COMARCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
July 8, 1998
To the Shareholders of COMARCO, Inc.:
The Annual Meeting of the Shareholders of COMARCO, Inc., a California
corporation (the "Company") will be held at the Hilton Hotel, 18800 Mac Arthur
Blvd., Irvine, California on July 8, 1998 at 10:00 A.M. for the following
purposes:
1. To elect five Directors;
2. To consider and act upon a proposal to approve the restatement of the
Director's Stock Option Plan; and
3. To transact such other business as may properly come before the meeting,
or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on May 15, 1998 are entitled to notice of and to vote at the Annual
Meeting.
The Board of Directors of the Company intends to present Don M. Bailey,
Gen. Wilbur L. Creech, Gerald D. Griffin, Adm. Wesley L. McDonald and Paul G.
Yovovich as nominees for election as Directors at the Annual Meeting.
Each shareholder is cordially invited to be present and to vote in person
at the meeting. TO ASSURE REPRESENTATION AT THE MEETING, HOWEVER, SHAREHOLDERS
ARE URGED TO SIGN AND RETURN THE PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. Shareholders who attend the meeting may still vote in person, even if
they have previously mailed a proxy, by notifying the Secretary of their
intention to do so.
BY ORDER OF THE BOARD OF DIRECTORS
EVELYN M. EVANS, Secretary
Yorba Linda, California
May 20, 1998
<PAGE>
COMARCO, INC.
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held
July 8, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of COMARCO, Inc., a California corporation,
("COMARCO" or the "Company") for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on Wednesday July 8, 1998 at 10:00 A.M. at the
Hilton Hotel, 18800 Mac Arthur Blvd., Irvine, California, or any adjournment
thereof, for the purposes set forth in the accompanying notice of meeting. This
Proxy Statement and the accompanying form of proxy were first mailed to
shareholders on or about May 20, 1998.
A shareholder giving a proxy has the power to revoke it at any time before
it is exercised by (1) filing with the Secretary of the Company a notice of
revocation; (2) filing with the Secretary of the Company a duly executed proxy
bearing a later date; or (3) attending the Annual Meeting and expressing his
intention to vote the shares in person. In the absence of such revocation, all
shares represented by a properly executed proxy received in time for the Annual
Meeting will be voted as specified therein.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy and the cost of soliciting proxies
will be borne by the Company. The Company may make arrangements with various
brokerage houses or other nominees to send proxy materials to the beneficial
owners of stock and may reimburse them for their reasonable expenses in
connection therewith.
VOTING RIGHTS
The only voting securities of the Company consist of Common Stock. Only
shareholders of record at the close of business on May 15, 1998 will be entitled
to vote at the Annual Meeting. As of said date there were outstanding 4,719,210
shares of Common Stock, which are entitled to one vote per share except that
each shareholder is entitled to cumulate his shares in the election of
Directors, provided that at least one shareholder has given notice, prior to the
voting, of his intention to do so. If cumulative voting is in effect, each
shareholder may give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of shares held by him, or he
may distribute his votes on the same principle among as many candidates as he
thinks fit.
The five nominees receiving the greatest number of votes at the Annual Meeting
shall be elected Director. Shareholders may cumulate their votes for one or more
candidates in the manner and upon satisfaction of the conditions described
above. Abstentions shall have no effect on voting for the election of Directors.
With respect to shares of Common Stock held by brokers in street name for the
beneficial owners thereof, the election of Directors is a "routine" matter upon
which the brokers, as the holders of record, may vote these shares for which the
beneficial owners have not provided them specific instructions. Under California
law, abstentions and "broker non-votes" are counted for purposes of determining
whether a quorum is present or represented at the meeting, but neither will be
counted for purposes of determining whether Proposal 2 (to Approve the
Restatement of the Company's Director's Stock Option Plan) has been adopted.
<PAGE>
Item 1 on Proxy Card
ELECTION OF DIRECTORS
Five Directors will be elected at the Annual Meeting. Each Director elected
at the Annual Meeting will hold office until the next annual meeting of
shareholders and until his successor is duly elected and qualified. It is
intended that the shares represented by the enclosed proxy will be voted, unless
otherwise instructed, for the election of the five nominees named below. While
the Company has no reason to believe that any of the nominees will be unable to
serve as Director, it is intended that if such an event should occur, such
shares will be voted for the remainder of the nominees and for such substitute
nominee or nominees as may be selected by the Board of Directors. Subject to the
foregoing, and unless a shareholder withholds authority to vote his shares (i)
for all of the nominees by so indicating on the enclosed proxy card or (ii) for
any one or more of the nominees by checking their names in the space provided on
such card, in which case his shares will not be voted for such nominee or
nominees, the proxies will have the discretion to cumulate votes as provided by
California law (see "VOTING RIGHTS") and to distribute such votes among all the
nominees (or, if authority to vote for any nominee or nominees has been
withheld) among the remaining nominees in whatever manner they deem appropriate.
All the nominees are currently serving as Directors of the Company. The
term of office of each of the current Directors expires on the date of the
Annual Meeting. All the Directors were elected at the last annual meeting.
The table immediately below contains pertinent information concerning the
nominees and is followed by a brief biography of each nominee.
<TABLE>
Year First
Principal Elected Other
Name Age Occupation Director Directorships
---- --- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Don M. Bailey 52 President and Chief 1991 None
Executive Officer of the
Company
Gen. Wilbur L. Creech 71 Executive Consultant 1985 Tech-Sym Corporation,
(Ret.) (1) (3) ESEA Corporation, and
GeoScience Corporation
Gerald D. Griffin 63 Executive Consultant 1986 None
(1) (3)
Adm. Wesley L. McDonald 74 Executive Consultant 1986 MPRI Inc.
(Ret.) (2) (3)
Paul G. Yovovich 44 Private Investor 1995 3Com Corporation,
(1) (2) APAC TeleServices, Inc. and
May & Speh, Inc.
</TABLE>
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
Mr. Bailey has been President and Chief Executive Officer of the Company
since June 1990. Prior to that, since November of 1988, he served as Senior Vice
President of the Company and, since January 1986, as Vice President, Corporate
Development. He has been employed by COMARCO since May 1980.
Since 1984, General Creech has been an executive consultant. General Creech
was Commander of the Tactical Air Command headquartered at Langley Air Force
Base, Virginia from 1978 until his retirement in November 1984.
Mr. Griffin has been an executive consultant since 1992. Previously he was
Managing Director of the Houston Office of Korn/Ferry International. From 1986
to 1988 he was President and Chief Executive Officer of the Houston Chamber of
Commerce. Between 1982 and 1986 he was Director of NASA's Johnson Space Center
in Houston, Texas.
Since 1985, Admiral McDonald has been an executive consultant. Admiral
McDonald served in various capacities with the United States Navy from 1946
until his retirement in December 1985. In his last assignment he served for more
than three years as Supreme Allied Commander, Atlantic; US Commander in Chief,
Atlantic; and Commander in Chief, US Atlantic Fleet.
Mr. Yovovich is a private investor. Mr. Yovovich served as President of
Advance Ross Corporation from 1993 to 1996. He served in a variety of executive
positions with Centel Corporation from 1982 through 1992, most recently as
President of its Central Telephone Company unit from 1990 through 1992.
BOARD ORGANIZATION AND COMMITTEE MEETINGS
During the fiscal year ended January 31, 1998, the Company's Board of Directors
met five times and various committees of the Board met a total of four times.
Each of the Company's Directors attended at least 75% of the total number of
meetings of the Board of Directors and meetings of the Committees on which he
served (during the periods within which he was a Director or Member of such
Committee) during the Company's last fiscal year.
