<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Evans & Sutherland Computer Coporation
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
EVANS & SUTHERLAND
April 12, 1996
Dear Evans & Sutherland Shareholder:
You are cordially invited to attend Evans & Sutherland's 1996 Annual
Meeting of Shareholders to be held on Thursday, May 16, 1996 at 11:00 a.m.,
local time. The meeting will be held at the Company's principal executive
offices located at 600 Komas Drive, Salt Lake City, Utah.
Details of the business to be conducted at the meeting are given in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement.
Whether you own a few or many shares of stock, it is important that
your shares be represented. Please complete, sign, and return the enclosed
proxy card as soon as possible. I hope you will be able to attend the meeting.
Sincerely,
/s/ James R. Oyler
James R. Oyler
President and
Chief Executive Officer
600 Komas Drive / P.O. Box 58700 / Salt Lake City, Utah 84158 / 801-588-1000 /
FAX: 801-588-4500
<PAGE>
EVANS & SUTHERLAND
COMPUTER CORPORATION
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 16, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Evans &
Sutherland Computer Corporation (E&S or the Company), a Utah corporation, will
be held on Thursday, May 16, 1996 at 11:00 a.m., local time, at the Company's
principal executive offices located at 600 Komas Drive, Salt Lake City, Utah,
for the following purposes:
1. To elect two directors to serve until the 1999 Annual Meeting of
Shareholders;
2. To approve an amendment to the 1989 Stock Option Plan for Non-Employee
Directors, increasing the number of shares of annual option grant
awards by 5,000 shares, increasing the cumulative ceiling of option
grant awards for a given director by 55,000 shares, and increasing the
number of shares reserved for issuance by 150,000 shares;
3. To approve an amendment to the Evans & Sutherland 1995 Long-Term
Incentive Equity Plan to increase the number of shares issuable under
such plan by 985,000 shares;
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 27, 1996;
and
5. To transact such other business as may properly come before the meeting
and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 22, 1996 (the
"Record Date") are entitled to notice of and to vote at the meeting and any
adjournment(s) thereof.
All shareholders are cordially invited to attend the meeting in person.
Any shareholder attending the meeting may vote in person even if such
shareholder previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS
Gary E. Meredith
Senior Vice President and
Secretary
Salt Lake City, Utah
Dated: April 12, 1996
================================================================================
THE VOTE OF EACH SHAREHOLDER IS IMPORTANT. PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES.
================================================================================
<PAGE>
EVANS & SUTHERLAND
COMPUTER CORPORATION
600 Komas Drive
Salt Lake City, Utah 84108
------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
General
The enclosed Proxy is solicited on behalf of the Board of Directors of Evans
& Sutherland Computer Corporation (E&S or the Company), a Utah corporation, to
be voted at the Annual Meeting of Shareholders to be held on May 16, 1996, or at
any adjournment or postponement thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Shareholders. The Annual
Meeting of Shareholders will be held on Thursday, May 16, 1996 at 11:00 a.m.,
local time, at the Company's principal executive offices located at 600 Komas
Drive, Salt Lake City, Utah 84108.
These proxy solicitation materials were mailed on or about April 12, 1996 to
all shareholders entitled to vote at the meeting. The cost of soliciting these
proxies will be borne by the Company. These costs will include the expenses of
preparing and mailing proxy materials for the Annual Meeting and reimbursement
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation of Proxies
by telephone, facsimile, mail, or personal contact through certain of its
directors, officers, and employees, none of whom will receive additional
compensation for assisting with the solicitation.
The Proxy
Proxies shall be voted in accordance with the directions of the shareholders.
Unless otherwise directed, Proxies will be voted (1) FOR the election of the two
nominees for director, (2) FOR the amendment to the 1989 Stock Option Plan for
Non-Employee Directors, (3) FOR the amendment to the Evans & Sutherland 1995
Long-Term Incentive Equity Plan, (4) FOR ratification of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending December 27, 1996, and (5) in the discretion of the persons named in the
accompanying Proxy, upon such other matters as may properly come before the
meeting.
The affirmative vote of a majority of a quorum of shareholders is required
for approval of all items being submitted to the shareholders for their
consideration, except for the election of directors, which is determined by a
simple plurality of the votes cast. An automated system administered by the
Company's transfer agent tabulates the votes. Abstentions and broker non-votes
are each included in the determination of the number of shares present and
voting for purposes of determining the presence of a quorum. Each is tabulated
separately. Abstentions will be included in tabulations of the votes cast for
purposes of determining whether a proposal has been approved. Broker non-votes
will not be counted for purposes of determining the number of votes cast for a
proposal. All Proxies delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice to
the Secretary of the Company, by delivering a later Proxy, or by voting in
person at the meeting.
Information on Outstanding Stock
The Company's authorized capital stock consists of 30 million shares of $0.20
par value common stock, 5 million shares of class A preferred stock, no par
value, and 5 million shares of class B preferred stock, no par value. As of
March 22, 1996 (the "Record Date"), there were 8,690,601 shares of common stock
issued and outstanding and there were no shares of preferred stock outstanding.
Each share of common stock is entitled to one vote. Only shareholders of
record at the close of business on the Record Date will be entitled to notice of
and to vote at the meeting. The presence at the meeting, in person or by proxy,
of a majority of the shares entitled to vote shall constitute a quorum for the
transaction of business.
<PAGE>
PROPOSAL ONE
------------
ELECTION OF DIRECTORS
Two directors are to be elected at the meeting. The directors so elected
will serve for a three-year term expiring in 1999, or until their respective
successors are duly elected and qualified. Proxies will be voted for the
election of Mr. Stewart Carrell and Mr. John E. Warnock. In the event a nominee
is unable to serve, the Proxies will be voted for a substitute nominee, if any,
to be designated by the Board of Directors, to serve for the term proposed for
the nominee replaced. The Board of Directors has no reason to believe that any
nominee will be unavailable. All directors have served continuously since first
elected as a director. Directors are elected by a plurality of the votes
present in person or represented by proxy and entitled to vote at the meeting.
<TABLE>
<CAPTION>
First Expiration
Elected as of Current
Name Principal Occupation a Director Term
---- -------------------- ---------- ----------
<S> <C> <C> <C>
Nominees for Election
Stewart Carrell (1) Chairman of the Board of the Company 1984 1996
John E. Warnock (2) Chairman and Chief Executive Officer of 1992 1996
Adobe Systems, Inc.
Incumbent Directors
Henry N. Christiansen (3) Professor, Civil Engineering Department 1983 1998
Brigham Young University
Peter O. Crisp (4) General Partner of Venrock Associates 1980 1997
James R. Oyler (5) President of the Company and Chief 1994 1998
Executive Officer
Ivan E. Sutherland (6) Vice President and Fellow of Sun 1968 1997
Microsystems, Inc.
</TABLE>
- -------------
(1) Mr. Carrell (age 62) was elected Chairman of the Board of Directors of the
Company on March 7, 1991. He has been a member of the Board for 12 years.
He also serves as the Chairman of Seattle Silicon Corporation, and he is a
director of Tripos, Inc. From mid-1984 until October 1993, Mr. Carrell was
Chairman and Chief Executive Officer of Diasonics, Inc., a medical imaging
company. From November 1983 until early 1987, Mr. Carrell was also a
General Partner in Hambrecht & Quist, a west coast based investment banking
and venture capital firm.
(2) Mr. Warnock (age 55) has been a member of the Board for 4 years. He is the
Chairman and Chief Executive Officer of Adobe Systems, Inc. He was a
founder of Adobe and has served as a director and its Chief Executive
Officer since 1982. He was also the President of Adobe from 1982 through
March 1989. From April 1978, until the founding of Adobe, he was Principal
Scientist of the Imaging Sciences Laboratory at Xerox Corporation's Palo
Alto Research Center.
(3) Mr. Christiansen (age 60) has been a member of the Board for 13 years. He
served as a consultant to the Company from 1978 to 1981. He has served as a
Professor of Civil Engineering at Brigham Young University since 1965 and
also served as Chairman of the Department of Civil Engineering from May 1980
to August 1986.
(4) Mr. Crisp (age 63) has been a member of the Board for 16 years. He has been
a General Partner of Venrock Associates, a venture capital firm based in New
York, since 1969. He is also a Director of American Superconductor Corp.,
Apple Computer, Inc., Long Island Lighting Co., Thermedics, Inc., Thermo
Electron Corporation, Thermo Power Corporation, Thermotrex Corporation, and
United States Trust Corporation.
(5) Mr. Oyler (age 50) was appointed President and Chief Executive Officer of
the Company and a member of the Board of Directors in December 1994. He is
also a director of Ikos Systems, Inc. Previously, Mr. Oyler served as
Senior Vice President of Harris Corporation from 1976 through 1990 and also
served as consultant with Booz, Allen & Hamilton.
2
<PAGE>
(6) Mr. Sutherland (age 57) has been a member of the Board for 28 years. He is
Vice President and Fellow for Sun Microsystems, Inc. From 1980 to late
1990, Mr. Sutherland served as Vice President and Technical Director for
Sutherland, Sproull and Associates, Inc. Also during this period, Mr.
Sutherland was associated with ATV as a partner and advisor in venture
capital activities. From March 1976 to July 1980, he served as Fletcher
Jones Professor of Computer Science and head of the Computer Science
Department at the California Institute of Technology. Mr. Sutherland served
as a Vice President and the Chief Scientist of the Company from 1968 until
June 1974, a Vice President of Picture Design Group from July 1974 to
December 1974, and as a Senior Scientist for the Rand Corporation from
January 1975 to May 1976.
Board Meetings and Committees
The Board of Directors held four Board Meetings in fiscal year 1995. Each
member of the Board of Directors attended at least 75% of the meetings of the
Board of Directors, with the exception of John E. Warnock. The Board has
established three committees, the Audit Committee, the Compensation and Stock
Options Committee, and the Nomination Committee. The members of all three
committees are Stewart Carrell, Henry N. Christiansen, Peter O. Crisp, Ivan E.
Sutherland, and John E. Warnock.
The principal functions of the Audit Committee are to recommend engagement of
the Company's independent auditors, to consult with the Company's auditors
concerning the scope of the audit and to review with them the results of their
examination, to approve the services performed by the independent auditors, to
review and approve any material accounting policy changes affecting the
Company's operating results, and to review the Company's financial control
procedures and personnel. The Audit Committee held two meetings in 1995.
The Compensation and Stock Options Committee reviews compensation and
benefits for the Company's executives and administers the grant of stock options
under the Company's existing plans. Pursuant to delegated authority from the
Board of Directors, Mr. Oyler, as Chief Executive Officer, determines all
salaries except for the Company's corporate officers. There were no separate
meetings of the Compensation and Stock Options Committee held in 1995. However,
the committee executed a unanimous written consent in the granting of stock
options.
