares, exchange of shares or other change
in corporate structure effected without the Company's receipt of consideration,
appropriate adjustments will be made to (i) the class and maximum number of
securities issuable under the Purchase Plan, including the class and number of
securities purchasable per participant during any one (1) purchase interval, and
(ii) the class and maximum number of securities subject to each outstanding
purchase right and the purchase price payable per share thereunder. If the
proposed amendment to the Purchase Plan is approved by the shareholders, an
additional 120,000 shares will be reserved for issuance over the remaining life
of the Purchase Plan (see "Amendment and Termination" below).
PURCHASE INTERVALS
The Purchase Plan is being implemented in a series of successive six (6)
month purchase intervals. Purchase intervals begin on the first business day in
September and March of each year and end on the last business day in February
and the following August of each year.
ELIGIBILITY
Any individual who has been employed by the Company or any participating
affiliate and who is expected to work for more than twenty (20) hours per week
for more than five (5) months per calendar year in the employ of the Company or
any participating affiliate will be eligible to participate in the Plan
("Eligible Employee").
Participating affiliates include any parent or subsidiary corporations
of the Company, whether now existing or hereafter organized, which elect to
extend the benefits of the Purchase Plan to their eligible employees, with the
approval of the Plan Administrator.
As of March 31, 2001, approximately 281 employees, including 5 executive
officers, were eligible to participate in the Purchase Plan.
PURCHASE PROVISIONS
Each participant is granted a separate purchase right for each offering
period in which he or she participates. The purchase right will be granted on
the start date of that offering period and will be automatically exercised in
installments on the last business day of each purchase interval within the
offering period. Each participant may authorize payroll deductions in any
multiple of one percent (1%) of his or her base salary, up to a maximum of ten
percent (10%).
On the last business day of each purchase interval, the accumulated
payroll deductions of each participant will automatically be applied to the
purchase of whole shares of Common Stock at the purchase price in effect for
that purchase interval. No participant may, during any one purchase interval,
purchase more than 1,000 shares of Common Stock.
PURCHASE PRICE
The purchase price per share at which Common Stock will be purchased on
the participant's behalf on each purchase date will be equal to eighty-five
percent (85%) of the lower of (i) the fair market value per share
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of Common Stock on the start date of the offering period in which the purchase
date occurs and (ii) the fair market value per share of Common Stock on the
purchase date.
VALUATION
The fair market value per share of Common Stock on any relevant date
will be the closing price per share on such date on the Nasdaq National Market.
On July 2, 2001, the fair market value was $3.40.
SPECIAL LIMITATIONS
The Purchase Plan imposes certain limitations on a participant's rights
to acquire Common Stock, including the following:
(i) No purchase right may be granted to any individual who owns stock
(including stock purchasable under any outstanding purchase
rights) possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the
company or any of its affiliates.
(ii) No purchase right granted to a participant may permit such
individual to purchase Common Stock at a rate greater than
$25,000 worth of such Common Stock (valued at the time such
purchase right is granted) for each calendar year the purchase
right remains outstanding at any time.
TERMINATION OF PURCHASE RIGHTS; WITHDRAWAL
The purchase right will immediately terminate upon the participant's
loss of eligible employee status. The payroll deductions collected for the
purchase interval in which the purchase right terminates will be refunded.
A participant may withdraw from the Purchase Plan at any time at least
one week prior to the next purchase date. The payroll deductions collected for
the purchase interval in which such withdrawal occurs will, at the participant's
election, be refunded or applied to purchase shares of Common Stock on the next
purchase date.
SHAREHOLDER RIGHTS
No participant will have any shareholder rights with respect to the
shares of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
ASSIGNABILITY
No purchase right will be assignable or transferable other than in
connection with the participant's death and will be exercisable only by the
participant during his or her lifetime.
ACQUISITION
Should the Company be acquired by merger or asset sale during any
purchase interval, all outstanding purchase rights will automatically be
exercised immediately prior to the effective date of such acquisition. The
purchase price will be eighty-five percent (85%) of the lower of (i) the fair
market value per share of Common Stock on the start date of that offering period
or (ii) the fair market value per share of Common Stock immediately prior to
such acquisition.
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AMENDMENT AND TERMINATION
The Purchase Plan will terminate upon the earliest to occur of (i) the
last business day in September, 2006, (ii) the date on which all available
shares are issued or (iii) the date on which all outstanding purchase rights are
exercised in connection with an acquisition of the Company.
The Board may at any time alter, suspend or discontinue the Purchase
Plan. However, applicable laws and regulations may require that certain
amendments be made the subject of shareholder approval.