Standing committees of the Board of Directors consist of the following:
The Audit Committee's primary purpose is to aid the Directors in undertaking and
fulfilling their responsibilities for financial reporting to the shareholders;
to support and encourage efforts to improve the financial controls exercised by
management and to ensure their adequacy for purposes of public reporting; and to
review the engagement of the Company's independent auditors and review with such
accountants the scope and results of their annual audit of the Company. The
Audit Committee met twice during the last fiscal year in conjunction with
regular Board meetings.
The Compensation Committee reviews the compensation of officers and key
employees, and makes awards under the Company's 1982 and 1995 Employee Stock
Option Plans and the Stock Option Plan for the Company's subsidiary, Comarco
Wireless Technologies, Inc. The Compensation Committee met twice during the last
fiscal year.
The Nominating Committee's responsibilities include reviewing the qualifications
of candidates for Board membership, reviewing the status of Directors when his
principal position and/or primary affiliation changes, recommending to the Board
of Directors new candidates for election by shareholders at annual meetings,
recommending candidates to fill vacancies in directorships, and making
recommendations to the Board of Directors concerning selection, tenure,
retirement, and composition of the Board of Directors. Shareholders of COMARCO
may recommend persons to be nominated for election as directors of COMARCO at
the Meeting. To be considered by the Nominating Committee and to have their
names placed in the proxy statement, such recommendations must be submitted in
writing to the secretary of the Company and received no later than 90 days
before the date in the current year which corresponds to the date on which the
Meeting was held during the immediate prior year. The Nominating Committee did
not meet during the year, but the Board nominees were approved by the entire
Board.
<PAGE>
DIRECTORS COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
Cash Compensation(1) (2) Security Grants
---------------------------------------------- --------------------------------------
Annual Meeting Consulting Fees/ Number of Number of Securities
Name Retainer Fees Fees Other Fees Shares Underlying Options/SARs(3)
- ---- ------------- ------- ---------------- --------- --------------------------
<S> <C> <C> <C> <C> <C>
Wilbur L. Creech $21,600 $10,200 $0 0 5,000 shares
Gerald D. Griffin $90,000 $0 $47,000 0 5,000 shares
(Chairman) (bonus)
Wesley L. McDonald $21,600 $11,750 $0 0 5,000 shares
Paul G. Yovovich $21,900 $12,000 $0 0 5,000 shares
</TABLE>
Notes:
(1) Each member of the Board other than Mr. Griffin and Mr. Bailey (who also
serves as an officer) received a daily Director's fee of $1,800 per meeting,
$900 per telephone meeting, and a monthly retainer of $1,800. Mr. Griffin
received a monthly payment of $7,500 in lieu of meeting fees and retainers.
Members of the various committees received a $750 meeting fee, and the Committee
Chairman received an additional $750 per meeting. Each Director was reimbursed
for reasonable lodging and expenses incurred to attend Board and Committee
meetings.
(2) "Cash compensation" includes compensation deferred during the current year
and earnings on compensation deferred from prior years.
(3) Represents a stock option award made on 4/30/97 at an exercise price of
$16.38 per share, the then current market price of a share of the Company's
Common Stock.
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/98
<TABLE>
Percent of Total
Options Options Granted Exercise Expiration Potential Value(5)
Name Granted(1) to Directors(2) Price(3) Date(4) @ 5% @10%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wilbur L. Creech 5,000 25% $16.38 5/07/07 $51,506 $130,528
Gerald D. Griffin 5,000 25% $16.38 5/07/07 $51,506 $130,528
(Chairman)
Wesley L. McDonald 5,000 25% $16.38 5/07/07 $51,506 $130,528
Paul G. Yovovich 5,000 25% $16.38 5/07/07 $51,506 $130,528
</TABLE>
Notes:
(1) The options vest in equal annual increments of 25% over the four year
period following their date of grant, April 30, 1997.
(2) Options were awarded each April 30 through 1997 in accordance with the plan
document.
(3) Represents the fair market value of an underlying share of Common Stock on
the date of grant.
(4) All options, vested and unvested, terminate ninety days after termination of
directorship.
(5) Represents the value of the shares of Common Stock issuable upon the
exercise of the options, assuming the stated rates of price appreciation
for ten years, compounded annually, with the aggregate exercise price
deducted from the final appreciated value. Such annual rates of
appreciation are for illustrative purposes only, are based on requirements
of the Securities and Exchange Commission, and do not reflect the Company's
estimate of future stock appreciation. No assurance can be given that such
rates of appreciation, or any appreciation, will be achieved.
OPTION EXERCISES FOR FISCAL YEAR ENDED 1/31/98
<TABLE>
Number of Unexercised Value of Unexercised(1)
Shares Acquired Value Options at Fiscal Year End Options at Fiscal Year End
Name on Exercise Realized Vested Unvested Vested Unvested
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wilbur L. Creech 0 0 10,500 12,500 $152,469 $106,375
Gerald D. Griffin 0 0 45,500 12,500 $869,775 $106,375
(Chairman)
Wesley L. McDonald 0 0 43,000 12,500 $818,556 $106,375
Paul G. Yovovich 0 0 1,250 8,750 $ 9,219 $ 57,631
</TABLE>
Notes:
(1) These values are calculated using the January 31, 1998 closing price of
Common Stock on the NASDAQ National Market of $22.375 per share, less the
exercise price of the options, multiplied by the number of shares to which
the options relate.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
Rules issued thereunder, the Company's executive officers, Directors and persons
that own more than 10% of the Company's Common Stock are required to file with
the Securities and Exchange Commission reports of ownership and changes in
ownership of Common Stock. The Company believes that, during the fiscal year
ended January 31, 1998, its executive officers, Directors and persons that own
more than 10% of the Company's Common Stock complied with the Section 16(a)
reporting requirements on a timely basis.
<PAGE>
Item 2 on Proxy Card
APPROVAL OF RESTATEMENT OF THE DIRECTOR STOCK OPTION PLAN
At the Annual Meeting, the shareholders will be asked to approve a
restatement (the "Plan Restatement") of the Company's Director Stock Option Plan
(the "Director Plan") that has been adopted by the Board of Directors. The
Director Plan, originally adopted by the Board of Directors on July 9, 1987 and
approved by the Company's shareholders on June 15, 1988, expired by its terms in
July 1997 and no further options could be granted following its termination
date. The Plan Restatement extends the term of the Director Plan and the time
for granting of options thereunder, removes the automatic grant provisions of
the Director Plan, extends the post-termination time period for exercising
options, and makes other minor changes to reflect changes in the Securities
Exchange Commission's ("SEC") rules. The Plan Restatement does not increase the
number of shares of Common Stock that were available for option grants on the
date the term of the original Director Plan expired. The Director Plan and the
Plan Restatement are summarized below, but the description is subject to and is
qualified in its entirety by the Director Plan as restated, which is attached
hereto as Exhibit A to the Proxy Statement.
Under the Director Plan, non-qualified stock options may be granted to
non-employee directors of the Company. The purpose of the Director Plan is to
further the growth and prosperity of the Company by assuring the acquisition and
retention of well-qualified directors by assisting them to acquire shares of the
Company's Common Stock and to benefit directly from the Company's growth,
development and financial success. The Board of Directors believes that, in
order to attract and retain directors, it is appropriate to grant non-qualified
stock options to such individuals.
The Board of Directors is authorized to administer the Director Plan and to
grant options in a manner consistent with the Director Plan. The Board of
Directors is also empowered to interpret the Director Plan, prescribe, amend and
rescind rules relating to the Plan, accelerate the time during which options may
be exercised and determine the rights and obligations of optionees.
