COMARCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
June 28, 2000
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 Orange County Airport,
18800 MacArthur Blvd, Irvine, CA, (949) 833-9999, on June 28, 2000 at 10:00 A.M.
for the following purposes:
1. To elect five Directors;
2. To consider and act upon a proposal to authorize an additional 200,000
shares under the Employee Stock Option Plan;
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 19, 2000 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, Thomas A.Franza, Gerald D. Griffin, and Jeffrey R. Hultman
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
Irvine, California
May 23, 2000
<PAGE>
COMARCO, INC.
2 Cromwell Drive
Irvine, CA 92618
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held
June 28, 2000
GENERAL INFORMATION
The Board of Directors of COMARCO, Inc., a California corporation,
("COMARCO" or the "Company"), furnishes this Proxy Statement in connection with
the solicitation of proxies. It will be used at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Wednesday, June 28, 2000 at
10:00 A.M. at the Hilton Orange County Airport, 18800 MacArthur Blvd, Irvine,
CA, (949) 833-9999, 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 22, 2000.
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 Company's only class of voting securities is its Common Stock. Only
shareholders of record at the close of business on May 19, 2000 will be entitled
to vote at the Annual Meeting. As of said date there were outstanding 4,370,387
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. With respect to shares of Common Stock held by brokers in street
name for the beneficial owners thereof, the election of Directors and Item 2
(relating to the Company's 1995 Employee Stock Option Plan) are "routine"
matters upon which the brokers, as the holders of record, may vote these shares
for which the beneficial owners have not provided them specific instructions.
With respect to the election of directors, the five nominees receiving the
greatest number of votes at the Annual Meeting shall be elected Director. If
cumulative voting is in effect, shareholders may cumulate their votes for one or
more candidates in the manner and upon satisfaction of the conditions described
above. Votes against, votes withheld, and abstentions have no effect on voting
for the election of Directors. With respect to Item 2, the approval of a
majority of outstanding shares of Common Stock is required. If any other matters
are presented at the Annual Meeting, a majority of the shares of Common Stock
must vote upon the matter and the matter must be approved by a majority of the
outstanding shares of Common Stock represented and voting at the meeting. Under
California law, while abstentions and broker non-votes are counted to determine
the presence of a quorum at the Annual Meeting, they will have the same effect
as votes against Item 2 and any such other matters.
<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 except Jeffrey R. Hultman 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 except Jeffrey R.
Hultman were elected at the last annual meeting. Mr. Yovovich will not be
standing for re-election at the end of his current term
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 (3) 54 Chairman 1991 None
of the Company
Gen. Wilbur L. Creech 73 Executive Consultant 1985 Tech-Sym Corporation and
(Ret.) (1) (3) ESEA Corporation
Thomas A. Franza 57 President and 1998 None
Chief Executive Officer
of the Company
Gerald D. Griffin 65 Executive Consultant 1986 None
(1) (2) (3)
Jeffrey R. Hultman 60 Chief Executive Officer 2000 None
of VirtualLan, Inc.
</TABLE>
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
Mr. Bailey has been Chairman of the Board since 1998. He also served as
President and Chief Executive Officer of the Company from June 1990 to April
2000. 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. Franza has been President and Chief Executive Officer of the Company
since April 2000. He is also currently President of Comarco Wireless
Technologies, Inc. and Comarco Wireless International, Inc. Mr. Franza served as
Executive Vice President of the Company from 1995 to April 2000, as Senior Vice
President of the Company from 1992 to 1995, and before then, as a Vice President
from 1990 until 1992. Prior to that, Mr. Franza was the General Manager of the
Company's Advanced Technologies Division. He joined the Company in 1985.
Mr. Griffin was the non-executive Chairman of the Board of the Company from
1988 until July 1998. In addition, 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.
Mr. Hultman has been Chief Executive Officer of VirtualLan, Inc. since
April 2000. From 1991 through 1997, he was CEO of Dial Page, Inc. (a leading
provider of wireless telecommunications throughout the Southeastern United
States) until its merger with Nextel Communications, Inc. From 1987 through
1991, he was CEO of PacTel Cellular, which became AirTouch Communications. Prior
to that, Mr. Hultman was an executive with Pacific Bell.
BOARD ORGANIZATION AND COMMITTEE MEETINGS
During the fiscal year ended January 31, 2000, the Company's Board of Directors
met four times and various committees of the Board met a total of five 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.
They also 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 three times 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 change. They also recommend to the
Board of Directors new candidates for election by shareholders at annual
meetings, recommend candidates to fill vacancies in directorships, and make
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. Such recommendations must be submitted in writing to the secretary
of the Company and be 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 entire Board approved the Board nominees.
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 $11,450 $0 0 5,000 shares
Gerald D. Griffin $21,600 $10,950 $0 0 5,000 shares
Paul G. Yovovich $21,600 $11,700 $0 0 5,000 shares
</TABLE>
Notes:
(1) Each member of the Board other than Mr. Franza and Mr. Bailey (who also
serve as officers) received a daily Director's fee of $1,800 per meeting,
$900 per telephone meeting, and a monthly retainer of $1,800. 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 expenses incurred to attend Board and Committee
meetings.
(2) "Cash compensation" includes compensation deferred during the current year.
(3) Represents a stock option award made on 6/30/99 at an exercise price of
$19.81 per share, the then current market price of a share of the Company's
Common Stock.
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/00
<TABLE>
Percent of Total
Options Options Granted Exercise Expiration Potential Value(4)
Name Granted(1) to Directors Price(2) Date(3) @ 5% @10%
- ------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C>
Wilbur L. Creech 5,000 33% $19.81 7/07/09 $62,292 $157,860
Gerald D. Griffin 5,000 33% $19.81 7/07/09 $62,292 $157,860
Paul G. Yovovich 5,000 33% $19.81 7/07/09 $62,292 $157,860
</TABLE>
Notes:
(1) The options vest in equal annual increments of 25% over the four-year
period following their date of grant, June 30, 1999.