The Nomination Committee makes recommendations to the Board of Directors
concerning candidates for election as directors. The Nomination Committee will
consider nominees recommended by shareholders for election as a director. Such
recommendations should be sent to the Secretary of the Company for presentation
to the Nomination Committee. There were no separate meetings of the Nomination
Committee held in 1995.
Compensation of Directors
Members of the Board of Directors employed by the Company do not receive any
separate compensation for services performed as a director. Those members of
the Board of Directors not employed by the Company receive a $20,000 annual
retainer per year plus $1,000 for each Board meeting attended. There is no
separate compensation for committee meeting attendance.
On February 2, 1989, the Board of Directors adopted the 1989 Stock Option
Plan for Non-Employee Directors (the "Non-Employee Directors Plan"), which was
approved by the shareholders on May 16, 1989. Under the Non-Employee Directors
Plan, 200,000 shares are reserved for issuance of options. Pursuant to the Non-
Employee Directors Plan, each non-employee director of the Company, serving at
such time, received an option on May 16, 1989 to purchase 10,000 shares, which
option was immediately exercisable. Each person who becomes an Eligible
Director (non-employee) subsequent to the date of adoption of the Plan, receives
an automatic grant, on the date of his first appointment or election to the
Board, of an option to purchase 5,000 shares. Such option is exercisable in
four annual installments on the first, second, third, and fourth anniversaries
of the date of the grant. Currently, the Board consists of four non-employee
directors.
In addition to the initial grants, each Eligible Director is automatically
granted additional options to purchase 5,000 shares of the Company on the first
day of each fiscal year, provided, however, that in no event shall an Eligible
Director be granted options under the Non-Employee Directors Plan to purchase
more than 45,000 shares in the aggregate. Each option, after the initial
option, becomes exercisable in four installments on the first, second, third,
and fourth anniversaries of the date of the grant. As of the Record Date
114,000 shares remain available for future option grants under the Non-Employee
Directors Plan. It is proposed that the Non-Employee Directors Plan be amended
in accordance with the provisions set forth in Proposal Two of this Proxy
Statement.
3
<PAGE>
The exercise price for options granted under the Non-Employee Directors Plan
is equal to the fair market value of the common stock as of the last trading day
immediately prior to the date the option is granted. The options have a term of
ten years. However, each option automatically terminates 30 days after the
optionee ceases to be a non-employee director of the Company except by reason of
the optionee's death, disability, or employment by the Company or a subsidiary,
and terminates in 90 days upon the occurrence of one of these stated events.
Options granted pursuant to the Non-Employee Directors Plan are nonqualified
stock options. Nonqualified stock options have no special tax status. An
optionee generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonqualified stock option, the optionee
normally recognizes ordinary income on the excess of the fair market value on
the date of exercise over the option exercise price. Upon the sale of stock
acquired by the exercise of a nonqualified stock option, any gain or loss, based
on the difference between the sale price and the fair market value on the date
of recognition of income, will be taxed as a capital gain or loss. A capital
gain or loss will be long-term if the optionee's holding period is more than
twelve months. In the event of a sale of the option, the optionee recognizes
ordinary income on the difference between the option exercise price and the sale
price. No tax deduction is available to the Company with respect to the grant
of the option or the sale of stock acquired upon exercise of the option. The
Company should be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of the nonqualified stock
option. Generally, the recipients will be subject to the restrictions of
Section 16(b) of the 34 Act.
PROPOSAL TWO
------------
AMENDMENT TO THE 1989 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
On February 20, 1996, the Board of Directors unanimously adopted, subject to
shareholder approval, an amendment to the Evans & Sutherland Non-Employee
Directors Plan, increasing the number of annual option grant awards to directors
from 5,000 to 10,000, increasing the cumulative ceiling of option grant awards
for a given director, under the Non-Employee Directors Plan, from 45,000 shares
to 100,000 shares, and increasing the number of shares reserved for issuance
from 200,000 shares to 350,000 shares.
The purpose of the Non-Employee Directors Plan is to promote the interests of
the Company and its shareholders by attracting and retaining highly qualified,
independent directors with an investment and performance interest in the
Company's future success. The Non-Employee Directors Plan is the only Evans &
Sutherland option plan in which non-employee directors are eligible to
participate. It is expected that the increased pool will be adequate for the
next several years. The Non-Employee Directors Plan is described in more detail
under the heading "Compensation of Directors", beginning on page 3 of this Proxy
Statement.
Vote Required
The affirmative vote of a majority of a quorum of shareholders is required
for the approval of the amendment of the Non-Employee Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
---
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY OTHERWISE ON THEIR PROXY CARDS.
PROPOSAL THREE
--------------
AMENDMENT TO THE EVANS & SUTHERLAND
1995 LONG-TERM INCENTIVE EQUITY PLAN
On February 20, 1996, the Board of Directors unanimously adopted, subject to
shareholder approval, an amendment to the Evans & Sutherland 1995 Long-Term
Incentive Equity Plan (the "1995 Plan"), increasing the number of shares of
Company common stock available for awards under the 1995 Plan from 350,000
shares plus any shares that are available from prior plans that have not yet
been granted or which may subsequently become available by termination or
cancellation under such plans to 1,335,000 shares plus any shares that are
available from prior plans that have not yet been granted or which may
subsequently become available by termination or cancellation under such plans.
4
<PAGE>
The purpose of the 1995 Plan is to promote the interests of the Company and
its shareholders by attracting and retaining highly qualified, key employees
with an investment and performance interest in the Company's future success. It
is expected that the increased pool will be adequate for the next several years.
The 1995 Plan is described in more detail under the heading "Evans & Sutherland
1995 Long-Term Incentive Equity Plan", beginning on page 9 of this Proxy
Statement.
Vote Required
The affirmative vote of a majority of a quorum of shareholders is required
for the approval of the amendment of the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
---
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY OTHERWISE ON THEIR PROXY CARDS.
PROPOSAL FOUR
-------------
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP (KPMG), independent certified public accountants, has
been selected by the Board of Directors as the firm to audit the accounts and to
report on the financial statements of the Company for the fiscal year ending
December 27, 1996, and recommends that the shareholders vote for ratification of
such selection. Shareholder ratification of the selection of KPMG as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. However, the Board is submitting the selection of KPMG for
shareholder ratification as a matter of good corporate practice. KPMG has
audited the Company's financial statements since 1968. Notwithstanding the
selection, the Board, in its discretion, may direct the appointment of a new
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
shareholders.
Neither KPMG, nor any of its members has any financial interest, direct or
indirect, in the Company, nor has KPMG, nor any of its members ever been
connected with the Company as promoter, underwriter, voting trustee, director,
officer, or employee. In the event the shareholders do not ratify such
appointment, the Board of Directors will reconsider its selection.
Representatives of KPMG are expected to attend the meeting with the opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
Vote Required
The affirmative vote of a majority of a quorum of shareholders is required
for the ratification of the appointment of KPMG.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG PEAT
---
MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 27, 1996. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
5
<PAGE>
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 22, 1996, (i) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (ii) by each of the Company's directors, (iii) by
the Company's Chief Executive Officer, (iv) by each of the Company's four most
highly compensated executive officers, in addition to the Company's Chief
Executive Officer, who served as executive officers at December 29, 1995, and
(v) by all directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Directors, Officers, and -----------------------------
Five Percent (5%) Shareholders (1) Number Percent
------------------------------ ---------------- ------------
<S> <C> <C>
Principal Shareholders
Vanguard/Primecap Fund, Inc. (2).................................. 840,000 9.4
P.O. Box 2600, Valley Forge, Pennsylvania 19482-2600
State of Wisconsin Investment Board (3)........................... 813,300 9.1
P.O. Box 7842, Madison, Wisconsin 53707
Brinson Partners, Inc. and Brinson Trust Company (4).............. 596,034 6.7
209 S. LaSalle, Chicago, Illinois 60604-1295
Cowen & Company (5)............................................... 514,000 5.8
Financial Square, New York, New York 10005-3597
The TCW Group, Inc. (6)........................................... 506,500 5.7
865 S. Figueroa Street, Los Angeles, California 90017
Directors
Stewart Carrell (7)............................................... 55,416 *
Henry N. Christiansen (8)......................................... 28,250 *
Peter O. Crisp (9)................................................ 64,687 *
James R. Oyler (10)............................................... 54,995 *
Ivan E. Sutherland (11)........................................... 61,780 *
John E. Warnock (12).............................................. 7,750 *
Other Executive Officers
Ronald R. Sutherland (13)......................................... 29,999 *
Gary E. Meredith (14)............................................. 11,666 *
Gordon B. Hurley (15)............................................. 8,368 *
All directors and executive officers as a group - 16 persons (16).... 334,648 3.8
- ------------
</TABLE>
*Less than one percent (1%).
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as "beneficially" owned include (a) shares subject to options
exercisable within 60 days of the Record Date, (b) shares held by
unincorporated entities and in trusts and estates over which an individual
holds at least shared voting or investment powers, and (c) shares held in
trusts and estates of which at least 10 percent of the beneficial interest
of such trust is attributable to specified persons in the immediate family
of the individual(s) involved. This information is not necessarily
indicative of beneficial ownership for any other purpose. The directors and
Named Executive Officers of the Company have sole voting and investment
power over the shares of the Company's common stock held in their names,
except as noted in the following footnotes.
(2) Vanguard/Primecap Fund, Inc. has sole voting power and shared dispositive
power as to 840,000 shares according to Schedule 13G filed with the
Securities and Exchange Commission on February 14, 1996.
6
<PAGE>
(3) State of Wisconsin Investment Board has sole voting power and sole
dispositive power as to 813,300 shares according to Schedule 13G filed with
the Securities and Exchange Commission on February 1, 1996.
(4) The Brinson ownership group has shared voting power and shared dispositive
power as to 596,034 shares according to Schedule 13G filed with the
Securities and Exchange Commission on February 9, 1996.
(5) Cowen & Company has shared voting power as to 395,400 shares and shared
dispositive power as to 514,000 shares according to Schedule 13G filed with
the Securities and Exchange Commission on February 14, 1996.
(6) The TCW Group, Inc. has sole voting power and sole dispositive power as to
506,500 shares according to Schedule 13G filed with the Securities and
Exchange Commission on February 12, 1996.
(7) In addition to being a director, Mr. Carrell is also Chairman of the Board
of Directors of the Company. The number of shares attributable to Mr.
Carrell includes 5,000 shares of Common Stock, 45,666 shares subject to
stock options which are currently exercisable or will be exercisable on or
before May 28, 1996, and 4,750 shares which are issuable upon conversion of
$200,000 of convertible debentures at a conversion rate of $42.10 per
share, acquired by Mr. Carrell on March 7, 1995.