Upon approval of the Plan Restatement by the shareholders, 99,250 shares
will be available for additional options to be granted under the Plan. The
purchase price for shares underlying each option will not be less than the Fair
Market Value of such shares on the date of grant. No options may be exercised
subsequent to its termination date. Options granted under the Director Plan are
nontransferable except by will or the laws of descent. The maximum term for
options under the Plan is ten years and one week.
As approved by the shareholders at the June 15, 1988 Annual Meeting, the
Director Plan called for discretionary awards. Under SEC rules adopted in 1991,
such discretionary awards disqualified Directors from disinterested
administration of the Employee Stock Option Plan. Accordingly, by vote on
October 8, 1991, the Board of Directors restricted awards to a fixed annual
award of 3,000 shares per Director, with the price for option exercise to be set
at April 30 of the year of award. These fixed awards were increased to 5,000
shares per in July 1994. Because of further changes in the SEC rules,
discretionary awards no longer disqualify Directors from disinterested
administration of the Employee Stock Option Plan. Accordingly, the Plan
Restatement deletes the automatic grant provisions and vests the authority to
grant options (including determining the Optionee and the number of options
granted) under the Director's Stock Option Plan to the Board of Directors.
The Director Plan provides for the acceleration of the exercisability of
outstanding options in the event of a change in control of the Company ("Change
of Control"). A Change of Control is deemed to have occurred (a) when any person
becomes the beneficial owner of shares of the Company with respect to which 20%
or more of the total number of votes for the election of the Board of Directors
of the Company may be cast; (b) when, in connection with any cash tender offer,
exchange offer, merger or other business combination, sale of assets or
contested election, the persons who were Directors of the Company just prior to
such event cease to constitute a majority of the Board of Directors of the
Company; (c) when the shareholders of the Company approve an agreement in which
the Company ceases to be an independent publicly-owned corporation or for a sale
of substantially all of the assets of the Company; or (d) when a tender offer or
exchange offer is made for shares of the Company's Common Stock other than one
made by the Company.
If the outstanding shares of Common Stock of the Company are exchanged for
different securities of the Company through a reorganization, merger,
consolidation, recapitalization or reclassification or if the number of
outstanding shares is changed through a stock split or stock dividend, or like
capital adjustment, an appropriate adjustment shall be made in the number,
exercise price, or kind of securities subject to any outstanding option granted
under the Director Plan and to the number or kind of remaining shares available
for further option grants under the Director Plan.
The Director Plan, as restated by the Plan Restatement, will terminate on
May 11, 2008, ten years from the date of its adoption by the Board of Directors,
subject to shareholder approval at the Annual Meeting.
It is currently anticipated that, subject to shareholder approval of the
Plan Restatement, each non-employee director will be granted an option under the
Director Plan on or about the date of the Annual Meeting, but the amount of such
grants has not been fixed. Such grants, and the timing and amounts of any future
grants under the Director Plan, will be within the discretion of the Board of
Directors as provided in the Plan Restatement.
Options granted under the Director Plan are nonqualified stock options. As
such, the directors who receive them are subject to tax on the difference
between the option price and the fair market value of the Common Stock on the
date on which the director exercises the option ("Exercise Date"). If the
director holds the stock for at least 12 months, any appreciation in the Common
Stock that occurs after the Exercise Date will qualify for long-term capital
gains which is generally taxed at the 28% rate. If the director holds the Common
Stock for at least 18 months, any appreciation that occurs after the Exercise
Date will qualify for long-term capital gains treatment which is generally taxed
at the rate of 20%. The Company will be entitled to a federal income tax
deduction in an amount equal to the income of the Optionee upon exercise.
Approval requires the affirmative vote of the holders of a majority of the
shares of Common Stock that are present or represented at the Annual meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF THIS
RESTATEMENT OF THE DIRECTOR STOCK OPTION PLAN.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Company's outstanding Common Stock as of February 1, 1998,
except as otherwise noted, by persons who are Directors, executive officers, or
persons known to the Company to be beneficial owners of more than five percent
of its outstanding Common Stock. The table also includes the stock ownership of
all Directors and executive officers of the Company as a group. Unless otherwise
indicated, the Company believes that each of the persons listed in the table
(subject to applicable community property laws) has the sole power to vote and
to dispose of the shares listed opposite their name.
<TABLE>
Name and Address Office, Number of Shares Percent
of Beneficial Owner If Any Beneficially Owned Of Class Notes
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don M. Bailey Director, President and 184,504 3.9% (1)
Chief Executive Officer
Gen. Wilbur L. Creech (Ret.) Director 13,500 * (2)
Gerald D. Griffin Chairman of 45,500 1.0% (3)
the Board
Adm. Wesley L. McDonald (Ret.) Director 44,000 * (4)
Paul G. Yovovich Director 7,750 * (5)
Thomas A. Franza Executive Vice President 26,821 * (6)
Richard C. Loomis Sr. Vice President 9,375 * (7)
Robert A. Lovingood Vice President 4,500 * (8)
Thomas P. Baird Vice President, 29,516 * (9)
Chief Financial Officer
Evelyn M. Evans Vice President, Secretary 31,918 * (10)
John C. Hillis Sr. Vice President 22,633 * (11)
Directors and Officers 422,517 9.0% (12)
As a Group (11 persons)
COMARCO, Inc. 193,044 4.1% (13)
Employee Savings and Retirement
Trust
Parsow Partnership, Ltd. 297,200 6.3% (14)
222 Skyline Drive
Elkhorn, NE 68022
T. Rowe Price Associates 352,500 7.5% (15)
100 East Pratt Street
Baltimore, MD 21202
Okabena Partnership K 267,800 5.7% (16)
5140 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Wanger Asset Management, L.P. 912,800 19.3% (17)
227 West Monroe St., Ste 3000
Chicago, Illinois 60606
Storie Partners, L.P. 477,300 10.1% (18)
One Bush Street
Suite 1350
San Francisco, CA 94104
Wellington Management Company, LLP 264,600 5.6% (19)
75 State Street
Boston, MA 02109
</TABLE>
* Indicates less than one percent
(1) Includes 162,500 shares which Mr. Bailey has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(2) Includes 10,500 shares which General Creech has a right to acquire within
60 days after February 1, 1998, by stock option exercise.
(3) Includes 45,500 shares which Mr. Griffin has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(4) Includes 43,000 shares which Admiral McDonald has the right to acquire
within 60 days after February 1, 1998, by stock option exercise.
(5) Includes 1,250 shares which Mr. Yovovich has the right to acquire within 60
days after February 1, 1998 by stock option exercise.
(6) Includes 23,750 shares which Mr. Franza has the right to acquire within 60
days after February 1, 1998, by stock option exercise. Does not include
options to acquire shares in the Company's subsidiary Comarco Wireless
Technologies, Inc. See section entitled "Stock Options".
(7) Includes 8,375 shares which Mr. Loomis has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(8) Includes 4,500 shares which Mr. Lovingood has the right to acquire within
60 days after February 1, 1998 by stock option exercise.
(9) Includes 28,500 shares which Mr. Baird has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(10) Includes 31,000 shares which Ms. Evans has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(11) Includes 22,500 shares which Mr. Hillis has the right to acquire within 60
days after February 1, 1998, by stock option exercise.
(12) Includes an aggregate of 381,375 shares held by all current executive
officers and Directors that are subject to options exercisable within 60
days after February 1, 1998.