(2) Represents the fair market value of an underlying share of Common Stock on
the date of grant.
(3) All options terminate one year after termination of directorship.
(4) 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 1/31/00
<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 20,500 12,500 $293,200 $77,938
Gerald D. Griffin 0 0 40,500 12,500 $758,075 $77,938
Paul G. Yovovich 0 0 7,500 12,500 $65,450 $77,938
</TABLE>
Notes:
(1) These values are calculated using the January 31, 2000 closing price of
Common Stock on the NASDAQ National Market of $25.125 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, 2000, 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
AUTHORIZATION FOR 200,000 ADDITIONAL SHARES UNDER THE
EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting, the shareholders will be asked to approve an
amendment (the "Plan Amendment") to the Company's Employee Stock Option (the
"Plan") adopted by the Board of Directors, subject to the approval of
shareholders. The Plan Amendment increases the number of shares of Common Stock
authorized by Section 5 of the Plan for grants of options under the Plan by
200,000 shares to a total of 550,000. Prior to this Plan Amendment, the Plan
covers 350,000 shares, of which 26,875 are available for future option grants,
the remaining 314,500 having been granted, of which 8,625 have been exercised.
In addition, the amendment automatically increases the number of shares that may
be granted at any one time to an individual by Section 3, to reflect all stock
splits, stock dividends or similar capital changes. The Plan and Plan Amendment
are summarized below. The Plan, incorporating this amendment to add 200,000
additional shares, is attached as Exhibit A to this Proxy Statement.
The purpose of the Plan is to make awards to officers, directors who are
also employees, and other key employees of the Company and of the Company's
subsidiaries, and thereby further the growth and prosperity of the Company by
providing incentives and identity of interest with the Company's shareholders.
The Company operates in a highly specialized field in which its success is
highly dependent upon the expertise of highly qualified and motivated key
personnel. The Board of Directors believes that being able to provide selected
persons with such incentives will assist the Company in attracting and retaining
well-qualified management and technical personnel and would be in the best
interests of the Company and its shareholders.
Terms and Conditions of the Plan
The Plan was adopted by the Board of Directors and approved by the
shareholders on July 12, 1995. Under the Plan, as currently in effect, both
incentive stock options and non-qualified stock options may be granted to
officers and key employees of the Company and of any of the Company's
subsidiaries, and to directors of the Company who are also key employees during
a ten-year period ending on May 14, 2005. After the proposed amendment, the
maximum number of authorized shares will be 550,000, of which 8,625 have already
been issued upon the exercise of options, 314,500 shares are currently subject
to outstanding options, and 226,875 shares will be available for future grants
of options. The Plan provides the flexibility for the grant of options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and options which do not so
qualify, referred to as "non-qualified stock options."
The Plan is administered and options granted by a committee (the "Option
Committee") of at least two disinterested members of the Board of Directors. The
Option Committee will determine which key employees will receive options, the
number of shares with respect to which options will be granted, the date on
which the options will be exercisable, and the installment provisions and other
terms of the options. The Option Committee is empowered to prescribe, amend and
rescind rules relating to the Plan and in certain circumstances to authorize the
repurchase of the options, suspend or discontinue the Plan, or revise or amend
it in any respect whatsoever, except that without approval of the shareholders
of the Company, no such revisions or amendment may increase the number of shares
subject to the Plan, decrease the price at which options may be granted to less
than 100% of the Fair Market Value on the date the option is granted, change the
class of persons eligible to receive options under the Plan, modify certain
limits regarding the value of Common Stock for which an optionee may be granted
options, or materially increase the benefits accruing to participants under the
Plan.
The number of shares subject to incentive stock options which may be
exercisable (the first time) by any one individual for any calendar year is
limited to a dollar value of ($100,000) measured by the fair market value of the
shares on the date of grant.
The purchase price per share with respect to which an option is granted
under the Plan shall not be less than the fair market value of such shares on
the date the option is granted. In the event however, that an incentive stock
option is granted to an employee, who, at the time the option is granted, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company or any subsidiary, the purchase price of shares
with respect to which such an option is granted must be at least 110% of the
fair market value of the shares on the date of the grant. Fair market value is
determined by the Committee on the basis of the reported closing sales price on
the date of the grant or, if there is no reported closing sales price on the
date of the grant, then the fair market value will be based of the average of
the reported closing bid and asked prices on the date of the grant. If there are
no reported bid and asked prices on the date of the grant, fair market value
will be determined on the basis of the next reported average of the closing bid
and asked prices.
Options under the Plan are exercisable in such increments and at such times
as the Option Committee shall specify, provided that in the event of a "change
of control" as defined in the Plan, options will be fully exercisable for a
period of thirty days from and after the date of the Change of Control. No
option granted to an Executive Officer of the Company is exercisable as a result
of acceleration within six months of the date of its grant. In addition, no
option may be exercised after the expiration of ten years from the date of
grant, or five years from the date of grant with respect to incentive stock
options granted to an employee who owns more than 10% of the outstanding shares
of the Company's stock. Shares covered by the unexercised portion of any
terminated or expired option may again be the subject of further options under
the Plan.
Upon exercise of an option granted under the Plan, the purchase price of
the shares purchased upon such exercise shall be paid in full (i) in cash, (ii)
by delivering shares of the Company's Common Stock already owned by the optionee
(iii) by a combination of cash and stock or (iv) 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.
The Company will receive no consideration upon the grant of any option
under the Plan. Cash proceeds received by the Company from the sale of Common
stock pursuant to the exercise of options granted under the Plan constitute
general funds of the Company which may be used for general corporate purposes.