(8) The number of shares attributable to Mr. Christiansen includes 6,000 shares
of Common Stock, and 22,250 shares subject to stock options which are
currently exercisable or will be exercisable on or before May 28, 1996.
(9) The number of shares attributable to Mr. Crisp includes 42,437 shares of
Common Stock, and 22,250 shares subject to stock options which are
currently exercisable or will be exercisable on or before May 28, 1996.
(10) In addition to being a director, Mr. Oyler is also President and Chief
Executive Officer of the Company. The number of shares attributable to Mr.
Oyler includes 5,000 shares of Common Stock, and 49,995 shares subject to
stock options which are currently exercisable or will be exercisable on or
before May 28, 1996.
(11) The number of shares attributable to Mr. Ivan Sutherland includes 39,530
shares of Common Stock, and 22,250 shares subject to stock options which
are currently exercisable or will be exercisable on or before May 28, 1996.
Of the 39,530 shares of Common Stock, 11,300 shares are held by the
Sutherland Family Trust of 1980 as to which Mr. Sutherland is a co-trustee
with Marcia Sutherland, with each trustee having sole voting and
dispositive power.
(12) The number of shares attributable to Mr. Warnock are 7,750 shares subject
to stock options which are currently exercisable or will be exercisable on
or before May 28, 1996.
(13) Mr. Ronald R. Sutherland is Vice President, General Manager of Government
Simulation. The number of shares attributable to Mr. Sutherland includes
8,000 shares of Common Stock, and 21,999 shares subject to stock options
which are currently exercisable or will be exercisable on or before May 28,
1996.
(14) Mr. Meredith is Senior Vice President and Secretary of the Company. The
number of shares attributable to Mr. Meredith are 11,666 shares subject to
stock options which are currently exercisable or will be exercisable on or
before May 28, 1996.
(15) Mr. Hurley is Vice President of Shared Technology. The number of shares
attributable to Mr. Hurley includes 35 shares of Common Stock, and 8,333
shares subject to stock options which are currently exercisable or will be
exercisable on or before May 28, 1996.
(16) The total for directors and officers as a group includes 114,155 shares of
Common Stock, and 220,493 shares subject to stock options which are
currently exercisable or will be exercisable on or before May 28, 1996.
7
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth compensation awarded to or earned by the Chief
Executive Officer of the Company and certain other highly compensated executive
officers of the Company (Named Executive Officers) for the fiscal years ended
December 29, 1995, December 30, 1994, and December 31, 1993.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
----------------------------------------- ----------------------- ---------
Other
Annual Restricted All Other
Compen- Stock LTIP Compen-
Name and Salary Bonus (1) sation Award(s) Options (2) Payouts sation (3)
Principal Position Year ($) ($) ($) ($) ($) ($) ($)
- ----------------------- -------- ------------ ------------ --------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Oyler 1995 $300,000 $277,400 None None None None $149,963
President and Chief 1994 23,077 - " " 150,000 " None
Executive Officer 1993 - - " " None " "
Ronald R. Sutherland 1995 183,946 160,000 None None None None 33,862
Vice President, 1994 174,330 - " " 30,000 " 29,660
Government Simulation 1993 121,094 25,000 " " None " 4,497
Gary E. Meredith 1995 177,614 151,300 None None None None 112,824
Senior Vice President 1994 167,596 - " " 35,000 " 4,620
and Secretary 1993 136,987 18,000 " " None " 4,254
Stewart Carrell 1995 113,942 150,000 None None None None 3,418
Chairman of the 1994 146,314 - " " 20,000 " 4,620
Board of Directors 1993 110,000 120,000 " " None " None
Gordon B. Hurley 1995 150,824 70,000 None None None None 18,696
Vice President of 1994 141,658 - " " 10,000 " 4,620
Shared Technology 1993 91,401 19,000 " " None " 23,247
</TABLE>
- ---------------
(1) Represents incentive bonuses paid, payable, or accrued to be paid for
achievement of corporate, individual, and organizational objectives for
fiscal years 1995, 1994, and 1993.
(2) Non-qualified stock options were not granted in 1995 to certain of the
individuals listed in the table. In 1994, the life of the listed options
are for ten years from the date of grant, with vesting occurring at the rate
of one-third of the total grant on each of the one-year anniversaries
subsequent to the grant date.
(3) Amounts reported for fiscal year 1995 consist of: (i) matching contribution
to the Company's 401(k) Deferred Savings Plan (Messrs. Sutherland, Meredith,
and Hurley $4,620 each, and Mr. Carrell $3,418), (ii) premiums paid for
executive life insurance policies (Mr. Oyler $24,893, Mr. Sutherland
$29,242, Mr. Meredith $108,204, and Mr. Hurley $14,076), and (iii) $125,070
paid to reimburse Mr. Oyler for relocation expenses.
Amounts reported for fiscal year 1994 consist of: (i) matching contribution
to the Company's 401(k) Deferred Savings Plan (Messrs. Sutherland, Meredith,
Carrell, and Hurley $4,620 each), and (ii) option exercise income that
exceeds 10% of base salary (Mr. Sutherland $25,040).
Amounts reported for fiscal year 1993 consist of: (i) matching contribution
to the Company's 401(k) Deferred Savings Plan (Messrs. Sutherland and Hurley
$4,497 each, and Mr. Meredith $4,254), and (ii) option exercise income that
exceeds 10% of base salary (Mr. Hurley $18,750).
8
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning the issuance of stock
options granted during fiscal year 1995 to each of the Named Executive Officers.
No stock appreciation rights (SARs) were granted in 1995.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------- Potential Realizable Value
at Assumed Annual Rates
% of Total of Stock Price Appreciation
Options Exercise for Option Term (2)
Options Granted to Prices Expiration --------------------------------
Name Granted (1) Employees Per Share Date At 5% At 10%
- ------------------------- --------------- ----------- ----------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler 0 0.0% $0.000 - $0 $0
Ronald R. Sutherland 0 0.0% 0.000 - 0 0
Gary E. Meredith 0 0.0% 0.000 - 0 0
Stewart Carrell 0 0.0% 0.000 - 0 0
Gordon B. Hurley 0 0.0% 0.000 - 0 0
</TABLE>
- -----------
(1) The total number of options granted during fiscal year 1995 was 290,700
shares. No options were granted to the Named Executive Officers during
fiscal year 1995.
(2) The five percent and ten percent assumed annual rates of compounded stock
price appreciation are mandated by the rules of the Securities and Exchange
Commission. There is no assurance to any executive officer or any other
holder of the Company's securities that the value realized over the 10-year
option term will be at or near the value estimated at the assumed 5% and 10%
levels or at any other defined level.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table sets forth information concerning the exercise of stock
options during fiscal year 1995 by each of the Named Executive Officers and
lists the value of their unexercised options on December 29, 1995.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at Fiscal Year End (1) at Fiscal Year-End (2)
Shares Acquired Value -------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler None $ None 49,995 100,005 $501,200 $1,002,550
Ronald R. Sutherland None None 21,999 20,001 203,190 200,010
Gary E. Meredith 7,000 15,330 11,666 23,334 116,660 233,340
Stewart Carrell None None 45,666 13,334 402,060 133,340
Gordon B. Hurley None None 12,333 6,667 110,730 66,670
</TABLE>
- ------------
(1) The options/SARs identified above are all non-qualified stock options with
no associated stock appreciation rights (SARs).
(2) Based on the closing price of the Company's Common Stock as reported on The
Nasdaq Stock Market on Friday, December 29, 1995 of $22.25.
Evans & Sutherland 1995 Long-Term Incentive Equity Plan
On February 21, 1995, the Board of Directors adopted the Evans & Sutherland
1995 Long-Term Incentive Equity Plan (the "Plan"), which was approved by the
shareholders on May 18, 1995. The 1995 Plan authorizes grants of Incentive
Stock Options ("ISOs"), Non-qualified Stock Options ("NQSOs"), Stock
Appreciation Rights ("SARs"), Stock Awards, and Dividend Equivalents. The total
number of shares of Company common stock available for awards under the 1995
Plan is 350,000, plus any shares that are available from prior plans that have
not yet been granted or which may subsequently become available by termination
or cancellation under the prior plans. It is proposed that the total number of
shares issuable under the plan be increased from 350,000 shares to 1,335,000
shares. See Proposal Three, "Amendment to the Evans & Sutherland 1995 Long-Term
Incentive Equity Plan", on page 4 of this Proxy Statement.
The Board believes that use of long-term incentives as authorized under the
1995 Plan to be beneficial to the Company as a means of promoting the Company's
success and enhancing its value by linking the personal interests
9
<PAGE>
of its key employees to those of its shareholders and by providing them with an
incentive for outstanding performance. These incentives also provide the Company
flexibility in its ability to attract and retain the services of employees upon
whose judgment, interest, and special effort the successful conduct of the
Company's operation is largely dependent. The following is a summary of the 1995
Plan.
Administration
The 1995 Plan is administered by a committee appointed by the Board (the
"Committee"). The Committee has the exclusive authority to administer the 1995
Plan, including the power to determine eligibility, the types and sizes of
awards, and the price and timing of awards.
Description of the Available Awards:
1. Incentive Stock Options
An ISO is a stock option that satisfies the requirements specified in
Section 422 of the Internal Revenue Code (the "Code"). In order for an
option to qualify as an ISO, the price payable to exercise the option must
equal or exceed the fair market value of the stock at the date of the grant,
the option must lapse no later than ten years from the date of the grant, and
the stock subject to ISOs that are first exercisable by an employee in any
calendar year must not have a value of more than $100,000 as of the date of
grant. Certain other requirements must also be met.
An optionee will not be treated as receiving taxable income upon either the
grant of an ISO or upon the exercise of an ISO. However, the difference
between the exercise price and the fair market value on the date of exercise
will be an item of tax preference at the time of exercise in determining
liability for the alternative minimum tax, assuming that the common stock is
either transferable or subject to a substantial risk of forfeiture under
Section 83 of the Code. If at the time of exercise, the common stock is both
nontransferable and is subject to a substantial risk of forfeiture, the
difference between the exercise price and the fair market value of the common
stock (determined at the time the common stock becomes either transferable or
not subject to a substantial risk of forfeiture) is a tax preference item in
the year in which the common stock becomes either transferable or not subject
to a substantial risk of forfeiture.
If common stock acquired by the exercise of an ISO is not sold or otherwise
disposed of within two years from the date of its grant and is held for at
least one year after the date such common stock is transferred to the
optionee, any gain or loss resulting from its disposition will be treated as
long-term capital gain or loss. If such common stock is disposed of before
the expiration of the above-mentioned holding periods, a "disqualifying
disposition" will occur. If disqualifying disposition occurs, the optionee
will realize ordinary income in the year of the disposition in an amount
equal to the difference between the fair market value of the common stock on
the date of exercise and the exercise price, or the selling price of the
common stock and the exercise price, whichever is less. The balance of the
optionee's gain on a disqualifying disposition, if any, will be taxed as
capital gain.