(13) Represents shares held in the Employee Savings and Retirement Trust, of
which the Company is the administrator. Under the beneficial ownership
rules promulgated by the Securities and Exchange Commission, the Company
could be deemed to be a beneficial owner of such shares. All such shares
are allocated to the accounts of Plan participants and are subject to and
voted in accordance with the direction of the participants. The assets of
the trust are under the trusteeship of Smith Barney Corporate Trust
Company. The number of shares listed is as of March 15, 1998.
(14) Taken from personal communication with Alan Parsow on March 17, 1998. Alan
Parsow is the sole general partner of Parsow Partnership, Ltd.
(15) Taken from Schedule 13G filed with the Securities and Exchange Commission
on February 12, 1998. These securities are owned by various individual and
institutional investors for which T. Rowe Price Associates, Inc. and T.
Rowe Price Small Cap Value Fund, Inc. ("Price Associates") serve as
investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact beneficial owner of such securities.
(16) Taken from Amendment No. 7 to Schedule 13D filed with the Securities and
Exchange Commission on behalf of Okabena Partnership K, on February 6,
1998. Okabena Investment Services, Inc. is the corporate managing partner
of the Reporting Person.
(17) Taken from Schedule 13G filed with the Securities and Exchange Commission
on February 6, 1998 on behalf of Wanger Asset Management, L.P. ("WAM"),
Wanger Asset Management, Ltd. ("WAM LTD"), and Ralph Wanger ("Wanger ").
WAM is an investment adviser registered under section 203 of the Investment
Advisers Act of 1940. WAM LTD is the general partner of the investment
adviser. Wanger is the principal stockholder of the general partner.
Included are COMARCO shares held in Acorn Fund, a series of Acorn
Investment Trust, for which WAM is deemed to be a beneficial owner.
(18) Taken from Schedule 13D Amendment No. 2 filed with the Securities and
Exchange Commission on behalf of Storie Partners, L.P. ("Storie") on May
23, 1997. The management of Storie is vested exclusively in its general
partner, Storie Advisors, Inc. Richard E. Dirickson, Jr. and Steven A.
Ledger make investment decisions for Storie, and either may be deemed to
have shared voting and dispositive powers.
(19) Taken from Schedule 13-D filed with the Securities and Exchange Commission
on February 10, 1998 on behalf of Wellington Management Company, LLP
("WMC"). WMC, in its capacity as investment adviser, may be deemed to
beneficially own these shares.
EXECUTIVE COMPENSATION
The Company's executive compensation structure consists of salaries, cash
incentive awards and stock option awards. This structure is administered by a
committee of the Board of Directors (the "Compensation Committee") consisting
solely of non-employee Directors. The Company's CEO recommends compensation
levels for the Company's officers, except for himself, to the Compensation
Committee. The Committee adjusts these recommendations and approves final
compensation levels for these officers. In addition the Committee sets the
compensation level for the CEO and the Chairman of the Board. Incentive
compensation is based upon pre-established quantitative goals, typically stock
price, profitability and new business bookings and qualitative goals, such as
customer satisfaction.
The information on compensation set forth below is furnished for the fiscal year
ended January 31, 1998 for the Chief Executive Officer and the four most highly
compensated executive officers whose cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long Term Compensation
---------------------------------------- --------------------------------------------------------
Name and Other Restricted Long Term
Principal Fiscal Annual Stock Options Incentive All Other
Position Year Salary ($)(1) Bonus ($) Compensation(2) Number Options # Payouts ($) Compensation ($)
- -------- ---- ---------- --------- ------------ ------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don M. Bailey(3) 1998 249,394 265,000 0 0 25,000 0 6,655(4)
President & CEO 1997 241,838 275,000 0 0 25,000 0 15,352(5)
1996 211,894 235,000 0 0 25,000 0 8,811(6)
Thomas P. Franza 1998 202,369 265,000 0 0 25,000 0 9,910(7)
Executive 1997 201,521 265,000 0 0 20,000 0 15,256(8)
Vice President 1996 176,031 225,000 0 0 10,000 0 6,587(9)
Richard C. Loomis 1998 146,194 45,000 0 0 3,000 0 5,161(10)
Sr. Vice President 1997 139,900 33,000 0 0 0 0 6,833(11)
1996 137,569 42,000 0 0 10,000 0 6,256(12)
Thomas P. Baird 1998 135,158 50,000 0 0 4,000 0 5,038(13)
Vice President & 1997 125,370 50,000 0 0 5,000 0 7,037(14)
Chief Financial 1996 120,516 30,000 0 0 5,000 0 5,901(15)
Officer
Evelyn M. Evans 1998 131,484 30,000 0 0 4,000 0 4,990(16)
Vice President 1997 120,939 34,000 0 0 5,000 0 9,037(17)
Secretary 1996 115,484 45,000 0 0 5,000 0 8,991(18)
</TABLE>
Notes:
(1) "Salary" includes compensation deferred during the current year, earnings
on compensation deferred from prior years, and cashed out vested vacation
payments.
(2) "Other Annual Compensation" amounts were below reporting thresholds.
(3) Mr. Bailey has an agreement with the Company providing that, if he is
terminated or constructively terminated following a change in control of
the Company, then he is entitled to two years of base salary and incentive
compensation of the planned level for that year or the amount paid in the
year before the change of control, whichever is greater.
(4) Of this amount, (i) $1,440 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,800 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $415 represents
premium and other payments made in connection with the Company's medical
plan.
(5) Of this amount, (i) $1,267 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $9,585 represents
premium and other payments made in connection with the Company's medical
plan.
(6) Of this amount, (i) $766 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $3,545 represents
premium and other payments made in connection with the Company's medical
plan.
(7) Of this amount, (i) $1,440 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,800 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $3,670 represents
premium and other payments made in connection with the Company's medical
plan.
(8) Of this amount, (i) $1,267 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $9,489 represents
premium and other payments made in connection with the Company's medical
plan.
(9) Of this amount, (i) $1,074 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $1,013 represents
premium and other payments made in connection with the Company's medical
plan.
(10) Of this amount, (i) $403 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,758 represents Company contributions to
the Company's Savings and Retirement Plan.
(11) Of this amount, (i) $401 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $1,932 represents
premium and other payments made in connection with the Company's medical
plan.
(12) Of this amount, (i) $430 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $1,326 represents
premium and other payments made in connection with the Company's medical
plan.
(13) Of this amount, (i) $238 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,800 represents Company contributions to
the Company's Savings and Retirement Plan.
(14) Of this amount, (i) $210 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) 2,327 represents
premium and other payments made in connection with the Company's medical
plan.
(15) Of this amount, (i) $188 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) 1,213 represents
premium and other payments made in connection with the Company's medical
plan.
(16) Of this amount, (i) $232 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,758 represents Company contributions to
the Company's Savings and Retirement Plan.
(17) Of this amount, (i) $212 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,500 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $4,325 represents
premium and other payments made in connection with the Company's medical
plan.
(18) Of this amount, (i) $138 represents life insurance premium of which the
officer is the beneficiary, (ii) $4,273 represents Company contributions to
the Company's Savings and Retirement Plan, and (iii) $4,580 represents
premium and other payments made in connection with the Company's medical
plan.
STOCK OPTIONS
The following tables set forth for each person named in the executive
compensation table above, information concerning (i) options granted by the
Company during the fiscal year ended January 31, 1998 and (ii) options exercised
during such period.