Under the Plan, if an optionee's employment with the Company is terminated
for any reason, the number of shares purchasable under any option granted
thereunder held by such optionee is limited to the number of shares which are
purchasable by the employee at the date of such termination. If the termination
of employment occurs for any reason other than the optionee's death, the option
will expire unless exercised by him within 90 days after the date of
termination. If termination of employment occurs by reason of death, or if the
individual dies within three months' of termination of employment, the option
expire unless exercised by the optionee's successor within one year from the
date of death. If an employee is disabled (within the meaning of Section
22(e)(3) of the Code) at time of termination of employment, the option will
expire unless exercised within one year from date of termination.
Options granted under the Plan are exercisable only by the optionee during
the optionee's lifetime and are not transferable except by will or the laws of
descent and distribution.
In the event of any change in common stock by reason of recapitalization,
reclassification, stock split, combination of shares, stock dividend, or like
capital adjustment, the Plan provides that the Board of Directors shall make
appropriate adjustments in the aggregate number, class and kind of shares
available for option grants under the Plan or subject to outstanding options
thereunder and also make appropriate adjustments in the per share exercise price
of outstanding options.
In the event of a merger, consolidation or other reorganization of the
Company, or in the event of any dissolution or liquidation of the Company, the
Plan provides that the Plan will be terminated, and if the optionee is not
granted substitute options, the optionee has the right until five days before
the effective date of such dissolution, liquidation, sale, reorganization,
merger or to exercise any unexpired Option issued to the extent that those
options are exercisable pursuant to the installment provisions. Unless the
optionee has been offered a "substitute" option as described below, the Option
Committee may elect to give the optionee (i) the option to exercise, in whole or
in part, any unexpired option, without regard to the passage of time normally
required for the options to be exercisable or (ii) the option to surrender the
options to the Company for a price (which may be payable, in the sole discretion
of the Committee, in cash or in securities of the Company, or in a combination
thereof), equal to the difference between the aggregate exercise price of the
options, and the aggregate fair market value of the shares on the date one day
before the effective date of such dissolution, liquidation, reorganization,
merger or consolidation. In its sole and absolute discretion, the surviving
entity (which may be the Company) or the entity that has acquired all or
substantially all the Company's assets may, but shall not be so obligated,
tender to any optionee a new option or options to purchase shares at equity
interests in such entity, 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 with any reasonable
changes to take into account the circumstances of the surviving entity.
Federal Income Tax Consequences
Incentive Stock Options. No federal income tax consequences result from the
grant of an incentive stock option and generally the exercise of an incentive
stock option will not result in the recognition of income by an optionee. If an
optionee satisfies certain holding period requirements for shares acquired upon
the exercise of an incentive stock option, the full amount of his gain upon sale
of such shares (measured by the difference between the amount of his proceeds of
sale less the exercise price) will normally be treated as long-term capital
gain. The Company will not be entitled to any deduction under such
circumstances.
Non-Qualified Stock Options. No federal income tax consequences result from
the grant of a non-qualified stock option. Generally, an optionee will recognize
ordinary income upon exercise of a non-qualified stock option in an amount equal
to the difference between the fair market value of shares acquired on the date
the option is exercised and the aggregate exercise price for such shares. The
Company will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by an optionee as a result of the exercise of a
non-qualified stock option.
The preceding discussion under the heading "Federal Income Tax
Consequences" is based on federal tax laws and regulations as in effect on the
date of this Proxy Statement and does not purport to be a complete description
of the federal income tax aspects of the Plan.
Vote Required for Approval
Approval requires the affirmative vote of shareholders of a majority of the
outstanding shares of Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S 1995 EMPLOYEE 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, 2000.
Except as otherwise noted, these persons, who are Directors, executive officers,
or persons known to the Company, are 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 his/her 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 Chairman of the Board 221,754 5.1% (1)(2)
President and CEO
of the Company
Gen. Wilbur L. Creech (Ret.) Director 23,500 * (3)
Gerald D. Griffin Director 43,000 1.0% (4)
Paul G. Yovovich Director 18,000 * (5)
Thomas A. Franza Executive Vice President 48,750 1.1% (6)(7)
Richard C. Loomis Sr. Vice President 2,375 * (8)
Robert A. Lovingood Vice President 14,125 * (9)
Thomas P. Baird Vice President, 37,266 * (10)
Chief Financial Officer
Evelyn M. Evans Vice President, Secretary 37,668 * (11)
John C. Hillis Sr. Vice President 33,758 * (12)
Directors and Executive Officers 480,196 11.1% (13)
As a Group (10 persons)
COMARCO, Inc. 179,368 4.1% (14)
Employee Savings and Retirement
Trust
T. Rowe Price Associates 408,000 9.4% (15)
100 East Pratt Street
Baltimore, MD 21202
Wanger Asset Management, L.P. 997,300 23.0% (16)
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Bear Stearns Asset Management, Inc. 260,050 6.0% (17)
575 Lexington Avenue
New York, NY 10022
</TABLE>
* Indicates less than one percent
(1) Includes 199,250 shares, which Mr. Bailey has the right to acquire
within 60 days after February 1, 2000, by stock option exercise.
(2) In April 2000, Mr. Bailey relinquished his positions as President and
CEO of the Company, but retained his position as Chairman. Data presented
is as of February 1, 2000.
(3) Includes 20,500 shares, which General Creech has a right to acquire
within 60 days after February 1, 2000, by stock option exercise.
(4) Includes 40,500 shares, which Mr. Griffin has the right to acquire within
60 days after February 1, 2000, by stock option exercise.
(5) Includes 7,500 shares that Mr. Yovovich has the right to acquire within
60 days after February 1, 2000 by stock option exercise.
(6) Includes 48,750 shares that Mr. Franza has the right to acquire within 60
days after February 1, 2000, 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) In April 2000, Mr. Franza was named President and CEO of the Company.
Data presented is as of February 1, 2000.
(8) Includes 1,375 shares that Mr. Loomis has the right to acquire within
60 days after February 1, 2000, by stock option exercise.
(9) Includes 14,125 shares that Mr. Lovingood has the right to acquire within
60 days after February 1, 2000 by stock option exercise.
