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SCHEDULE 14A
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 Rule 14a-11(c) or Rule 14a-12
GIGA-TRONICS INCORPORATED
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule<ws>0<ho>-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 registrations 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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Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
June 25, 1997
To Our Shareholders:
I cordially invite you to attend the annual meeting of Giga-tronics
Incorporated shareholders to be held at 10:00 a.m. on Tuesday, August 5, 1997,
at the Giga-tronics facility, 4650 Norris Canyon Road, San Ramon, California.
At the meeting, you will be asked to elect four directors, ratify the
appointment of independent certified public accountants, approve the employee
stock purchase plan, and approve an amendment to the Company's 1990 Stock Option
Plan, which would increase the number of shares available for issuance from
400,000 to 700,000 shares of Common Stock, and remove or relax certain plan
limitations (including limitations on the Board of Directors authority to amend
the plan) that are no longer required by Securities and Exchange Commission
rules and make the grant of Limited Stock Appreciation Rights to officers
discretionary rather than mandatory. Information about these matters is set
forth in the attached Notice and Proxy Statement.
The Company 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,
/s/ George H. Bruns, Jr.
George H. Bruns, Jr.
Chairman and Chief Executive Officer
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Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of Giga-tronics Incorporated will be
held at 10:00 a.m., local time, on Tuesday, August 5, 1997, at the Giga-tronics
facility, 4650 Norris Canyon Road, San Ramon, California, for the following
purposes:
1. Elect four directors for the ensuing year;
2. Ratify the appointment of independent certified public accountants;
3. Approve the employee stock purchase plan;
4. Approve an amendment to the Company's 1990 Stock Option Plan, which
would increase the number of shares available for issuance from
400,000 to 700,000 shares of Common Stock, and remove or relax
certain plan limitations (including limitations on the Board of
Directors authority to amend the plan) that are no longer required by
Securities and Exchange Commission rules and make the grant of
Limited Stock Appreciation Rights to officers discretionary rather
than mandatory.
5 Transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on June 9, 1997, will
be entitled to vote at this meeting, or any adjournment thereof.
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,
/s/ George H. Bruns, Jr.
George H. Bruns, Jr.
Chairman and Chief Executive Officer
San Ramon, California
June 25, 1997
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Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 5, 1997
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 5,
1997, in accordance with the foregoing notice, and at any adjournment thereof.
The Board of Directors has fixed June 9, 1997 as the record date for the
meeting. Only shareholders of record on the record date are entitled to notice
of and to vote at the 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 3,379,449 shares of Common Stock of the Company
issued and outstanding, each of which is entitled to one vote as to each matter
to be acted on at the 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 the meeting prior to 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 (four at this
meeting) and may use the total number of votes for one nominee or may distribute
such number among as many nominees as such shareholder chooses.
Shares represented by properly executed proxies received by
Giga-tronics will be voted at the meeting in accordance with the instructions
thereon. It is intended that shares represented by proxies received by
Giga-tronics which are not limited to the contrary will be voted FOR all
proposals set forth in the notice of 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 meeting and votes in person. Attendance at the
meeting will not, in and of itself, constitute the revocation of a proxy. The
granting of a proxy shall give the proxy holder authority to cumulate votes if
cumulative voting is elected.
So far as is presently known, there is no business to be transacted at
the meeting other than that referred to in the Notice of Annual Meeting of
Shareholders, and it is not anticipated that other matters will be brought
before the meeting. If, however, other matters should be brought before the
meeting it is intended that the proxy holders may vote or act in accordance with
their judgment on such matters.
An affirmative vote of a majority of the shares present or represented
and entitled to vote at the meeting is required for approval of all items being
submitted to the shareholders for their consideration. An automated system
administered by the Company's transfer agent tabulates shareholder votes.
Abstentions are included in determining the number of shares present and voting
at the Annual Meeting and each is tabulated separately. Abstentions are counted
in tabulations of the votes cast on proposals presented to shareholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
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The Annual Report of the Company for the fiscal year ended March 29,
1997 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 approximate date on which this Proxy Statement and the accompanying
form of proxy will be sent to Giga-tronics shareholders is July 3, 1997.
The executive offices of Giga-tronics are located at 4650 Norris Canyon
Road, San Ramon, California 94583, and the telephone number is (510) 328-4650.
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ELECTION OF DIRECTORS
At the annual meeting four (4) directors (constituting the entire
Board) are to be elected to serve until the next annual meeting and until their
successors are elected and qualified. The following are the nominees of the
Board of Directors for election as directors. There are no family relationships
among the nominees or between any nominee and any executive officer of the
Company.