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/98
<TABLE>
Percent of Total
Options Options Granted Exercise Expiration Potential Value(4)
Name Granted(1) to Employees Price(2) Date(3) @ 5% @10%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Don M. Bailey 25,000 18% $17.50 2/27/07 $275,139 $697,261
Thomas A. Franza 15,000 11% $17.50 2/27/07 $165,084 $418,357
Richard C. Loomis 3,000 2% $17.50 2/27/07 $ 33,017 $ 83,671
Thomas P. Baird 4,000 3% $17.50 2/27/07 $ 44,022 $111,562
Evelyn M. Evans 4,000 3% $17.50 2/27/07 $ 44,022 $111,562
</TABLE>
Notes:
(1) The options vest in equal annual increments of 25% over the four-year
period following their date of grant, February 26, 1997.
(2) Represents the fair market value of an underlying share of Common Stock on
the date of grant.
(3) All options, vested and unvested, terminate ninety days after termination
of employment.
(4) Represents the value of shares of Common Stock issuable upon the exercise
of the option, assuming the stated rates of price appreciation for ten
years, compounded annually, with the aggregate exercise price deducted from
the final appreciated value. Such annual rates of appreciation are for
illustrative purposes only, are based on requirements of the Securities and
Exchange Commission, and do not reflect the Company's estimate of future
stock appreciation. No assurance can be given that such rates of
appreciation, or any appreciation, will be achieved.
OPTION EXERCISES FOR FISCAL YEAR ENDED 1/31/98
<TABLE>
Shares Acquired Value Number of Unexercised Value of Unexercised(2)
Name on Exercise Realized(1) Vested Unvested Vested Unvested
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Don M. Bailey 0 0 143,750 63,250 $2,514,131 $444,809
Thomas A. Franza(3) 0 0 12,500 42,000 $ 150,588 $263,440
Richard C. Loomis 0 0 5,125 8,000 $ 78,974 $ 83,350
Thomas P. Baird 0 0 25,000 14,250 $ 457,975 $ 85,374
Evelyn M. Evans 0 0 27,500 10,250 $ 492,013 $ 83,394
</TABLE>
Notes:
(1) Market value on the date of exercise, net of the exercise price.
(2) These values are calculated using the January 31, 1998 closing price of
Common Stock on the Nasdaq National Market of $22.375 per share, less the
exercise price of the options, multiplied by the number of shares to which
the options relate.
(3) Mr. Franza has been granted options to purchase a total of 95,000 shares of
common stock of one of the Company's subsidiaries under its stock option
plan. Of the 95,000 options, 62,500 are vested and 32,500 are unvested. As
of May 1, 1998, the subsidiary had 3,000,000 shares of common stock
outstanding. Based on current valuation, which is done by the Compensation
Committee of the COMARCO Board of Directors, the shares underlying the
vested options are valued at $1,162,250, and those underlying the unvested
options are valued at $563,450.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To: The Board of Directors
As members of the Compensation Committee, it is our duty to establish the salary
and incentive compensation of the President and Chief Executive Officer and to
review, to revise as appropriate, and to approve the Chief Executive Officer's
recommendations for the salaries and incentive compensation of the Company's
executive officers. Since 1985, the Committee, composed exclusively of Directors
who are not employees of the Company, has received a comprehensive written and
oral corporate performance report from the Company's Chief Executive Officer.
This report presents corporate performance against predetermined quantitative
and qualitative performance objectives. The report summarizes the results for
each of the Company's operations and provides an explanation for each
compensation recommendation made by the Chief Executive Officer. The Committee,
after appropriate inquiry and modification, approves compensation
recommendations and establishes appropriate compensation for the Chief Executive
Officer and for the Chairman of the Board. (The Compensation Committee meets
without Mr. Griffin on all matters relating to the compensation of the Chairman
of the Board.)
Performance objectives and incentive goals are established at the outset of each
fiscal year, together with salary levels. Incentive awards are made after the
close of each fiscal year. Incentive compensation is based on quantitative
performance factors (stock price, profit and new business) as well as a number
of qualitative factors related to long-term performance. For fiscal year 1998,
quantitative factors were considered by the Committee to be more important than
qualitative factors in establishing compensation levels.
The Committee adheres to the following philosophy regarding compensation of the
Company's executive officers:
o to provide competitive total pay opportunities in order to attract, retain,
and motivate high quality executive talent critical to the Company's
success;
o to pay for performance through a compensation mix that emphasizes
competitive cash incentives and merit-based salary increases and
de-emphasizes entitlements and perquisites;
o to create a mutuality of interest between executives and shareholders
through a stock option program; and
o to focus the executive's attention on overall corporate objectives as well
as the executive's specific operational objectives.
The key elements of the Company's executive compensation program are base
salary, annual incentive compensation, and stock options. The Committee's
policies with respect to each of these elements, including the basis for the
compensation paid and awarded to Mr. Bailey, the Company's President and CEO,
are described below. While the elements of compensation are considered
separately, the Committee takes into account the total compensation package
afforded by the Company to the individual.
Base Salaries
Base salaries for executive officers are initially determined by evaluating
responsibilities of the position held and the experience of the individual and
by comparing the salaries paid to persons holding similar positions at other
companies. Each year, the Company uses data compiled from a nationwide
compensation survey of small to medium size private and publicly traded
companies. Comparisons are made based on like-sized companies and those in
similar industries. The Committee uses this information to assist in
establishing base salaries. In general, base salaries and total compensation are
targeted to be consistent with these data.
Annual salary adjustments are determined by evaluating the performance of the
Company and of each executive officer and reviewing base salaries for comparable
positions contained in the survey data mentioned above. In addition, the
Committee takes into account any new responsibilities that such officer may have
assumed. The Committee, where appropriate, also considers non-financial
performance measures in such areas as any increase in market share, customer
service, working capital management, employee relations, and leadership
development.
Concerning Mr. Bailey, the Company's President and CEO, the Committee took into
account a comparison of base salaries of chief executive officers of the other
companies contained in the national salary survey mentioned above, the Company's
success in meeting several financial goals, including return on capital employed
and earnings per share; the performance of the Company's stock; and the
assessment of Mr. Bailey's individual performance, including his development of
long-term strategies for the continued growth of shareholder value. Consistent
with these criteria, Mr. Bailey received a salary of $265,000 in the fiscal year
ended January 31, 1998.
Incentive Compensation
The Company's officers and other key employees are eligible for annual cash
incentive compensation, based upon individual and corporate performance goals
which are established at the beginning of each fiscal year. Corporate
performance is measured primarily by the financial results and new business
development achieved by the Company for such fiscal year.
The Committee takes into account a number of criteria in determining Mr.
Bailey's annual incentive compensation, the most important of which are
financial indicators such as net income, earnings per share and stock price.
Goals for determining Mr. Bailey's annual incentive compensation are set at the
beginning of each fiscal year. The Committee determined to award Mr. Bailey
annual incentive compensation of $265,000 for the last fiscal year, $10,000 less
than the previous fiscal year. While the average price of the Company's Common
Stock increased approximately 18% during the last fiscal year from its average
price during the prior fiscal year and the Company's performance improved in
such areas as diversifying its business base and decreasing its dependence on
government contract work, the Company's operating results and earnings per share
increased only slightly during fiscal year 1998.
Stock Options
Stock options are designed to align the interests of executives with those of
the shareholders. The sizes of the option awards are entirely at the discretion
of the Committee. The Committee takes into account the total compensation
offered to its executives when considering the number of options awarded each
year.
Stock option awards to officers and employees were made in the last fiscal year
based upon the criteria described above. The awards to the CEO and the other
four most highly compensated executive officers are shown in the preceding
section entitled "Stock Options". The number of options awarded in February 1998
were reduced substantially for the executive officers, including the CEO,
because of the relatively high percentage of options outstanding compared to the
number of shares outstanding.