(10) Includes 36,250 shares that Mr. Baird has the right to acquire within
60 days after February 1, 2000, by stock option exercise.
(11) Includes 36,750 shares that Ms. Evans has the right to acquire within
60 days after February 1, 2000, by stock option exercise.
(12) Includes 33,625 shares that Mr. Hillis has the right to acquire within
60 days after February 1, 2000, by stock option exercise.
(13) Includes an aggregate of 438,625 shares held by all current executive
officers and Directors that are subject to options exercisable within 60
days after February 1, 2000.
(14) Represents shares held in the Employee Savings and Retirement Trust
("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 February 1, 2000.
(15) Taken from Schedule 13GA (Amendment 7) filed with the Securities and
Exchange Commission on February 4, 2000. 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 Schedule 13GA (Amendment 5) filed with the Securities and
Exchange Commission on February 11, 2000 on behalf of Wanger Asset
Management, L.P. 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.
(17) Taken from Schedule 13G filed with the Securities and Exchange
Commission on behalf of Bear Stearns Asset Management, Inc. on February
14, 2000.
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 reviews these recommendations and approves final
compensation levels for these officers. In addition, the Committee sets the
compensation level for the CEO. Incentive compensation is based upon
pre-established quantitative goals, typically earnings, profitability, asset
utilization, and new business bookings as well as qualitative goals, such as
customer satisfaction.
The information on compensation set forth below is furnished for the fiscal year
ended January 31, 2000 for the Chief Executive Officer, and the four most highly
compensated executive officers whose cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long Term Compensation
----------------------------------- -----------------------------------------
Name and
Principal Fiscal All Other
Position Year Salary ($)(1) Bonus ($) Options # Compensation ($)(2)
- -------- ---- ---------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Don M. Bailey 2000 310,000 0 20,000 4,800
President & 1999 275,000 245,000 15,000 4,800
CEO 1998 260,000 265,000 25,000 4,800
Thomas A. Franza 2000 260,000 0 20,000 8,000
Executive 1999 230,000 225,000 13,000 8,000
Vice President 1998 215,000 265,000 15,000 4,800
Thomas P. Baird 2000 160,000 25,000 0 4,384
Vice President & 1999 150,000 50,000 4,000 4,460
Chief Financial 1998 130,000 50,000 4,000 4,800
Officer
John C. Hillis 2000 180,000 0 0 4,800
Sr. Vice President 1999 150,000 15,000 2,500 4,800
1998 116,500 15,000 6,000 4,800
Robert A. Lovingood 2000 150,000 15,000 0 2,253
Vice President 1999 150,000 0 2,500 2,637
1998 150,000 0 3,000 2,400
</TABLE>
Notes:
(1) "Salary" includes compensation deferred during the current year.
(2) "All Other Compensation" consists of Company contributions to the Company's
401K plan.
(3) Each of the named executives, except for Robert Lovingood, 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 one times his cash compensation (base salary plus incentive
compensation of the planned level for that year or the amount paid in the
year before the change of control, whichever is greater), except for Mr.
Bailey who is entitled to two times his annual cash compensation.
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, 2000 and (ii) options exercised
during such period.
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/00
<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 20,000 36% $21.25 4/13/09 $267,280 $677,341
Thomas A. Franza 20,000 36% $21.25 4/13/09 $267,280 $677,341
Thomas P. Baird 0 n/a n/a n/a n/a n/a
John C. Hillis 0 n/a n/a n/a n/a n/a
Robert A. Lovingood 0 n/a n/a n/a n/a n/a
</TABLE>
Notes:
(1) The options vest in equal annual increments of 25% over the four-year
period following their date of grant.
(2) Represents the fair market value of an underlying share of Common Stock on
the date of grant.
(3) All options 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.
<PAGE>
OPTION EXERCISES FOR FISCAL YEAR ENDED 1/31/00
<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 0 185,000 50,000 $3,359,272 $285,766
Thomas A. Franza(3) 0 0 38,250 42,250 $444,016 $227,234
Thomas P. Baird 0 0 33,000 6,250 $613,213 $38,844
John C. Hillis 0 0 29,625 7,375 $441,184 $58,344
Robert A. Lovingood 0 0 13,375 7,125 $106,263 $50,963
</TABLE>
Notes:
(1) Market value on the date of exercise, net of the exercise price.
(2) These values are calculated using the January 31, 2000 closing price of
Common Stock on the Nasdaq National Market of $21.125 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, all are vested. On May 25, 1999, Mr. Franza
exercised 19,000 option shares. The value realized for those shares were
$380,570 (based on valuation on the date of exercise, net of exercise
price). As of May 1, 2000, the subsidiary had 3,061,000 shares of common
stock outstanding. Based on valuation as of January 31, 2000, the shares
underlying the vested options are valued at $1,347,560.
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 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.
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 as well as a number of qualitative factors related to
long-term performance. For fiscal year 2000, 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
during fiscal year 2000, 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. They also
considered 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 $310,000 in the fiscal year ended January 31, 2000.
Incentive Compensation
The Company's officers and other key employees are eligible for annual cash
incentive compensation, based upon individual and corporate performance goals
that are established at the beginning of each fiscal year. Primarily the
financial results and new business development achieved by the Company for such
fiscal year measure corporate performance.
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 Company did not meet its quantitative goals
for the year and, consistent with the plan and Mr. Bailey's recommendation, no
incentive compensation was awarded for fiscal year 2000. The average price of
the Company's Common Stock decreased approximately 1% during the last fiscal
year from its average price during the prior fiscal year.
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 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.
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, 1995 in Comarco Common Stock, the Russell 2000 Composite
Stock Index, and the Common Stock of the Peer Group.
With the new focused effort on wireless communications and the placement of all
other business lines in discontinued operations, a new Peer Group was selected
for this year and forward. The new Peer Group consists of seven companies of
similar business focus as Comarco. The old Peer Group has companies with a focus
on the non-wireless portions of the Company, and with the recent divestitures
and forward focus in wireless telecommunications, no longer provides an
appropriate comparison going forward. 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.
