SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
___ Preliminary Information Statement
___ Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
_X_ Definitive Information Statement
Sierra Monitor Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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_X_ No fee required.
___ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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pursuant to Exchange Act Rule 0-11: N/A
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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
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE>
SIERRA MONITOR CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 2000
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Sierra Monitor Corporation (the "Company") will be held at the Company's
principal executive offices located at 1991 Tarob Court, Milpitas, California,
on Tuesday, May 16, 2000, at 10:00 a.m. local time, for the following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected.
2. To authorize an increase of 500,000 shares of Common Stock to
be made available for issuance under the Company's 1996 Stock
Option Plan;
3. To ratify the appointment of KPMG LLP as the Company's
independent public accountants for the fiscal year ending
December 31, 2000.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the
Information Statement accompanying this Notice and in the Annual Report on Form
10-KSB which was separately mailed to shareholders on March 31, 2000.
Only shareholders of record at the close of business on April 3, 2000
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. All shareholders are cordially invited to attend the Annual
Meeting in person.
For the Board of Directors
SIERRA MONITOR CORPORATION
/s/ Gordon R. Arnold
Gordon R. Arnold
President
Milpitas, California
April 7, 2000
- --------------------------------------------------------------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
- --------------------------------------------------------------------------------
<PAGE>
SIERRA MONITOR CORPORATION
INFORMATION STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
May 16, 2000
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
The enclosed Information Statement has been prepared on behalf of the
Board of Directors of Sierra Monitor Corporation, a California corporation
("Sierra Monitor" or the "Company"), with respect to Sierra Monitor's Annual
Meeting of Shareholders (the "Annual Meeting") to be held on May 16, 2000, or at
any adjournment(s) or postponement(s) thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Shareholders.
Sierra Monitor's principal executive offices are located at 1991 Tarob
Court, Milpitas, CA 95035. The telephone number at that address is (408)
262-6611.
This Information Statement was mailed on or about April 7, 2000 to all
shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING VOTING
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 3, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, Sierra Monitor had issued and outstanding 10,967,588 shares of
Common Stock.
Voting
Every shareholder voting for the election of directors may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more than the number of directors to be elected.
No shareholder, however, shall be entitled to cumulate votes for any candidate
unless (i) the candidate's name has been placed in nomination prior to the
voting and (ii) the shareholder, or any other shareholder, has given notice at
the meeting prior to the voting of the intention to cumulate the shareholder's
votes. On all other matters, each share has one vote. Votes against a particular
proposal are counted for purposes of determining the presence or absence of a
quorum and are also counted as having been "voted" with respect to the proposal
for purposes of determining whether the requisite majority of voting shares has
been obtained. While there is no definitive statutory or case law authority in
California as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining whether a quorum is
present at the Annual Meeting. The Company further believes that abstentions
should be counted as having been voted with respect to the election of directors
or the other proposals set forth herein for purposes of determining whether the
requisite majority of the shares has been obtained. In the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
with respect to the election of directors and the proposals set forth herein in
this manner.
<PAGE>
PROPOSAL ONE - ELECTION OF DIRECTORS
Nominees
A board of four directors is to be elected at the Annual Meeting. The
Board of Directors of Sierra Monitor has authorized the nomination at the Annual
Meeting of the persons named below as candidates. In the event that any such
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the shareholders may vote for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. The directors
elected will hold office until the next annual meeting of shareholders and until
their successors are elected and qualified.
<TABLE>
The names of the nominees and certain information about them are set
forth below:
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- -------------------------------- ------------ ----------------------------------------------- --------------
<S> <C> <C>
Gordon R. Arnold 54 President, Chief Financial Officer, Secretary 1989
and Director of the Company
C. Richard Kramlich 64 General Partner, New Enterprise Associates - 1989
Venture Capital
Jay T. Last 70 President, Hillcrest Press 1989
Robert C. Marshall 68 Principal, Selby Venture Partners 1998
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
GORDON R. ARNOLD joined Sierra Monitor Corporation, a California
corporation ("Old Sierra"), in December 1979 as Operations Manager and Vice
President. He became President in 1984 and Chief Executive Officer in April
1985. In September 1989, Old Sierra merged into UMF Systems, Inc., a California
corporation ("UMF"), and UMF changed its name to "Sierra Monitor Corporation."
