<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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.
WELLS-GARDNER ELECTRONICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[WELLS-GARDNER LOGO]
2701 North Kildare Avenue
Chicago, Illinois 60639
March 16, 2000
To Our Shareholders:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of Wells-Gardner Electronics Corporation which will be held at the General
Offices of the Company, 2701 North Kildare Avenue, Chicago, Illinois, Tuesday,
April 25, 2000, at 2:00 P.M. Central Daylight Savings Time. All holders of
common shares of the Company as of the close of business on March 10, 2000, are
entitled to vote at the Annual Meeting.
Time will be set aside for discussion of each item of business described in
the accompanying Notice of Annual Meeting and Proxy Statement. A current report
on the business operations of the Company will be presented at the meeting and
shareholders will have an opportunity to ask questions. We plan to adjourn the
meeting at approximately 3:00 P.M., but members of senior management will remain
to answer any additional questions you may have.
WE HOPE YOU WILL BE ABLE TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU
EXPECT TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY
CARD IN THE ENCLOSED ENVELOPE IN ORDER TO MAKE CERTAIN THAT YOUR SHARES WILL BE
REPRESENTED AT THE ANNUAL MEETING.
Sincerely,
/s/ Anthony Spier
Anthony Spier
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
WELLS-GARDNER ELECTRONICS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- APRIL 25, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Wells-Gardner
Electronics Corporation will be held on Tuesday, April 25, 2000, at 2:00 P.M.,
Central Daylight Savings Time, at the general offices of the Company, 2701 North
Kildare Avenue, Chicago, Illinois, for the following purposes:
1. To elect five directors;
2. To consider and vote upon a proposal to adopt the Company's Executive
Stock Award Plan;
3. To consider and vote upon a proposal to ratify the appointment of KPMG
LLP, as independent certified public accountants of the Company for the
fiscal year ending December 31, 2000;
4. To act upon any other business which may properly be brought before the
meeting.
The close of business on March 10, 2000, has been fixed as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting.
By Order of the Board of
Directors,
George B. Toma
Corporate Secretary
<PAGE> 4
WELLS-GARDNER ELECTRONICS CORPORATION
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 25, 2000
This Proxy Statement is being sent on or about March 16, 2000, to all
holders of common shares, $1.00 par value ("Common Stock"), the only class of
stock outstanding, of Wells-Gardner Electronics Corporation, 2701 North Kildare
Avenue, Chicago, Illinois 60639 (the "Company"), entitled to vote at the Annual
Meeting of Shareholders on Tuesday, April 25, 2000 (the "Meeting"), in order to
furnish information relating to the business to be transacted.
VOTING PROCEDURES
Shareholders of record at the close of business on March 10, 2000, are
entitled to vote at the Meeting. As of that date, there were approximately
4,562,742 shares of Common Stock outstanding. Shareholders are entitled to one
vote per share owned on the record date, and with respect to the election of
directors, shareholders have cumulative voting rights. Under cumulative voting,
each shareholder is entitled to a number of votes equal to the number of
directors to be elected multiplied by the number of shares owned by such
shareholder, and such shareholder may cast such votes for one nominee or
distribute them in any manner among any number of nominees.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE, which is postage-paid if mailed in the United States.
You may revoke your proxy at any time before it is actually voted at the
Meeting by delivering written notice of revocation to the Secretary of the
Company, by submitting a subsequently dated proxy, or by attending the Meeting
and withdrawing the proxy. You may also be represented by another person present
at the Meeting by executing a proxy designating such person to act on your
behalf. Each unrevoked proxy card properly executed and received prior to the
close of the Meeting will be voted as indicated.
Unless otherwise indicated on the proxy card, votes represented by all
properly executed proxies will be distributed equally among the nominees for
director named herein, except that if additional persons are nominated, the
proxies will have discretionary authority to cumulate votes among the nominees
named herein. The withholding of authority to vote for any individual nominee or
nominees will permit the proxies to distribute the withheld votes in their
discretion among the remaining nominees. In addition, where specific
instructions are not indicated, the proxy will be voted FOR the adoption of the
Executive Stock Award Plan and the FOR the ratification of appointment of the
selection of KPMG LLP as independent certified public accountants for the fiscal
year ending December 31, 2000.
Assuming the presence of a quorum, the affirmative vote of the holders of a
plurality of the shares represented at the Meeting and entitled to vote is
required for the election of directors and the affirmative vote of the holders
of a majority of the shares represented at the Meeting and entitled to vote is
required for the adoption of the Company's Executive Stock Award Plan and
ratification of appointment of KPMG LLP and for any other matters which may be
submitted for consideration. Abstentions are included in the determination of
the number of shares present for purposes of determining if a quorum is present.
Shares represented by proxies which are marked "abstain" or to deny
discretionary authority on any matter will be treated as shares present and
<PAGE> 5
entitled to vote, which will have the same effect as a vote against any such
matters. Broker "non-votes" will be treated as not represented at the Meeting as
to matters for which a non-vote is indicated on the broker's proxy and will not
affect the determination of the outcome of the vote on any proposal to be
decided at the Meeting. A broker "non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
The cost of soliciting proxies will be borne by the Company. The Company
will solicit shareholders by mail through its regular employees and will request
banks and brokers, and other custodians, nominees and fiduciaries, to solicit
their customers who have stock of the Company registered in the names of such
persons and will reimburse them for their reasonable, out-of-pocket costs. The
Company also may use the services of its officers, directors, and others to
solicit proxies, personally or by telephone, without additional compensation.
A copy of the 1999 Annual Report to Shareholders, which includes the
consolidated financial statements of the Company for 1999, was mailed to the
shareholders on or about March 16, 2000.
ELECTION OF DIRECTORS
The bylaws of the Company provide that the number of directors of the
Company shall be from five to nine, as fixed from time to time by the Board of
Directors. The size of the Board is currently set at five members. Shareholders
are entitled to cumulative voting in the election of directors. See "Voting
Procedures" herein. Directors will hold office until the next Annual Meeting and
until their successors are duly elected and qualified, or until their earlier
death or resignation. The Board of Directors has inquired of each nominee and
has ascertained that each will serve if elected. In the event that any of these
nominees should become unavailable for election, the Board of Directors may
designate substitute nominees, in which event the shares represented by the
proxy cards returned will be voted for such substitute nominees unless an
instruction to the contrary is indicated on the proxy card.
INFORMATION CONCERNING NOMINEES
ANTHONY SPIER DIRECTOR SINCE APRIL, 1990
Anthony Spier, age 56, has been Chairman of the Board, President and Chief
Executive Officer since April, 1994. Before joining the Company, Mr. Spier was
President of Bruning Corporation, a manufacturer of drafting equipment and
supplies, from 1989 to 1994. Prior thereto, he was Vice President of AM
International, and President of the International Division of AM International.
He is chairman of the Executive Committee and a member of the Acquisition
Committee.
MARSHALL L. BURMAN DIRECTOR SINCE AUGUST, 1998
Marshall L. Burman, age 70, is of Counsel to Wildman, Harrold, Allen &
Dixon. Prior to 1992, Mr. Burman was Managing Partner of Arvey, Hodes, Costello
& Burman. Mr. Burman is a current member and former chairman of the Illinois
State Board of Investments. He is chairman of the Compensation Committee and a
member of the Audit Committee.