In order to provide a comparison, the returns of the former peer group (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), VSE Corp (VSEC), LCC
International Inc. (LCCI) and Salient 3 Communications (STCIA)) and the new Peer
Group (Salient 3 Communications (STCIA), LCC International, Inc. (LCCI), Agilent
Technologies, Inc. (A), Dynatec Corporation (DYNA), Allen Telecom, Inc. (ALN),
Ascom (Swiss company), and ADC Telecommunications, Inc.(ADCT)), are provided
both numerically and graphically.
As shown on the following graph, an investment of $100 in Comarco Common Stock
on January 31, 1995 would have grown in value to $287 as of January 31, 2000.
For the five-year period ending January 31, 2000, the total cumulative return
for holders of Comarco Common Stock amounted to 187.2%, or the equivalent of
23.5% per year compounded annually. By comparison, $100 invested in the New Peer
Group composite would have grown in value to $173 as of January 31, 2000,
assuming the reinvestment of dividends from those companies, which paid
dividends. For the five-year period ending January 31, 2000, the total
cumulative return for the New Peer Group composite was 72.6% or the equivalent
of 11.6% per year compounded annually. The returns of Comarco 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.
<TABLE>
1/31/95 1/31/969 1/31/97 1/31/98 1/31/99 1/31/00
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMARCO $100 $180 $211 $256 $273 $287
Former Peer Group $100 $131 $180 $195 $167 $181
Current Peer Group $100 $111 $150 $102 $106 $173
Russell 2000 Index $100 $130 $155 $182 $183 $216
</TABLE>
[GRAPH OMITTED: Five-Year Performance Comparison]
<PAGE>
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.
<TABLE>
Name Age Capacity
---- --- --------
<S> <C> <C>
Thomas P. Baird 46 Vice President, Chief Financial Officer and
Assistant Secretary, COMARCO, Inc.
Marc W. Booth 42 Vice President, Comarco Wireless Technologies, Inc.
Michael J. Burdiek 41 Vice President, COMARCO, Inc.
Sr. Vice President, Comarco Wireless Technologies, Inc.
Mark Chapman 38 Vice President, Comarco Wireless Technologies, Inc.
Evelyn M. Evans 44 Vice President and Secretary, COMARCO, Inc.
Sebastian E. Gutierrez 38 Vice President, Comarco Wireless Technologies, Inc.
John C. Hillis 54 Sr. Vice President, COMARCO, Inc.
Richard C. Loomis 51 Sr. Vice President, COMARCO, Inc.
Stephen W. Rogers 43 Sr. Vice President and Chief Technology Officer, Comarco
Wireless Technologies, Inc.
Robert E. Wattenberg, Jr. 37 Vice President, Comarco Wireless Technologies, Inc.
</TABLE>
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.
Mr. Booth joined Comarco Wireless Technologies, Inc. ("CWT") as Vice
President of Engineering in October 1999. Before coming to the Company, he spent
eight years at Sony, serving as Director of Engineering and later, Vice
President of Engineering, of Sony's wholly owned subsidiary, Trans Com, Inc.
Prior to Sony, he served in several engineering management positions at Hughes
Aircraft Company.
Mr. Burdiek joined the Company in 1986 and served in management positions
in Production Operations and Business Development from 1987 through 1992. In
1998, he was promoted to Sr. Vice President of Programs at CWT, and in 1999,
General Manager of CWT's Consulting Services (Information Services) business
unit. In 1993 Mr. Burdiek was promoted to Vice President, COMARCO and General
Manager of the Test and Measurement division of Comarco Wireless Technologies,
Inc (CWT). Prior to joining the Company, Mr. Burdiek was a design engineer with
Hughes Aircraft (1982 through 1984), and Printrak International (1985).
Mr. Chapman has served as the Vice President and General Manager of CWT's
Test and Measurement division since January 1998, and acted as Director,
Business Development for the same division since February 1995. Prior to that,
he held various sales and marketing positions in the communications
semiconductor industry. From 1988 to 1995 he served with Rockwell International
in London, England and in Newport Beach, California. He also held various
engineering development positions at Racal and British Telecom PLC in the UK.
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 the Vice President, Administration and Corporate Secretary for
COMARCO, Inc. Prior to joining the Company, Ms. Evans served for six years as an
officer in the United States Army.
Mr. Gutierrez joined Comarco Wireless Technologies in 1996 as Director of
Business Development and was promoted to Vice President of the Company's Call
Box Division in 1998. Before coming to COMARCO, he spent eight years at Pacific
Bell (1987 - 1996) working in various management positions as a member of their
Accelerated Management Program. He also held engineering positions at TRW's
Space and Technology Division (1984 - 1987).
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 President of the Company's subsidiary, Comarco 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. Rogers has been a Sr. Vice President and Chief Technology Officer of
CWT since October 1, 1999. From 1993 to 1999 he was CWT's Vice President of
Engineering. Mr. Rogers started with the Company in 1985.
Mr. Wattenberg has been with the Company since 1985, and has served as Vice
President of Operations for CWT since 1993. Between January 1987 until April
1994 he served as Quality Assurance Manager and Production Operations Manager of
the Advanced Technologies Division of the Company.
SELECTION OF AUDITORS
KPMG LLP has been selected as the Company's independent certified public
accountants for the fiscal year ending January 31, 2001. Representatives of KPMG
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 2001 Annual
Meeting, such proposal must be received in writing by the Company at its
corporate office no later than January 23, 2001. The proposal must also comply
with applicable regulations in order to be included in the Proxy Statement for
that meeting. If a shareholder notifies the Company in writing prior to April 8,
2001, that he or she intends to present a proposal at the Company's 2001 Annual
Meeting, the proxyholders designated by the Board of Directors may exercise
their discretionary voting authority with regard to the shareholder's proposal
only if the Company's proxy statement discloses the nature of the shareholder's
proposal and the proxyholder's intentions with respect to the proposal. If the
stockholder does not notify the Company by such date, the proxyholders may
exercise their discretionary voting authority with respect to the proposal
without such discussion in the proxy statement.