DIRECTOR
NAME AND PRINCIPAL OCCUPATION SINCE: AGE
George H. Bruns, Jr. 1980 78
Chief Executive Officer since January, 1995, Chairman of the Board and a
Director of the Company. Founded 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
Peninsula Wireless Communications Inc. and Testronics Inc.
James A. Cole 1994 55
Managing 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 Semi-Conductor Corp., and Spectrian Corp.
Edward D. Sherman 1993 63
President and Chief Executive Officer of FET Acquisition Co., Inc. from April,
1995 through September, 1996. Served as Product Line Manager for Giga-tronics
from May, 1995 through March, 1996. President and Chief Executive Officer at
3dbm, Inc. from January, 1994 through March, 1995. Prior to that time, and
from 1990, Mr. Sherman served as President and Chief Executive Officer of
Peninsula Engineering.
Robert C. Wilson 1991 77
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 six regularly scheduled meetings and no special meetings of
the Board of Directors during the last fiscal year.
COMMITTEES
Giga-tronics' Board of Directors has an Audit Committee and a
Compensation and Stock Option Committee.
During fiscal 1997, the Audit Committee consisted of Edward D. Sherman
and James A. Cole. 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 one meeting during the past
fiscal year.
During fiscal 1997, the Compensation and Stock Option Committee
consisted of independent non-employee directors James A. Cole and Robert C.
Wilson. It 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 the Company over the long-term, the Committee awards options
to purchase shares of the Company's stock. The Compensation and Stock Option
Committee held one meeting during the past fiscal year.
The Company does not have a nominating committee or any committee
performing such functions. All of the directors attended all the meetings of the
Board and all the committees on which they sat.
COMPENSATION OF DIRECTORS
Each of Giga-tronics' directors who is not employed by the Company
receives an annual director's fee of $6,000 and $750 for attendance at each
Board meeting. Outside directors serving on committees of the Board receive $500
for attendance at each committee meeting.
The Company 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 (the "Exchange
Act") requires the Company's directors, executive officers, and holders of more
than 10% of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors, and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that during the fiscal year ending March 29, 1997, all filing
requirements applicable to its officers, directors and greater than 10%
shareholders were complied with.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 9, 1997, information
concerning the beneficial ownership of the Company's Common Stock for (a) each
person known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock; (b) each director; (c) each of the executive officers
named in the Summary Compensation Table below; and (d) all directors and
officers of the Company as a group:
AMOUNT AND PERCENT
NATURE OF OF TOTAL
BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
George H. Bruns, Jr 387,553(1) 11.5
4650 Norris Canyon Road
San Ramon, CA 94583
James A. Cole 260,147(2) 7.7
5424 Island Forest Place
Westlake Village, CA 91362
Jeffrey T. Lum 78,364 2.3
47790 Westinghouse Drive
Fremont, CA 94539
Gregory L. Overholtzer -0- 0.0
4650 Norris Canyon Road
San Ramon, CA 94583
Bradley C. Stribling -0- 0.0
4650 Norris Canyon Road
San Ramon, CA 94583
Edward D. Sherman -0- 0.0
6507 Leyland Park Drive
San Jose, CA 95120
Robert C. Wilson 6,000(3) 0.2
274 Catalpa Drive
Atherton, CA 94027
All officers and directors as a group
(9 persons including the above) 732,064 21.6
Dimensional Fund Advisors Inc. 171,900(4) 5.1
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
The Robertson Stephens Orphan Fund 276,672(5) 8.2
555 California Street
San Francisco, CA 94104
Montgomery Asset Management 178,000(6) 5.3
600 Montgomery Street
San Francisco, CA 94111
- -------------------------------
(1) Includes 187,650 shares owned by the Bruns Trust, 170,000 registered
in the names of his son and daughter, and 22,163 shares owned by The
Bruns Company.
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(2) James A. Cole is the Managing General Partner of Spectra Enterprise
Associates (a Venture Partnership), which beneficially owns 260,147
shares over which Mr. Cole has shared voting and dispositive power.
(3) All 6,000 shares represent currently exercisable options.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 171,900 shares as of
December 31, 1996, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and the DFA Participating Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(5) As general partners of the Orphan Fund, Bayview Investors, Ltd. and
Robertson, Stephens & Company share voting and dispositive power over
276,672 shares held by the Orphan Fund.
