SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
EVANS & SUTHERLAND COMPUTER CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
EVANS & SUTHERLAND COMPUTER CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Filing Date:
<PAGE>
EVANS & SUTHERLAND
COMPUTER CORPORATION
April 20, 1998
Dear Evans & Sutherland Shareholder:
You are cordially invited to attend Evans & Sutherland's 1998 Annual
Meeting of Shareholders to be held on Thursday, May 21, 1998 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
<PAGE>
EVANS & SUTHERLAND
COMPUTER CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
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 21, 1998 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 2001 Annual Meeting of
Shareholders;
2. To approve adoption of the Evans & Sutherland 1998 Stock Option
Plan;
3. To approve an amendment to the 1989 Stock Option Plan for
Non-Employee Directors;
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998;
and
5. 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 27, 1998 (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
Mark C. McBride
Vice President and
Secretary
Salt Lake City, Utah
April 20, 1998
- --------------------------------------------------------------------------------
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 21, 1998 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 20, 1998
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 adoption of the Evans &
Sutherland 1998 Stock Option Plan, (3) FOR the amendment to the 1989 Stock
Option Plan for Non-Employee Directors, (4) FOR ratification of the appointment
of KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal
year ending December 31, 1998, 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. 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, five million shares of class A preferred stock, no
par value, and five million shares of class B preferred stock, no par value. As
of March 27, 1998 (the "Record Date"), there were 8,923,273 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 2001. 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. Gerald S. Casilli and Mr. James R. Oyler.
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 2001
Gerald S. Casilli, Director of Evans & Sutherland since 1997. Mr. Casilli is
Chairman of the Board of Ikos Systems, Inc. (Ikos) and has served in such
capacity since July 1989 and has served as a director of Ikos since 1986. He was
also Chief Executive Officer of Ikos from April 1989 to August 1995. From
January 1986 to December 1989, Mr. Casilli was a general partner of Trinity
Ventures, Ltd., a venture capital firm, and from February 1982 to 1990, he was a
general partner of Genesis Capital, a venture capital firm. Mr. Casilli founded
Millenium Systems in 1973, a manufacturer of microprocessor development systems,
and served as its President and Chief Executive Officer until 1982. Age: 58.
James R. Oyler, President, Chief Executive Officer and Director of Evans &
Sutherland since December 1994. Mr. Oyler is also a Director of Ikos Systems,
Inc. and Silicon Light Machines. 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: 52.
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. 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, an investment
banking and venture capital firm. Age: 64.
John E. Warnock, Director of Evans & Sutherland since 1992. 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: 57.
DIRECTORS CONTINUING IN OFFICE - TERMS ENDING IN 2000
Peter O. Crisp, Director of Evans & Sutherland since 1980. 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:
65.
<PAGE>
Ivan E. Sutherland, Co-founder and Director of Evans & Sutherland since 1968.
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: 59.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held four Board Meetings in fiscal year 1997. 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, Gerald S. Casilli, 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 1997.
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 1997, however,
the committee executed one 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 1997.
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. The Board has approved, subject to shareholder
approval, that the Non-Employee Directors Plan be amended to reduce the vesting
period and allow the options to be exercisable in three annual installments on
the first, second, and third anniversaries of the date of the grant. For
additional information, see Proposal Three, "Evans & Sutherland Computer
Corporation 1989 Stock Option Plan for Non-Employee Directors", on page five of
this Proxy Statement.
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 five non-employee directors. As of the Record Date, 144,000
shares remain available for future option grants under the Non-Employee
Directors Plan.
<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, in which case the option terminates 90 days after the occurrence of
one of these stated events. The Board has approved, subject to shareholder
approval, that the Non-Employee Directors Plan be amended to allow that each
option shall expire on the earlier of its expiration date or 90 days from the
date the Grantee ceased to be a Non-Employee Director for any reason other than
retirement from the Board after attaining age 57, or employment by the Company.
In the event of retirement, each option shall become fully vested and
exercisable until the expiration date of such option. In the event of
employment, each option shall continue to be exercisable until the expiration of
the option or 90 days after termination of employment of such individual. For
additional information, see Proposal Three, "Evans & Sutherland Computer
Corporation 1989 Stock Option Plan for Non-Employee Directors", on page five of
this Proxy Statement.