2
<PAGE> 6
JERRY KALOV DIRECTOR SINCE FEBRUARY, 1999
Jerry Kalov, age 64, is President of Kay Consulting. Prior thereto, Mr. Kalov
was President and Chief Executive Officer of Cobra Electronics Corporation
(NASDAQ: COBR), retired January 1, 1998. Mr. Kalov also serves as a director of
Recoton Corporation. Mr. Kalov is also a Governor and a member of the Executive
Committee of the Electronic Industries Alliance. He is a member of the
Acquisition, Compensation and Executive Committee.
FRANK R. MARTIN DIRECTOR SINCE AUGUST, 1997
Frank R. Martin, age 53, is Senior Partner of the law firm Righeimer, Martin and
Cinquino, P.C. Mr. Martin has been associated with this firm since 1974. He is a
chairman of the Audit Committee and a member of the Executive Committee.
ERNEST R. WISH DIRECTOR SINCE AUGUST, 1995
Ernest R. Wish, age 68, is Chairman of the Board of WRM, Inc. a residential real
estate management firm. Mr. Wish also held the position as the Director of
Revenue from 1995 to 1996, and was City Clerk from 1993 to 1995, for the City of
Chicago. Prior thereto, Mr. Wish was Managing Partner of the Chicago and Midwest
Regional offices of Coopers & Lybrand LLP, a public accounting firm. He is
chairman of the Acquisition Committee and a member of the Audit and Compensation
Committees.
The shares represented by the proxy cards returned will be voted FOR the
election of these nominees, as specified under "Voting Procedures" herein,
unless specified otherwise.
VOTING RIGHTS AGREEMENT
The Company, John R. Blouin, James J. Roberts, Jr. and James Industries,
Inc. are parties to a voting rights agreement (the "Voting Rights Agreement")
dated August 30,1999, governing the voting of Common Stock for directors of the
Company. Pursuant to the Voting Rights Agreement, the parties have agreed to
vote their shares of Common Stock at each election of directors for such slate
of nominees as the Executive Committee of the Board designates (collectively,
the "Designated Directors"). In any election of directors of the Company in
which the number of nominees exceeds the number of directors to be elected, the
agreement provides that the parties will vote in a manner to assure the election
of the greatest number of Designated Directors or their successors. The Voting
Rights Agreement terminates on the earlier of the termination of the Sales
Representative Agreement between the Company, James Industries, Inc. and James
J. Roberts, Jr. (see "Compensation Committee Interlocks and Insider
Participation" herein) or December 31, 2003.
BOARD COMPENSATION
Employee directors do not receive additional compensation for serving on
the Board of Directors. At the 1996 Annual Meeting, the shareholders approved
the Nonemployee Director Stock Plan. The Nonemployee Director Stock Plan, as
amended by the Board in February, 1999, provides that for each quarter the
director is a Board member and each Board or Committee meeting attended, each
nonemployee director will receive $1,500 in value either as: (i) fair market
value of Common Stock, or (ii) a combination of Common Stock and a cash payment
in the amount sufficient to offset the tax liability incurred in connection with
the receipt of such stock. The closing Common Stock price on the day of each
meeting will set the basis price for such
3
<PAGE> 7
payment. The Nonemployee Director Stock Plan, as amended, also provides that
nonemployee directors may receive stock options for a number of shares of Common
Stock equal to one percent of the number of shares of Common Stock outstanding
on the date of grant divided by the number of eligible directors, to be granted
to nonemployee directors in office upon final adjournment of an annual meeting
of shareholders. During 1999, the Board of Directors met seven times and all
directors attended at least 97 percent of the aggregate number of Board
meetings.
COMMITTEES OF THE BOARD
The Board of Directors has a standing Audit, Executive, Compensation and
Acquisition Committee. Although the Board has no nominating committee, the
Executive Committee deals with matters relating to nominations to the Board.
AUDIT COMMITTEE
The Audit Committee consists of Frank R. Martin (Chairman), Marshall L.
Burman and Ernest R. Wish. The Audit Committee met four times during 1999. It
also meets separately with representatives of the Company's independent auditors
and with representatives of senior management. The Audit Committee is governed
by a Charter, which is attached as an appendix to this proxy statement.
EXECUTIVE COMMITTEE
The Executive Committee consists of Anthony Spier (Chairman), Jerry Kalov
and Frank R. Martin. The Executive Committee, which met two times during 1999,
has the authority to take all actions that could be taken by the Board of
Directors, except as provided by statute. It may meet between regularly
scheduled Board meetings to take such action as is necessary for the efficient
operation of the Company.
The Executive Committee's duties relating to nominations to the Board
include proposing a slate of directors for election by the shareholders at each
Annual Meeting and proposing candidates to fill vacancies on the Board. It
conducts research to identify suitable candidates for Board membership, and
seeks individuals who will make a substantial contribution to the Company. It
will consider candidates proposed by shareholders. Generally, candidates must be
highly qualified and affirmatively desirous of serving on the Board. They should
represent the interests of all shareholders and not those of a special interest
group. Any shareholder wishing to propose a candidate for consideration should
forward the candidate's name and a detailed background of the candidate's
qualifications to the Secretary of the Company.
COMPENSATION COMMITTEE
The Compensation Committee consists of Marshall L. Burman (Chairman), Jerry
Kalov and Ernest R. Wish. The Compensation Committee met six times during 1999.
The Compensation Committee administers the Company's Amended and Restated
Incentive Stock Plan. See "Report of the Compensation Committee" herein. The
Compensation Committee also makes recommendations to the Board with respect to
the compensation paid to the Chief Executive Officer and other executive
officers. See "Report of Board of Directors on Compensation" herein.
4
<PAGE> 8
ACQUISITION COMMITTEE
The Acquisition Committee consists of Ernest R. Wish (Chairman), Jerry
Kalov and Anthony Spier. The Acquisition Committee met four times during 1999.
The Acquisition Committee identifies and makes recommendations to the Board
regarding possible acquisitions and other investment opportunities of the
Company.
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
Set forth in the following table are the beneficial holdings on December
31, 1999, of each person known by the Company to own beneficially more than five
percent of its outstanding common stock, directors and nominees, the Chief
Executive Officer and all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY % OF
OWNED CLASS
------------ -----
<S> <C> <C>
Voting Rights Agreement.......................... 652,396(a)(d) 13.0%
James J. Roberts, Jr............................. 608,626(a)(b)(d) 12.1%
Individual and as Trustee of the James J.
Roberts Trust dated January 23, 1991
1619 Colonial Parkway
Inverness, Illinois 60067
The Killen Group, Inc............................ 407,055(c) 9.0%
1199 Lancaster Avenue
Berwyn, Pennsylvania 19312
Dimensional Fund Advisors, Inc................... 255,905(c) 5.6%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Anthony Spier.................................... 217,944(d) 4.3%
Randall S. Wells................................. 163,560(d) 3.3%
Ernest R. Wish................................... 54,419(d) 1.1%
John R. Blouin................................... 43,770(d)(e) *
Frank R. Martin.................................. 14,402(d)(e) *
Marshall L. Burman............................... 6,085 *
Jerry Kalov...................................... 4,677 *
Officers & Directors as a group (15 persons)..... 1,474,914(d)(e) 29.4%
</TABLE>
- ---------------
* Represent holdings of less than one percent.
(a) Pursuant to the Voting Rights Agreement dated August 30, 1999, Mr. James J.
Roberts Jr. and Mr. John R. Blouin have agreed to vote 652,396 shares as a
block on certain matters. See "Voting Rights Agreement" for additional
disclosure.