(6) Montgomery Asset Management is registered under section 203 of the
Investment Advisors Act of 1940.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning compensation paid
or accrued by the Company, to or on behalf of the Company's Chief Executive
Officer and each of the three other most highly compensated executive officers
who earned more than $100,000 annual compensation during the last fiscal year,
for the fiscal years ended March 29, 1997, March 30, 1996, and March 25, 1995:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------------------------
ANNUAL COMPENSATION AWARDS PAY-OUTS
-------------------------------- ---------------------------------------------------
NUMBER OF
SECURITIES
OTHER UNDERLYING ALL OTHER
NAME AND ANNUAL OPTIONS/ COMPEN-
PRINCIPAL FISCAL COMPEN- SARS SATION
POSITION YEAR SALARY($) BONUS SATION (#)(1) ($)(2)
- ---------------------------------------------------------------------------------------------------------------------
George H. Bruns 1997 $146,862 -- $ 7,145(4) 75,000 --
Chairman and 1996 $148,000 -- $ 7,200(4) -- --
Chief Executive 1995 $ 37,000(3) -- $ 9,050(5) -- --
Officer
Jeffrey T. Lum 1997(6) $ 97,409 $29,015 -- 20,000 $1,164
President
ASCOR, Inc.
Gregory Overholtzer 1997 $108,500 $10,205 -- -- $3,218
Vice President, 1996(7) $104,885 -- -- -- $3,392
Finance and
Chief Financial Officer
Brad C. Stribling 1997(8) $ 92,353 $10,813 -- -- $2,164
Vice President, 1996 $111,126 -- -- -- $2,015
Engineering 1995 $116,462 $10,000 -- 40,000 $1,558
(1) Stock options granted under the Company's 1990 Stock Option Plan.
(2) Represents contributions made by the Company to the Company's 401 (k) Plan
which match in part the pre-tax elective deferral contributions (included
under Salary) made to such plan by the executive officers.
(3) In January 1995, Mr. George H. Bruns, Jr. assumed the role of Chief
Executive Officer.
(4) Other compensation for Mr. George H. Bruns, Jr. represents a car allowance
in 1997 and 1996.
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(5) Other compensation for Mr. George H. Bruns, Jr. includes a car
allowance of $1,800 for three months and board compensation of $7,250.
The Board compensation was earned prior to the assumption of the Chief
Executive Officer position in January, 1995.
(6) ASCOR merged with Giga-tronics in fiscal 1997.
(7) Pursuant to regulations issued by the Commission, no data is reportable
for prior fiscal years because annual compensation was below the $100,000
requirement.
(8) Mr. Brad Stribling left the Company in January of 1997. Data is still
reportable for 1997 pursuant to regulations issued by the Commission.
STOCK OPTIONS
The following table sets forth stock options granted in fiscal 1997 to
each of the Company's executive officers named in the Summary Compensation
Table. No stock appreciation rights were granted during the 1997 fiscal year.
All option exercise prices would have been based on market price on the date of
grant. The table also sets forth the hypothetical gains that would exist for the
options at the end of their five year terms, assuming compound annual rates of
stock appreciation of 5% and 10%. These numbers are calculations based on the
requirements promulgated by the Commission and do not reflect the Company's
estimate of future stock price growth. The actual future value of all options
will depend on the market value of the Company's Common Stock.
OPTION GRANTS IN FISCAL 1997
Percent of Potential Realizable
No. of Total Options Value at Assumed
Securities Granted To Annual Rates of Stock
Underlying Employees Price Appreciation
Date of Options In Fiscal Exercise Exp. for Option Term
Name Grant Granted (#) 1997 Price ($/sh) Date 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------
George H. Bruns, Jr. 8/27/96 75,000 35.4 $9.35 2/26/99 $18,750 $108,750
Jeffrey T. Lum 8/28/96 20,000 9.4 $8.50 8/27/01 $47,000 $103,800
OPTIONS EXERCISES AND FISCAL YEAR END VALUE TABLE
The following table provides information, with respect to the
named executive officers, concerning the exercise of options during fiscal 1997
and unexercised options held as of the end of the fiscal year. No stock
appreciation rights were exercised by such individuals during fiscal 1997. No
stock appreciation rights were outstanding at the end of such fiscal year.
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AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 29, 1997(#) AT MARCH 29, 1997($)(1)
-------------------- --------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ------------ -------------- ---------------- ------------- ----------------
George H. Bruns, Jr. -- $ -- -- 75,000 -- $ --(3)
Chairman and
Chief Executive Officer
Gregory Overholtzer 7,500 $30,000 (2) -- 15,000 -- $ 60,000
Vice President, Finance
and Chief Financial Officer
Bradley C. Stribling 10,000 $56,875 (2) -- -- -- $ --
Vice President,
Engineering
Jeffrey T. Lum -- $ -- -- 20,000 -- $ -- (3)
President
ASCOR
(1) Equal to the fair market value of the option shares on March 29, 1997
($8.00 per share), less the aggregate option price payable for such
shares. Options are in-the-money if the market value of the shares is
greater than the option exercise price.