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 18 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
EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
The Board of Directors of the Company has approved, and recommends that
the shareholders approve, the adoption of the Evans & Sutherland Computer
Corporation 1998 Stock Option Plan (the "1998 Plan") for employees, officers,
and executives of, and consultants and independent contractors to, the Company
and any subsidiary.
The Board believes that the issuance of stock options under the 1998 Plan
is an essential element of a compensation package needed to attract and retain
employees in the highly competitive computer industry. Furthermore, such options
promote the success and enhance the value of Evans & Sutherland Computer
Corporation by linking the personal interests of its employees, officers,
executives, consultants, and advisors to those of its shareholders and by
providing such individuals with an incentive to work to maximize shareholder
value. The 1998 Plan utilizes vesting periods to encourage key employees to
continue in the employ of the Company and thereby acts as a retention device for
those employees as well as encouraging them to maintain a long-term perspective.
The 1998 Plan makes several changes from the Evans & Sutherland 1995
Long-Term Incentive Equity Plan (the "1995 Plan") currently in effect. The first
is to simplify, streamline, and modernize the 1998 Plan by eliminating several
types of incentives found in the 1995 Plan, including Stock Appreciation Rights,
Stock Awards, and Dividend Equivalents. (None of these were ever issued under
the 1995 Plan.) The only incentive forms included in the 1998 Plan are Incentive
Stock Options and Non-Qualified Stock Options. The 1998 Plan also alters the
vesting provisions for employees taking normal retirement from the Company.
The 1998 Plan, if approved by shareholders, will have an effective date of
April 13, 1998. An aggregate of 400,000 shares of the Company's common stock
will be available for grant under the 1998 Plan. The Company intends to register
the 400,000 shares available under the 1998 Plan on Form S-8 under the Security
Act of 1933 as soon as practicable after receiving shareholder approval.
The Board believes that the potential dilutive effect of the issuance of
stock options under the 1998 Plan is mitigated by the stock repurchase program
currently in effect, which is designed to offset options issued. During the past
12 months, the Company repurchased 362,000 shares of its common stock, largely
offsetting grants made in 1997. The Company intends to continue the stock
repurchase program and currently has 411,000 shares remaining under the Board's
repurchase authorization to offset the 400,000 shares available for grant under
this proposal.
<PAGE>
During the past three years, a majority of options granted have been
issued to non-executive employees, with a minority to executives. In 1995, every
employee in the Company was granted stock options, and since then every new
employee has received options when starting employment. In 1996 and 1997,
options were granted to key contributors below the executive level. The Company
believes that these practices have had a positive effect on performance, and
plans to continue them in the future.
The 1998 Plan is described in more detail under the heading "Evans &
Sutherland Computer Corporation 1998 Stock Option Plan", beginning on page 11 of
this Proxy Statement and is qualified in its entirety by reference to the 1998
Plan.
VOTE REQUIRED
The affirmative vote of a majority of a quorum of shareholders is required
for the adoption of the Evans & Sutherland 1998 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
PROPOSAL THREE
AMENDMENT TO THE EVANS & SUTHERLAND
1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors of the Company has approved, and recommends that
the shareholders approve, an amendment (the "Amendment") to the Evans &
Sutherland Computer Corporation 1989 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan") to (i) reduce the vesting period of
the options issued under the Non-Employee Director Plan from four years to three
years and (ii) amend the termination provisions of the options issued under such
Plan.
The purpose of the Non-Employee Director 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 Director Plan is the incentive
plan of the Company in which non-employee directors participate. It is therefore
essential that the plan be competitive with non-employee director plans offered
by other companies.
The Amendment makes the Non-Employee Director Plan consistent with the
Employee Stock Option Plan with respect to vesting and retirement provisions.
This change will simplify administration and provides consistent procedures and
philosophy between the two plans.
Under the Amendment, in the event an individual ceases to be a
non-employee director for any reason other than retirement from the Board after
attaining age 57 or employment by the Company, each option will expire on the
earlier of (i) the expiration date or (ii) 90 days from the date of termination.