In the event an optionee exercises an ISO using common stock acquired by a
previous exercise of an ISO, unless the stock exchange occurs after the
required holding periods, such exchange shall be deemed a disqualifying
disposition of the stock exchanged.
The Company will not be entitled to any tax deduction as a result of the
grant or exercise of an ISO, or on a later disposition of the common stock
received, except that in the event of a disqualifying disposition, the
Company will be entitled to a deduction equal to the amount of ordinary
income realized by the optionee.
2. Non-Qualified Stock Options
An NQSO is any stock option other than an Incentive Stock Option. Such
options are referred to as "non-qualified" because they do not meet the
requirements of, and are not eligible for, the favorable tax treatment
provided by Section 422 of the Code.
No taxable income will be realized by an optionee upon the grant of an
NQSO, nor is the Company entitled to a tax deduction by reason of such grant.
Upon the exercise of an NQSO, the optionee will realize ordinary income in an
amount equal to the excess of the fair market value of the common stock on
the date of exercise over the exercise price and the Company will be entitled
to a corresponding tax deduction.
10
<PAGE>
Upon a subsequent sale or other disposition of common stock acquired
through exercise of an NQSO, the optionee will realize short-term or long-
term capital gain or loss to the extent of any intervening appreciation or
depreciation. Such a resale by the optionee will have no tax consequence to
the Company.
3. Stock Appreciation Rights
An SAR is the right granted to an employee to receive that appreciation in
the value of a share of common stock over a certain period of time. Under
the 1995 Plan, the Company may pay that amount in cash, in common stock, or
in a combination of both.
A recipient who receives an SAR award is not subject to tax at the time of
the grant and the Company is not entitled to a tax deduction by reason of
such grant. At the time such award is exercised, the recipient must include
in income the appreciation inherent in the SARs (i.e. the difference between
the fair market value of the common stock on the date of grant and the fair
market value of the common stock on the date the SAR is exercised). The
Company is entitled to a corresponding tax deduction in the amount equal to
the income includible by the recipient in the year in which the recipient
recognizes taxable income with respect to the SAR.
4. Stock Awards
Under the Stock Award feature of the 1995 Plan, a key employee or
consultant may be granted a specified number of shares of common stock or
units equivalent in value to shares. However, vested rights to such shares
may be subject to certain restrictions or conditions established by the
Committee, such as continuous service with the Company, attainment of certain
business objectives, or other performance based achievements. If the
employee fails to comply with any of the restrictions during the period
specified by the Committee, or the performance standards are not satisfied,
the stock is forfeited.
A recipient of a Stock Award will recognize ordinary income equal to the
fair market value of the common stock ("Awarded Stock") at the time the
restrictions lapse. The Company is entitled to a tax deduction equal to the
amount of income recognized by the recipient in the year in which the
restrictions lapse.
Instead of postponing the income tax consequences of a Stock Award, the
recipient may elect to include the fair market value of the common stock in
income in the year the award is granted. This election is made under Section
83(b) of the Code. This Section 83(b) election is made by filing a written
notice with the Internal Revenue Service office with which the recipient
files his or her Federal income tax return. The notice must be filed within
30 days of the date of grant and must meet certain technical requirements.
The tax treatment of the subsequent disposition of the Awarded Stock will
depend upon whether the recipient has made a Section 83(b) election to
include the value of the common stock in income when awarded. If the
recipient makes a Section 83(b) election, any disposition thereafter will
result in a capital gain or loss equal to the difference between the selling
price of the common stock and the fair market value of the common stock on
the date of grant. Such capital gain or loss will be a long-term or short-
term capital gain or loss depending upon the period the Awarded Stock is
held. If no Section 83(b) election is made, any disposition thereafter will
result in a capital gain or loss equal to the difference between the selling
price of the Awarded Stock and the fair market value of the Awarded Stock on
the date the restrictions lapsed. Again, such capital gain or loss will be a
long-term or short-term capital gain or loss depending upon the period the
Awarded Stock is held.
During the period in which a recipient holds the Awarded Stock, if
dividends are declared prior to the lapse of the restrictions, the dividends
will be treated for tax purposes by the recipient and the Company in the
following manner: If the recipient makes a Section 83(b) election to
recognize income at the time of the Stock Award, the dividends will be taxed
as dividend income to the recipient when the restrictions lapse. Under such
circumstances, the Company will not be entitled to a tax deduction, nor will
it be required to withhold for applicable taxes. If no such election is made
by the recipient, the dividends will be taxed as compensation to the
recipient at the time the restrictions lapse and will be deductible by the
Company and subject to income tax withholding at that time.
11
<PAGE>
5. Dividend Equivalents
The 1995 Plan also allows for the granting of dividend equivalent rights in
conjunction with the grant of other awards under the 1995 Plan. Such
dividends or dividend equivalents may be paid currently or may be credited to
a participant's account. Any crediting of dividends or dividend equivalents
may be subject to such restrictions and conditions as the Committee may
establish, including reinvestment in additional shares or share equivalents.
A recipient of a dividend equivalent will not be treated as receiving taxable
income upon the grant of a dividend equivalent. The recipient will recognize
ordinary income at the time dividend equivalents are paid.
Recent Tax Changes
Section 162(m) of the Code, adopted as part of the Revenue Reconciliation Act
of 1993, generally limits to $1 million the deduction that can be claimed by any
publicly-held corporation for compensation paid to any "covered employee" in any
taxable year beginning after December 31, 1993. The term "covered employee" for
this purpose is defined generally as the chief executive officer and the four
other highest paid employees of the corporation.
Performance-based compensation is outside the scope of the $1 million
limitation, and, hence, generally can be deducted by a publicly-held corporation
without regard to amount; provided that, among other requirements, such
compensation is approved by shareholders. Among the items of performance-based
compensation that can be deducted without regard to amount (assuming shareholder
approval and other applicable requirements are satisfied) is compensation
associated with the exercise price of a stock option so long as the option has
an exercise price equal to or greater than the fair market value of the
underlying stock at the time of the option grant. All options granted under the
1995 Plan will have an exercise price at least equal to the fair market value of
the underlying stock on the date of grant.
Tax Withholding
The Company shall have the right to deduct from any settlement of an award
made under the 1995 Plan, including the delivery or vesting of shares, a
sufficient amount to cover withholding of any federal, state, or local taxes
required by law, or to take such other action as may be necessary to satisfy any
such withholding obligations. The Committee may permit shares to be used to
satisfy required tax withholding and such shares shall be valued at their fair
market value as of the settlement date of the applicable award.
Plan Amendment
The 1995 Plan may be amended by the Committee as it deems necessary or
appropriate to better achieve the purposes of the 1995 Plan, except that no such
amendments which would increase the number of shares available for issuance or
cause the 1995 Plan not to comply with Rule 16b-3 (or any successor rule) under
the Securities Exchange Act of 1934 or Section 162(m) of the Internal Revenue
Code shall be made without the approval of the Company's shareholders.
12
<PAGE>
PENSION PLAN AND SERP
The Company supports a defined benefit pension plan and SERP (the "Evans &
Sutherland Executive Retirement Plan" or "SERP") with contributions based upon
actuarial computations which take into account many assumptions and factors
including, among others, projected average salary and time in service.
Directors of the Company who are not employees are not eligible to participate
in the Pension Plan and SERP. The Company's 1995 expense for the Pension Plan
of $797,500 was 2.0% of the total remuneration of those participants covered by
the Pension Plan for the fiscal year 1995. Under the pension provisions, the
credited years of service for the Named Executive Officers listed in the
proceeding compensation table are as follows: Messrs. James R. Oyler, 1 year;
Ronald R. Sutherland, 14 years; Gary E. Meredith, 18 years; Stewart Carrell, 3
years; and Gordon Hurley, 15 years.
The Company maintains a non-qualified deferred compensation plan or SERP for
certain executives selected by the Compensation Committee of the Board. Under
the SERP, an executive's annual retirement income commencing at age 65 (and
having at least three years of service under the SERP) equals 66.7% of the
executive's average base salary reduced by the executive's annual benefit under
the Company's Defined Benefit Pension Plan multiplied by a fraction the
numerator of which is the total number of years of service with the Company (up
to a maximum of ten) and the denominator of which is ten. For purposes of the
SERP, the term "average base salary" is defined as the average of the
executive's base compensation over a three year period, excluding all other
forms of compensation except amounts deferred under the Company's 401 (k) Plan
and the Company's Executive Supplemental Savings Plan.
Messrs. James R. Oyler, Ronald R. Sutherland, Gary E. Meredith, and Gordon B.
Hurley are currently participating in the SERP and have 1, 14, 18, and 15 years
of service, respectively, credited under the SERP and are expected to have 10
years of service credited under the Plan at age 65. The Company has purchased
life insurance for its benefit on the lives of some or all of the participants.
It is anticipated that the life insurance proceeds payable upon the death of
plan participants will reimburse the Company for the after-tax cost of benefit
payments, premiums, and a factor for the cost of money.
The following table illustrates the approximate annual retirement benefits
(not including social security benefits) under the Pension Plan and SERP,
assuming retirement at age 65, based upon years of accredited service and final
qualifying earnings as defined in the Pension Plan and SERP, and also assuming
that the employee elects a straight life annuity.
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------
Remuneration/(1)/ 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 ............... $ 83,375 $ 83,375 $ 83,375 $ 83,375 $ 83,375
150,000 ............... 100,050 100,050 100,050 100,050 100,050
175,000 ............... 116,725 116,725 116,725 116,725 116,725
200,000 ............... 133,400 133,400 133,400 133,400 133,400
225,000 ............... 150,075 150,075 150,075 150,075 150,075
250,000 ............... 166,750 166,750 166,750 166,750 166,750
300,000 ............... 200,100 200,100 200,100 200,100 200,100
400,000 ............... 266,800 266,800 266,800 266,800 266,800
450,000 ............... 300,150 300,150 300,150 300,150 300,150
500,000 ............... 333,500 333,500 333,500 333,500 333,500
</TABLE>
- -----------
/(1)/ For purposes of determining benefits at normal retirement, remuneration is
based upon the average qualifying earnings of the employee. Under the
Pension Plan, this is the average of the five consecutive calendar years
that will produce the highest average earnings out of the last ten
calendar years of employment. Under the SERP, this is the average of the
three consecutive calendar years of employment with the Company that
produces the highest annual average. For 1995, compensation taken into
account under the qualified pension plan and SERP for any individual in
any year was limited to $150,000.
13
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE
OF THE BOARD OF DIRECTORS
General
The following report shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933 (the "1933 Act") or under the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under either the 1933 Act of the 1934 Act.