(2) Equal to the market value of shares on date of exercise less the aggregate
option price paid for such shares.
(3) Options are out-of-the-money.
LONG-TERM INCENTIVE PLAN (LTIP) AWARDS TABLE
There were no long-term incentive plan awards made during fiscal 1997 to
the Company's executive officers.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CHANGE-IN-CONTROL ARRANGEMENTS
All outstanding options held by the Chief Executive Officer and the
Company's other executive officers under the Company's 1990 Stock Option Plan
will automatically accelerate and become exercisable for fully vested shares
upon a change in control of the Company, whether effected through merger, sale
of substantially all of the Company's assets, the successful completion of a
hostile tender offer for 30% or more of the Company's outstanding Common Stock,
or a change in the majority of the Board as a result of one or more contested
elections for Board membership.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the 1997 fiscal year, the Compensation and Stock Option
Committee of the Board was comprised of Messrs. Cole and Wilson.
No executive officer of the Company 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 the Company's Board of Directors or
Compensation Committee.
COMPENSATION AND STOCK OPTION 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 the Company's 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 (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
(performance based bonus), and long term incentives (stock options).
FACTORS
The process involved and the factors considered in the executive
compensation determination for fiscal year 1997 are summarized below. It is
expected that this process will remain the same in fiscal year 1998. 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 the Company. 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 the Company's executive officers are
competitive with the companies within and without the industry with which the
Company 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 the Company's
executive officers stood in relation to other companies in the 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.
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ANNUAL PERFORMANCE (NON-STOCK) BASED INCENTIVE COMPENSATION
Giga-tronics' annual incentive bonus plan is intended to (1) reward key
employees based upon company and individual performance, (2) motivate, and (3)
provide competitive cash compensation opportunities. Incentive awards are paid
annually based upon achievement of individual performance objectives for the
most recently completed fiscal year.
Bonus payments of approximately $75,000 in the aggregate were earned in
fiscal 1997.
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 management and shareholder
interests. With one exception, options issued have been at 100% of market value,
for 5 year terms, exercisable 25% per year after the first year. The right to
exercise options expires 60 days after termination of employment, except in case
of death when optionee's estate would have six months to exercise. The exception
is 75,000 options issued to Mr. George Bruns at 110% of market value, for a term
of 2-1/2 years, exercisable 50% per year after the first year.
Options outstanding in FY 1995 were 8.3% of total shares outstanding,
options outstanding at the end of FY 1996 were 6.0% of total shares outstanding,
and options outstanding at the end of FY 1997 were 7.8% of total shares then
outstanding.
CEO COMPENSATION
The CEO compensation is based on the same considerations as any other
senior executive. Base rates are determined by market factors. Other
compensation factors (salary increases, incentive bonus, option participation)
are performance-based.
Mr. Bruns' compensation for 1997 was $146,862 plus $7,145 transportation
allowance.
Mr. Bruns holds 75,000 options and owns, directly and through family,
387,553 shares comprising of 11.5% of the Company's stock.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Effective January 1, 1994, Section 162(m) of the IRS 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 the Company's executive officers with an exercise price
not less than the fair market value of the underlying shares on the grant date
will qualify as performance-based compensation which is not subject to the $1
million limitation
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has re-appointed the firm of KPMG Peat Marwick as
the Company's independent accountants for the fiscal year ending March 28, 1998
and to perform other appropriate services. Ratification by the shareholders will
be sought for this appointment.
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Representatives of KPMG Peat Marwick are expected to be present at the
Company's 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK.
EMPLOYEE STOCK PURCHASE PLAN
The shareholders are being asked to vote on a proposal to approve the
Company's Employee Stock Purchase Plan (the "Purchase Plan"), pursuant to which
130,000 shares will be reserved for issuance. 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
Purchase Plan was adopted by the Board on December 11, 1996, and became
effective on January 15, 1997 (the "Effective Date"). However, no shares will be
issued under the Purchase Plan unless it is approved by the shareholders at the
1997 Annual Meeting.
The following is a summary of the principal features of the Purchase Plan.
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 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
A total of 130,000 shares of Common Stock have been reserved for issuance
over the ten (10) year term of the Purchase Plan. 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.
Purchase Intervals
Except for the initial offering period, which shall consist of a single
purchase interval, the Purchase Plan shall be implemented in a series of
successive six (6) month purchase intervals. The initial purchase interval is to
begin on January 15, 1997 and end on the last business day in August 1997.
Subsequent purchase intervals will begin on the first business day in September
and March each year and end on the last business day in February and the
following August 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
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year in the employ of the Company or any participating affiliate ("Eligible
Employee") will be eligible to participate in the Plan.