<PAGE>
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 2000 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 23, 2000
<PAGE>
1995 Employee Stock Option Plan (as restated June 2000)
Section 1. Description of Plan.
This is the Employee Stock Option Plan, dated May 15, 1995, as amended on
September 28, 1998, and June 28, 2000 (the "Plan") of COMARCO, Inc., a
California corporation (the "Company"). Under this Plan, key employees of the
Company or of any present or future subsidiaries of the Company and employee
directors, to be selected as set forth below, may be granted options ("Options"
) to purchase shares of the common stock of the Company ("Common Stock"). For
the purposes of the Plan the term "subsidiary" means any corporation 50% or more
of the voting stock of which is owned by the Company or by a subsidiary (as so
defined) of the Company. It is intended that the Options under the Plan will
either qualify for treatment as incentive stock options under Section 422 of the
Internal Revenue Code of 1986 as amended (the "Code"), and be designated
Incentive Stock Options, or not qualify for such treatment and be designated
Nonqualified Stock Options.
Section 2. Purpose of Plan.
The purpose of the Plan and of granting Options to specified employees is to
further the growth, development, and financial success of the Company by
providing additional incentives to certain key employees holding responsible
positions by assisting them to acquire shares of Common Stock and to benefit
directly from the Company's growth, development, and financial success.
Section 3. Eligibility.
Officers and key employees of the Company or any of its subsidiaries and those
directors who are also key employees, shall be eligible to receive grants of
Options under the Plan. A person who holds an Option is herein referred to as an
"Optionee". More than one Option may be granted to any one Optionee.
For incentive stock options, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to which incentive stock
options are exercisable for the first time by such individuals during any
calendar year (under all such plans of the individual's employer corporation and
its parent and subsidiary corporations) shall not exceed $100,000 plus any
"unused limit carryover" to such year as such term is defined in Section 422 of
the Code. Under the Plan, the maximum number of Options that may be granted to
any one Optionee shall be 350,000 shares, subject to adjustment under Section 10
hereof to reflect all stock splits, stock dividends or similar capital changes.
Section 4. Administration.
The Plan shall be administered by a committee (the "Committee") to be composed
of at least two "non-employee" (as such term is used in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934) members of the Board of Directors of
the Company (the "Board"). Members of the Committee shall be appointed, both
initially and as vacancies occur, by the Board, to serve at the pleasure of the
Board. The Board may serve as the Committee, if by the terms of the Plan all
Board members are otherwise eligible to serve on the Committee. The Committee
shall meet at such times and places as it determines and may meet through a
telephone conference call. A majority of its members shall constitute a quorum,
and the decision of a majority of those present at any meeting at which a quorum
is present shall constitute the decision of the Committee. A memorandum signed
by all of its members shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting.
The Committee is authorized and empowered to administer the Plan and, subject to
the provisions of the Plan (a) to select the Optionees, to specify the number of
shares of Common Stock with respect to which Options are granted to each
Optionee, to specify the grant date, Option Price and the terms and conditions
of the Options, which terms and conditions need not be identical as to the
various Options granted; (b) to interpret the Plan; (c) to prescribe, amend, and
rescind rules relating to the Plan; (d) to accelerate the time during which an
Option may be exercised, notwithstanding the provisions in the Option Agreement
(as defined in Section 12) stating the time during which it may be exercised;
(e) to determine, subject to Sections 3 and 6 hereof, whether Options will be
Incentive Stock Options or Nonqualified Stock Options; and (f) to determine the
rights and obligations of Optionees under the Plan. All questions of
interpretation of the terms and provisions of the Plan or of any Options granted
under the Plan shall be determined by the Committee, and such determinations and
decisions shall be final, conclusive, and binding upon all persons having an
interest in the Plan and/or any Options. No member of the Committee shall be
liable for any action or determination made with respect to the Plan or any
Option granted under it.
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 550,000 shares,
subject to adjustment under 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 which 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 11, the purchase price per share (the "Option
Price") of the shares of Common Stock underlying each Option shall not be less
than the fair market value of such shares on the date the Option is granted;
provided, however, that if an Incentive Stock Option is granted to an Optionee
who is a 10-percent shareholder of the Company as defined in Code Section
422(b)(6) at the time such Incentive Stock Option is granted, the Option Price
shall be not less than 110 percent of said fair market value. Such fair market
value shall be determined by the Committee 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 reported bid and asked prices, the Committee
shall determine such fair market value on the basis of the next reported average
of the closing bid and asked prices.
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 Committee may
determine in granting such an Option, provided that no Option may be exercisable
subsequent to its termination date. To the extent it is then vested, an Option,
or any exercisable portion thereof, shall be exercised by delivery to the
Company of all of the following prior to the time when such Option becomes
unexercisable.
(a) Notice in writing signed by the Optionee or other person
entitled to exercise such Option, stating that such Option or
portion thereof is exercised, such notice complying with all
applicable rules established by the Committee;
(b) Payment in full for the Shares with respect to which such
Option or portion is thereby exercised either (i) in cash
(including check, bank draft or money order) or (ii), without
limitation and at the sole discretion of the Board, by
delivering shares of the Company's Common Stock already owned
by the Optionee, or by a combination of cash and Common Stock;
or in such other lawful means as the Committee in its sole
discretion may permit; or 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, and
(c) Such representations and documents (including, without
limitation, those contemplated by Section 8 hereof) as the
Committee shall, in its absolute discretion deem necessary.