FEDERAL TAX CONSEQUENCES
The Purchase Plan is intended to be an "employee stock purchase plan"
within the meaning of Section 423 of the Internal Revenue Code. Under a plan
which so qualifies, no taxable income will be recognized by a participant, and
no deductions will be allowable to the Company, in connection with the grant or
the exercise of an outstanding purchase right. Taxable income will not be
recognized until there is a sale or other disposition of the shares acquired
under the Purchase Plan or in the event the participant should die while still
owning the purchased shares.
If the participant sells or otherwise disposes of the purchased shares
within two (2) years after the start date of the purchase interval in which such
shares were acquired, then the participant will recognize ordinary income in the
year of sale or disposition equal to the amount by which the fair market value
of the shares on the purchase date exceeded the purchase price paid for those
shares, and the Company will be entitled to an income tax deduction, for the
taxable year in which such sale or disposition occurs, equal in amount to such
excess.
If the participant sells or disposes of the purchased shares more than
two (2) years after the start date of the purchase interval in which such shares
were acquired, then the participant will recognize ordinary income in the year
of sale or disposition equal to the lesser of (i) the amount by which the fair
market value of the shares on the sale or disposition date exceeded the purchase
price paid for those shares or (ii) fifteen percent (15%) of the fair market
value of the shares on the start date of the offering period, and any additional
gain upon the disposition will be taxed as a long-term capital gain. The Company
will not be entitled to any income tax deduction with respect to such sale or
disposition.
If the participant still owns the purchased shares at the time of death,
the lesser of (i) the amount by which the fair market value of the shares on the
date of death exceeds the purchase price or (ii) fifteen percent (15%) of the
fair market value of the shares on the start date of the offering period in
which those shares were acquired will constitute ordinary income in the year of
death.
ACCOUNTING TREATMENT
The issuance of Common Stock under the Purchase Plan is intended to
qualify as noncompensatory under APB No. 25, "Accounting of Stock Issued to
Employees". As such, issuances under the Purchase Plan would not result in
compensation expense chargeable against the Company's reported earnings.
However, the Company must disclose, in pro-forma statements to the Company's
financial statements, the impact the purchase rights granted under the Purchase
Plan would have upon the Company's reported earnings were the value of those
purchase rights treated as compensation expense.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN.
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PROPOSAL 3
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors upon recommendation of the Audit Committee has
re-appointed the firm of KPMG LLP as Giga-tronics' independent accountants for
the fiscal year ending March 30, 2002 and to perform other appropriate services.
We are seeking ratification by the shareholders for this appointment.
Representatives of KPMG LLP are expected to be present at Giga-tronics'
Annual Meeting with the opportunity to make a statement, if they desire to do
so, and they are expected to be available to respond to appropriate questions.
AUDIT FEES
Fees for the last fiscal year were $150,000 for the annual audit and
related quarterly reviews. KPMG provided no other consulting or tax services for
the fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
KPMG LLP.
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SHAREHOLDERS' PROPOSALS
To be considered for presentation to the Annual Meeting of Shareholders
to be held in 2001, a shareholder proposal must be received by Giga-tronics no
later than June 5, 2002. To be considered for inclusion in the Giga-tronics
proxy statement for its Annual Meeting of Shareholders to be held in 2002, a
shareholder proposal must be received by Giga-tronics no later than March 22,
2002. Proposals should be addressed to the Corporate Secretary, Giga-tronics
Incorporated, 4650 Norris Canyon Road, San Ramon, CA 94583.
The Annual Report of Giga-tronics for the fiscal year ended March 31,
2001 is being mailed with this mailing of the Notice of Annual Meeting and Proxy
Statement to all shareholders entitled to notice of and to vote at the Annual
Meeting. Giga-tronics will mail the Annual Report on Form 10-K for the most
recent fiscal year to any shareholder who requests a copy. Requests should be
sent to the Corporate Secretary as noted above for proposals.
OTHER MATTERS
Giga-tronics knows of no other business which will be presented at the
Annual Meeting other than the proposals included in the Notice of Meeting. If
any other business is properly brought before the Annual Meeting, persons
appointed as proxies for the shareholders in the enclosed form will vote on
these matters in accordance with their judgments. Regardless of whether you
intend to be present at the Annual Meeting, you are urged to complete, date,
sign and return your proxy promptly.
The Report of the Compensation Committee, the Report of the Audit
Committee, the Performance Graph, the Audit Committee Charter contained in
Appendix A to this proxy statement and the statement of independence of Audit
Committee members referred to under "Information About the Board of Directors
and Committees of the Board" are not to be considered as filed with the
Securities and Exchange Commission or incorporated by reference into any other
filings which the Company makes with the Exchange Commission under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, nor is this information considered as proxy soliciting material. These
portions of this proxy statement are not a part of any of those filings unless
otherwise stated in those filings.
