<PAGE>
EVANS & SUTHERLAND
April 17, 1997
Dear Evans & Sutherland Shareholder:
You are cordially invited to attend Evans & Sutherland's 1996 Annual
Meeting of Shareholders to be held on Thursday, May 22, 1997 at 11:00 a.m.,
local time, at the Company's principal executive offices located at 600 Komas
Drive, Salt Lake City, Utah.
An outline of the business to be conducted at the meeting is given in
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
In addition to the matters to be voted on, there will be a report on the
progress of the Company and an opportunity for shareholders to ask questions.
I hope you will be able to join us. To ensure your representation at
the meeting, I encourage you to complete, sign, and return the enclosed proxy
card as soon as possible. Your vote is very important. Whether you own a few
or many shares of stock, it is important that your shares be represented.
Sincerely,
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 22, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Evans &
Sutherland Computer Corporation (Evans & Sutherland, E&S, or the Company), a
Utah corporation, will be held on Thursday, May 22, 1997 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 2000 Annual Meeting of
Shareholders;
2. 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 450,000 shares;
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997;
and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Shareholders of record at the close of business on March 24, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting and any
adjournment(s) thereof.
We invite all shareholders 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
April 17, 1997
- --------------------------------------------------------------------------------
THE VOTE OF EACH SHAREHOLDER IS IMPORTANT. TO ASSURE REPRESENTATION OF YOUR
SHARES, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<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 (Evans & Sutherland, E&S, or the Company), a
Utah corporation, to be voted at the Annual Meeting of Shareholders to be held
on Thursday, May 22, 1997 at 11:00 a.m., local time, 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 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 17, 1997 to
all shareholders entitled to vote at the meeting. The cost of soliciting these
proxies will be borne by the Company. These costs 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 has engaged the firm of Morrow & Company,
Inc. (Morrow), a proxy solicitation firm, to assist the Company in the
solicitation of proxies for the meeting. The Company will pay approximately
$5,000 in fees for Morrow's services and will reimburse Morrow for reasonable
out of pocket expenses. Proxies may also be solicited on behalf of the Company
by directors, officers, or employees of the Company, without additional
compensation.
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 Evans & Sutherland 1995
Long-Term Incentive Equity Plan, (3) FOR ratification of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997, and (4) 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. The Company's by-laws provide that a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum for transaction of business. Each shareholder is
entitled to one vote for each share held on the Record Date. 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 24, 1997 (the "Record Date"), there were 9,073,389 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
The Board of Directors is divided into three classes, currently consisting of
two directors each, whose terms expire at successive annual meetings. Two
directors will be elected at the Annual Meeting to serve for a three-year term
expiring at the Company's Annual Meeting in the year 2000. Each nominee elected
as a director will continue in office until their respective successors are duly
elected and qualified.
The Board of Directors has proposed the following nominees for election as
directors at the Annual Meeting: Mr. Peter O. Crisp and Mr. Ivan E. Sutherland.
Unless otherwise instructed, the proxy holders will vote for the two nominees
proposed. 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.
VOTE REQUIRED
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" ALL OF THE NOMINEES LISTED
ABOVE.
DIRECTORS
Set forth below is the principal occupation of, and certain other information
regarding, such nominees and other directors whose terms of office will continue
after the Annual Meeting.
DIRECTOR NOMINEES - TERMS ENDING IN 2000
Peter O. Crisp, Director of Evans & Sutherland since 1980 (17 years). Mr. Crisp
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
Corporation, Long Island Lighting Co., Thermedics, Inc., Thermo Electron
Corporation, Thermo Power Corporation, ThermoTrex Corporation, and United States
Trust Corporation. Age: 64.
Ivan E. Sutherland, Co-founder of Evans & Sutherland and Director of Evans &
Sutherland since 1968 (29 years). Mr. Sutherland is Vice President and Fellow
for Sun Microsystems, Inc. From 1980 to late 1990, he 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 Chief Scientist of Evans & Sutherland from 1968 until June 1974,
as 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.
Age: 58.
DIRECTORS CONTINUING IN OFFICE - TERMS ENDING IN 1998
Henry N. Christiansen, Director of Evans & Sutherland since 1983 (14 years).
Mr. Christiansen served as a consultant to the Company from 1978 to 1981. He
has been Professor of Civil Engineering at Brigham Young University since 1965,
and he served as Chairman of the Department of Civil Engineering from May 1980
to August 1986. Age: 61.
James R. Oyler, President and Chief Executive Officer and Director of Evans &
Sutherland since December 1994 (two years). Mr. Oyler is also a Director of
Ikos Systems, Inc. Previously, he served as President of AMG, Inc. from mid-
1990 through 1994 and as Senior Vice President of Harris Corporation from 1976
through mid-1990. Age: 51.