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 rulings and regulations of any government 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), and the taking of such actions by the Company as may be
necessary, 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 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,
registration, qualification or other necessary authorization, or the
unavailability of any exemption from registration or qualification obligation,
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares hereunder shall suspend the Company's obligation to permit the
exercise of any affected Option or to issue any shares thereupon and shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares as to which such requisite authority or exemption shall not have
been obtained. In the event that exercisability of an Option shall be suspended
as provided in this Section, the term of such Option shall be extended until the
thirtieth day after the date on which the Company shall have given notice that
such Option may be exercised; provided that in no event may an Incentive Stock
Option be exercised after (i) the expiration, if applicable of the
post-employment exercise period specified in Section 14 of the Plan, or (ii) the
tenth anniversary of the date of its grant.
Section 9. Nontransferability.
No Option shall be assignable or transferable, except that an Option may be
transferable by will or by the applicable laws of descent and distribution
provided such Option Agreement (as contemplated in Section 12 hereof) explicitly
so provides. During the lifetime of an Optionee, only he may exercise an Option
granted to him, or any portion thereof. After the death of the Optionee, any
exercisable portion may be exercised prior to its termination as provided in
Section 14(b) only by his legal representative, his legatee, his beneficiary if
any as designated by the Optionee to the Company for the Option or by a person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
Section 10. Recapitalization, Reorganization, Merger or Consolidation.
If the outstanding shares of Common Stock are increased, decreased or exchanged
for different securities through a reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or like capital
adjustment, a proportionate adjustment shall be made by the Committee (a) in the
aggregate number of shares of Common Stock 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; provided that no fractional shares (or cash in lieu
thereof) will be issuable upon exercise of any Option as so adjusted.
Subject to the provisions of Section 21, upon (i) the dissolution, liquidation
or sale of all or substantially all of the assets of the Company or (ii) upon
any reorganization, merger or consolidation in which the Company does not
survive, or (iii) upon any reorganization, merger, or consolidation in which the
Company does survive and (A) in which the stockholders of the Company have the
opportunity to receive cash, securities of another entity or other property in
exchange for their shares in the Company or (B) the shareholders of the Company
immediately preceding such merger or consolidation will not hold a majority of
the outstanding capital stock or equity interests of the Company immediately
after such merger or consolidation, the Plan and each outstanding Option shall
terminate; provided that in such event: (a) each Optionee who is not tendered a
substitute Option in accordance with all the terms of provision (b) immediately
below shall have the right until five days before the effective date of such
dissolution, liquidation, sale, reorganization, merger or to exercise any
unexpired Option or Options issued to him to the extent that such Options are
then exercisable pursuant to the installment provisions of said Option and of
Section 7 above; provided, however, that should the Committee so elect in its
sole and absolute discretion said Optionee may be given (i) the option to
exercise, in whole or in part, any unexpired Option, without regard to said
installment provisions or (ii) the option to surrender such Option or Options to
the Company for a price (which may be payable, in the sole discretion of the
Committee, in cash or in securities of the Company, or in a combination
thereof), equal to the difference between the aggregate exercise price of the
Option or 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 entity (which may be the Company) or the entity that has acquired all
or substantially all the Company's assets may, but shall not be so obligated,
tender to any Optionee an option or options to purchase shares at equity
interests in such entity, 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 with any reasonable
changes to take into account the circumstances of the surviving entity.
To the extent that the foregoing adjustments relate to stock or securities of
the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding, and conclusive. Except as
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, 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 any 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 their business or assets.
Section 11. Substitute Options.
If the Company at any time should succeed to the business of another enterprise
through a merger or consolidation, or through the acquisition of stock, equity
interests, or assets of such enterprise, Options may be granted under the Plan
to those employees of (or entities who were providing service to) such
enterprise or its subsidiaries in substitution for options to purchase stock or
equity interests of such enterprise held by them at the time of succession. The
Committee, in its sole and absolute discretion, shall determine the extent to
which such substitute Options shall be granted (if at all), the person or
persons to receive such substitute Options (who need not be all Optionees of
such enterprise), the number and type of such Options to be received by each
such person, the Option Price of such Option (which may be determined without
regard to Section 6) and the terms and conditions of such substitute Options;
provided, however, that the Option Price of each such substituted Option shall
be an amount such that, in the sole and absolute judgment of the Committee (and
with respect to a substitute Option that is an Incentive Stock Option, in
compliance with Section 424(a) of the Code), the economic benefit provided by
such Option is not greater than the economic benefit represented by the option
in the acquired enterprise as of the date of the Company's acquisition of such
enterprise. Notwithstanding anything to the contrary herein, no Option shall be
granted, nor any action taken, permitted, or omitted, which would cause the
Plan, or any Options granted hereunder as to which Rule 16b-3 under the
Securities Exchange Act of 1934 may apply, not to comply with such Rule.
Section 12. 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 (a) shall contain each of the provisions and agreements herein
specifically required to be contained therein, (b) shall indicate whether such
Option is to be an Incentive Stock Option or a Nonqualified Stock Option, and if
it is to be an Incentive Stock Option such Option Agreement shall contain terms
and conditions permitting such Option to qualify for treatment as an incentive
stock option under Section 422 of the Code, (c) may contain the agreement of the
Optionee to remain in the employ of, and render services to, the Company or any
of its subsidiaries for a period of time to be determined by the Committee, and
(d) may contain such other terms and conditions as the Committee deems desirable
and which are not inconsistent with the Plan.
Section 13. 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 this 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(s) to him 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 14. 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 from
the date such Option is granted, except that in the case of an Incentive Stock
Option grant to a 10-percent stockholder of the Company, the expiration date
shall not be more than five years from the date of the grant. 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 of
employment if an Optionee is disabled (within the meaning of Section 22(e)(3) of
the Code) on the date of termination; or
(b) the expiration of one year from the date of the death of an Optionee if his
death occurs while he is, or not later than three months after he ceases to be
employed by the Company or any of its subsidiaries; or
(c) the termination of the Option pursuant to Section 10 of the Plan; or
(d) the termination date set forth in the Option Agreement; or
(e) the expiration of three months from the date of termination of employment
other than by reason of death or disability.