The Compensation and Stock Options Committee of the Board of Directors (the
"Committee") establishes and oversees the general compensation policies of the
Company, which include specific compensation levels for executive officers, cash
incentive initiatives for executives and the technical staff, and the 1995 Long-
Term Incentive Equity Plan. The Committee is composed of the Chairman of the
Board and the four independent outside directors.
E&S operates in highly competitive businesses and competes nationally for
personnel at the executive and technical staff level. Outstanding candidates
are aggressively recruited, often at premium salaries. Highly qualified
employees are essential to the success of the Company. The Company is committed
to providing competitive compensation that helps attract, retain, and motivate
the highly skilled people it requires. The Committee strongly believes that a
considerable portion of the compensation for the Chief Executive Officer and
other top executives must be tied to the achievement of business objectives and
to business unit and overall company performance, both current and long-term.
The Board of Directors and the Compensation and Stock Options Committee have
determined that it is in the best interests of the Company to administer the
Company's employee benefit plans under the old Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 until such time as the Company
is required to administer its employee benefit plans under the new Rule 16b-3.
In order to comply with the applicable rule, the Compensation and Stock Options
Committee has established the Stock Option Administrative Subcommittee to
administer all stock options granted to members of the Board of Directors. This
subcommittee is composed of three disinterested individuals who are not
directors or employees of the Company.
Executive Compensation
The salary of the Chief Executive Officer is established solely by the
Committee, while the salary of other executives is recommended by the Chief
Executive Officer for review and approval of the Committee. Prime sources of
information in determining executive salaries is a survey published by the
American Electronics Association (AEA), entitled "Executive Compensation in the
Electronics Industry", and a survey published by Radford Associates entitled
"Management Total Compensation Report", a major source for executive and top
management compensation in high-tech industries. The Committee has determined
that, as a general rule, executive, management, and top technical salaries
should be at or near the 50th percentile of these surveys.
In 1995, the Committee approved a Management Incentive Plan (MIP), which
provides financial incentives for certain key executives and managers of the
Company to achieve profitable growth. Participation is limited to those who
significantly and directly contribute through their actions to the profitable
growth of the Company. The MIP incentive is based on operating profit
achievement relative to the annual operating plan. Measurement for corporate
(functional) managers is total corporate performance, while measurement for
business unit managers is both corporate and business unit performance. The MIP
incorporates an operating profit level that must be attained before bonuses may
be earned, as well as individual maximums on annual incentive amounts. This
provision ensures a return to shareholders prior to any incentive payments being
made.
Other than the company pension plan and SERP, the long-term component of
compensation for the Chief Executive Officer and other executives is the 1995
Long-Term Incentive Equity Plan. The plan does not provide for automatically-
timed option grants, but rather provides for grants at the discretion of the
Committee. In general, stock options are granted to executives, key managers,
and technical staff whose individual assignments are anticipated to have high
leverage in terms of achieving the longer-term objectives of the Company. This
report is submitted by the members of the Compensation and Stock Options
Committee.
Stewart Carrell Peter O. Crisp John E. Warnock
Henry N. Christiansen Ivan E. Sutherland
14
<PAGE>
Termination of Employment and Change of Control Arrangements
In April 1984, the Board of Directors authorized a form of severance
agreement which provides that, upon termination of employment (i) by the Company
within two years of a change in control which has not been approved by a
majority of the directors in office immediately preceding such change in control
(an "unapproved change in control") or (ii) by the executive for good reason
within two years after such an unapproved change in control, such executive will
be entitled to receive, among other things, an amount equal to the sum of his
base salary at the date of termination plus any amount awarded under the
President's Plan or the Executive Plan for the year preceding the year of
termination multiplied by two and a pro rata portion of any award related to any
uncompleted performance award period under the President's Plan, the Executive
Plan, or the Stock Bonus Plan. Such agreements would also require the Company
to provide certain benefits, including insurance coverage, for each person after
termination of employment for a two year period and to provide each person with
an amount in cash equal to an amount which he would have received under the
Company pension plans had he been fully vested and had he remained employed for
two additional years, reduced by the pension benefits he will actually receive
under such pension plans. However, each executive may terminate employment with
the Company within 90 days of an unapproved change in control without good
reason, in which case the severance benefits are limited to an amount in cash
equal to the sum of his annual base salary at the date of termination plus an
amount equal to the amount of any award received under the President's Plan, the
Executive Plan, or the Stock Bonus Plan for the year preceding the year of
termination. Such arrangements confer no benefits either prior to an unapproved
change in control nor after a change in control which has been approved by the
Board of Directors as described above. Because such agreements may impose
significant costs upon the Company following a change in control, they may tend
to discourage takeover attempts. The Board of Directors has authorized the
President or the Board, in his or their discretion, to cause the Company to
enter into such severance agreements with up to approximately twelve persons,
including some or all of the officers of the Company and such other key
employees as the President shall in his discretion designate. The Company has
not yet entered into any such agreements.
In addition to the Termination of Employment and Change of Control protection
for key officers noted above, the Company has entered into separate agreements
with certain executive officers of the Company regarding severance and
termination issues. A summary of these agreements follow:
On November 29, 1994, an agreement was entered into with Mr. James R. Oyler,
President and Chief Executive Officer, which provides, in the unlikely event
that circumstances result in dismissal, regardless of the quality of service he
has rendered, for other than cause, the Company will pay him an amount equal to
one year's base salary, plus the amount, if any, of the prior year's bonus, and
medical and life insurance benefits for one year.
On December 6, 1994, an agreement was entered into with Mr. Gary E. Meredith,
Senior Vice President and Corporate Secretary, which provides, in the unlikely
event that circumstances result in dismissal, regardless of the quality of
service he has rendered, for other than cause, the Company will pay him an
amount equal to one and a half times the then current year's base salary, plus
the amount, if any, of the prior year's bonus. In addition, the Company will
pay the medical insurance premiums under the Company's regular insurance plan
for continuation coverage and, after the expiration of continuation coverage,
under the conversion policy provided under the medical plan. The Company will
also pay a single sum cash payment for Company defined benefit pension plan
service lost due to early termination. If at any time Mr. Meredith voluntarily
terminates his employment, the severance policies set forth in the Company's
Employee Handbook and Policies shall apply.
15
<PAGE>
COMPARATIVE STOCK PERFORMANCE CHART
The following graph presents a five year comparison of cumulative total
shareholder return for the Company's common stock, the Standard & Poor's 500
Index, and the Hambrecht & Quist Computer Hardware Sector Index. It assumes the
investment of $100 on January 1, 1991, with the reinvestment of all dividends.
Total shareholder returns for prior periods are not an indication of future
investment returns.
Comparison of Five Year Cumulative Total Return
[GRAPH APPEARS HERE]
Specific Plot Points
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Evans & Sutherland 123 103 108 84 142
Hambrecht & Quist 97 84 88 109 157
Standard & Poor 500 130 140 155 157 215
</TABLE>
16
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors, and greater than ten-percent beneficial owners are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the fiscal year ended December
29, 1995 with all Section 16(a) filing requirements applicable to the Company's
officers, directors, and greater than ten-percent beneficial owners.
SHAREHOLDER PROPOSALS
Proposals by shareholders of the Company that are intended to be presented by
such shareholders at the Company's 1997 Annual Meeting of Shareholders must be
received by the Company on or before December 13, 1996 in order that they may be
included in the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at the
meeting. However, if any other matters properly come before the meeting, it is
intended that the persons voting the proxies will vote them in accordance with
their best judgment.
EVANS & SUTHERLAND COMPUTER
CORPORATION
Gary E. Meredith
Senior Vice President and
Secretary
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ATTACHMENT A
EVANS & SUTHERLAND COMPUTER CORPORATION
1989 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
Section 1. Purpose.
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The purpose of the Plan is to promote the interests of the Corporation
and its shareholders by attracting and retaining highly qualified independent
Directors with an investment interest in the future success of the Corporation.
Section 2. Definitions.
-----------
Unless the context clearly indicates otherwise, the following terms, when
used in the Plan, shall have the meanings set forth in this Section:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Corporation" shall mean Evans & Sutherland Computer Corporation, a
Utah corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the Committee which shall administer the Plan.
(e) "Director" shall mean any member of the Board.
(f) "Fair Market Value" shall mean for any day the closing price of the
Stock in the over-the-counter market, as reported through the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System or,
if the Stock is listed or admitted to trading on the NASD National Market System
or any national securities exchange or if the last reported sale price of such
Stock is generally available, the last reported sale price on such system or
exchange. The Fair Market Value for any day for which there is no such closing
price or last reported sales price shall be the Fair Market Value of the last
day for which there is such a price.
(g) "Grantee" shall mean a person granted an Option under the Plan.
(h) "Non-Employee Directors" shall mean Directors who are not also
employees of the Corporation or any of its consolidated subsidiaries.
(i) "Options" shall mean options granted under the Plan.
(j) "Plan" shall mean this 1989 Stock Option Plan for Non-Employee
Directors as set forth herein and as amended from time to time.
(k) "Stock" shall mean shares of the Common Stock $0.20 par value of the
Corporation.
Section 3. Shares of Stock Subject to the Plan.
-----------------------------------
Subject to the provisions of Section 6, the Stock which may be issued
pursuant to Options granted under the Plan shall not exceed 200,000 shares in
the aggregate. Stock issuable upon the exercise of any Option may be authorized
but unissued shares or reacquired shares of Stock. Shares of Stock subject to
an Option which are not issued pursuant to the exercise of such Option shall be
available for subsequent issuance under the Plan.
Section 4. Grant of Options.
----------------
(a) Eligibility. Only Non-Employee Directors of the Corporation shall be
-----------
eligible to receive Options under the Plan.
(b) Automatic Grants. Subject to approval of the Plan by shareholders of
----------------
the Corporation, Options under the Plan shall be granted automatically, not
subject to the discretion of any person or persons, as follows:
(i) Initial Options. Each Non-Employee Director serving as of the
---------------
effective date hereof (May 16, 1989) shall immediately receive an Option (an
"Initial Option") under the Plan relating to the purchase of 10,000 shares of
Stock (subject to adjustment as provided in Section 6.)
(ii) New Directors Options. Any Non-Employee Director appointed or
---------------------
elected to the Board after the effective date of this Plan shall receive, as
of the date of such appointment or election, an Option (a
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"New Directors Option") under the Plan relating to the purchase of 2,000
shares of Stock (subject to adjustment as provided in Section 6), unless such
Non-Employee Director received an Initial Option under Section 4(b)(i) hereof
or was serving as a Director while an employee.