DIRECTORS CONTINUING IN OFFICE - TERMS ENDING IN 1999
Stewart Carrell, Chairman of the Board of Evans & Sutherland since March 1991
and Director of Evans & Sutherland since 1984 (13 years). Mr. Carrell also
serves as Chairman of Seattle Silicon Corporation and as a Director of Tripos,
Inc. From mid-1984 until October 1993, he 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 LLC, a
west coast based investment banking and venture capital firm. Age: 63.
2
<PAGE>
John E. Warnock, Director of Evans & Sutherland since 1992 (five years). Mr.
Warnock is Chairman and Chief Executive Officer of Adobe Systems, Inc. (Adobe).
He is also a Director of Netscape Communications Corporation and Redbrick
Systems. Mr. Warnock was a founder of Adobe and has served as a Director and
its Chief Executive Officer since 1982. He was also President of Adobe from
1982 through March 1989. From April 1978, until the founding of Adobe, Mr.
Warnock was Principal Scientist of the Imaging Sciences Laboratory at Xerox
Corporation's Palo Alto Research Center. Age: 56.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five Board Meetings in fiscal year 1996. 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 1996.
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 1996, however,
the committee executed four unanimous written consents 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 1996.
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. The Non-Employee Directors Plan
was subsequently amended on February 20, 1996. Under the Non-Employee Directors
Plan, 350,000 shares have been 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 became 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 10,000 shares. Such options are exercisable
in four annual installments on the first, second, third, and fourth
anniversaries of the date of the grant.
In addition to the initial grants, each Eligible Director is automatically
granted additional options to purchase 10,000 shares of the Company's common
stock 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 100,000 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. Currently, the
Board consists of four non-employee directors. As of the Record Date, 204,000
shares remain available for future option grants under the Non-Employee
Directors Plan.
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,
in which case the option terminates 90 days after the occurrence of one of these
stated events.
3
<PAGE>
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 1934 Act.
PROPOSAL TWO
------------
AMENDMENT TO THE EVANS & SUTHERLAND
1995 LONG-TERM INCENTIVE EQUITY PLAN
On February 27, 1997, the Board of Directors unanimously approved, and
recommends that the shareholders approve, 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 800,000 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).
The amendment also provides that (i) the limitations on the aggregate of awards
granted under the 1995 Plan to any one individual be increased from 283,000
shares to 471,200 shares and (ii) the aggregate of incentive stock options
issuable under the 1995 Plan be increased from 850,000 shares to 1,413,600
shares. In light of historical usage and expected future grants, the Company
expects these increases will be adequate to meet current requirements. The
Board believes that the potential dilutive effect of the sale of additional
shares under the 1995 Plan is mitigated by the stock repurchase program
currently in effect. The Company intends to register the 450,000 share increase
on Form S-8 under the Security Act of 1933 as soon as practicable after
receiving shareholder approval.
The Board believes the use of long-term incentives as authorized under the
1995 Plan to be beneficial to the Company as a means of promoting the success
and enhancing the value of Evans & Sutherland by linking the personal interests
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 1995 Plan is administered by the Compensation and Stock Options Committee
of the Board. This 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. The 1995 Plan is described in more
detail under the heading "Evans & Sutherland 1995 Long-Term Incentive Equity
Plan", beginning on page 10 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.
4
<PAGE>
PROPOSAL THREE
--------------
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 31, 1997, 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 THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
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 24, 1997, (i) by each person
who is known by the Company to own beneficially more than five percent of the
Company's common stock, (ii) by each of the Company's directors, (iii) by the
Company's Chief Executive Officer and each of the Company's four most highly
compensated executive officers who served as executive officers at December 27,
1996 (the "Named Executive Officers"), and (iv) by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Directors, Officers, and ---------------------------
Principal Shareholders /(1)/ Number Percent
---------------------- ---------- ---------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
Vanguard/PRIMECAP Fund, Inc. /(2)/..................................... 840,000 9.3
P.O. Box 2600, Valley Forge, Pennsylvania 19482-2600
State of Wisconsin Investment Board /(3)/.............................. 813,300 9.0
P.O. Box 7842, Madison, Wisconsin 53707
Brinson Partners, Inc. and Brinson Trust Company /(4)/................. 495,000 5.5
209 South LaSalle, Chicago, Illinois 60604-1295
DIRECTORS
Stewart Carrell /(5)/.................................................. 29,749 *
Henry N. Christiansen /(6)/............................................ 29,250 *
Peter O. Crisp /(7)/................................................... 65,687 *
James R. Oyler /(8)/................................................... 138,324 1.5
Ivan E. Sutherland /(9)/............................................... 62,780 *
John E. Warnock /(10)/................................................. 9,250 *
OTHER EXECUTIVE OFFICERS
Ronald R. Sutherland /(11)/............................................ 36,667 *
John T. Lemley /(12)/.................................................. 38,334 *
Gary E. Meredith /(13)/................................................ 21,665 *
Charles R. Maule /(14)/................................................ 13,334 *
All directors and executive officers as a group - 19 persons (15)......... 577,250 6.4
</TABLE>
- -----------
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as "beneficially" owned include (a) shares subject to options
currently exercisable or which will be 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 10, 1997.