(b) Pursuant to Schedule 13D filed with the Securities and Exchange Commission
by Mr. Roberts on November 18, 1999 and other information furnished by him,
Mr. Roberts has sole voting power over all shares beneficially owned by
him. According to such information, all of these shares are owned by Mr.
Roberts as trustee of a trust of which he is sole beneficiary.
5
<PAGE> 9
(c) Pursuant to Schedule 13G filed with the Securities and Exchange Commission
on February 9, 2000, The Killen Group, Inc., a registered investment
advisor, is deemed to have beneficial ownership of 407,055 shares of
Wells-Gardner Electronics as of December 31, 1999.
Pursuant to Schedule 13G filed with the Securities and Exchange Commission
on February 4, 2000, Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of
255,905 shares of Wells-Gardner Electronics as of December 31, 1999. All
securities reported are owned by advisory clients of Dimensional, no one of
which, to the knowledge of Dimensional, owns more than 5% of the class.
Dimensional disclaims beneficial ownership of all such securities.
(d) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock options: Mr. Spier, 81,111 shares,
Mr. Wells, 51,922 shares, Mr. Roberts, 18,770, Mr. Wish, 18,770 shares, Mr.
Blouin, 18,770 shares, Mr. Martin, 5,556 shares, and all executive officers
and directors as a group, 478,909 shares.
(e) The amount shown excludes 2,000 shares owned in joint tenancy by Mr. Blouin
and 1,050 shares owned in joint tenancy by Mr. Martin. Both Mr. Blouin and
Mr. Martin disclaim beneficial ownership of such shares.
REPORT OF BOARD OF DIRECTORS ON COMPENSATION
This report of the Board of Directors shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and shall not otherwise be deemed filed under
such acts.
OVERVIEW OF EXECUTIVE COMPENSATION POLICIES
The Board of Directors' policy with respect to compensation of the
Company's executive officers includes the following objectives:
- Maintain a level of compensation that will attract and retain highly
qualified individuals.
- Match the compensation goals of the executive officers with the
short-term and long-term operational goals of the Company.
- Align the interests of the executive officers and shareholders.
- Reward significant performance by individual executive officers, which
performance contributes to the success of the Company.
To achieve these objectives, the overall compensation of the Company's
executive officers was comprised in 1999 of salaries and stock options granted
under the Company's Amended and Restated Incentive Stock Plan. The Board of
Directors determines the annual salary of each executive officer, based upon
recommendations of the Compensation Committee. The Amended and Restated
Incentive Stock Plan is administered by the Compensation Committee. See "Report
of the Compensation Committee" herein.
Certain executive officers are parties to employment contracts which
specify minimum salaries. Any compensation exceeding such minimum levels is set
relative to executive compensation at comparable companies in the electronics
industry and companies of comparable size.
6
<PAGE> 10
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Spier is employed under a contract originally entered into in
connection with his joining the Company and being elected as Chairman of the
Board, President and Chief Executive Officer of the Company in April, 1994, (the
"1994 Contract"). In February, 1999, Mr. Spier's contract was amended (the
"Amended Contract"). The Amended Contract, which expires December 31, 2002, but
can be extended for additional one-year terms thereafter, provides for minimum
annual compensation of $232,000. Mr. Spier may terminate the Amended Contract in
the event of a "change in control" of the Company. If, upon a "change of
control" of the Company, Mr. Spier terminates the Amended Contract and does not,
within five days of termination, enter into a new contract with a term of at
least two years with the Company or the Company's successor, the Amended
Contract provides that Mr. Spier is entitled to a lump sum payment in an amount
equal to the greater of the compensation Mr. Spier would have been entitled to
but for such termination during the remaining term of the agreement and twice
his total compensation from the Company for the twelve calendar months preceding
termination. In addition, in case of a "change of control," the Amended Contract
provides for payment of the value of any unvested stock options or stock awards,
and a payment to offset any excise tax liability (pursuant to section 4999 of
the Internal Revenue Code) incurred. In addition, Mr. Spier also received stock
options in 1999. See "Report of the Compensation Committee" and "Summary
Compensation Table" herein.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
Anthony Spier John R. Blouin
Marshall L. Burman Jerry Kalov
Frank R. Martin James J. Roberts, Jr.
Randall S. Wells Ernest R. Wish
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Company believes that significant stock ownership by executive officers
is a major incentive in building shareholder value and aligning the interests of
executives and shareholders. Under the Company's Amended and Restated Incentive
Stock Plan, which is administered by the Compensation Committee, nonqualified
stock options, incentive stock options, stock appreciation rights and stock
awards may be granted to officers and other key employees of the Company. In
1999, 135,000 stock options were granted to nine executive officers.
CHIEF EXECUTIVE OFFICER AWARDS
In 1999, Mr. Spier was granted an option to purchase 30,000 shares of
Common Stock at an exercise price of $2.50, the fair market value on the date of
the grant. See "Option Grants in 1999" for further information with respect to
the specific terms of such grant. The Compensation Committee believes the stock
option grant helps to align Mr. Spier's long term compensation directly with
shareholder value since the potential value of the grant is tied directly to
increases in the fair market value of the Company's Common Stock during the term
of the option.
COMPENSATION COMMITTEE
Marshall L. Burman (Chairman)
Jerry Kalov
Ernest R. Wish
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
Set forth on the following table are, for the years indicated, each
component of compensation paid to the Chief Executive Officer, Vice President of
Sales and Vice President of Marketing.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------------------
RESTRICTED SECURITIES LONG-TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND FISCAL SALARY(A) BONUS COMPENSATION(B) AWARDS(C) OPTIONS PAYOUTS(C) COMPENSATION(D)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ------ --------- ----- --------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony Spier.............. 1999 226,455 41,682 22,151 -- 30,000 33,250 6,032
Chairman of the Board, 1998 226,435 32,176 11,279 -- 30,000 45,500 7,016
President and Chief 1997 224,134 39,998 15,919 -- 30,000 42,000 33,116
Executive Officer
Mark Komorowski............ 1999 128,922 8,775 9,000 -- 15,000 9,500 3,758
Vice President 1998 115,718 5,052 8,400 -- 15,000 10,500 3,995
of Sales 1997 100,817 4,376 8,400 -- 15,000 7,000 3,447
John Pircon................ 1999 92,428 13,727 9,000 -- 20,000 9,500 3,409
Vice President 1998 91,565 13,027 8,400 -- 15,000 10,500 3,259
of Marketing 1997 88,222 13,198 8,400 -- 15,000 7,000 3,136
</TABLE>
- -------------------------
(a) Includes all pre-tax employee contributions to the Employee Retirement
401(k) Plan.
(b) Includes benefits associated with the use of a Company automobile or monthly
allowance for 1999, 1998 and 1997.
(c) In 1994, Mr. Spier received performance-based restricted stock awards
aggregating 39,000 shares, which awards were amended in February, 1996, and,
as amended, are subject to vesting or forfeiture as follows: 12,000, 13,000
and 14,000 of Mr. Spier's shares will vest in each of 1996, 1997 and 1998,
respectively, if the Company's earnings equal or exceed the target amount
for that year. The performance goal set for these awards was reached for the
period ended December 31, 1998 and subsequently paid in 1999. In 1994, Mr.
Komorowski and Mr. Pircon received performance-based restricted stock awards
of 9,000 shares each, which awards were amended in February, 1996, and, as
amended, are subject to vesting or forfeiture as follows: 2,000, 3,000 and
4,000 shares will vest in each of 1996, 1997 and 1998, respectively, if the
Company's earnings equal or exceed the target amount for that year. The
performance goal set for these awards was reached for the period ended
December 31, 1998 and subsequently paid in 1999.