The Compensation Committee continuously reviews the Company's executive
compensation policies and plans to determine if revisions may be necessary due
to Section 162 of the Internal Revenue Code of 1986 which limits the
deductibility of compensation paid to certain executives to $1 million. It is
the current policy of the Compensation Committee to preserve, to the extent
reasonably possible, the Company's ability to obtain a corporate tax deduction
for compensation paid to executive officers of the Company to the extent
consistent with the best interests of the Company and its shareholders.
Submitted by the Committee:
General Wilbur L. Creech, Chairman
Gerald D. Griffin
Paul G. Yovovich
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following Directors served on the Company's Compensation Committee for the
awards and decisions discussed above.
Gen. Wilbur L. Creech, Chairman
Gerald D. Griffin
Paul G. Yovovich
None of the members of the Compensation Committee served as an officer or
employee of the Company or its subsidiaries during the last fiscal year, except
for Mr. Griffin, the Company's non-employee Chairman of the Board (a statutory
office under California law).
The Company did not engage in any transactions that required disclosure under
Item 404 of the Securities and Exchange Commission's Regulation S-K during the
last fiscal year.
There were no compensation committee interlocks with other companies within the
meaning of the Securities and Exchange Commission's rules during the last fiscal
year.
PERFORMANCE COMPARISON
The following graphical presentation provides an indication of total shareholder
returns for COMARCO as compared to the Russell 2000 Composite Stock Index and a
peer group of companies (the "Peer Group"). The presentation assumes $100
invested on January 31, 1993 in COMARCO Common Stock, the Russell 2000 Composite
Stock Index, and the Common Stock of the Peer Group. The Peer Group consists of
ten companies of similar size (in terms of assets and revenue) and business
focus as COMARCO. While none of the selected peers offer a fully comparable
range of products and services to COMARCO, they are recognized as providers of
high technology electronic, computer, and communications systems engineering
services and products to US government and commercial markets. The returns of
each company within the Peer Group have been averaged assuming an equal dollar
investment in each company at the beginning of the time period or at the initial
public offering. Dividends paid by those peer companies that pay dividends are
assumed to be reinvested at the end of the ex-dividend month without any
transaction cost. The on-going members of the Peer Group are as follows:
Analysis & Technology, Inc. (AATI), CACI International, Inc. (CACI), Dynamics
Research Corp (DRCO), ECC International Corp (ECC), Halifax Corp (HX), Nichols
Research Corp (NRES), National Technical Systems, Inc. (NTSC) and VSE Corp
(VSEC). This is the same group of peer companies which was used for a comparison
in the previous year, except one company ceased to be a public company during
the year and LCC International Inc. (LCCI) and Salient 3 Communications (STCIA)
were added to reflect COMARCO's growing wireless communications business.
As shown on the following graph, an investment of $100 in COMARCO Common Stock
on January 31, 1993 would have grown in value to $416 as of January 31, 1998.
For the five-year period ending January 31, 1998, the total cumulative return
for holders of COMARCO Common Stock amounted to 316%, or the equivalent of 33.0%
per year compounded annually. By comparison, $100 invested in the Peer Group
composite would have grown in value to $218 as of January 31, 1998, assuming the
reinvestment of dividends from those companies which paid dividends. For the
five-year period ending January 31, 1998, the total cumulative return for the
Peer Group composite was 118%, or the equivalent of 16.9% per year compounded
annually. The returns of COMARCO and the Peer Group exceeded the comparable
return of the Russell 2000 Composite Stock Index.
The accompanying graph depicts the relative performance of COMARCO in relation
to the Peer Group and to the Russell 2000 Stock Index for the periods indicated.
[graph omitted: Comparison of Cumulative Total Return]
<TABLE>
1/31/93 1/31/94 1/31/95 1/31/96 1/31/97 1/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMARCO $100 $90 $163 $293 $344 $416
Peer Group $100 $135 $172 $193 $233 $218
Russell 2000 Index $100 $119 $111 $145 $172 $203
</TABLE>
EXECUTIVE OFFICERS
The following table sets forth pertinent information concerning the persons
who are the current executive officers (who are not Directors) of the Company.
Name Age Capacity
---- --- --------
Thomas P. Baird 44 Vice President, Chief Financial Officer
and Assistant Secretary
Evelyn M. Evans 42 Vice President and Secretary
Thomas A. Franza 55 Executive Vice President
John C. Hillis 52 Sr. Vice President
Richard C. Loomis 49 Sr. Vice President
Robert A. Lovingood 40 Vice President
Mr. Baird has served as Chief Financial Officer of the Company since
September 1992, and Vice President and Controller of the Company since November
1988. He became Assistant Secretary in 1996. He currently holds various
executive positions at a number of the Company's subsidiaries. From December
1987 to November 1988 he served as Vice President, Treasurer and Assistant
Secretary of International Business Services, Inc., a wholly-owned subsidiary of
the Company. From September to December 1987 he served as Assistant to the
Company's Chief Financial Officer. Prior to joining the Company, he was a
Division Controller for Western Gear Corporation from November 1985 to September
1987. Prior to that time, he served in various financial and accounting
positions at Becor Western, Inc.
Ms. Evans joined the Company in January 1986 in the field of contracts
administration. Subsequently, she designed budget models for the Company in her
capacity as Manager of Plans and Analysis. Ms. Evans was promoted to Vice
President in March 1989 and became Secretary of the Company in May 1996. She
currently is a key member of the management team in Comarco Staffing. Prior to
joining the Company, Ms. Evans served for six years as an officer in the United
States Army.
Mr. Franza has served as Executive Vice President of the Company since July
1995. He is also currently President of Comarco Wireless Technologies, Inc. and
Comarco Wireless Europe, Inc. From October 1992 until July 1995, he was a Sr.
Vice President of the Company and before then, served as a Vice President from
July 1990 until October 1992. Prior to then, Mr. Franza was the General Manager
of the Company's Advanced Technologies Division. He joined the Company in 1985.
Mr. Hillis has served as Sr. Vice President of the Company since December
1994. He is also currently the President and Chief Executive Officer of Comarco
Systems, Inc. as well as President of International Business Services, Inc. and
LCTI, Inc., each a subsidiary of the Company. Mr. Hillis became a Vice President
in August 1991 and served in such position until December 1994. Before then, he
was the Manager of Engineering Services Business Development and a Vice
President of International Business Services, Inc. He joined the Company in
1986.
Mr. Loomis has been a Sr. Vice President of the Company since October 1992.
He is also General Manager of the Company's Airport Management Services
Division, as well as a Vice President of International Business Services, Inc.
From November 1989 until October 1992, he served as a Vice President of the
Company. Since joining the Company in April 1986, he has held various management
positions with the Company including Project Manager and Division Manager at the
Facilities Management Division.
Mr. Lovingood has been a Vice President of the Company since August 1996.
He is also President of Comarco Staffing, Inc. From October 1989 until joining
the Company, Mr. Lovingood was President and sole owner of RAL Consulting
Services, Inc. He then incorporated RAL Leasing Consultants, Inc. in June 1991.
SELECTION OF AUDITORS
KPMG Peat Marwick, LLP has been selected as the Company's independent
certified public accountants for the fiscal year ending January 31, 1998.
Representatives of KPMG Peat Marwick, LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and to respond to appropriate questions from shareholders.
PROPOSALS FOR SUBMISSION AT NEXT ANNUAL MEETING
If a shareholder desires to submit a proposal at the Company's 1999 Annual
Meeting, such proposal must be received in writing by the Company at its
corporate office no later than January 21, 1999 and otherwise comply with
applicable regulations in order to be included in the Proxy Statement for that
meeting.