Mr. Arnold has served as the Company's President and Chief Financial Officer
since the merger and as the Company's Secretary since February 1993. Mr. Arnold
was also a director of Old Sierra from 1984 until the merger with UMF.
C. RICHARD KRAMLICH became a director of Old Sierra in February 1980
and remained a director of the Company following the merger between Old Sierra
and UMF. Since 1978, he has been a General Partner of New Enterprise Associates,
a venture capital firm. Mr. Kramlich is also a director of Com 21, Juniper
Networks, Chalone Inc., Lumisys, Inc., Silicon Graphics and NetSolve.
JAY T. LAST was a director of UMF from 1977 until September 1989 and
became a director of the Company following the merger of Old Sierra and UMF. Mr.
Last is the President of Hillcrest Press, a publishing company, and has been a
business and technical consultant for over five years.
ROBERT C. MARSHALL has been the principal Selby Venture Partners, a
venture capital firm, since October 1997. Mr. Marshall was President and CEO of
Infogear Technology from April 1996 to October 1997. Prior to April 1996 Mr.
Marshall held senior management positions with Tandem Computers for more than 20
years.
Vote Required
The four nominees receiving the highest number of affirmative votes of
the shares entitled to vote shall be elected as directors of the Company. Votes
withheld from any directors are counted for purposes of determining the presence
or absence of a quorum but have no other legal effect under California law.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
re-election of the above-named directors to the Board of Directors of the
Company.
-2-
<PAGE>
PROPOSAL TWO - AMENDMENT TO THE 1996 STOCK PLAN
The Company's Board of Directors and shareholders have previously
adopted and approved the Company's 1996 Stock Plan (the "1996 Plan"). A total of
600,000 shares of Common Stock were initially reserved for issuance under the
1996 Plan. On January 19, 2000, the Board of Directors approved an amendment to
the 1996 Plan, subject to shareholder approval, to increase the shares reserved
for issuance thereunder by 500,000 shares, bringing the aggregate number of
shares issuable under the 1996 Plan to 1,100,000.
As of the Record Date, only 80,000 shares remained available for future
issuance under the 1996 Plan.
At the Annual Meeting, the shareholders of the Company are being asked
to approve an amendment to the 1996 Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 500,000 shares, bringing the
total number of shares issuable under the 1996 Plan to 1,100,000. The Board
believes that the amendment will enable the Company to continue its policy of
widespread employee stock ownership as a means of motivating high levels of
performance and recognizing key employee accomplishments.
Summary of the 1996 Plan
General. The purpose of the 1996 Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of the
Company and to promote the success of the Company's business. Options and stock
purchase rights may be granted under the 1996 Plan. Options granted under the
1996 Plan may be either "incentive stock options", as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or "nonstatutory"
stock options.
Administration. The Plan may generally be administered by the Board or
a committee appointed by the Board. However, with respect to grants of options
to employees who are also officers or directors of the Company ("Insiders"), the
1996 Plan shall be administered by: (i) the Board if the Board may administer
the Plan in a manner complying with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or any successor rule
thereto ("Rule 16b-3") with respect to a plan under which discretionary grants
and awards of equity securities are to be made to Insiders; or (ii) a committee
designated by the Board to administer the 1996 Plan, which committee shall be
constituted to comply with the rules under Rule 16b-3 governing a plan under
which discretionary grants and awards of equity securities are to be made to
Insiders. The administrators of the 1996 Plan are referred to herein as the
"Administrator."
Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the 1996 Plan to employees and consultants of the
Company and any parent or subsidiary of the Company. Incentive stock options may
be granted only to employees. The Administrator, in its discretion, selects the
employees and consultants to whom options and stock purchase rights may be
granted, the time or times at which such options and stock purchase rights shall
be granted, and the number of shares subject to each such grant.