(d) Includes premiums paid on life insurance for the benefit of Mr. Spier for
1999, 1998 and 1997 of $1,032, $2,016 and $2,016, respectively and the
Company's contributions to the Employee Retirement 401(k) Plan in 1999, 1998
and 1997 of $5,000, $5,000 and $4,750, respectively. Included in 1997 was
$26,350 for an automobile purchase.
Includes premiums paid on life insurance for the benefit of Mr. Komorowski
for 1999, 1998 and 1997 of $96, $143 and $97, respectively and the Company's
contributions to the Employee Retirement 401(k) Plan in 1999, 1998 and 1997
of $3,662, $3,852 and $3,350, respectively.
Includes premiums paid on life insurance for the benefit of Mr. Pircon for
1999, 1998 and 1997 of $105, $158, and $171, respectively and the Company's
contributions to the Employee Retirement 401(k) Plan in 1999, 1998 and 1997
of $3,304, $3,101 and $2,965, respectively.
8
<PAGE> 12
OPTION GRANTS IN 1999
Set forth is certain information concerning grants of options to the Chief
Executive Officer, Vice President of Sales and Vice President of Marketing.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------------- STOCK PRICE
NUMBER OF PERCENTAGE OF APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION TERM
UNDERLYING GRANTED TO EXERCISE OF --------------------
OPTIONS GRANTED EMPLOYEE IN 1999 BASE PRICE EXPIRATION 5% 10%
NAME (#) (%) ($/SHARE) DATE ($) ($)
---- --------------- ---------------- ----------- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Anthony Spier........ 30,000(a) 11 2.500 1/4/2009 35,809 85,769
Mark Komorowski...... 15,000(a) 4 2.500 1/4/2009 17,905 42,885
John Pircon.......... 20,000(a) 6 2.656 1/4/2009(b) 25,362 60,747
</TABLE>
- ---------------
(a) The options become exercisable in 25% installments in June, 1999, January,
2000, January, 2001 and January, 2002.
(b) Mr. Pircon was granted 5,000 additional options which become exercisable in
25% installments in December, 1999, June, 2000, June, 2001 and June, 2002.
AGGREGATED OPTION EXERCISES IN 1999 AND
OPTION VALUES AT DECEMBER 31, 1999
Set forth on the following table is information relating to the number of
shares of Common Stock subject to options held at December 31, 1999, by the
Chief Executive Officer, Vice President of Sales and Vice President of
Marketing.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END (#) AT FISCAL YEAR-END(A) ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony Spier......... 0 0 65,361 47,250 4,921 14,766
Mark Komorowski....... 0 0 29,753 23,626 2,461 7,383
John Pircon........... 0 0 61,634 27,376 2,574 7,299
</TABLE>
- ---------------
(a) Based on a per share value, at December 31, 1999, of $3.125.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Anthony Spier, Jerry Kalov and Frank R. Martin serve on the Executive
Committee, which deals with certain matters related to compensation of executive
officers. Mr. Spier does not participate in any decisions relating to his
compensation. James J. Roberts, Jr. is Chairman of the Board and Chief Executive
Officer of James Industries, Inc. and John R. Blouin is President of James
Industries, Inc., a sales representative organization, acts as a sales
representative for, and as a distributor of, the Company's products. James
Industries, Inc. has been an independent sales representative for the Company
since 1979 and is compensated therefor on a commission basis pursuant to the
Amended and Restated Sales Representation Agreement dated August 30, 1999 (the
"Representation Agreement"). Commissions paid or due pursuant to the
Representation
9
<PAGE> 13
Agreement to James Industries, Inc. in 1999, totaled approximately $1,076,000.
The agreement expires December 31, 2003, but can be extended for additional
one-year terms thereafter. James Industries, Inc. also acts as a distributor,
purchasing the Company's products for sale to third parties. For 1999, the
Company's sales to James Industries, Inc. totaled approximately $261,000.
COMMON STOCK PRICE PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total shareholder return of the Company's Common Stock with the cumulative total
return of the S&P Midcap 400 Index and the S&P Electronics-Instrumentation Index
during the years 1994 through 1999, assuming the investment of $100 on December
31, 1994, and the reinvestment of dividends.
[Performance Graph]
<TABLE>
<CAPTION>
WELLS-GARDNER ELECTRONICS S & P ELECTRONICS
CORPORATION S & P MIDCAP 400 INDEX (INSTRUMENTATION) INDEX
------------------------- ---------------------- -----------------------
<S> <C> <C> <C>
12/94 100.00 100.00 100.00
12/95 119.00 131.00 155.00
12/96 163.00 156.00 194.00
12/97 221.00 206.00 228.00
12/98 100.00 236.00 272.00
12/99 122.00 271.00 610.00
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
PROPOSAL FOR APPROVAL OF THE ADOPTION OF THE WELLS-GARDNER
ELECTRONICS CORPORATION EXECUTIVE STOCK AWARD PLAN
Subject to the approval of the Company's shareholders at the Meeting, the
Board of Directors has adopted the Wells-Gardner Electronics Corporation
Executive Stock Award Plan (the "Stock Award Plan"), effective as of April 25,
2000. The Company wishes to provide the Stock Award Plan to: (a) increase the
proprietary interest in the Company of those Key Employees (as defined below)
whose responsibilities and decisions directly affect the performance of the
Company; (b) provide rewards for those Key Employees who make contributions to
the success of the Company; and (c) attract and retain persons of superior
ability as Key Employees of the Company. "Key Employee" means an officer or
other key employee of the Company or its subsidiary who is responsible for or
contributes to the management, growth, technology or profitability of the
Company's business.
Shareholders are being asked to approve the adoption of the Stock Award
Plan to qualify the Stock Award Plan pursuant to Rule 16b-3 under the Securities
Exchange Act of 1934 (the
10
<PAGE> 14
"Exchange Act") and thereby render certain transactions under the Stock Award
Plan exempt from Section 16 of the Act.
The Stock Award Plan will be administered by the Compensation Committee of
the Board of Directors (the "Stock Award Plan Committee"). The Stock Award Plan
Committee has plenary discretion and control respecting the administration of
the Stock Award Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE
ADOPTION OF THE STOCK AWARD PLAN.
The following brief summary of certain features of the Stock Award Plan is
qualified in its entirety by reference to the full text of the Stock Award Plan,
which is available upon request from the Company's Corporate Secretary.
TERMS OF THE STOCK AWARD PLAN
Employees eligible to participate in the Stock Award Plan consist of our
employees who have been notified in writing by the Stock Award Plan Committee
that they have been selected.
Under the Stock Award Plan, Key Employees may be awarded restricted shares
of our common stock. Forty percent of the Key Employee's shares of restricted
stock becomes unrestricted two years after the date such restricted stock was
awarded. The remaining 60% of a Key Employee's shares of restricted stock
becomes unrestricted five years after the date on which such restricted stock
was awarded. Shares of restricted stock awarded under the Stock Award Plan will
be forfeited prior to their designated expiration date if a Key Employee's
employment terminates, except under certain circumstances described below.