(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 January 31, 1997.
(4) The Brinson ownership group has shared voting power and shared dispositive
power as to 495,000 shares according to Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1997.
6
<PAGE>
(5) In addition to being a Director, Mr. Carrell is also Chairman of the Board
of the Company. The number of shares attributable to Mr. Carrell includes
10,000 shares of common stock, 4,750 shares which are issuable upon
conversion of $200,000 of convertible debentures at a conversion rate of
$42.10 per share and acquired by Mr. Carrell on March 7, 1995, and 14,999
shares subject to outstanding stock options which are currently exercisable
or will be exercisable on or before May 23, 1997.
(6) The number of shares attributable to Mr. Christiansen includes 6,000 shares
of common stock, and 23,250 shares subject to outstanding stock options
which are currently exercisable or will be exercisable on or before May 23,
1997.
(7) The number of shares attributable to Mr. Crisp includes 42,437 shares of
common stock, and 23,250 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 23, 1997.
(8) In addition to being a Director, Mr. Oyler is also President and Chief
Executive Officer of Evans & Sutherland. The number of shares attributable
to Mr. Oyler includes 5,000 shares of common stock, and 133,324 shares
subject to outstanding stock options which are currently exercisable or
will be exercisable on or before May 23, 1997.
(9) The number of shares attributable to Mr. Ivan E. Sutherland includes 39,530
shares of common stock, and 23,250 shares subject to outstanding stock
options which are currently exercisable or will be exercisable on or before
May 23, 1997. 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.
(10) The number of shares attributable to Mr. Warnock are 9,250 shares subject
to outstanding stock options which are currently exercisable or will be
exercisable on or before May 23, 1997.
(11) Mr. Ronald R. Sutherland is Vice President and General Manager of the
Government Simulation business unit. The number of shares attributable to
Mr. Sutherland includes 36,667 shares subject to outstanding stock options
which are currently exercisable or will be exercisable on or before May 23,
1997.
(12) Mr. Lemley is Vice President and Chief Financial Officer of the Company.
The number of shares attributable to Mr. Lemley includes 5,000 shares of
common stock, and 33,334 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 23, 1997.
(13) Mr. Meredith is Senior Vice President and Secretary of the Company. The
number of shares attributable to Mr. Meredith are 21,665 shares subject to
outstanding stock options which are currently exercisable or will be
exercisable on or before May 23, 1997.
(14) Mr. Maule is Vice President and General Manager of the Desktop Graphics
business unit. The number of shares attributable to Mr. Maule are 13,334
shares subject to outstanding stock options which are currently exercisable
or will be exercisable on or before May 23, 1997.
(15) The total for directors and officers as a group includes 199,760 shares of
common stock, and 377,490 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 23, 1997.
7
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information regarding the compensation of the
Company's Chief Executive Officer and the four most highly compensated executive
officers of the Company (i.e. the "Named Executive Officers") for the fiscal
years ended December 27, 1996, December 29, 1995, and December 30, 1994.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
-------------------- ------------- --------
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus (1) sation Award(s) SARs Payouts sation (2)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ---- --------- -------------------- -------- ------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Oyler 1996 $310,000 $174,100 - - 100,000 - $ 76,890
President and 1995 300,000 277,400 - - - - 150,592
Chief Executive Officer 1994 23,077 - - - 150,000 - 33
Ronald R. Sutherland 1996 190,000 152,800 - - 50,000 - 183,911
Vice President, 1995 183,400 160,100 - - - - 36,147
Government Simulation 1994 175,500 - - - 30,000 - 31,873
John T. Lemley 1996 200,000 102,100 - - - - 30,994
Vice President and 1995 23,077 - - - 100,000 - 19,606
Chief Financial Officer 1994 - - - - - - -
Gary E. Meredith 1996 186,500 85,700 - - 30,000 - 291,262
Senior Vice President 1995 181,830 151,300 - - - - 119,241
and Secretary 1994 174,000 - - - 35,000 - 12,298
Charles R. Maule 1996 145,962 46,200 - - 40,000 - 111,650
Vice President, 1995 - - - - - - -
Desktop Graphics 1994 - - - - - - -
</TABLE>
- --------------
(1) Represents incentive bonuses for the year indicated, to be paid in the
subsequent year. Amount of bonus is for achievement of corporate,
individual, and organizational objectives for fiscal years 1996, 1995, and
1994.