OTHER MATTERS
The Board of Directors of the Company does not know of any matter to be
acted upon at the meeting other than the matters described above. If other
matters properly come before the meeting, the holders of the proxies will vote
on such matters in accordance with their judgment.
The Company's 1998 Annual Report to Shareholders is enclosed with this
Proxy Statement.
IN ORDER TO AVOID ADDED EXPENSE OR ADDITIONAL SOLICITATION OF PROXIES, YOU
ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED.
By ORDER OF THE BOARD OF DIRECTORS
Evelyn M. Evans, Secretary
May 20, 1998
<PAGE>
PROXY COMARCO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR JULY 8, 1998
The undersigned shareholder(s) of COMARCO, Inc. a California corporation,
having received the Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 15, 1998, hereby appoints Gerald D. Griffin and Evelyn M. Evans as
Proxies, each with the power to appoint a substitute, and hereby authorizes them
to represent the undersigned at the Annual Meeting of Shareholders of COMARCO,
Inc. to be held on July 8, 1998 at 10:00 AM at the Hilton Hotel, 18800 MacArthur
Blvd., Irvine, California and at any adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote thereat
on all matters set forth below, as described in the accompanying Proxy
Statement:
1.ELECTION OF DIRECTORS: [] FOR all nominees listed below [] WITHHELD AUTHORITY
to vote for
all nominees
(INSTRUCTION: To withhold authority to vote for an individual nominee, mark the
box next to the nominee's name below. Names not marked will receive a vote FOR)
[] Wilbur L. Creech [] Wesley L. McDonald [] Paul G. Yovovich
[] Gerald D. Griffin [] Don M. Bailey
IMPORTANT - PLEASE SIGN ON THE OTHER SIDE
<PAGE>
2. PROPOSAL TO APPROVE THE RESTATEMENT OF THE DIRECTOR'S STOCK OPTION PLAN
[] FOR [] AGAINST [] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
In the event the Directors are to be elected by cumulative voting, the
Proxies will have the discretion to cumulate votes and to distribute such votes
among all nominees (or if authority to vote for any nominee or nominees has been
withheld, among the remaining nominees, if any) in whatever manner they deem
appropriate.
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 APPROVAL OF THE RESTATEMENT OF THE DIRECTOR'S STOCK OPTION PLAN
AND FOR ALL OF THE DIRECTORS NOMINATED BY THE BOARD.
Dated: -----------------------------------, 1998
------------------------------------------------
(Signature)
------------------------------------------------
(Signature)
(Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator
trustee or guardian, please set forth your full title. If signer is a
corporation, please sign the full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ACCOMPANYING
PREPAID ENVELOPE.
EXHIBIT A
DIRECTOR STOCK OPTION PLAN
(as restated through May 12, 1998)
SECTION 1. Description of Plan
Under this Plan, Directors of the Company may be granted Nonqualified Options to
purchase shares of the common stock of the Company ("Common Stock"). The Plan
was originally dated July 1, 1987, amended on October 8, 1991, amended again on
January 15, 1992, restated on July 11, 1996, and restated again on May 12, 1998.
SECTION 2. Purpose of the Plan
The purpose of the Plan and of Granting Options to the Directors is to further
the growth, development, and financial success of the Company by assuring the
acquisition and retention of strong, capable, reliable and well-qualified
Directors by assisting them to acquire shares of Common Stock and thus benefit
directly from the Company's growth, development, and financial success.
SECTION 3. Eligibility
All Directors who are not employees of the Company shall be eligible for the
award of Options under this Plan.
SECTION 4. Administration
The Plan shall be administered by the Board of Directors.
The Board of Directors is authorized and empowered to administer the Plan and,
subject to the Plan (i) to make grants of shares at market value on the date of
award to each Optionee, to specify the terms of the Options, and in general to
grant Options; (ii) to determine the terms and conditions thereof in a manner
consistent with this Plan, which terms and conditions need not be identical as
to the various Options granted; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules relating to the Plan; (v) to accelerate the time during
which an Option may be exercised, notwithstanding the provisions in the Option
Agreement stating the time during which it may be exercised; and (vi) to
determine the rights and obligations of Optionees under the Plan. The
interpretation and construction by the Board of any provision of the Plan or of
any Option granted under it shall be final.
SECTION 5. Shares Subject to the Plan
The number of shares of Common Stock which may be purchased pursuant to the
exercise of Options granted under the Plan shall not exceed a total of 425,000
shares, subject to adjustment as provided in Section 10 hereof to reflect all
stock splits, stock dividends or similar capital changes. Upon the expiration or
termination for any reason of an outstanding Option which shall not have been
exercised in full, any shares of Common Stock then remaining unissued shall have
been reserved for issuance upon such exercise shall again become available for
the granting of additional Options under the Plan.
SECTION 6. Option Price
Except as provided in Section 10, the purchase price per share (the "Option
Price") of the shares of Common Stock underlying each Option shall be not less
than the fair market value of such shares on the day the option is granted. Such
fair market value shall be determined by the Board of Directors on the basis of
the reported closing sales price on such date or, in the absence of a reported
sales price on such date, on the basis of the average of the reported closing
bid and asked prices on such date. In the absence of both a reported sales price
and reported bid and asked prices, the Board shall determine such fair market
value on the basis of the next reported average of the closing bid and asked
price.
SECTION 7. Exercise of Options
Subject to all other provisions of the Plan, each Option shall be exercisable
for the full number of shares of Common Stock subject thereto, or any part
thereof, in such installments and at such intervals as the Board may determine
in granting such Option, provided that no option may be exercisable subsequent
to its termination date. The Option shall be exercised by the Optionee by giving
written notice to the Company specifying the number of full shares to be
purchased and accompanied by payment of the full purchase price therefor in
cash, by check, or in such other form of lawful consideration as the Board may
approve from time to time, including, without limitation, in the sole discretion
of the Board, the assignment and transfer by the Optionee to the Company of
outstanding shares of the Company's Common Stock theretofore held by the
Optionee. After giving due considerations of the consequences under Rule 16b-3
under the Securities Exchange Act of 1934, as amended ("Exchange Act") and under
the Code, the Board of Directors may also authorize the exercise of Options by
the delivery to the Company or its designated agent of an irrevocable written
notice of exercise form together with irrevocable instructions to a
broker-dealer to sell or margin a sufficient portion of the shares of Common
Stock and to deliver the sale or margin loan proceeds directly to the Company to
pay all or a portion of the exercise price of the Option.
SECTION 8. Issuance of Common Stock
The Company's obligation to issue shares of its Common Stock upon exercise of an
Option is expressly conditioned upon the completion by the Company of any
registration or other qualification of such shares under any state and/or
federal law or rules and regulation of any government or regulatory body or the
making of such investment representations or other representations and
undertakings by the Optionee (or his legal representative, heir or legatee, as
the case may be) in order to comply with the requirements of any exemption from
any such registration or other qualification of such shares which the Company in
its sole discretion shall deem necessary or advisable. Such required
representations and undertakings may include representations and agreements that
such Optionee (or his legal representative, heir or legatee): (a) is purchasing
such shares for investment and not with any present intention of selling or
otherwise disposing thereof; and (b) agrees to have a legend placed upon the
face and reverse of any certificates evidencing such shares (or, if applicable,
an appropriate data entry made in the ownership records of the Company) setting
forth (i) any representations and undertakings which such Optionee has given to
the Company or a reference thereto, and (ii) that, prior to effecting any sale
or other disposition of any such shares, the Optionee must furnish to the
Company an opinion of counsel, satisfactory to the Company and its counsel, to
the effect that such sale or disposition will not violate the applicable
requirements of state and federal laws and regulatory agencies. The inability of
the Company to obtain, from any regulatory body having jurisdiction, authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares hereunder shall relieve the Company of any liability in respect of
the nonissuance or sale of such shares as to which such requisite authority
shall not have been obtained.