Key Employees will not be able to assign or transfer their shares of
restricted stock until they vest as explained above. As holders of restricted
stock, Key Employees who have received awards will be entitled to vote on all
shares of restricted stock and receive all dividends, if any, issued on their
restricted stock. Once shares of restricted stock vest, the Key Employee will
receive certificates representing his or her shares of stock and will be
entitled to all of the rights enjoyed by the Company's shareholders, provided
however, that the Key Employee may be subject to limitations on resale such as
Rule 144 of the Securities Act of 1933, as amended, and Section 16 of the
Exchange Act.
If a Key Employee dies while any of his or her restricted stock is
outstanding, his or her representative or beneficiary will receive a pro rata
portion of such restricted stock based on the number of years from the date the
restricted stock was awarded to the date of death. Similarly, if the employment
of a Key Employee terminates due to disability, such Key Employee will receive a
pro rata portion of the restricted stock based on the number of years from the
date the restricted stock was awarded to the date of disability.
The Company may issue up to 300,000 shares of common stock under the Stock
Award Plan, subject to adjustment for stock splits and the like as described
below. These shares will be made available either from the Company's authorized
but unissued shares of common stock or from treasury shares. If awards are
forfeited, canceled or otherwise terminate for any reason before the
corresponding shares of the Company's common stock are delivered to a
participant in the Stock Award Plan, then the shares of common stock will again
become available for grants of awards under the Stock Award Plan.
11
<PAGE> 15
In the event of a stock dividend, stock split, recapitalization, or other
change in the Company's capital structure, the sale of all or substantially all
of its assets or an other similar corporate transaction, the Stock Award Plan
Committee will adjust the number and kind of shares subject to awards and the
exercise price of awards and make any other necessary adjustments that it deems
appropriate to equitably reflect the corporate event or transaction.
The Company's Board of Directors may amend or terminate the Stock Award
Plan at any time and for any reason. The Stock Award Plan Committee can amend
the Stock Award Plan as long as it reports its amendments to the Board of
Directors. If required by applicable law, agreement or the rules of any stock
exchange or market on which the Company's common stock is listed, shareholder
approval will be sought for an amendment to the Stock Award Plan.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
The following summary of tax consequences with respect to awards under the
Stock Award Plan is not comprehensive and is based upon laws and regulations in
February 1, 2000. Such laws and regulations are subject to change.
Generally, a Key Employee will not recognize taxable income at the time of
a stock award of restricted shares. However, a Key Employee may make an election
under Section 83(b) of the Internal Revenue Code of 1986, as amended (the
"Code") to be taxed at the time of the award as described below. A Key Employee
will recognize ordinary income at the time restricted stock becomes
unrestricted. The taxable income will be equal to the fair market value of the
unrestricted shares on the grant date.
If a Key Employee did not elect under Code Section 83(b) to recognize
income at the time of the stock award, he or she will recognize ordinary income
at the time of vesting.
If a Key Employee receives restricted shares, he or she may elect under
Code Section 83(b) to include as ordinary income in the year of the stock award
an amount equal to the fair market value of the shares on the transfer date. The
fair market value of the restricted shares will be determined as if the shares
were not subject to forfeiture. If a Key Employee makes the Section 83(b)
election, he or she will not recognize any additional income when the shares
vest. Any appreciation in the value of the restricted shares after the award is
not taxed as compensation, but instead is taxed as capital gain when the
restricted shares are sold or transferred. If a Key Employee makes a Section
83(b) election and the restricted shares are later forfeited, he or she is not
entitled to a tax deduction or a refund of the tax already paid.
Dividends received by a Key Employee on unvested restricted shares are
treated as taxable compensation and are subject to withholding. The Company is
entitled to a deduction equal to the amount of the dividends paid on unvested
restricted shares. Dividends received on restricted shares subject to a Section
83(b) election are taxed as dividends instead of compensation.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by a Key Employee in connection with a stock
award. The deduction will generally be allowed for the Company's taxable year in
which a Key Employee recognizes such ordinary income.
STOCK AWARD PLAN BENEFITS
It is not possible to determine the number of shares of Common Stock that
will in the future be purchased under the Stock Award Plan by any particular
individual. It is anticipated that
12
<PAGE> 16
between six and 12 individuals will be deemed Key Employees by the Stock Award
Plan Committee.
PROPOSAL FOR RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of KPMG LLP to
serve as independent certified public accountants of the Company for the fiscal
year ending December 31, 2000. Although shareholder ratification is not
required, the Board of Directors believes that the shareholders should be
afforded the opportunity to ratify the appointment and has directed that such
appointment be submitted to the shareholders of the Company for ratification at
the Meeting. KPMG LLP has served as independent certified public accountants of
the Company with respect to the Company's financial statements for fiscal years
1997, 1998 and 1999, and is considered by the Board of Directors of the Company
to be well qualified. If the shareholders do not ratify the appointment of KPMG
LLP, the Board of Directors may reconsider the appointment.
A representative of KPMG LLP will be present at the Annual Meeting and will
have the opportunity to make a statement. The representative will also be
available to respond to appropriate questions from the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
APPOINTMENT OF KPMG LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2000.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive (and certain other) officers, and any person holding more than ten
percent of the Company's Common Stock are required to report their ownership of
Common Stock and any changes in that ownership to the Securities and Exchange
Commission (the "SEC") and any exchange or quotation system on which the Common
Stock is listed or quoted. Specific due dates for these reports have been
established and the Company is required to report in this proxy statement any
failure to file by these dates. Based solely on a review of the forms it has
received and on written representations from certain reporting persons that no
such forms were required for them, the Company believes that all of these filing
requirements were satisfied by its directors and officers and ten percent
holders during 1999. In making these statements, the Company has relied on the
representations of its directors and officers and its ten percent holders and
copies of the reports that they have filed with the Securities and Exchange
Commission.
PROPOSALS OF SECURITY HOLDERS
Pursuant to the proxy solicitation regulations of the SEC, any shareholder
proposal intended to be presented at the 2001 Annual Meeting of Shareholders
(the "2001 Meeting") must be received at the Company's executive offices, 2701
North Kildare Avenue, Chicago, Illinois 60639, by no later than November 10,
2000, in order to be considered for inclusion in the Company's proxy statement
materials relating to such meeting. Nothing in this paragraph shall be deemed to
require the Company to include in its proxy statement and form of proxy any
shareholder proposal which does not meet the requirements of the SEC in effect
at that time. The Company form of
13
<PAGE> 17
proxy for the 2001 Meeting will confer discretionary authority upon the persons
named as proxies to vote on any untimely stockholder proposals.
NOTICE OF BUSINESS TO BE CONDUCTED
AT A SPECIAL OR ANNUAL MEETING
The bylaws of the Company set forth the procedures by which a shareholder
may properly bring business before a meeting of shareholders. The bylaws of the
Company provide an advance notice procedure for a shareholder to properly bring
notice to the Secretary of the Corporation not less than twenty (20) days prior
to such meeting. The advance notice by shareholders must include (i) a brief
description of the business to be brought before the meeting, (ii) the name,
age, business and residence address of the shareholder submitting the proposal,
(iii) the principal occupation or employment of such shareholder, (iv) the
number of shares of the Company which are beneficially owned by such
shareholder, and (v) any material interest of the shareholder in such business.
Nothing in this paragraph shall be deemed to require the Company to include in
its proxy statement or proxy relating to any annual meeting any shareholder
proposal which does not meet all of the requirements for inclusion established
by the SEC in effect at that time such proposal is received.