By order of the Board of Directors,
George H. Bruns, Jr.
Chairman and Chief Executive Officer
San Ramon, California
July 20, 2001
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APPENDIX A
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22
AUDIT COMMITTEE CHARTER
-----------------------
I. MEMBERSHIP:
The Audit Committee shall be comprised of three (3) or more non-employee
members of the Board of Directors elected for a one-year term. A
chairman shall be designated by the Board.
II. FUNCTIONS:
A. Review adequacy and performance of the finance function with
respect to Audit Committee matters.
B. Recommend independent (external) auditors to the Board of
Directors, as the independent auditors are directly accountable
to the Audit Committee.
C. Review the intended scope of the annual audit, and the audit
methods and principles being applied by the independent auditors
and the fees charged by the independent auditors.
D. Review and discuss the results of the audit with both the
independent auditors and management.
E. Review the Company's significant accounting principles, policies
and practices.
F. Review adequacy of management information systems internal
accounting and financial controls.
G. Review the annual financial statements before their submission to
the Board of Directors for approval.
H. Review with both management and the independent auditors
procedures and their execution established to:
1. Prevent and uncover unlawful political contributions,
bribes, unexplained and unaccounted for payments to
intermediaries (foreign or US).
2. Ascertain whether there are any unaccounted or off-book
transactions.
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AUDIT COMMITTEE CHARTER
-----------------------
3. Identify payments in violation of applicable laws and
standards of business which are intended to influence
employees of potential customers to purchase their products
(commercial bribes, kickbacks, etc.).
I. Approve the performance of professional services provided by the
independent auditors, including audit and non-audit services,
before such services are rendered, and consider the possible
effect on the performance of such services on the independence of
the auditors.
J. Review annually internal and external audits of employee benefit
plans of the Company (including subsidiaries).
K. Review annually, with the independent auditors, their audit of
the Company pension plans to determine that there are proper
Company procedures to insure compliance with all relevant laws
and regulations.
L. Review annually adequacy of the Company's insurance.
M. Review annually adequacy of protection of technology, including:
- physical security
- patent and trademark program
- proprietary information
N. Review annually policies, and compliance with policies relating
to legal matters, conflict of interest, etc.
III. MINUTES:
Minutes will be kept of each meeting of the Audit Committee and will be
provided to each member of the Board. Any action of the Audit Committee
shall be subject to revision.
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GIGA-TRONICS INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
George H. Bruns, Jr. and Mark H. Cosmez II, or either of them are hereby
constituted and appointed the lawful attorneys and proxies of the undersigned,
each with full power of substitution, to vote and act as proxy with respect to
all shares of common stock of Giga-tronics Incorporated standing in the name of
the undersigned on the books of Giga-tronics at the close of business on July 2,
2001, at the Annual Meeting of Shareholders to be held at 9:30 A.M., on August
30, 2001, at Giga-tronics' principal executive offices at 4650 Norris Canyon
Road, San Ramon, CA 94583, or at any adjournment or postponement thereof.
THE POWERS HEREBY GRANTED MAY BE EXERCISED BY BOTH OF SAID ATTORNEYS OR PROXIES
OR THEIR SUBSTITUTES PRESENT AND ACTING AT THE ANNUAL MEETING OF SHAREHOLDERS OR
ANY ADJOURNMENT OR POSTPONEMENT THEREOF OR, IF ONLY ONE BE PRESENT AND ACTING,
THEN BY THAT ONE. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES HERETOFORE
GIVEN BY THE UNDERSIGNED TO VOTE AT SAID MEETING.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- FOLD AND DETACH HERE -
FOR ALL NOMINEES LISTED (EXCEPT AS WITHHELD IN ONE SPACE BELOW).
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED.
1. Elect four Directors for the ensuing year.
Nominees: George H. Bruns, Jr., James A. Cole, Robert C. Wilson, William E.
Wilson.
INSTRUCTION: To withhold authority to vote for one or more individual nominees,
(write such name or names in the space provided below.)
- --------------------------------------------------------------------------------
2. Amend the Giga-tronics Incorporated Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratify the appointment of independent certified public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Signature(s) Dated: , 2001
---------------------------------- ----------
Please sign exactly as the name appears printed hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by annual authorized officer. If
a partnership, please sign in full partnership name by authorized person.
Receipt is acknowledged of the Proxy Statement for the meeting.
- FOLD AND DETACH HERE -