In the event a non-employee director retires from the Board after age 57, each
option shall become fully vested and shall remain exercisable until the
expiration date of such option. In the event a non-employee director becomes
employed by the Company, the options shall continue to vest and shall be
exercisable until the expiration date or 90 days after termination of
employment.
The Non-Employee Directors Plan is described in more detail under the
heading "Compensation of Directors", beginning on page three 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 to the 1989 Stock Option Plan for Non-Employee
Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
<PAGE>
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 accounting firm to audit the
accounts and to report on the financial statements of the Company for the fiscal
year ending December 31, 1998, 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, 1998.
<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 27, 1998, (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 31,
1997 (the "Named Executive Officers"), and (iv) by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Directors, Officers, and Shares Beneficially Owned
Principal 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) 710,000 8.0
----------------------------
P.O. Box 7842, Madison, Wisconsin 53707
I.G. Investment Management, Ltd. (4) 584,900 6.6
-------------------------------
447 Portage Avenue, One Canada Centre, Winnipeg, MB R3C CB6
DIRECTORS
Stewart Carrell (5) 41,418 *
------------------------------------------------
Gerald S. Casilli (6) 2,500 *
-----------------------------------------------
Henry N. Christiansen (7) 33,750 *
-------------------------------------------
Peter O. Crisp (8) 71,187 *
-------------------------------------------------
James R. Oyler (9) 245,001 2.8
-------------------------------------------------
Ivan E. Sutherland (10) 68,280 *
--------------------------------------------
John E. Warnock (11) 14,750 *
-----------------------------------------------
OTHER EXECUTIVE OFFICERS
Ronald R. Sutherland (12) 51,668 *
------------------------------------------
John T. Lemley (13) 78,334 *
------------------------------------------------
Charles R. Maule (14) 30,001 *
----------------------------------------------
Gary E. Meredith (15) 23,334 *
----------------------------------------------
All directors and executive officers as a group - 18 persons (16) 813,741 9.1
--------
</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 dated February 9, 1998.
(3) State of Wisconsin Investment Board has sole voting power and sole
dispositive power as to 710,000 shares according to Schedule 13G filed
with the Securities and Exchange Commission dated January 20, 1998.
(4) I.G. Investment Management, Ltd. has sole voting power and sole
dispositive power as to 584,900 shares, according to the best knowledge of
Evans & Sutherland at the close of business March 27, 1998.
<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 26,668
shares subject to outstanding stock options which are currently
exercisable or will be exercisable on or before May 26, 1998.
(6) The number of shares attributable to Mr. Casilli includes 2,500 shares
subject to outstanding stock options which are currently exercisable or
will be exercisable on or before May 26, 1998.
(7) The number of shares attributable to Mr. Christiansen includes 5,000
shares of common stock, and 28,750 shares subject to outstanding stock
options which are currently exercisable or will be exercisable on or
before May 26, 1998.
(8) The number of shares attributable to Mr. Crisp includes 42,437 shares of
common stock, and 28,750 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 26,
1998.
(9) 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 240,001 shares
subject to outstanding stock options which are currently exercisable or
will be exercisable on or before May 26, 1998.
(10) The number of shares attributable to Mr. Ivan E. Sutherland includes
39,530 shares of common stock, and 28,750 shares subject to outstanding
stock options which are currently exercisable or will be exercisable on or
before May 26, 1998. 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.
(11) The number of shares attributable to Mr. Warnock are 14,750 shares subject
to outstanding stock options which are currently exercisable or will be
exercisable on or before May 26, 1998.
(12) 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 51,668 shares subject to outstanding stock options
which are currently exercisable or will be exercisable on or before May
26, 1998.
(13) 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 73,334 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 26,
1998.
(14) Mr. Maule is Vice President and General Manager of the Desktop Graphics
business unit. The number of shares attributable to Mr. Maule includes
30,001 shares subject to outstanding stock options which are currently
exercisable or will be exercisable on or before May 26, 1998.
(15) As of December 31, 1997, Mr. Meredith was Senior Vice President and
Secretary of the Company. The number of shares attributable to Mr.