OTHER BUSINESS
The Company is not aware of any business to be acted upon at the Meeting
other than that which is described in this Proxy Statement. The enclosed proxy
does, however, confer discretionary authority upon the persons named therein, or
their substitutes, to take action with respect to any other matter that may
properly be brought before the Meeting. In the event that other business calling
for a vote of the shareholders is properly presented at the Meeting, the holders
of the proxies will vote your shares in accordance with their best judgment.
Chicago, Illinois
March 16, 2000
14
<PAGE> 18
APPENDIX
WELLS-GARDNER ELECTRONICS CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee of Wells-Gardner Electronics Corporation (the
"Committee") shall have the power to conduct or authorize investigations into
any matters within the Committee's scope of responsibility which, shall include,
but not be limited to:
- Assessing the Company's risks and control environment and the steps
management has taken to monitor, control and report significant financial
risks.
- Oversee the financial reporting of the Company.
- Review the independence and performance of the Company's independent
auditors.
- Provide an avenue of communication among independent auditors, management
and the Board of Directors (the "Board").
- Annually review and reassess the adequacy of the Charter.
The Committee shall be empowered to retain independent counsel, independent
auditors, or others to assist it in the conduct of any investigation.
The independent auditors are ultimately accountable to the Committee and
Board as a representative of shareholders. The Committee shall review the
independence and performance of auditors. It is the responsibility of the
Committee and Board for selection, evaluation and replacement of the outside
auditor. The Committee shall approve the fees, review the audit plan and discuss
the independence of the independent auditors. The Committee will receive a
formal written statement from the independent auditor, consistent with
Independence Standards Board Standard No. 1, delineating all relationships
between them and the Company.
The Committee members shall meet all Charter requirements of the American
Stock Exchange and will issue a report to shareholders in the Company's proxy
statement as required by the Securities and Exchange Commission. Membership of
the Committee shall consist of at least three independent members of the Board
who are financially literate and who shall serve at the discretion of the Board.
Additionally, at least one member of the Committee shall have accounting or
related financial management expertise. The Committee shall meet at least
quarterly or more frequently as circumstances require and will receive an agenda
and materials for such meeting in advance. The Committee will also meet
privately in executive session with management and the independent auditors to
discuss any matters that the Committee or each group believes should be
discussed. The Chairman of the Committee will distribute minutes and communicate
such discussions to the Board on a quarterly basis.
Finally, the Committee will perform any other activities consistent with
this Charter, the Company's by-laws and governing law, as the Committee or Board
deems necessary or appropriate.
<PAGE> 19
APPENDIX
WELLS-GARDNER ELECTRONICS CORPORATION
EXECUTIVE STOCK AWARD PLAN
SECTION 1. PURPOSE AND NUMBER OF SHARES.
The purpose of the Wells-Gardner Electronics Corporation Executive
Stock Award Plan is to:
(a) increase the proprietary interest in the Company of those Key
Employees whose responsibilities and decisions directly affect
the performance of the Company;
(b) provide rewards for those Key Employees who make contributions
to the success of the Company; and
(c) attract and retain persons of superior ability as Key
Employees of the Company.
Subject to adjustment as provided below, the aggregate number of shares
of Stock which may be delivered under the Plan shall not exceed
300,000. To the extent any shares of Stock covered by an Award are not
delivered to a Key Employee or beneficiary thereof because the Award
expires, is forfeited, canceled or otherwise terminated, or the shares
of Stock are not delivered because the Award is settled in cash or used
to satisfy the applicable tax withholding obligation, such shares shall
not be deemed to have been delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the
Plan.
In the event of a Change of Control, the restrictions applicable to
Restricted Stock shall permanently lapse and such Restricted Stock
shall become vested and transferable to the full extent of the Award.
In the event of any Company stock dividend, stock split, combination or
exchange of shares, recapitalization or other change in the capital
structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off
or distribution to Company stockholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its
assets (measured on either a stand-alone or consolidated basis),
reorganization, rights offering, partial or complete liquidation, or
any other corporate transaction, Company share offering or other event
involving the Company and having an effect similar to any of the
foregoing, the Committee may make such substitution or adjustments in
the (A) number and kind of shares that may be delivered under the Plan,
(B) number and kind of shares subject to outstanding Awards and (C)
other characteristics or terms of the Awards as it may determine
appropriate in its sole discretion to equitably reflect such corporate
transaction, share offering or other event; provided, however, that the
number of shares subject to any Award shall always be a whole number.
<PAGE> 20
SECTION 2. DEFINITIONS.
"AFFILIATE" means a corporation or other entity controlled by the
Company and designated by the Committee as such.
"AWARD" means an award of Restricted Stock granted to any Key Employee
in accordance with the provisions of the Plan.
"BOARD" means the Board of Directors of the Company.
"CHANGE OF CONTROL" shall be deemed to have occurred if (a) any
corporation, person or other entity (other than the Company, a
majority-owned Affiliate or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the
Company), including a "group" as defined in Section 13(d)(3) of the
Exchange Act becomes the beneficial owner of stock representing more
than forty-five percent (45%) of the combined voting power of the
Company's then outstanding securities; (b)(i) the shareholders of the
Company approve a definitive agreement to merge or consolidate the
Company with or into another corporation other than a majority-owned
Affiliate, or to sell or otherwise dispose of all or substantially all
of the Company's assets, and (ii) the persons who were the members of
the Board prior to such approval do not represent a majority of the
directors of the surviving, resulting or acquiring entity or the parent
thereof; (c) the shareholders of the Company approve a plan of
liquidation of the Company; or (d) within any period of 24 consecutive
months, persons who were members of the Board immediately prior to such
24-month period, together with any persons who were first elected as
directors (other than as a result of any settlement of a proxy or
consent solicitation contest or any action taken to avoid such a
contest) during such 24-month period by or upon the recommendation of
persons who were members of the Board immediately prior to such
24-month period and who constituted a majority of the Board at the time
of such election, cease to constitute a majority of the Board.
"COMMITTEE" means the Compensation Committee appointed by the Board to
administer the Plan pursuant to Section 4 hereof.
"COMPANY" means Wells-Gardner Electronics Corporation and its
successors and assigns.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"KEY EMPLOYEE" means an officer or other key employee of the Company or
any of its Affiliates who, in the judgment of the Committee, is
responsible for or contributes to the management, growth, technology or
profitability of the business.
"PLAN" means the Wells-Gardner Electronics Corporation Executive Stock
Award Plan
<PAGE> 21
as amended or supplemented from time to time.
"RESTRICTED STOCK" means Stock delivered under the Plan subject to the
requirements of Section 7 hereof and such other restrictions as the
Committee deems appropriate or desirable.
"RETIREMENT" means retirement from active employment under a pension
plan of the Company or any subsidiary or Affiliate, or under an
employment contract with any of them, or termination of employment or
provision of services at or after age 55 under circumstances which the
Committee, in its sole discretion, deems equivalent to retirement.
"STOCK" means the common stock ($1.00 par value) of the Company.
"TOTAL DISABILITY" means the complete and permanent inability of a Key
Employee to perform substantially all of his or her duties under the
terms of his or her employment with the Company as determined by the
Committee upon the basis of such evidence, including independent
medical reports or data, as the Committee deems appropriate or
necessary; provided, however, that a Total Disability shall not qualify
under this Plan if it is the result of (i) a willfully self-inflicted
injury or willfully self-induced sickness; or (ii) an injury or disease
contracted, suffered or incurred while participating in a criminal
offense. The determination of Total Disability for purposes of this
Plan shall not be construed to be an admission of disability for any
other purpose.