(iii) Annual Options. On the first day of each fiscal year of the
--------------
Company after the effective date of this Plan, each Non-Employee Director then
serving as a Director shall receive an Option (an "Annual Option") relating to
the purchase of 2,000 shares of Stock; provided, however, that in no event
shall any Non-Employee Director be granted any Annual Option if options
previously granted to such Non-Employee Director under the Plan relate in the
aggregate to the purchase of 20,000 shares of Stock (subject to adjustment as
provided in Section 6).
(c) Exercise Price. The exercise price of each share of Stock subject to
--------------
an Option shall equal the Fair Market Value of a share of Stock on the last
trading day immediately prior to the date such Option is granted.
(d) Term: Exercisability. An Option granted under this Plan shall have
---------------------
a term of ten years from the date the Option is granted and except as otherwise
set forth in Section 4(e) hereof, shall be exercisable as follows:
(i) Initial Options granted pursuant to Section 4(b)(i) shall be
immediately exercisable.
(ii) New Directors Options and Annual Options granted pursuant to
Sections 4(b)(ii) and (iii) shall become exercisable in four (4) equal
installments at a whole number of shares on the first, second, third and
fourth anniversaries of the date each such Option is granted.
(e) Changes in Control. Notwithstanding any provision of this Option
------------------
Agreement establishing the earliest date upon which the Grantee may exercise his
rights under this Option as to all or any number of the Option Shares:
(i) Options granted under this Plan shall become immediately
exercisable in full as of the date upon which occurs any of the following:
(A) The Company executes a definitive agreement to merge or
consolidate with or into another corporation in which the Company is not
the surviving corporation and the Stock is converted into or exchanged for
stock or securities of any other corporation, cash, or any other thing of
value; or
(B) The Company executes a definitive agreement to sell or
otherwise dispose of substantially all its assets; or
(C) The Company undergoes a change of control of the nature which
would, if it had occurred as of the date of the adoption of this Plan, have
been required to be reported in response to Item I of Form 8-K promulgated
under the Securities Exchange Act of 1934, as amended; or
(D) A public announcement that more than thirty percent (30%) of
the Company's then outstanding voting stock has been acquired by any person
or group; or
(E) A change is made in the membership of the Board of Directors
of the Company resulting in a membership of which less than a majority were
also members of the Board of Directors on the date two years prior to such
change, unless the election, or the nomination for election by the
stockholders of the Company, of each new director was approved by the vote
of at least two-thirds of the directors then still in office who were
directors on the date two years prior to such change; and
(ii) In the event of any proposed merger or consolidation in which the
Company is not the surviving corporation, any proposed sale of substantially
all of the Company's assets, the proposed dissolution or liquidation of the
Company, or any corporate separation or division, including, but not limited
to, split-up, split-off, or spin-off, the Committee shall provide, in its
absolute discretion, that one of the following alternatives shall apply to
Options granted under this Plan:
(A) The Grantee shall have the right to exercise the Option at the
Option Price solely for the kind and amount of stock and other securities,
property, cash, or any combination thereof receivable upon such merger,
consolidation, sale of assets, dissolution, liquidation, or corporate
separation or division by a holder of the number of shares of Stock for
which the Option might have been exercised immediately prior to such
merger, consolidation, sale of assets, dissolution, liquidation, or
corporate separation or division; or
(B) In the alternative, the Option shall terminate as of a date to
be fixed by the Board of Directors of the Company; provided that not less
than thirty (30) days written notice of the date so fixed
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shall be given to the Grantee, who shall have the right, during the period
of thirty (30) days preceding such termination, to exercise the Option as
to all or any part of the Optioned Shares including Optioned Shares as to
which the Option would not otherwise be exercisable.
Section 5. Exercise of Options.
-------------------
(a) Upon the exercise of any option, the Grantee shall pay the exercise
price for the shares being purchased in cash or by check payable to the
Corporation or by the surrender of shares of Stock in the Company at their then
Fair Market Value, which shares have either been owned by the Grantee for more
than six months or were not acquired, directly or indirectly, from the Company,
or any combination of the foregoing. The number of shares which are issued
pursuant to the exercise of an Option shall be charged against the maximum
limitation on shares set forth in Section 3 hereof.
(b) The notice of exercise filed by a Grantee shall specify whether the
Grantee intends to file an election pursuant to Section 83(b) of the Code to
have such exercise be taxable as of the date of exercise.
(c) Before the Company issues shares to a Grantee pursuant to the
exercise of an Option, the Committee (i) may require that the Grantee make such
provision, or furnish the Company such authorization, as the Committee in its
sole discretion determines to be necessary or desirable so that the Company may
satisfy its obligation, under applicable tax laws, to withhold for income or
other taxes due upon or incident to such exercise and (ii) may permit the
Grantee to increase the amount withheld or surrendered to provide for the
satisfaction of up to a maximum of the Grantee's entire liability for such taxes
at the maximum applicable marginal tax rates. Under such procedures as the
Committee may adopt, the Committee may permit Grantees to make an election
(hereinafter a "Withholding Election") with respect to the exercise of an option
either (i) to have the Company withhold from the shares to be issued pursuant to
such exercise, or (ii) to surrender to the Company from shares already owned by
the Grantee, or (iii) a combination of both, in any case such number of shares
which, when valued at their fair market value on the date as of which the option
exercise is taxable for federal income tax purposes (the "Tax Date"), shall be
sufficient to satisfy, at a minimum, the Company's withholding obligation with
respect to the Option exercise and, at a maximum, the Grantee's entire liability
at the maximum applicable marginal tax rates for income or other taxes due upon
or incident to such exercise. If the fair market value on the Tax Date of the
number of whole shares withheld or surrendered pursuant to a Withholding
Election exceeds the Company's withholding obligation (or the Grantee's entire
liability for income or other taxes, as the case may be) with respect to the
exercise, a fractional share shall not be issued or returned for the excess, but
an amount equal to the excess shall be paid to the Grantee by the Company in
cash as soon as reasonably practicable after the amount of such excess is
determined by the Company. A Withholding Election shall be made applicable with
respect to a particular Option exercise. Any such Withholding Election and any
Option to which the Withholding Election applies also shall meet the following
requirements:
(1) The Withholding Election, once made, shall be irrevocable.
(2) The Withholding Election must be made either (i) during one of the
ten-day periods beginning on the third business day following the date of
release of the Company's quarterly and annual summary statements of sales and
earnings and ending on the twelfth business day following such date, or (ii)
at least six months prior to the Tax Date for the Option exercise to which
such Withholding Election applies.
(3) An Option with respect to which such a Withholding Election is in
effect shall not be exercisable until at least six months after its date of
grant, except that this limitation shall not apply if the Grantee dies or is
disabled prior to the expiration of this six-month period.
(4) The Committee shall have sole discretion to consent to or
disapprove any Withholding Election made by such a Grantee, and if the
Committee disapproves such a Withholding Election, shares shall not be issued
to the Grantee upon the exercise of an Option to which the disapproved
Withholding Election applies until the Grantee shall have complied with the
requirements, if any, which the Grantee may have adopted pursuant to the first
sentence of this paragraph satisfying the withholding obligation with respect
to such exercise. The committee by resolution may approve in advance all
Withholding Elections made by Grantees, provided the resolution expressly
reserves to the Committee the right both to disapprove any such Withholding
Election and to revoke its advance approval.
(5) If the notice of exercise filed by such a Grantee shall specify
that the Grantee intends to file an election pursuant to Section 83(b) of the
Code to have such exercise be taxable as of the date of exercise, such notice
shall state whether the withholding obligation (and all or any part of the
remaining liability of the Grantee for income or other taxes incident to the
exercise, as the case may be) will be satisfied by withholding from the shares
to be issued upon the exercise, or by surrender of already-owned shares. If
the withholding
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obligation (and all or any part of the remaining liability of the Grantee for
income or other taxes incident to the exercise, as the case may be) will be
satisfied from already-owned shares, the notice of exercise shall be
accompanied by certificates for a sufficient number of such Shares. If the
notice indicates that no such Section 83(b) election will be filed, all of the
shares for which the Option is exercised shall be issued to the Grantee, and
the Company shall advise the Grantee as of the Tax Date of the amount of the
withholding obligation (and all or any part of the remaining liability of the
Grantee for income or other taxes incident to the exercise, as the case may
be) so that the Grantee may tender an appropriate number of Shares either from
those issued upon exercise of the option or from Shares already owned by the
Grantee.
The Committee may adopt such rules, forms and procedures as it considers to be
necessary or desirable to implement this paragraph, which rules, forms and
procedures shall be binding upon all Grantees, and which shall be applied
uniformly to all Grantees similarly situated.
Section 6. Certain Corporate Changes.
-------------------------
If the outstanding shares of stock of the Company are increased,
decreased, or changed into, or exchanged for, a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation, or other similar event, an appropriate and proportionate
adjustment shall be made in the number and kind of shares or securities as to
which the Options granted hereunder, or portion thereof remaining unexercised,
may be exercised. Any such adjustment, however, shall be made without changing
the total price applicable to the unexercised portion of the Option but by
adjusting the price for each share or security covered by the Option.
Upon the dissolution and liquidation of the Company or upon a
reorganization, merger, or consolidation of the Company or any other form of
business combination requiring shareholder approval involving the Company with
one or more corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all of the assets of the Company to
another corporation, the Option granted hereby shall, except as provided in
Section 4(e), terminate, unless provision be made in connection with such
transaction for the assumption of the Option or for the substitution for the
Option of a new option covering the stock of the successor employer corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to number and
kind of shares and prices. Simultaneously with the notification of the
shareholders of any proposal for the dissolution, liquidation, merger,
reorganization, consolidation, sale of assets, or any other business combination
of the Company, the Company shall endeavor to give the Grantee notice in
writing, delivered or mailed to the Grantee's last known address, of such
pending action in order to afford the Grantee the opportunity to decide whether
or not to exercise the Option, to the extent then exercisable, in view of its
potential termination pursuant to the preceding sentence.
Adjustments under this Section shall be made by the Board of Directors of
the Company or the Committee, whose determination shall be final, binding, and
conclusive. No fractional shares of stock shall be issued on account of any
such adjustment.
Section 7. Termination of Directorship.
---------------------------
Upon the Grantee ceasing to be a Non-Employee Director of the Corporation
for any reason (except as a result of the employment of such person by the
Corporation or a consolidated subsidiary or as a result of the Grantee's
disability or death), such Grantee's options shall be terminated 30 days after
such grantee ceases to be a Non-Employee Director. In no event shall any Option
be exercisable for more than the maximum number of shares that the Grantee was
entitled to purchase at the date of the Grantee ceases to be a Non-Employee
Director.