Section 162(m) of the Code places limits on the deductibility for
federal income tax purposes of compensation paid to certain executive officers
of the Company. In order to preserve the Company's ability to deduct the
compensation income associated with options and stock purchase rights granted to
such persons, the 1996 Plan provides that no employee may be granted, in any
fiscal year of the Company, options and stock purchase rights to purchase more
than 100,000 shares of Common Stock. Notwithstanding this limit, however, in
connection with an employee's initial employment, he or she may be granted
options or stock purchase rights to purchase up to an additional 25,000 shares
of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
-3-
<PAGE>
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, the exercise price
of an incentive stock option granted to a 10% shareholder may not be less than
110% of the fair market value of the Common Stock on the date such option is
granted. The fair market value of the Common Stock is generally determined with
reference to the closing sale price for the Common Stock (or the closing bid if
no sales were reported) on the last market trading day prior to the date the
option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted under
the 1996 Plan generally vest and become exercisable over four years. The means
of payment for shares issued upon exercise of an option is specified in each
option agreement. The 1996 Plan permits payment to be made by cash, check,
promissory note, other shares of Common Stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of any Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.
(c) Term of Option. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% shareholder, the term of the option may
be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), then all options held by the optionee under the 1996 Plan expire on
the earlier of (i) the date set forth in his or her notice of grant or (ii) the
expiration date of such option. To the extent the option is exercisable at the
time of such termination, the optionee may exercise all or part of his or her
option at any time before termination.
(e) Death or Disability. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the 1996 Plan expire on the earlier of (i) 12 months
from the date of such termination or (ii) the expiration date of such option.
The optionee (or the optionee's estate or the person who acquires the right to
exercise the option by bequest or inheritance), may exercise all or part of the
option at any time before such expiration to the extent that the option was
exercisable at the time of such termination.
(g) Nontransferability of Options: Options granted under the 1996 Plan
are not transferable other than by will or the laws of descent and distribution,
and may be exercisable during the optionee's lifetime only by the optionee.
(h) Other Provisions: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Stock Purchase Rights. A stock purchase right under the 1996 Plan gives
the purchaser a period of no longer than 6 months from the date of grant to
purchase Common Stock. A stock purchase right is accepted by the execution of a
restricted stock purchase agreement between the Company and the purchaser,
accompanied by the payment of the purchase price for the shares. Unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall give the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment or consulting relationship
with the Company for any reason (including death and disability). The purchase
price for any shares repurchased by the Company shall be the original price paid
by the purchaser. The repurchase option lapses at a rate determined by the
Administrator. A stock purchase right is nontransferable other than by will or
the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee.
Adjustments Upon Changes in Capitalization. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the 1996 Plan, the number
-4-
<PAGE>
and class of shares of stock subject to any option or stock purchase right
outstanding under the 1996 Plan, and the exercise price of any such outstanding
option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options
or stock purchase rights will terminate. The Administrator may, in its
discretion provide that each optionee shall have the right to exercise all of
the optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or
like occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to exercise
the option or stock purchase right as to all the optioned stock, including
shares not otherwise exercisable. In such event, the Administrator shall notify
the optionee that the option or stock purchase right is fully exercisable for
fifteen (15) days from the date of such notice and that the option or stock
purchase right terminates upon expiration of such period.
Amendment and Termination of the Plan. The Board may amend, alter,
suspend or terminate the 1996 Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any amendment
to the 1996 Plan to the extent necessary to comply with Rule 16b-3, Section
162(m) and Section 422 of the Code, or any similar rule or statute. No such
action by the Board or shareholders may alter or impair any option or stock
purchase right previously granted under the 1996 Plan without the written
consent of the optionee. Unless terminated earlier, the 1996 Plan shall
terminate ten years from the date of its approval by the shareholders or the
Board of the Company, whichever is earlier.
Federal Income Tax Consequences
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% shareholder of the Company. The Company is entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject to
a substantial risk of forfeiture. The stock will generally cease to be subject
to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the
-5-
<PAGE>
purchaser's termination of employment with the Company. At such times, the
purchaser will recognize ordinary income measured as the difference between the
purchase price and the fair market value of the stock on the date the stock is
no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock on
the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% shareholder of the Company.
The foregoing is only a summary of the effect of federal income
taxation upon optionees, holders of stock purchase rights, and the Company with
respect to the grant and exercise of options and stock purchase rights under the
1996 Plan and does not purport to be complete. In addition, this summary does
not discuss the tax consequences of the employee's or consultant's death or the
provisions of the income tax laws of any municipality, state or foreign country
in which the employee or consultant may reside.