SECTION 3. EFFECTIVE DATE.
The effective date of the Plan shall be July 1, 1999, subject to
approval of the Plan by the Company's stockholders. Notwithstanding
anything in the Plan to the contrary, if the Plan shall have been
approved by the Board prior to such stockholder approval, Key Employees
may be selected and Award criteria may be determined and Awards may be
made as provided herein subject to subsequent stockholder approval.
SECTION 4. PLAN ADMINISTRATION.
(a) COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board.
(b) POWERS. The Committee is authorized, subject to the provisions
of the Plan, to establish such rules and regulations as it
deems necessary or advisable for the proper administration of
the Plan, to interpret the Plan and any Awards and to take
such other action in connection with or in relation to the
Plan as it deems necessary or advisable. Each decision made or
action taken pursuant to the Plan, including interpretation of
the Plan and the Awards granted hereunder by the Committee,
shall be final, binding and conclusive for all purposes and
upon
<PAGE> 22
all persons, including without limitation, the Company, the
Committee, the Board, Key Employees and their respective
successors in interest.
(c) INDEMNIFICATION. No member or former member of the Committee
or the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Award
granted under it. Each member or former member of the
Committee or the Board shall be indemnified and held harmless
by the Company against all costs and expenses (including
counsel fees) and liability (including any sum paid in
settlement of a claim with the approval of the Board) arising
out of any act or omission to act in connection with the Plan
unless arising out of such member's own fraud or bad faith.
Such indemnification shall be in addition to any rights of
indemnification the members or former members may have as
directors or under the by-laws of the Company.
(d) INDEPENDENT ADVISORS. The Committee may employ such
independent professional advisors, including without
limitation independent legal counsel and counsel regularly
employed by the Company, consultants and agents as the
Committee may deem appropriate for the administration of the
Plan and may rely upon any opinion received from any such
counsel or consultant and any computations received from any
such consultant or agent. All expenses incurred by the
Committee in interpreting and administering the Plan,
including without limitation meeting fees and expenses and
professional fees, shall be paid by the Company.
SECTION 5. PARTICIPATION.
Participation in the Plan shall be limited to Key Employees who have
received written notification from the Committee, or from a person
designated by the Committee, that they have been selected to
participate in the Plan. No employee shall at any time have any right
to be selected to participate in the Plan. No Key Employee having been
granted an Award shall have any right to be granted an additional Award
in the future. Neither the Plan nor any action taken thereunder shall
be construed as giving any Key Employee any right to be retained in the
employ of the Company. The right and power of the Company to dismiss or
discharge any Key Employee, with or without cause, is specifically
reserved.
SECTION 6. AWARD GRANTS AND AGREEMENTS.
(a) AWARDS. The President of the Company may recommend Key
Employees to participate in the Plan, and may recommend the
timing, amount and restrictions, if any, and other terms and
conditions of an Award, subject to the terms of the Plan. The
Committee, in its sole discretion, has the authority to grant
Awards under the Plan, which may be made in accordance with
<PAGE> 23
the recommendations of the President or otherwise.
(b) AGREEMENTS. Each Award shall be evidenced by a written Award
Agreement, in a form adopted by the Committee. Each Award
Agreement shall be subject to and incorporate the express
terms and conditions, if any, required by the Plan, and
contain such restrictions, terms and conditions as the
Committee may determine.
SECTION 7. RESTRICTED STOCK.
(a) CUSTODY OF SHARES.
(i) Each certificate representing shares of Restricted
Stock issued pursuant to an Award shall be registered
in the name of the Key Employee and held, together
with a stock power endorsed in blank, by the Company.
Unless and until such shares of Restricted Stock fail
to vest and are forfeited as provided herein, (1) the
Key Employee shall be entitled to vote all such
shares of Restricted Stock and receive all cash
dividends, if any, with respect thereto; and (2) all
other distributions with respect to such Restricted
Stock, including, but not limited to, Stock received
as a result of a stock dividend, stock split,
combination of shares or otherwise, shall be treated
as provided in Section 1 hereof. Each certificate of
Restricted Stock issued pursuant to an Award shall
bear the following (or similar) legend:
"The transferability of this certificate and
of the shares of Common Stock represented
hereby are subject to the terms and
conditions (including vesting) contained in
the Wells-Gardner Electronics Corporation
Executive Stock Award Plan and an Award
Agreement entered into between the
registered owner and Wells-Gardner
Electronics Corporation. A copy of such Plan
and Award Agreement is on file in the office
of the Secretary of Wells-Gardner
Electronics Corporation."
In lieu of the foregoing, the Company may issue stop
transfer instructions to its transfer agent or take
such other steps as are necessary to preclude the
transfer of Restricted Stock.
(ii) Certificates representing shares of Restricted Stock
which have become vested pursuant to Section 7 hereof
and which have been held by the Company shall be
delivered by the Company to the Key Employee (or the
Key Employee's legal representative) in the form of a
freely transferable certificate, without legend
(provided that the Key Employee is not an "affiliate"
of the Company within the meaning of Rule 405 adopted
pursuant to the Securities Act of 1933, as amended)
promptly
<PAGE> 24
after becoming vested, provided, however, that the
Company need not deliver such certificates to a Key
Employee until the Key Employee has paid or caused to
be paid all taxes required to be withheld pursuant to
Section 8 hereof.
<PAGE> 25
(b) RESTRICTION PERIOD.
(i) Vesting Schedule. Except as provided in Section
7(b)(ii) or 7(b)(iii) hereof, to the extent that a
Key Employee remains continuously employed by the
Company, Restricted Stock received as an Award shall
become vested, and no longer subject to forfeiture,
in accordance with the following schedule:
PERIOD OF EMPLOYMENT PORTION OF AWARD VESTED
On or after the second 40%
anniversary date of the Award
On or after the fifth 100%
anniversary date of the Award
Except as specifically provided in Section 7(b)(ii)
or 7(b)(iii) hereof, upon the termination of a Key
Employee's employment with the Company, for any
reason whatsoever, all remaining nonvested Restricted
Stock received by such Key Employee as an Award shall
be immediately forfeited.
(ii) Waiver of Vesting Schedule. Notwithstanding the
provisions of Section 7(b)(i) hereof, with respect to
any Key Employee or group of Key Employees, the
Committee may elect to waive or accelerate the
vesting schedule set forth in Section 7(b)(i) hereof,
in whole or in part, at any time at or after the time
an Award is granted, based on such corporate,
personal or other performance criteria as the
Committee may determine and require, in its sole
discretion.
(iii) Death, Disability or Retirement. Notwithstanding the
provisions of Section 7(b)(i) hereof, upon a Key
Employee's death, Total Disability or Retirement,
shares of Restricted Stock shall vest on a pro rata
basis, comparing the number of years from the date of
the Award to the date of death, Total Disability or
Retirement. Shares of Restricted Stock which do not
so vest shall be forfeited to the Company.
(c) RESTRICTIONS. Until shares of Restricted Stock have vested in
accordance with Section 7(b) hereof, an Award shall be subject
to the following restrictions:
(i) Nontransferability. Except as otherwise required by
law, Restricted Stock which has not vested may not be
sold, assigned, exchanged, transferred, pledged,
hypothecated or otherwise disposed of, except to the
Company as provided herein.
<PAGE> 26
(ii) Other Restrictions. The Committee may impose such
other restrictions on any Award as it may deem
advisable, including without limitation,
stop-transfer orders and other restrictions set forth
in the terms of the Award Agreement or as the
Committee may deem advisable under the rules and
regulations, and other requirements of the Securities
and Exchange Commission, and any applicable federal
or state securities or other laws.