SECTION 9. Nontransferability
No Option shall be assignable or transferable, except that an Option may be
transferable by will or by the laws of descent and distribution. The Option
granted to an Optionee (if so transferable) may be exercised, prior to its
termination as provided in Section 13(a), only by his or her legal
representative, his or her legatee or a person who acquired the right to
exercise the Option by reason of the death of the Optionee.
SECTION 10. Recapitalization, Reorganization, Merger or Consolidation
The following provisions of this Section 10 are subject to the provisions of
Section 17 below.
If the outstanding shares of Common Stock of the Company are increased,
decreased or exchanged for different securities through a reorganization,
merger, consolidation, recapitalization, reclassification, stock split, stock
dividend or like capital adjustment, an appropriate adjustment shall be made (a)
in the aggregate number of shares which may be purchased pursuant to the
exercise of Options granted under the Plan, as provided in Section 5, and (b) in
the number, price, and kind of shares subject to any outstanding Option granted
under the Plan.
Upon the dissolution or liquidation of the Company; upon any reorganization,
merger or consolidation in which the Company does not survive; or upon any
reorganization, merger, or consolidation in which the Company does survive but
the shareholders of the Company immediately preceding such transaction will not
hold a majority of the outstanding capital stock immediately after such
transaction, the Plan and each outstanding Option shall terminate, provided that
in such event: (a) each Optionee who is not tendered an option by the surviving
corporation, to exercise, in whole or in part, any unexpired Option or Options
issued to him which said Optionee is then capable of exercising pursuant to the
installment provisions of said Option and of Section 7 above; provided, however,
that should the Board of Directors so elect in its sole and absolute discretion
said Optionee may be given (x) the option to exercise, in whole or in part, any
unexpired Option, without regard to said installment provisions or (y) the
option to surrender such Option or Options to the Company for a price (which may
be payable, in the sole discretion of the Board of Directors, in cash or in
securities of the Company or in a combination of both), equal to the difference
between the aggregate exercise price of the Option of Options without regard to
said installment provisions and the aggregate fair market value (as determined
in the manner provided in Section 6 above) of the shares subject to such Option
or Options on the date one day before the effective date of such dissolution,
liquidation, reorganization, merger or consolidation; or (b) in its sole and
absolute discretion, the surviving corporation may, but shall not be so
obligated, tender to any Optionee an option or options to purchase shares of the
surviving corporation, and such new option or options shall contain such terms
and provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan.
To the extent that the foregoing adjustments relate to Common Stock, such
adjustments shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as hereinbefore expressly
provided in this Section 10, the Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class, and the number or price of shares of Common Stock subject to
any Option shall not be affected by, and no adjustment shall be made by reason
of, any dissolution, liquidation, reorganization, merger or consolidation, or
any issuance by the Company of shares of stock of any class, or rights to
purchase or subscribe for stock of any class, or securities convertible into
shares of stock of any class.
The grant of an Option under the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications or changes in its
capital or business structures or to merge, consolidate, dissolve, or liquidate
or to sell or transfer all or any part of its business or assets.
SECTION 11. Option Agreement
Each Option granted under the Plan shall be evidenced by a written stock option
agreement ("Option Agreement") executed by the Company and accepted by the
Optionee, which shall contain each of the provisions and agreements herein
specifically required to be contained therein, may contain the agreement of the
Optionee to remain a Director for a period of time to be determined by the
Board, and may contain such other terms and conditions as the Board deems
desirable and which are not inconsistent with the Plan.
SECTION 12. Rights as a Shareholder
An Optionee or a transferee of an Option shall have no rights as a shareholder
with respect to any shares covered by any Option until exercise thereof;
provided, however, that no Optionee or transferee of an Option shall be able to
vote any shares covered by this Option until the issuance of a stock certificate
to him or her for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the exercise
date, except as expressly provided in Section 10.
SECTION 13. Termination of Options
Each Option Agreement representing an Option granted under the Plan shall set
forth a termination date thereof, which shall be not later than ten years and
one week from the date of grant of the Option. In any event, all Options shall
terminate and expire upon the first to occur of the following events:
(a) the expiration of one year from the date of an Optionee's termination as a
Director for any reason, including death or disability;
(b) the termination of the Option pursuant to Section 10 of the Plan; or
(c) the termination date set forth in the Option Agreement.
SECTION 14. Effectiveness and Termination of Plan
The 1998 restatement of the Plan shall be effective as of the date on which it
is approved by the Board; provided, however, that (a) no Option that was granted
pursuant to this 1998 restatement of the Plan may be exercised until the 1998
restated Plan has been approved by the shareholders of the Company, and (b) no
Option may be granted pursuant to this restated Plan on or after the date that
is ten years from the date of such Board approval. The Plan shall terminate when
all Options granted hereunder either have been fully exercised, and all shares
of Common Stock which may be purchased pursuant to the exercise of such Options
have been so purchased, or have expired; provided, however, that the Board may
in its absolute discretion terminate the Plan at any time. No such termination,
other than as provided for in Section 10 hereof, shall in any way affect any
Option then outstanding.
SECTION 15. Time of Granting Options
The date of an Option shall, for all purposes, be the day the Board approves the
grant.
SECTION 16. Amendment of Plan
The Board may make such amendments to the Plan and, with the consent of each
Optionee affected, make such changes in the terms and conditions of outstanding
Options as it shall deem advisable. Such amendments and changes shall include,
but not be limited to, acceleration of the time at which an Option may be
exercised, but may not, without the written consent or approval of the holders
of a majority of the voting stock of the Company which is represented and
entitled to vote at a duly held shareholders' meeting (a) increase the maximum
number of shares that may be issued pursuant to Options, except as such number
may be adjusted pursuant to Section 10 hereof, (b) decrease the Option Price
requirement contained in Section 6 hereof (except as contemplated by Section 10
hereof), (c) change the designation of the class of persons eligible to receive
Options, or (d) in any manner materially increase the benefits accruing to
participants under the Plan.
SECTION 17. Acceleration of Options
The following provisions of this Section 17 take precedence over anything in
this Plan to the contrary.
Notwithstanding any provision to the contrary contained in any agreement
evidencing an Option granted under the Plan, each outstanding Option shall
become immediately and fully exercisable upon the occurrence of any of the
following events:
(a) any person, including a group as defined in Section
13(d)(3) of the Exchange Act, shall become the beneficial owner of shares of the
Company with respect to which 20% or more of the total number of votes for the
election of the Board may be cast;
(b) as a result of, or in connection with, any cash tender
offer, exchange offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who were
Directors of the Company just prior to such event shall cease to constitute a
majority of the Board;
(c) the shareholders of the Company shall approve an agreement
providing either for a transaction in which the Company will cease to be an
independent publicly owned corporation or for a sale or other disposition of all
or substantially all the assets of the Company; or
(d) a tender offer or exchange offer is made for shares of the
Company's Common Stock (other than one made by the Company) and shares of Common
Stock are acquired thereunder (an "Offer").
SECTION 18. Governing Law
This Plan and all actions taken under this Plan, as well as all Options granted
hereunder shall be governed by and construed in accordance with the laws of the
State of California, determined without regard to its conflicts of laws
principles.