Vote Required
The approval of the amendment to the 1996 Plan requires the affirmative
vote of the holders of a majority of shares present at the Annual Meeting in
person or by proxy and entitled to vote as of the Record Date.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
amendment of the 1996 Plan to increase the number of shares reserved for
issuance thereunder by 500,000 shares to an aggregate of 1,100,000 shares.
PROPOSAL THREE - RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG LLP as the independent public
accountants of the Company for the current fiscal year ending December 31, 2000.
It is expected that a representative of KPMG LLP will be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so, and will be available to answer any appropriate questions.
Required Vote
Approval of the appointment of KPMG LLP as the Company's independent
public accountants for the fiscal year ending December 31, 2000 requires the
affirmative vote of the holders of a majority of shares present at the Annual
Meeting in person or by proxy and entitled to vote as of the Record Date. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider such appointment.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders vote FOR the
ratification of the appointment of KPMG LLP as the Company's independent public
accountants for the fiscal year ending December 31, 2000.
-6-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
<TABLE>
The following table sets forth the shares of Common Stock beneficially
owned as of the Record Date by the following persons known to the Company to be
the beneficial owners of more than 5% of the Company's outstanding Common Stock,
by each director of the Company, by the Chief Executive Officer of the Company,
by the other executive officers of the Company, and by all directors and
officers of the Company as a group:
<CAPTION>
Shares
Beneficially Owned (2)
-------------------------------------
Five-Percent Shareholders, Directors and Executive Officers (1) Number Percent
- ----------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
Five-Percent Shareholders:
Shires Income plc. ......................................................... 1,549,134 14.1%
c/o Glasgow Investment Managers
Sutherland House, 149 St. Vincent Street
Glasgow, Scotland G2-5DR
Directors and Executive Officers:
C. Richard Kramlich (3)..................................................... 2,034,494 18.6%
Jay T. Last................................................................. 2,016,942 18.4%
Gordon R. Arnold (4)........................................................ 1,050,702 9.6%
Robert C. Marshall.......................................................... 247,254 2.3%
Edward K. Hague (5)......................................................... 352,159 3.2%
Stephen R. Ferree (6)....................................................... 218,542 2.0%
Michael C. Farr (7)......................................................... 167,542 1.5%
All officers and directors as a group (7 persons)(2)-(8).................... 6,087,633 55.5%
<FN>
(1) Unless otherwise indicated, the business address of each of the beneficial
owners listed in this table is: c/o Sierra Monitor Corporation, 1991 Tarob
Court, Milpitas, California 95035.
(2) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(3) Includes 100,000 shares held by Pamela P. Kramlich, Mr. Kramlich's wife.
(4) Includes 77,083 shares subject to stock options exercisable within 60 days
of the Record Date.
(5) Includes 120,834 shares subject to stock options exercisable within 60 days
of the Record Date.
(6) Includes 63,542 shares subject to stock options exercisable within 60 days
of the Record Date.
(7) Includes 63,542 shares subject to stock options exercisable within 60 days
of the Record Date.
(8) Includes 325,001 shares subject to stock options exercisable within 60 days
of the Record Date.
</FN>
</TABLE>
-7-
<PAGE>
MANAGEMENT
Executive Officers
<TABLE>
The executive officers of the Company and their ages are as follows:
<CAPTION>
Name Age Positions
----------------------------------- ----------- -----------------------------------------------------------
<S> <C> <C>
Gordon R. Arnold 54 President, Chief Financial Officer, Secretary and Director
Michael C. Farr 42 Vice President, Operations
Stephen R. Ferree 52 Vice President, Marketing
Edward K. Hague 38 Vice President, Engineering
</TABLE>
Executive officers hold office until their successors are chosen,
subject to early removal by the Board of Directors.
There are no family relationships between any of the directors or
executive officers of the Company.
Board Meetings and Committees
The Board of Directors held four meetings during the fiscal year ended
December 31, 1999. Each current Director attended all of the meetings of the
Board of Directors held during the last fiscal year. The Board of Directors does
not have a standing audit, nominating or compensation committee or other any
other committees performing similar functions.