SECTION 8. MISCELLANEOUS.
(a) AWARDS NOT CONSIDERED COMPENSATION. No Award made under the
Plan shall be deemed salary or compensation for the purpose of
computing benefits under any employee benefit plan or other
arrangement for the benefit of its employees unless the
Company shall determine otherwise.
(b) ABSENCES. Absence on leave approved by a duly constituted
officer of the Company shall not be considered interruption or
termination of employment for purposes of the Plan; provided,
however, that no Award may be granted to an employee while he
or she is absent on leave.
(c) DELIVERY TO PERSONS OTHER THAN KEY EMPLOYEE. If the Committee
finds that shares of Restricted Stock are to be delivered
under the Plan to a Key Employee who is unable to care for his
or her affairs then any payment due him or her (unless a prior
claim therefor has been made by a duly appointed legal
representative) may, if the Committee so directs, be paid to
his or her spouse, a child, a relative, an institution
maintaining or having custody of such person, or any other
person deemed by the Committee to be a proper recipient on
behalf of such person otherwise entitled to delivery. Any such
delivery shall be a complete discharge of the liability of the
Company therefor.
(d) PLAN COPIES. Copies of the Plan and all amendments,
administrative rules and procedures and interpretations shall
be made available to all Key Employees at all reasonable times
at the Company's headquarters.
(e) WITHHOLDING TAXES. The Company may withhold any taxes in
connection with the Plan that the Company determines it is
required to withhold under the laws and regulations of any
governmental authority, whether federal, state or local and
whether domestic or foreign, including, without limitation,
taxes in connection with the delivery of shares of Restricted
Stock or the vesting of Restricted Stock. A Key Employee may
elect to satisfy such withholding requirements either by (i)
delivery to the Company of a certified check prior to the
delivery of shares of Restricted Stock which are vested
pursuant to Section 7 hereof, (ii) instructing the Company to
retain a sufficient number of shares of Stock to cover the
withholding requirements, or (iii) instructing the Company to
<PAGE> 27
satisfy the withholding requirements from the Key Employee's
salary.
(f) GOVERNING LAW. The Plan and all rights hereunder shall be
governed by and constructed in accordance with the law of the
State of Illinois, without giving effect to its rules on
conflicts of law.
(g) KEY EMPLOYEE COMMUNICATIONS. All elections, designations,
requests, notices, instructions and other communications from
a Key Employee or other person to the Committee required or
permitted under the Plan shall be in such form as is
prescribed from time to time by the Committee and shall be
mailed by first class or delivered to such location as shall
be specified by the Committee.
(h) BINDING ON SUCCESSORS. The terms of the Plan shall inure to
the benefit of, and be binding upon, the Company and its
successors and assigns. All obligations imposed upon a Key
Employee, and all rights granted to the Company hereunder,
shall be binding upon the Key Employee's heirs, legal
representatives and successors.
(i) CAPTIONS. Captions preceding the sections and clauses hereof
are inserted solely as a matter of convenience and in no way
define or limit the scope or intent of any provisions hereof.
(j) SEVERABILITY. Whenever possible, each provision of the Plan
shall be interpreted in such manner as to be effective and
valid under applicable law. If any provision of the Plan or
the application thereof to any person or circumstances is
prohibited by or invalid under applicable law, such provision
shall be ineffective to the minimal extent of such prohibition
or invalidity without invalidating the reminder of such
provision or the remaining provisions of the Plan or the
application of such provision to other persons or
circumstances.
(k) DURATION, AMENDMENT AND TERMINATION. The Board may at any time
amend or terminate this Plan as of any date specified in a
resolution adopted by the Board. The Plan may also be amended
by the Committee, provided that all such amendments are
reported to the Board. Each amendment shall be subject to
stockholder approval if required by Rule 16b-3 under the
Exchange Act or a successor rule or regulation. No amendment
of the Plan may affect an Award theretofore granted under the
Plan without the written consent of the Key Employee affected.
No Award may be granted after this Plan has terminated. After
the Plan has terminated, the functions of the Committee shall
be limited to supervising the administration of Awards
previously granted. Termination of the Plan shall not affect
any Award previously granted.
(l) MITIGATION OF EXCISE TAX. If any payment or right accruing to
a Key Employee
<PAGE> 28
under this Plan (without the application of this Section
(8)(l)), either alone or together with other payments or
rights accruing to the Key Employee from the Company or an
Affiliate ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Internal Revenue
Code of 1986, as amended ("Code") and regulations thereunder),
such payment or right shall be reduced to the largest amount
or greatest right that will result in no portion of the amount
payable or right accruing under this Plan being subject to an
excise tax under Section 4999 of the Code or being disallowed
as a deduction under Section 280G of the Code; provided,
however, that the foregoing shall not apply to the extent
provided otherwise in an Award or in the event the Key
Employee is party to an agreement with the Company or an
Affiliate that explicitly provides for an alternate treatment
of payments or rights that would constitute "parachute
payments." The determination of whether any reduction in the
rights or payments under this Plan is to apply shall be made
by the Committee in good faith after consultation with the Key
Employee and such determination shall be conclusive and
binding on the Key Employee. The Key Employee shall cooperate
in good faith with the Committee in making such determination
and providing the necessary information for this purpose. The
foregoing provisions of this Section 8(l) shall apply with
respect to any person only if, after reduction for any
applicable Federal excise tax imposed by Section 4999 of the
Code and Federal income tax imposed by the Code, the Total
Payments accruing to such person would be less than the amount
of the Total Payments as reduced, if applicable, under the
foregoing provisions of this Plan and after reduction for only
Federal income taxes.
<PAGE> 29
{PROXY CARD}
WELLS-GARDNER ELECTRONICS CORPORATION
2701 NORTH KILDARE AVENUE
CHICAGO, ILLINOIS 60639
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony Spier and George B. Toma and each of
them, as Proxies, each with power of substitution, and hereby authorizes
them to vote, as designated below, all common shares of Wells-Gardner
Electronics Corporation held of record by the undersigned on March 10, 2000,
at the annual meeting of shareholders to be held on April 25, 2000, and any
adjournment thereof. A majority of the Proxies present at the meeting, and
if only one is present, then that one, may exercise the power of all the
Proxies hereunder.
1. ELECTION OF DIRECTORS
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote for
all nominees listed below
(except as marked to the contrary below)
Anthony Spier, Marshall L. Burman, Jerry Kalov,
Frank R. Martin, Ernest R. Wish
If additional persons are nominated, the named Proxies may cumulate the
votes represented by this proxy in their discretion among the above named
nominees. The withholding of authority to vote for any individual nominee or
nominees will permit the Proxies to distribute the withheld votes among the
remaining nominees. (INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in the space below).
----------------------------------------------------------------------------
2. ADOPTION OF THE COMPANY'S EXECUTIVE STOCK AWARD PLAN. To consider and
vote upon a proposal to adopt the Company's Executive Stock Award Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
To consider and vote upon a proposal to ratify the appointment of KPMG LLP,
as independent certified public accountants of the Company for the fiscal
year ending December 31, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL LISTED DIRECTORS AND FOR PROPOSAL 2
AND 3.
Please sign exactly as name appears below. 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 partnership name by
authorized person.
DATED , 2000
------------------------------------
-----------------------------------------------
Signature
-----------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