Participating affiliates include any parent or subsidiary corporations of
the Company, whether now existing or hereafter organized, which elect, with the
approval of the Plan Administrator, to extend the benefits of the Purchase Plan
to their eligible employees.
As of March 29, 1997, approximately 167 employees, including 4 executive
officers, were eligible to participate in the Purchase Plan.
Purchase Provisions
Each participant will be 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 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;
provided that the purchase price per share for the purchase date of the initial
offering period shall be equal to eighty-five percent (85%) of the fair market
value per share of common stock on that purchase date.
Valuation
The fair market value per share of Common Stock on any relevant date will
be the closing selling price per share on such date on the Nasdaq National
Market. On March 29, 1997, the fair market value per share of Common Stock was
$8.00 per share.
Special Limitations
The Purchase Plan imposes certain limitations upon a participant's rights
to acquire Common Stock, including the following limitations:
(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.
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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 transferrable 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.
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.
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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.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares present or represented
and entitled to vote at the Annual Meeting is required for approval of the
Purchase Plan. Should such shareholder approval not be obtained, then the
Purchase Plan will terminate and all sums collected from any individuals who
joined the initial purchase interval on the Effective Date will be refunded.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE EMPLOYEE STOCK
PURCHASE PLAN.
APPROVAL OF STOCK OPTION PLAN AMENDMENTS
The Company's shareholders are being asked to approve an amendment to the
Company's Restated 1990 Stock Option Plan (the "Option Plan") which the Board of
Directors adopted on June 20, 1997, subject to shareholder approval at the 1997
Annual Meeting. The principal changes which the amendment has made to the Option
Plan as last approved by the shareholders may be summarized as follows:
o The total number of shares of Common Stock available for
issuance over the term of the Option Plan has been increased
by an additional 300,000 shares to 700,000 shares of Common
Stock.
o The requirement that the Option Plan be administered by a
committee of directors who qualify under Rule 16b-3, prior to
its amendment in 1996, as "disinterested persons" has been
eliminated.
o The authority of the Board to amend the Option Plan has been
modified.
o Stock options granted to officers no longer must be
accompanied by Limited Stock Appreciation Rights. However,
such Limited Rights may be granted on a case-by-case basis.
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The purpose of these changes is to assure that the Company will
continue to have a sufficient reserve of Common Stock available under the Option
Plan to attract and retain the services of key individuals essential to the
Company's long-term growth and success, and to eliminate or modify certain
restrictions, as permitted by recent amendments to Rule 16b-3 issued by the
Securities and Exchange Commission under Section 16(b) of the Securities
Exchange Act of 1934.
The affirmative vote of a majority of the Company's outstanding voting
stock present or represented by proxy at the 1997 Annual Meeting and entitled to
vote on this proposal is required for approval of the amendments to the Option
Plan.
The following is a summary of the principal features of the Option Plan as
amended through June 20, 1997. The summary, however, is not intended to be a
complete description of all the terms of the Option Plan. A copy of the Option
Plan will be furnished by the Company to any shareholder upon written request to
the Corporate Secretary.
DESCRIPTION OF THE OPTION PLAN
Option Grant Programs. The Option Plan consists of the Discretionary
Option Grant Program under which key employees may be granted stock options to
purchase shares of Common Stock.
Option Plan Administration. The Option Plan is administered by a
committee or committees (the "Committee) appointed by the Board from among its
members or a subcommittee or subcommittees thereof. In establishing the
composition of the Committee the Board will consider, but is not bound by
compliance with Rule 16b-3 issued under the Security Exchange Act of 1934 and
Section 162(m) of the Internal Revenue Code. Before amendment, the Option Plan
required that administration of the Option Plan with respect to officers subject
to Section 16(b) be performed by a committee of directors who qualified as
"disinterested persons" within the meaning of then-existing Rule 16b-3. The term
"disinterested persons", as well as the requirement that the Option Plan be
administered by such "disinterested persons" was eliminated from Rule 16b-3 in
1996. Amended Rule 16b-3 provides several alternative means of exempting
transactions under the Option Plan from the liability provisions of Section 16,
including but not limited to administration by a committee that satisfies
certain requirements as to composition.
As Plan Administrator, the Committee has complete discretion to select
the eligible individuals who are to receive grants under the Discretionary
Option Grant Program, the number of shares subject to each grant and the
remaining terms and conditions of that grant.
Eligibility. Eligibility for grants under the Discretionary Option
Grant Program is limited to key employees (including officers and directors) of
the Company or one or more parent or subsidiary corporations, whether now
existing or subsequently established. Non-employee Board members will not be
eligible to participate in the Discretionary Option Grant Program. As of March
29, 1997, approximately 167 employees (including 4 executive officers) were
eligible to receive option grants under the Discretionary Option Grant Program.