Compensation of Directors
Directors of the Company who are not employees receive a fee of $100
for each Board meeting they attend. Directors receive no other fees.
Certain Relationships and Related Transactions
None.
-8-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
<TABLE>
The following table sets forth the cash compensation, including
bonuses, paid to the Chief Executive Officer of the Company and the three next
most highly paid executive officers for the three fiscal years ended December
31, 1999. No other executive officer of the Company received more than $100,000
in compensation during fiscal year 1999.
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Awards
-------------------
Annual Compensation Securities
--------------------------- Underlying All Other
Salary Bonus Options Compensation
Name and Principal Position ($) ($) (#) ($)
- ----------------------------------- ------------ ------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Gordon R. Arnold 1999 84,735 0 0 72,325 (1)
Chief Executive Officer 1998 78,931 0 100,000 72,733 (2)
1997 75,723 0 100,000 55,633 (3)
Michael C. Farr 1999 92,973 0 0 39,083 (4)
Vice President, Operations 1998 86,700 0 75,000 49,820 (5)
1997 86,700 0 90,000 32,672 (6)
Stephen R. Ferree 1999 87,255 0 0 30,806 (7)
Vice President, Marketing 1998 81,000 0 75,000 44,633 (8)
1997 81,000 0 90,000 32,461 (9)
Edward K. Hague 1999 135,710 0 100,000 3,115 (10)
Vice President, Engineering 1998 125,131 0 200,000 3,717 (11)
1997 56,196 0 100,000 2,018 (12)
<FN>
(1) Represents $68,741 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $211 life insurance premium, and
$3,023 under the Company's medical insurance plan paid in fiscal 1999.
(2) Represents $69,167 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $374 life insurance premium, and
$2,842 under the Company's medical insurance plan paid in fiscal 1998.
(3) Represents $52,324 paid in sales commissions, a $250 contribution by
the Company under its 401(k) plan, $374 life insurance premium, and
$2,675 under the Company's medical insurance plan paid in fiscal 1997.
(4) Represents $34,635 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $211 life insurance premium, and
$3,887 under the Company's medical insurance plan paid in fiscal 1999.
(5) Represents $45,988 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $132 life insurance premium, and
$3,350 under the Company's medical insurance plan paid in fiscal 1998.
(6) Represents $29,954 paid in sales commissions, a $250 contribution by
the Company under its 401(k) plan, $150 life insurance premium, and
$2,318 under the Company's medical insurance plan paid in fiscal 1997.
(7) Represents $27,222 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $211 life insurance premium, and
$3,023 under the Company's medical insurance plan paid in fiscal 1999.
(8) Represents $38,176 paid in sales commissions, a $350 contribution by
the Company under its 401(k) plan, $374 life insurance premium, and
$5,733 under the Company's medical insurance plan paid in fiscal 1998.
(9) Represents $22,980 paid in sales commissions, a $250 contribution by
the Company under its 401(k) plan, $374 life insurance premium, and
$8,857 under the Company's medical insurance plan paid in fiscal 1997.
(10) Represents a $350 contribution by the Company under its 401(k) plan,
$211 life insurance premium, and $2,554 under the Company's medical
insurance plan paid in fiscal 1999.
(11) Represents a $350 contribution by the Company under its 401(k) plan,
$86 life insurance premium, and $3,281 under the Company's medical
insurance plan paid in fiscal 1998.
(12) Represents a $250 contribution by the Company under its 401(k) plan,
$36 life insurance premium, and $1,732 under the Company's medical
insurance plan paid in fiscal 1997.
</FN>
</TABLE>
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<PAGE>
EMPLOYEE BENEFIT PLANS
<TABLE>
The following table sets forth the number and terms of options granted
to the executive officers named in the Summary Compensation Table during the
fiscal year ended December 31, 1999:
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
- -------------------------------------------------------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Price Appreciation
Options Granted to Exercise for Option Term (1)
Granted Employees in Price Expiration ------------------------
Name (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- --------------------------- -------------- ----------------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gordon R. Arnold 0 - - - - -
Michael C. Farr 0 - - - - -
Stephen R. Ferree 0 - - - - -
Edward K. Hague 100,000 80.0% $0.50 10/31/09 $31,445 $79,687
- ---------------------------
<FN>
(1) The assumed 5% and 10% compound rates of annual stock appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. Assuming a ten year term of the option, the total calculated
compounded amount of stock appreciation is 63% (assuming 5% per year) and
159% (assuming 10% per year).