(2) All other compensation for fiscal year 1996 includes (i) premiums paid for
executive life insurance policies (Mr. Oyler $25,742, Mr. Sutherland
$31,656, Mr. Lemley $23,218, Mr. Meredith $115,976, and Mr. Maule $10,838);
(ii) matching contribution to the Company's Executive Savings Plan (Mr.
Oyler $17,616, Mr. Sutherland $10,499, Mr. Lemley $6,000, and Mr. Maule
$5,879); (iii) matching contribution to the Company's 401(k) Deferred
Savings Plan (Mr. Sutherland $4,750, Mr. Lemley $462, and Mr. Meredith
$4,750); (iv) premiums paid for group term life insurance policies (Mr.
Oyler $1,314, Mr. Sutherland $2,286, Mr. Lemley $1,314, Mr. Meredith $3,798,
and Mr. Maule $763); (v) premiums paid for executive medical insurance (Mr.
Meredith $4,814); (vi) option exercise income that exceeds 10% of base
salary (Mr. Sutherland $134,720 and Mr. Meredith $161,924); and (vii)
reimbursement for relocation expenses (Mr. Oyler $32,218 and Mr. Maule
$94,170).
All other compensation for fiscal year 1995 includes (i) premiums paid for
executive life insurance policies (Mr. Oyler $24,893, Mr. Sutherland
$29,242, Mr. Lemley $19,505, and Mr. Meredith $108,204); (ii) matching
contribution to the Company's 401(k) Deferred Savings Plan (Messrs.
Sutherland and Meredith $4,620 each); (iii) premiums paid for group term
life insurance policies (Mr. Oyler $629, Mr. Sutherland $2,285, Mr. Lemley
$101, and Mr. Meredith $3,797); (iv) premiums paid for executive medical
insurance (Mr. Meredith $2,620); and (v) reimbursement for relocation
expenses (Mr. Oyler $125,070).
All other compensation for fiscal year 1994 includes (i) matching
contribution to the Company's 401(k) Deferred Savings Plan (Messrs.
Sutherland and Meredith $4,620 each); (ii) premiums paid for group term life
insurance policies (Mr. Oyler $33, Mr. Sutherland $2,213, and Mr. Meredith
$3,715); (iii) premiums paid for executive medical insurance (Mr. Meredith
$3,963); and (iv) option exercise income that exceeds 10% of base salary
(Mr. Sutherland $25,040).
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted during
fiscal year 1996 to the "Named Executive Officers". No stock appreciation
rights (SARs) were granted in 1996.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------- Potential Realizable Value
at Assumed Annual Rates
% of Total Exercise of Stock Price Appreciation
Options/ Options/SARs or Base for Option Term /(2)/
SARs Granted to Price Expiration -----------------------------
Name Granted (1) Employees Per Share Date At 5% At 10%
- ---------------------- ----------- ------------- --------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler 100,000 14.2% $20.875 02/05/06 $1,312,818 $3,326,937
Ronald R. Sutherland 50,000 7.1% 20.875 02/05/06 656,409 1,663,469
John T. Lemley - - - - - -
Gary E. Meredith 30,000 4.3% 20.875 02/05/06 393,845 998,081
Charles R. Maule 40,000 5.7% 20.875 02/05/06 525,127 1,330,775
</TABLE>
- -----------------
(1) The options are all granted to employees under the Company's 1995 Long-Term
Incentive Equity Plan and become exercisable in three equal installments on
the first, second, and third anniversaries of the date of the grant. The
options have a 10-year term, subject to earlier termination in the event of
the optionee's cessation of service with the Company. The total number of
options granted to employees during fiscal year 1996 was 704,200 shares.
(2) These potential realizable values are based on an assumed annual rate of
increase in the value of the Company's common stock over the ten-year term
of the options of five percent and ten percent, compounded annually, as
required by the rules of the Securities and Exchange Commission. These
rates of increase in value are not indicative of the past performance of the
Company's common stock, and are not intended to be a forecast of future
appreciation in value of the Company's common stock. The actual realizable
value, if any, of these options is dependent upon the actual future value of
the Company's common stock, which cannot be predicted with any assurance at
this time.