Securities Subject to the Option Plan. The total number of shares of
Common Stock issuable over the term of the Option Plan may not exceed 700,000
shares, and no participant in the Option Plan may be granted stock options or
separately exercisable stock appreciation rights for more than 200,000 shares in
the aggregate, exclusive of any grants made prior to May 1, 1994. These share
numbers will be subject to periodic adjustment in the event of certain changes
to the capital structure of the Company.
Should an option terminate or expire for any reason prior to exercise
or surrender in full, the shares subject to the portion of the option not so
exercised or surrendered will be available for subsequent issuance under the
Option Plan. However, shares subject to any option surrendered in accordance
with the stock appreciation right provisions summarized below will not be
available for subsequent issuance.
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As of June 20, 1997, 75,550 shares of Common Stock have been issued
under the Option Plan, options covering 262,500 shares were outstanding and
361,950 shares remained available for future grant, assuming shareholder
approval of this proposal.
DISCRETIONARY OPTION GRANT PROGRAM
The principal features of the Discretionary Option Grant Program may be
summarized as follows:
Price, Term and Exercisability. The option price per share may not be
less than eighty percent (80%) of the fair market value per share of Common
Stock on the date of grant, and granted options may not have a term in excess of
ten (10) years.
The option price may be paid in cash or in shares of Common Stock held
for the requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes. Options may also be exercised through a
same-day sale procedure, whereby the optionee authorizes a designated stock
broker to effect an immediate sale of the vested shares purchased under the
option and to pay over to the Company, out of the sale proceeds, sufficient
funds to cover the option price and any withholding taxes incurred by reason of
the transaction. The Plan Administrator may also assist any optionee (including
an officer or director) in the exercise of one or more outstanding options by
(a) authorizing a loan from the Company or (b) permitting the optionee to pay
the option price in installments over a period of years. The terms and
conditions of any such loan or installment payment will be established by the
Plan Administrator in its sole discretion, but in no event may the maximum
credit extended to the optionee exceed the aggregate option price payable for
the purchased shares plus any Federal or state income or employment taxes
incurred in connection with the purchase.
Valuation. The fair market value per share of Common Stock on any
relevant date under the Option Plan will be the closing selling price per share
on that date on the Nasdaq National Market. If there are no reported sales for
such date, then the closing selling price for the last previous date for which
such quotation exists will be determinative of fair market value. On March 29,
1997, the closing selling price per share was $8.00.
Termination of Service. Should the optionee cease to remain in the
Company's service while holding one or more outstanding options, then the
optionee will have a limited period following such cessation of service in which
to exercise each such option for the number of shares for which the option is
otherwise exercisable at the time of such cessation of service.
The Plan Administrator will have the discretionary authority under the
Option Plan to extend the period following the optionee's cessation of service
during which outstanding options are to remain exercisable and/or to accelerate
the exercisability or vesting of such options in whole or in part. Such
discretion may be exercised either at the time the options are granted or at any
time while the option remains outstanding.
For purposes of the Option Plan, an individual will be deemed to
continue in service for so long as he or she remains in the employ of the
Company or any parent or subsidiary corporation or serves as a non-employee
member of the Company's Board of Directors.
Cancellation/Regrant Programs. The Plan Administrator has the authority
to effect, at any time and from time to time, with the consent of the affected
optionees, the cancellation of any or all options outstanding under the Option
Plan and to grant in substitution therefor new options covering the same or
different numbers of shares of Common Stock but with an option price per share
not less than eighty percent (80%) of the fair market value of Common Stock on
the new grant date.
Stock Appreciation Rights. Each person who is at the time of the option
grant an officer or director of the Company subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended ("Section 16(b) Insider") may be
granted a limited stock appreciation right ("Limited Right") with respect to
that
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option. Prior to the proposed amendment, each such option automatically
included a Limited Right. The Limited Right will entitle the Section 16(b)
Insider to surrender the option upon the occurrence of a Change in Control,
provided such option has been outstanding for a period of at least six (6)
months. In return for the surrendered option, the Section 16(b) Insider will
receive a cash payment from the Company in an amount equal to (i) the greater of
(A) the fair market value of the vested shares for which the option is
exercisable on the date of the option surrender or (B) the highest reported
price per share paid in connection with the Change in Control of the Company's
outstanding Common Stock, less (ii) the aggregate option price payable for such
vested shares.