Except as provided for above, the termination of employment of an Optionee by
death or otherwise shall not accelerate or otherwise affect the number of shares
with respect to which an Option may be exercised, and the Option may only be
exercised with respect to that number of shares which could have been purchased
under the Option had the Option been exercised by the Optionee on the date of
such termination. In no event shall the post employment exercise periods
provided in this Section 14 extend the time during which any Option may be
exercised in whole or in part beyond the termination date that would otherwise
be applicable thereto pursuant to the Option Agreement or the Plan.
Section 15. Withholding of Taxes.
The Company may deduct and withhold from the wages, salary, bonus and other
compensation paid by the Company to the Optionee the requisite tax upon the
amount of taxable income, if any, recognized by the Optionee in connection with
the exercise in whole or in part of any Option or the sale of Common Stock
issued to the Optionee upon exercise of the Option, as may be required from time
to time under any federal or state laws and regulations. This withholding of tax
shall be made from the Company's concurrent or next payment of wages, salary,
bonus or other income to the Optionee or by payment to the Company by the
Optionee in cash or by surrendering Common Stock, of the required withholding
tax, as the Committee may determine.
Section 16. Effectiveness and Termination of the Plan.
The Plan shall be effective on the date on which it is adopted by the Committee
and the Board, provided however that no Option shall be exercised pursuant to
the Plan until the Plan has been approved by the shareholders of the Company;
and provided further that no Option shall be granted hereunder on or after the
tenth anniversary of the effective date of the Plan. 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
adversely affect any Option then outstanding except as specifically provided for
in the Plan.
Section 17. Time of Granting Options.
Except with respect to the provisions of Section 21, the date of grant of an
Option shall, for all purposes, be the date on which the Committee makes the
determination granting such an Option. Notice of the determination shall be
given to each Optionee to whom an Option is so granted within a reasonable time
after the date of such grant.
Section 18. 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 granted
Options as it shall deem advisable; provided that such amendments and changes
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 is entitled to vote at
a duly held shareholders' meeting, (a) increase the maximum number of shares
subject to Options, except pursuant to Section 10 hereof, (b) decrease the
Option Price requirement contained in Section 6 hereof (except as contemplated
by Section 10 or 11 hereof) applicable to Incentive Stock options, (c) change
the designation of the class of persons eligible to receive Options, or (d)
modify the limits set forth in Section 3 hereof regarding the value of Common
Stock for which any Optionee may be granted Incentive Stock Options, unless
provided for under Section 422(d) of the Code.
Section 19. Not an Employment Agreement.
Nothing contained in the Plan or in any Option Agreement shall confer on any
Optionee any right to be continued in the employ of the Company or one of its
subsidiaries.
Section 20. Transfers and Leaves of Absence.
For purposes of the Plan (a) a transfer of an Optionee's employment, without an
intervening period from the Company to a subsidiary or, or vice versa, or from
one subsidiary to another shall not be deemed a termination of employment and
(b) an Optionee who is granted in writing a leave of absence shall be deemed to
have remained in the employ of the Company during such leave of absence, except
if the Optionee has an Option which is an Incentive Stock Option, the Optionee's
employment, with respect to that Option only, is deemed to have terminated on
the 91st day of a leave of absence, unless the Optionee's rights to reemployment
are guaranteed by statute or contract.
Section 21. Acceleration of Options.
(a) Notwithstanding any provisions to the contrary contained in any agreement
evidencing an Option granted under the Plan, each outstanding Option shall
become immediately and fully exercisable during the periods specified in
subsection (b) below upon the occurrence of any of the following events:
(i) Any person, including a group defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, 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;
(ii) 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;
(iii) The stockholders of the Company shall approve an agreement
providing either for a transaction in which the Company will
cease to be an independently owned public corporation, or for
a sale or other disposition of all or substantially all the
assets of the Company; or
(iv) 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 said Common Stock are acquired thereunder (an
"Offer").
(b) In the event of the acceleration of the exercisability of Options as the
result of the occurrence of an event specified in Section 21 (a) above, each
outstanding Option shall become exercisable in full for a period of thirty days
from and after the date of the occurrence of such event after which period the
Option shall, subject to Section 10 of the Plan, again be exercisable only to
the extent and at the times provided in the Option Agreement relating thereto.
Section 22. Applicable 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.
Section 23. Other Plans.
This Plan is not intended to and shall not preclude the establishment or
operation by the Company or any subsidiary, of any thrift, savings and
investment, achievement award, stock purchase, employee recognition or other
benefit plan or arrangement for any employees, and any such other plan may be
authorized and payments made thereunder independently of this Plan.
<PAGE>
COMARCO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR JUNE 28, 2000
The undersigned shareholder(s) of COMARCO, Inc. a California corporation,
having received the Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 23, 2000, hereby appoints Don M. Bailey 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 June 28, 2000 at 10:00 AM at the Hilton Orange County Airport
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 [ ] WITHELD 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 [ ] Thomas A. Franza [ ] Jeffrey R. Hultman
[ ] Gerald D. Griffin [ ] Don M. Bailey
2. AUTHORIZATION OF 200,000 SHARE INCREASE TO THE 1995 EMPLOYEE STOCK OPTION
PLAN AND AUTOMATIC ADJUSTMENT OF MAXIMUM NUMBER OF SHARES PER INDIVIDUAL ISSUE,
TO REFLECT ALL STOCK SPLITS, STOCK DIVIDENDS, OR SIMILAR CAPITAL CHANGES
[ ] For [ ] Against [ ] Abstain
IMPORTANT- PLEASE SIGN ON THE OTHER SIDE
<PAGE>
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 ALL OF THE DIRECTORS NOMINATED BY THE BOARD.
Dated: , 2000
-----------------------------
--------------------------------------------
(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.