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 1996 by each of the "Named Executive Officers" and
lists the value of their unexercised options on December 27, 1996.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at Fiscal Year End at Fiscal Year-End/(1)/
Shares Acquired Value -------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler - $ - 99,990 150,010 $1,289,871 $1,070,129
Ronald R. Sutherland 12,000 134,720 10,000 70,000 128,750 470,000
John T. Lemley - - 33,334 66,666 154,170 308,330
Gary E. Meredith 11,666 161,924 - 53,334 - 427,925
Charles R. Maule - - - 40,000 - 170,000
</TABLE>
- --------------------
(1) Based on the closing price of the Company's common stock as reported on The
NASDAQ Stock Market on Friday, December 27, 1996 of $25.125.
9
<PAGE>
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 "1995 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. On February 27, 1997, the Board of
Directors, subject to shareholder approval, adopted an amendment to the 1995
Plan to increase the share reserve under the 1995 Plan from 350,000 shares to
800,000 shares. See Proposal Two, "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 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 Compensation
and Stock Option Committee of 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.
10
<PAGE>
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.
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 the appreciation in
the value of a share of common stock over a certain period of time. Under
the 1995 Plan, the Company may pay such 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.
11
<PAGE>
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.
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 (Pension Plan) and
Supplemental Executive Retirement Plan (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 1996 expense for the Pension Plan
of $1,093,500 was 3% of the total remuneration of those participants covered by
the Pension Plan for the fiscal year 1996. 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, 2 years;
Ronald R. Sutherland, 15 years; John T. Lemley, 1 year; Gary E. Meredith, 20
years; and Charles R. Maule, 1 year.
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 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 SERP.
Messrs. James R. Oyler, Ronald R. Sutherland, John T. Lemley, Gary E.
Meredith, and Charles R. Maule are currently participating in the SERP and have
3, 16, 2, 20, and 1 year(s) of service, respectively, credited under the SERP
and are expected to have at least 10 years of service credited under the Pension
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 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 1996, compensation taken into account under the
Pension Plan 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.
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's 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 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 Hambrecht & Quist
Computer Hardware Sector Index, and the Standard & Poor's 500 Index. It assumes
the investment of $100 on January 1, 1992, 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
[LINE GRAPH APPEARS HERE]
Specific Plot Points
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Evans & Sutherland ............... 84 89 69 115 130
Hambrecht & Quist ............... 86 91 113 162 215
Standard & Poor 500 ............... 108 118 120 165 203
</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
27, 1996 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 1998 Annual Meeting of Shareholders must be
received by the Company on or before December 18, 1997 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.
ADDITIONAL INFORMATION
Evans & Sutherland will provide without charge to each person solicited, upon
oral or written request of any such person, a copy of the Company's annual
report on Form 10-K, including the consolidated financial statements and the
financial statement schedules required to be filed with the Securities and
Exchange Commission pursuant to Rule 13a-1 under the Securities Exchange Act of
1934. Direct any such correspondence to the Secretary of the Company.
EVANS & SUTHERLAND COMPUTER
CORPORATION
Gary E. Meredith
Senior Vice President and
Secretary
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SIDE 1
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PROXY
EVANS & SUTHERLAND COMPUTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 22, 1997
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 24, 1997, at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, May 22, 1997 at
11:00 a.m., local time, at the Company's principal executive offices located at
600 Komas Drive, Salt Lake City, Utah 84108, 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 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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[X] Please mark your votes as in this example.
FOR ALL nominees listed at right (except to the contrary below) [ ]
1. ELECTION OF DIRECTORS, each to serve for a three year term expiring at the
Company's Annual Meeting to be held in the year 2000 and until their
respective successors are duly elected and qualified.
WITHHOLD AUTHORITY to vote for all nominees listed at right [ ]
Nominees: Peter O. Crisp and Ivan E. Sutherland.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee(s) name on the space provided below:)
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2. Proposal to amend the Evans & Sutherland 1995 Long-Term Incentive Equity
Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
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.
<PAGE>
ATTACHMENT A
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 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.
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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
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.
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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.
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.
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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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<PAGE>
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 "1995 Plan"). By this instrument, the Corporation desires to
amend the 1995 Plan to increase (i) the number of shares of the Corporation's
stock available for issuance under the 1995 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 1995 Plan.
1. This Amendment shall amend only those provisions specified herein and
all other provisions of the 1995 Plan shall remain unchanged and in full force
and effect.
2. The first paragraph of section 5 of the 1995 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 800,000, 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 471,200 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 1,413,600.
3. This Amendment to the 1995 Plan shall be effective as of February 27,
1997, the date it was adopted by the Corporation's Board of Directors.
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