Upon the Grantee ceasing to be a Non-Employee Director as a result of
disability or death, or such grantee's employment by the Corporation or a
consolidated subsidiary, the period during which such Grantee may exercise any
outstanding installments of his or her Options which were exercisable as of the
date of such disability or death, or such Grantee's employment by the
Corporation or a consolidated subsidiary shall not exceed 90 days from the date
of death, disability or employment, provided, however, that in no event shall
the period extend beyond the expiration of the option term. In no event shall
any Option be exercisable for more than the maximum number of shares that the
Grantee was entitled to purchase at the date of disability, death or employment,
as the case may be.
Section 8. General Provisions.
------------------
(a) Each Option grant shall be evidenced by a written instrument
containing terms and conditions consistent with the Plan.
(b) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee, shall have any right, title or interest by reason of any
Option or any particular assets of the Corporation, or any shares of
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Stock allocated or reserved for the purposes of the Plan or subject to any
Option except as set forth herein. The Corporation shall not be required to
establish any fund or make any other segregation of assets to assure the payment
of any Option.
(c) No right under the Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance or charge except by will or the laws of descent
and distribution, and an option shall be exercisable during the Grantee's
lifetime only by the Grantee. Subject to the provisions of Section 7 hereof, in
the event of a Grantee's death or disability, his or her options may be
exercised by the Grantee's legal representatives.
(d) Notwithstanding any other provision of the Plan or agreements made
pursuant hereto, the Corporation shall not be required to issue or deliver any
certificate for shares of Stock under this Plan prior to fulfillment of all of
the following conditions:
(1) The listing, or approval for listing upon notice of issuance, of
such shares on any securities exchange on which the Stock may then be traded;
(2) Any registration or other qualification of such shares under any
state or federal law or regulation, or other qualification which the Board
shall, upon the advice of counsel, deem necessary or advisable;
(3) The obtaining of any other required consent, approval or permit
from any state or federal governmental agency; and
(4) The execution by the Grantee (or the Grantee's legal
representative) of such written representation that counsel for the
Corporation shall advise is necessary or advisable to the effect that the
shares then being purchased are being purchased for investment with no present
intention of reselling or otherwise disposing of such shares in any manner
which may result in a violation of the Securities Act of 1933, as amended, and
the placement upon certificates for such shares of an appropriate legend in
connection therewith.
In no event shall the Corporation be required to issue a fractional share
hereunder.
Section 9. Amendment.
---------
The Board may make such modifications or amendments to the Plan as it
shall deem advisable, provided, however, that the Board may not, without the
affirmative vote of the holders of a majority of the outstanding shares present,
or represented, and entitled to vote on such issues at a meeting held in
accordance with Utah law, make any modification if, in the opinion of counsel to
the Corporation, such change shall require the vote of the shareholders in order
to comply with such rules and regulations as may then exist in order to comply
with Section 16 of the Securities Exchange Act of 1934.
Adopted March 22, 1989.
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AMENDMENT
TO THE
EVANS & SUTHERLAND COMPUTER CORPORATION
1989 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
On March 22, 1989, Evans & Sutherland Computer Corporation (the
"Corporation") adopted the Evans & Sutherland Computer Corporation 1989 Stock
Option Plan For Non-Employee Directors (the "Plan"). By this instrument, the
Corporation desires to amend the Plan to memorialize amendments previously
adopted by the Corporation's Board of Directors and approved by the
Corporation's shareholders.
1. This Amendment shall amend only those provisions specified herein and
those provisions amended hereby shall remain in full force and effect.
2. Paragraphs 4(b)(ii) and (iii) of the Plan are hereby amended by
deleting the references in those paragraphs to the number "2,000" and replacing
such references with the number "5,000".
3. Paragraph 4(b)(iii) of the Plan is hereby amended by deleting the
reference in that paragraph to the number "20,000" and replacing such reference
with the number "45,000".
4. This Amendment shall be effective as of the date adopted by the
Corporation's Board of Directors, which was January 25, 1994.
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AMENDMENT
TO THE
EVANS & SUTHERLAND COMPUTER CORPORATION
1989 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
On March 22, 1989, Evans & Sutherland Computer Corporation (the
"Corporation") adopted the Evans & Sutherland Computer Corporation 1989 Stock
Option Plan For Non-Employee Directors (the "Plan"). Effective January 25,
1994, the Corporation amended the Plan to increase the number of options granted
under the Plan. By this instrument, the Corporation desires to again amend the
Plan to increase the number of options granted under the Plan.
1. This Amendment shall amend only those provisions specified herein and
those provisions amended hereby shall remain in full force and effect.
2. Paragraph 3 of the Plan is hereby amended by deleting the reference in
that paragraph to the number "200,000" and replacing such reference with the
number "350,000".
3. Paragraphs 4(b)(ii) and (iii) of the Plan are hereby amended by
deleting the references in those paragraphs to the number "5,000" and replacing
such references with the number "10,000".
4. Paragraph 4(b)(iii) of the Plan is hereby amended by deleting the
reference in that paragraph to the number "45,000" and replacing such reference
with the number "100,000".
5. This Amendment shall be effective as of the date adopted by the
Corporation's Board of Directors, which was February 20, 1996.
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ATTACHMENT B
EVANS & SUTHERLAND
1995 LONG-TERM INCENTIVE EQUITY PLAN
1. Purpose
This 1995 Long-Term Incentive Equity Plan (the "Plan") is intended to
promote the long-term success of Evans & Sutherland (the "Company") by
providing its officers and other employees with incentives to create
excellent performance and to continue in the employ of the Company, its
subsidiaries, and affiliates. By encouraging Plan participants to become
shareholders of the Company and by providing actual ownership through Plan
awards, it is also intended that participants will view the Company from an
ownership perspective.
2. Term
The Plan shall terminate at the close of business on the fifth anniversary
of its approval by the Company's shareholders. After termination of the
Plan, no future awards may be granted but previously granted awards shall
remain outstanding in accordance with their applicable terms and conditions
and the terms and conditions of the Plan.
3. Plan Administration
A Committee (the "Committee") appointed by the Board shall be responsible
for administering the Plan. The Committee shall be comprised of persons, in
such numbers as the rules reference herein shall require at any given time,
who shall qualify to administer the Plan as contemplated by (a) Rule 16b-3
under the Securities and Exchange Act of 1934 (the "1934 Act"), as now or
hereafter applicable to the Company, or any successor rules; and (b) Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Committee shall have full and exclusive power to interpret the Plan and to
adopt such rules, regulations and guidelines for carrying out the Plan as it
may deem necessary or proper, all of which power shall be executed in the
best interests of the Company and in keeping with the objectives of the Plan.
This power includes but is not limited to selecting award recipients,
establishing all award terms and conditions and adopting modifications,
amendments and procedures, including those contemplated by Section 15 of the
Plan, as well as rules and regulations governing awards under the Plan, and
to make all other determinations necessary or advisable for the
administration of the Plan.
4. Eligibility
Any employee of the Company shall be eligible to receive one or more
awards under the Plan. "Employee" shall also include any former employee of
the Company eligible to receive an assumed or replacement award as
contemplated in Sections 5 and 8, and "Company" includes any entity that is
directly or indirectly controlled by the Company or any entity in which the
Company has a significant equity interest, as determined by the Committee.
5. Shares of Common Stock Subject to the Plan
Subject to the provisions of Section 6 of the Plan, the aggregate number
of shares of Common Stock ($.20 par value) of the Company ("shares") which
may be transferred to participants under the Plan shall be 350,000, plus any
shares available for grant on the date the Plan is approved by the Company's
shareholders, and any shares which subsequently become available to the
extent that outstanding stock options are terminated or canceled under the
Company's 1985 Stock Option Plan for Key Employees and the 1981 Stock Bonus
Plan (the "Prior Plans"). The aggregate number of shares that may be issued
under awards pursuant to Section 8(c) of the Plan and the aggregate number of
shares that may be covered by awards granted to any single individual under
the Plan shall not exceed 283,000 shares. The aggregate number of shares
that may be represented by incentive stock options ("ISOs") intended to
comply with Section 422 of the Code shall not exceed 850,000.
Shares subject to awards under the Plan, which expire, terminate or are
canceled without exercise or vesting shall thereafter be available for the
granting of other awards. Any shares tendered, either actually or by
attestation, by a person as full or partial payment made to the Company, on
or after the effective date of the Plan in connection with any exercise of a
stock option or receipt of shares under the Plan or Prior Plans shall again
be available for grants under the Plan. Further, in instances where a stock
appreciation right ("SAR") or other award is settled in cash, the shares
covered by such award shall remain available for issuance under the Plan.
Likewise, the payment of cash dividends and dividend equivalents paid in cash
in conjunction with
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outstanding awards shall not be counted against the shares available for
issuance. Any shares that are issued by the Company, and any awards that are
granted through the assumption, or in substitution for, outstanding awards
previously granted by an acquired entity shall not be counted against the
shares available for issuance under the Plan.
Any shares issued under the Plan may consist in whole or in part of
authorized and unissued shares or of treasury shares, and no fractional
shares shall be issued under the Plan. Cash may be paid in lieu of any
fractional shares in settlements of awards under the Plan.
6. Adjustments and Reorganizations
In the event of any stock dividend, stock split, combination or exchange
of shares, merger, consolidation, spin-off, recapitalization or other
distribution (other than normal cash dividends) of Company assets to
shareholders, or any other change affecting shares or share price, such
proportionate adjustments, if any, as the Committee in its discretion may
deem appropriate to reflect such change shall be made with respect to (a) the
aggregate number of shares that may be issued under the Plan, (b) each
outstanding award made under the Plan, and (c) the exercise price per share
for any outstanding stock options, SARs or similar awards under the Plan.
In the event that the Company undergoes a change in control (as defined by
the Committee), or is liquidated or reorganized, or is not the surviving
company in a merger or consolidation with another company, and in the absence
of the surviving Company's assumption of outstanding awards made under the
Plan, the Committee may provide for appropriate adjustments, including the
acceleration of vesting, and settlements of such awards either at the time of
award or at a subsequent date.
7. Fair Market Value
Fair Market Value for all purposes under the Plan shall mean the closing
price of a share as reported daily in the Wall Street Journal or similar
readily available public source for the date in question. If no sales of
shares were made on such date, the closing price of a share as reported for
the preceding day on which sales of shares were made shall be used.
8. Awards
The Committee shall determine the type or types of award(s) to be made to
each participant. Awards may be granted singly, in combination or in tandem.
Awards also may be made in combination or in tandem with, in replacement of,
as alternatives to, or as the payment form for grants or rights under any
other employee or compensation plan of the Company including the plan of any
acquired entity. The types of awards that may granted under the Plan are:
a) Stock Options -- This is a grant of a right to purchase a specified
number of shares during a specified period as determined by the Committee.