</FN>
</TABLE>
<TABLE>
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock and the fiscal year
end value of unexercised options held by each of the executive officers named in
the Summary Compensation Table during the fiscal year ended December 31, 1999.
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Value of Unexercised
Number of Securities --------------------------------
Underlying Unexercised In-the-Money Options (1)
Options at at
Shares Value Fiscal-Year End (#): Fiscal-Year End ($):
Acquired on Realized -------------------------------- --------------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------- --------------- ------------ -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Gordon R. Arnold 0 0 73,958 26,042 32,052 4,948
Michael C. Farr 0 0 61,979 13,021 29,776 2,474
Stephen R. Ferree 0 0 61,979 13,021 29,776 2,474
Edward K. Hague 0 0 108,334 191,666 33,875 51,125
------------------------
<FN>
(1) Represents the market value of the securities underlying the options at
the fiscal year end, less the exercise price of "in-the-money" options.
The closing price of the Company's last reported sale of Common Stock on
December 31, 1999 was $0.75 per share. Includes incentive stock options
previously granted to employees under the Company's 1986 and 1996 Option
Plans with exercise prices ranging from $0.22 to $0.75 per share.
</FN>
</TABLE>
-10-
<PAGE>
Changes to Compensation Plans
The Company has proposed an amendment to increase the number of shares
reserved for issuance and sale under the Company's 1996 Stock Plan. (See
PROPOSAL TWO - AMENDMENT TO THE 1996 STOCK PLAN above.) Because all grants under
the 1996 Stock Plan are made at the discretion of the Board of Directors, future
grants under such 1996 Stock Plan are not yet determinable. Accordingly, the
following table summarizes the number of stock options granted under the 1996
Stock Plan during the last fiscal year ended December 31, 1999 to (i) the
persons named in the Summary Compensation Table, (ii) all current executive
officers as a group, (iii) all current directors who are not executive officers
as a group, and (iv) all employees (excluding executive officers) as a group.
<TABLE>
New Plan Benefits
<CAPTION>
1996 Stock Plan (1)
-------------------------------
Exercise
Price
($ per Share) Number of
Name and Position (2) Options Granted
- ------------------------------------------------------ ------------- ---------------
<S> <C> <C>
Gordon R. Arnold - 0
Chief Executive Officer
Michael C. Farr - 0
Vice President, Operations
Stephen R. Ferree - 0
Vice President, Marketing
Edward K. Hague $0.50 100,000
Vice President, Engineering
Current Executive Officers, as a group $0.50 100,000
Non-Executive Officer Directors, as a group - 0
Non-Executive Officer Employees, as a group $0.75 25,000
- -------------------------------------------------------
<FN>
(1) Only employees and consultants (including officers and directors) of the
Company are eligible for option grants under the 1996 Stock Plan as
approved by the Company's Board of Directors.
(2) Exercise prices for the options granted during the fiscal year ended
December 31, 1999 under the 1996 Stock Plan are shown on a weighted-average
basis for the groups presented. Future benefits under the 1996 Stock Plan
are not determinable, as grants of options are made at the sole discretion
of the Company's Board of Directors and are dependent upon the price of the
Company stock in the future.
</FN>
</TABLE>
-11-
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors and persons who own more
than 10% of a registered class of the Company's equity securities during fiscal
year 1999 to file reports of initial ownership on Form 3 and changes in
ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and 10% shareholders are also required by SEC
rules to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that, during the fiscal year
ended December 31, 1999, all remaining Section 16(a) filing requirements
applicable to its officers, directors and ten-percent shareholders were complied
with.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
For the Board of Directors
SIERRA MONITOR CORPORATION
/s/ Gordon R. Arnold
Gordon R. Arnold
President
Dated: April 7, 2000
-12-