For purposes of the Option Plan, a Change in Control will be deemed to
occur in the event:
(i) a person or group of related persons, other than the Company or any
person controlling, controlled by or under common control with the
Company, acquires beneficial ownership (as determined pursuant to the
provisions of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company's then outstanding
securities pursuant to a transaction or series of related transactions
which the Board does not approve; or
(ii) there is effected, within any period of twelve (12) consecutive
months or less, any change in the composition of the Board such that the
majority of the Board (determined by rounding up to the next whole number)
ceases to be comprised of individuals who either (A) have been members of
the Board continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by
at least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by
the Board.
Acceleration of Options. In the event of a Change in Control or an
acquisition of the Company by merger or asset sale (an "Acquisition"), each
option outstanding at the time will automatically become exercisable for all of
the option shares and may be exercised for any or all of such shares immediately
prior to the effective date of such Change in Control or Acquisition. However,
an outstanding option will not so accelerate in connection with an Acquisition
if that option is either to be assumed by the successor corporation or parent
thereof or replaced by a comparable option to purchase shares of the capital
stock of the successor corporation or parent thereof, and certain outstanding
options may not, pursuant to their express terms, accelerate upon a Change in
Control. The Plan Administrator will have the discretion to provide for the
subsequent acceleration of any option which does not accelerate at the time of
such Acquisition or Change in Control, should the optionee's service terminate
within a designated period following that transaction.
The Plan Administrator will also have the discretionary authority to
provide for the automatic vesting of the shares of Common Stock subject to one
or more outstanding options upon an Acquisition, whether or not those options
are to be assumed or replaced in connection with such acquisition.
The acceleration of options in the event of a Change in Control or an
Acquisition of the Company may be seen as an anti-takeover provision and may
have the effect of discouraging a proposal for merger, a takeover attempt or
other efforts to gain control of the Company.
Special Tax Election. The Plan Administrator may provide one or more
holders of non-statutory options under the Discretionary Grant Option Program
with the right to have the Company withhold a portion of the shares of Common
Stock otherwise issuable to such individuals in satisfaction of the Federal and
state income and employment tax liability incurred by such individuals in
connection with the exercise of those options. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
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GENERAL PROVISIONS
Option Plan Amendments. The Board of Directors may amend, suspend or
discontinue the Option Plan at any time. Without shareholder approval, the Board
may not make any other change with respect to which the Board determines that
stockholder approval is required by applicable law or regulatory standards.
Before its amendment, as proposed, the Option Plan also contained the following
restriction, which was required by Rule 16b-3 before its amendment in 1996: the
Board could not, without stockholder approval, (i) materially modify the
requirements for eligibility and participation in the Option Plan, or (ii)
materially increase the number of shares which may be subject to awards granted
under the Option Plan (except as provided above).
To the extent not inconsistent with the Option plan, the committee may
modify or waive the terms of any outstanding award.
OPTION GRANTS
The table below shows, as to the Company's Chief Executive Officer,
each of the Company's other executive officers named in the Summary Compensation
Table (below), each of the non-employee Board members and the various indicated
groups, the following information with respect to stock option transactions
effected from the beginning of fiscal year 1997 through June 25, 1997, the
number of shares of Common Stock subject to options granted under the Option
Plan during that period and the weighted average option price payable per share
under such options:
NAME AND POSITION NUMBER OF WEIGHTED AVERAGE
OPTION SHARES OPTION PRICE OF
GRANTED OPTIONS
- ----------------------------------------------------------------------------------------------------
George H. Bruns, Jr. 75,000 $9.35
Chairman and Chief Executive Officer
- ----------------------------------------------------------------------------------------------------
Gregory L. Overholtzer -0- N/A
Vice President, Finance and Chief Financial Officer
- ----------------------------------------------------------------------------------------------------
Jeffrey T. Lum 20,000 $8.50
President, ASCOR, Inc.
- ----------------------------------------------------------------------------------------------------
Bradley C. Stribling -0- N/A
Vice President, Engineering
- ----------------------------------------------------------------------------------------------------
Byron F. Flanders 25,000 $8.50
Vice President, Manufacturing
- ----------------------------------------------------------------------------------------------------
Robert D. Geddes 25,000 $8.50
Vice President, Marketing and Sales
- ----------------------------------------------------------------------------------------------------
All current executive officers as a group 145,000 $8.94
(6 persons)
- ----------------------------------------------------------------------------------------------------
James A. Cole -0- N/A
Director
- ----------------------------------------------------------------------------------------------------
Edward D. Sherman -0- N/A
Director
- ----------------------------------------------------------------------------------------------------
Robert C. Wilson -0- N/A
Director
- ----------------------------------------------------------------------------------------------------
All current directors (other than executive officers) as a -0- N/A
group (3 persons)
- ----------------------------------------------------------------------------------------------------
All employees, including current officers who are not 66,900 $7.78
executive officers, as a group (12 persons)
- ----------------------------------------------------------------------------------------------------
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FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Option Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
described below:
Incentive Stock Options. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is generally
recognized at the time the option is exercised. The optionee will, however,
recognize taxable income in the year in which the purchased shares are sold or
otherwise made the subject of disposition. For Federal tax purposes,
dispositions are divided into two categories: (i) qualifying and (ii)
disqualifying. The optionee will make a qualifying disposition of the purchased
shares if the sale or other disposition of such shares is made after the
optionee has held the shares for more than two years after the grant date of the
option and more than one year after the exercise date. If the optionee fails to
satisfy either of these two minimum holding periods prior to the sale or other
disposition of the purchased shares, then a disqualifying disposition will
result.