The purchase price per share for each stock option shall be not less than
100% of Fair Market Value on the date of grant, except if a stock option
is granted retroactively in tandem with or as a substitution for a SAR,
the exercise price may be no lower than the Fair Market Value of a share
on the date the SAR was granted. A stock option may be in the form of an
ISO which, in addition to being subject to applicable terms, conditions
and limitations established by the Committee, complies with Section 422 of
the Code. The price at which shares may be purchased under a stock option
shall be paid in full at the time of the exercise in cash or such other
method permitted by the Committee, include (i) tendering (either actually
or by attestation) shares, (ii) surrendering a stock award valued at Fair
Market Value on the date of surrender, (iii) authorizing a third party to
sell the shares (or a sufficient portion thereof) acquired upon exercise
of a stock option and assigning the delivery to the Company of a
sufficient amount of the sale proceeds to pay for all the shares acquired
through such exercise, or (iv) any combination of the above.
The Committee may grant stock options that provide for the award of a new
stock option when the exercise price has been paid for by tendering shares
to the Company. Such a stock option shall be limited to the number of
shares tendered, with the stock option purchase price set at the then-
current Fair Market Value, and shall not extend beyond the remaining term
of the originally exercised option.
b) SARs -- This is a right to receive a payment, in cash and/or shares,
equal to the excess of the Fair Market Value of a specified number of
shares on the date the SAR is exercised over the Fair Market Value on the
date the SAR was granted as set forth in the applicable award agreement.
Except if a SAR is granted retroactively in tandem with or in substitution
for a stock option, the designated Fair Market Value in the
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applicable award agreement for the date of grant shall be no lower than
the actual Fair Market Value of a share on such date of grant.
c) Stock Awards __ This is an award made or denominated in shares or units
equivalent in value to shares. All or part of any stock award may be
subject to conditions and restrictions established by the Committee, and
set forth in the award agreement, which may include but are not limited to
continuous service with the Company, achievement of specific business
objectives and other measurements of individual, business unit or Company
performance.
9. Dividends and Dividend Equivalents
The Committee may provide that any awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in
additional shares or share equivalents.
10. Deferrals and Settlements
Payment of awards may be in the form of cash, stock, other awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee also may require or permit
participants to elect to defer the issuance of shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan. It also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting
of dividend equivalents where the deferral amounts are denominated in
shares.
11. Transferability and Exercisability
Awards granted under the Plan shall be nontransferable or assignable other
than by will or the laws of descent and distribution, except that the
Committee may provide for the transferability of particular awards: (a) by
gift or other transfer of an award to (i) any trust or estate in which the
original award recipient or such participant's spouse or other immediate
relative has a substantial beneficial interest or (ii) a spouse or other
immediate relative; and (b) pursuant to a qualified domestic relations order
(as defined by the Code). However, any award so transferred shall continue
to be subject to all the terms and conditions contained in the instrument
evidencing such award.
In the event that a participant terminates employment with the Company to
assume a position with a governmental, charitable, educational or similar
non-profit institution, the Committee may subsequently authorize a third
party, including but not limited to a "blind" trust, to act on behalf of and
for the benefit of such participant regarding any outstanding awards held by
the participant subsequent to such termination of employment. If so
permitted by the Committee, a participant may designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive any
distribution under the Plan upon the death of the participant.
12. Award Agreements
Awards under the Plan shall be evidenced by agreements that set forth the
terms, conditions and limitations for each award which may include the term
of an award (except that in no event shall the term of any ISO exceed a
period of ten years from the date of its grant), the provisions applicable
in the event the participant's employment terminates, and the Company's
authority to unilaterally or bilaterally amend, modify, suspend, cancel or
rescind any award. The Committee need not require the execution of any such
agreement, in which case acceptance of the award by the participant shall
constitute agreement to the terms of the award.
13. Foreign Participation
In order to assure the viability of awards granted to participants
employed in foreign countries, the Committee may provide for such special
terms as it may consider necessary or appropriate to accommodate differences
in local law, tax policy, or custom. Moreover, the Committee may approve
such supplements to, or amendments, restatements or alternative versions of
the Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of the Plan as in effect for any other
purpose; provided, however, that no such supplements, amendments,
restatements or alternative versions shall increase the share limitations
contained in Section 5 of the Plan.
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14. Plan Amendment
The Plan may be amended by the Committee as it deems necessary or
appropriate to better achieve the purposes of the Plan, except that no such
amendment which would increase the number of shares available for issuance
in accordance with Sections 5 and 6 of the Plan or cause the Plan not to
comply with Rule 16b-3 (or any successor rule) under the 1934 Act or Section
162(m) of the Code shall be made without the approval of the Company's
shareholders.
15. Tax Withholding
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of shares, a
sufficient amount to cover withholding of any federal, state or local taxes
required by law, or to take such other action as may be necessary to satisfy
any such withholding obligations. The Committee may permit shares to be used
to satisfy required tax withholding and such shares shall be valued at the
Fair Market Value as of the settlement date of the applicable award.
16. Other Benefit and Compensation Programs
Unless otherwise specifically determined by the Committee, settlements of
awards received by participants under the Plan shall not be deemed a part of
a participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan, severance program or
severance pay law of any country. Further, the Company may adopt other
compensation programs, plans or arrangements as it deems appropriate or
necessary.
17. Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund
or funds. The Plan shall not establish any fiduciary relationship between
the Company and any participant or other person. To the extent any person
holds any rights by virtue of a grant awarded under the Plan, such rights
(unless otherwise determined by the Committee) shall be no greater than the
rights of an unsecured general creditor of the Company.
18. Use of Proceeds
The cash proceeds received by the Company from the issuance of shares
pursuant to awards under the Plan shall be used for general corporate
purposes.
19. Regulatory Approvals
The implementation of the Plan, the granting of any award under the Plan,
and the issuance of shares upon the exercise or settlement of any award
shall be subject to the Company's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
awards granted under it or the shares issued pursuant to it.
20. Future Rights
No person shall have any claim or rights to be granted an award under the
Plan, and no participant shall have any rights under the Plan to be retained
in the employ of the Company.
21. Governing Law
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
State of Utah and applicable federal law.
22. Successors and Assigns
The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the
executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the participant's creditors.
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AMENDMENT
TO THE
EVANS & SUTHERLAND COMPUTER CORPORATION
1995 LONG-TERM INCENTIVE EQUITY PLAN
Evans & Sutherland Computer Corporation (the 'Corporation') previously
adopted the Evans & Sutherland Computer Corporation 1995 Long-Term Incentive
Equity Plan (the "Plan"). By this instrument, the Corporation desires to amend
the Plan to increase (i) the number of shares of the Corporation's stock
available for issuance under the Plan, (ii) the maximum number of shares subject
to award to any one individual, and (iii) the maximum number of incentive stock
options that may be awarded under the Plan.
1. This Amendment shall amend only those provisions specified herein and
those provisions amended hereby shall remain in full force and effect.
2. Paragraph 5 of the Plan is hereby amended and restated in its entirety
as follows:
Subject to the provisions of Section 6 of the Plan, the aggregate
number of shares of Common Stock ($.20 par value) of the Company
("shares") which may be transferred to participants under the Plan
shall be 1,335,000, plus any shares available for grant on the date
the Plan is approved by the Company's shareholders, and any shares
which subsequently become available to the extent that outstanding
stock options are terminated or canceled under the Company's 1985
Stock Option Plan for Key Employees and the 1981 Stock Bonus Plan (the
"Prior Plans"). The aggregate number of shares that may be issued
under awards pursuant to Section 8(c) of the Plan and the aggregate
number of shares that may be covered by awards granted to any single
individual under the Plan shall not exceed 610,000 shares. The
aggregate number of shares that may be represented by incentive stock
options ("ISOs") intended to comply with Section 422 of the Code shall
not exceed 1,830,000.
Shares subject to awards under the Plan, which expire, terminate
or are canceled without exercise or vesting shall thereafter be
available for the granting of other awards. Any shares tendered,
either actually or by attestation, by a person as full or partial
payment made to the Company, on or after the effective date of the
Plan in connection with any exercise of a stock option or receipt of
shares under the Plan or Prior Plans shall again be available for
grants under the Plan. Further, in instances where a stock
appreciation right ("SAR") or other award is settled in cash, the
shares covered by such award shall remain available for issuance under
the Plan. Likewise, the payment of cash dividends and dividend
equivalents paid in cash in conjunction with outstanding awards shall
not be counted against the shares available for issuance. Any shares
that are issued by the Company, and any awards that are granted
through the assumption, or in substitution for, outstanding awards
previously granted by an acquired entity shall not be counted against
the shares available for issuance under the Plan.
Any shares issued under the Plan may consist in whole or in part
of authorized and unissued shares or of treasury shares, and no
fractional shares shall be issued under the Plan. Cash may be paid in
lieu of any fractional shares in settlements of awards under the Plan.
3. This Amendment shall be effective as of the date adopted by the
Corporation's Board of Directors, which was February 20, 1996.
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SIDE 1
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PROXY
EVANS & SUTHERLAND COMPUTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 16, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James R. Oyler and Gary E. Meredith and each
of them, as proxies, with full power of substitution, and hereby authorizes them
to represent and vote, as designated on the reverse, all shares of Common Stock
of Evans & Sutherland Computer Corporation, a Utah corporation (the "Company"),
held of record by the undersigned, on March 22, 1996, at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Company's principal
executive offices located at 600 Komas Drive, Salt Lake City, Utah 84108, on
Thursday, May 16, 1996 at 11:00 a.m., local time, or at any adjournment or
postponement thereof, upon the matters set forth on the reverse, all in
accordance with and as more fully described in the accompanying Notice of Annual
Meeting of Shareholders and Proxy Statement, receipt of which is hereby
acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ON THE REVERSE, FOR THE
PROPOSAL TO AMEND THE 1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, FOR THE
PROPOSAL TO AMEND THE EVANS & SUTHERLAND 1995 LONG-TERM INCENTIVE EQUITY PLAN,
AND FOR RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE COMING YEAR. PLEASE COMPLETE, SIGN, AND
DATE THIS PROXY WHERE INDICATED AND RETURN PROMPTLY IN THE ACCOMPANYING PREPAID
ENVELOPE.
(To be Signed on Reverse Side.)
SIDE 2
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1. ELECTION OF DIRECTORS, each to serve a term of three years expiring at the
Annual Meeting of shareholders of the Company to be held in 1999 and until
their respective successors shall be duly elected and qualified. Nominees:
Stewart Carrell and John E. Warnock.
2. Proposal to amend the 1989 Stock Option Plan for Non-Employee Directors.
3. Proposal to amend the Evans & Sutherland 1995 Long-Term Incentive Equity
Plan.
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 27, 1996.
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment or
adjournments thereof.
Signature__________________ Date______ Signature_________________ Date______
Note: Please sign above exactly as the shares are issued. When shares are held
by joint tenants, both should sign. When signing as an attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership
name by authorized person.