Upon a qualifying disposition of the shares, the optionee will
recognize long-term capital gain in an amount equal to the excess of (i) the
amount realized upon the sale or other disposition of the purchased shares over
(ii) the option price paid for those shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the option exercise date over (ii) the option price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
option price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares. The Company anticipates that the ordinary income recognized in
connection with most disqualifying dispositions of incentive stock option shares
under the Option Plan will be deductible by it and will not be subject to the
annual $1 Million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company.
Non-Statutory Stock Options. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the option price paid for the shares, and the optionee will be
required to satisfy the tax withholding requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the ordinary income recognized upon the
exercise of most non-statutory options under the Option Plan will be deductible
by it and will not be subject to the annual $1 million limitation per covered
individual on the deductibility of the compensation paid to certain executive
officers of the Company.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
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ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any charge to
the Company's earnings. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
For fiscal years beginning with the Company's 1996 fiscal year,
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123") requires the Company to disclose, in footnotes to
the Company's financial statements, the impact that options and other awards
granted under the Option Plan would have had on the Company's reported earnings
were the fair value of those awards treated as compensation expense.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of
the Company represented and entitled to vote at the 1997 Annual Meeting is
required for approval of the amendment to the Option Plan. If such approval is
obtained, then all outstanding options based upon the 300,000-share increase
which forms part of that amendment will remain outstanding and become
exercisable in accordance with their terms. Should such shareholder approval not
be obtained, then the option grants based upon such share increase will
immediately terminate, and no further option grants will be made on the basis of
that increase. The Option Plan will, however, continue to remain in effect, and
option grants may continue to be made pursuant to the provisions of the Option
Plan until the available reserve of Common Stock under the Option Plan, as last
approved by the shareholders, is issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDED OPTION PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED
UNDER THE OPTION PLAN AND TO ELIMINATE CERTAIN RESTRICTIONS AS PERMITTED BY
RECENT AMENDMENTS TO SECURITIES AND EXCHANGE COMMISSION RULE 16b-3.
SHAREHOLDERS' PROPOSALS
To be considered for presentation to the Annual Meeting of Shareholders
to be held in 1998, a shareholder proposal must be received by the Company no
later than February 28, 1998. Proposals should be addressed to the Corporate
Secretary, Giga-tronics Incorporated, 4650 Norris Canyon Road, San Ramon, CA
94583.
The Annual Report of the Company for the fiscal year ended March 29,
1997 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 Company will mail Annual Report on Form 10K to any shareholder who
so requests. Requests should be sent to the Corporate Secretary as noted above
for proposals.
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OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof in accordance with the judgments of the persons voting the
proxies. Regardless of whether you intend to be present at the Annual Meeting,
you are urged to complete, date, sign and return your proxy promptly.
By order of the Board of Directors,
/s/ George H. Bruns, Jr.
George H. Bruns, Jr.
Chairman and Chief Executive Officer
San Ramon, California
June 25, 1997
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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 Larry Kaye, 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 ("Giga-tronics") standing in the
name of the undersigned on the books of Giga-tronics at the close of business on
June 9, 1997, at the Annual Meeting of Shareholders to be held at 10:00 A.M., on
August 5, 1997, at Giga-tronics' Facilities 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)
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27
FOR ALL NOMINEES LISTED (EXCEPT AS WITHHELD IN ONE SPACE BELOW).
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED.
Elect four Directors for the ensuing year.
Nominees: George H. Bruns, Jr., James A. Cole.
Edward D. Sherman, Robert C. Wilson.
INSTRUCTION: To withhold authority to vote for one or more individual nominees,
(write such name or names in the space provided below.)
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2. Ratify the appointment of independent certified public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratify the Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratify the amendment to the Stock Option Plan to increase the number of
authorized shares from 400,000 to 700,000 and make the other changes
described in the Proxy Statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Signature(s) Dated: , 1997
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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 President or other
authorized officer. If a partnership, please sign in full partnership name by
authorized person. Receipt is acknowledged of the Proxy Statement for the
meeting.
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