Meredith includes 23,334 shares subject to outstanding stock options which
are currently exercisable or will be exercisable on or before May 26,
1998. Mr. Meredith resigned as an Officer and Secretary of the Company in
March 1998.
(16) The total for directors and officers as a group includes 198,899 shares of
common stock, and 614,842 shares subject to outstanding stock options
which are currently exercisable or will be exercisable on or before May
26, 1998.
<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 31, 1997, December 27, 1996, and December 29, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Other 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 1997 $328,000 $194,500 - - 70,000 - $ 46,854
President and 1996 310,000 174,100 - - 100,000 - 76,890
Chief Executive Officer 1995 300,000 277,400 - - - - 150,592
Ronald R. Sutherland 1997 199,900 131,100 - - 25,000 - 376,358
Vice President, 1996 190,000 152,800 - - 50,000 - 183,911
Government Simulation 1995 183,400 160,100 - - - - 36,147
John T. Lemley 1997 208,000 112,100 - - 20,000 - 36,266
Vice President and 1996 200,000 102,100 - - - - 30,994
Chief Financial Officer 1995 23,077 - - - 100,000 - 19,606
Charles R. Maule 1997 171,600 112,000 - - 10,000 - 21,612
Vice President, 1996 145,962 46,200 - - 40,000 - 111,650
Desktop Graphics 1995 - - - - - - -
Gary E. Meredith 1997 190,200 92,300 - - 10,000 - 306,292
Senior Vice President 1996 186,500 85,700 - - 30,000 - 291,262
and Secretary 1995 181,830 151,300 - - - - 119,241
</TABLE>
(1) Represents incentive bonuses for the year indicated that were paid in the
subsequent year. Amount of bonus is for achievement of corporate,
individual, and organizational objectives for fiscal years 1997, 1996, and
1995.
(2) All other compensation for fiscal year 1997 includes (i) premiums paid for
executive life insurance policies (Mr. Oyler $27,491, Mr. Sutherland
$33,204, Mr. Lemley $22,438, Mr. Maule $11,400, and Mr. Meredith
$118,276); (ii) matching contribution to the Company's Executive Savings
Plan (Mr. Oyler $13,160, Mr. Sutherland $9,447, Mr. Lemley $8,098, and Mr.
Maule $5,540); (iii) matching contribution to the Company's 401(k)
Deferred Savings Plan (Mr. Oyler $4,750, Mr. Sutherland $4,750, Mr. Lemley
$4,750, Mr. Maule $3,981, and Mr. Meredith $4,750); (iv) premiums paid for
group term life insurance policies (Mr. Oyler $1,453, Mr. Sutherland
$1,707, Mr. Lemley $980, Mr. Maule $691, and Mr. Meredith $2,836); (v)
premiums paid for executive medical insurance (Mr. Meredith $3,555); and
(vi) option exercise income that exceeds 10% of base salary (Mr.
Sutherland $327,250 and Mr. Meredith $176,875).
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. Maule $10,838, and Mr. Meredith $115,976);
(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. Maule $763, and
Mr. Meredith $3,798); (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).
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted
during fiscal year 1997 to the "Named Executive Officers". No stock appreciation
rights (SARs) were granted in 1997.
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable Value
% of Total Exercise at Assumed Annual Rates
Options/ Options/SARs or Base of Stock Price Appreciation
SARs Granted to Price Expiration for Option Term (2)
----------------------
Name Granted (1) Employees Per Share Date At 5% At 10%
- ---------------------- ------------ ---------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler 70,000 12.3% $22.375 02/28/07 $985,006 $2,496,199
Ronald R. Sutherland 25,000 4.4% 22.375 02/28/07 351,788 891,500
John T. Lemley 20,000 3.5% 22.375 02/28/07 281,430 713,200
Charles R. Maule 10,000 1.8% 22.375 02/28/07 140,715 356,600
Gary E. Meredith 10,000 1.8% 22.375 02/28/07 140,715 356,600
</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 1997 was
570,400 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 1997 by each of the "Named Executive Officers"
and lists the value of their unexercised options on December 31, 1997.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
Shares Acquired Value at Fiscal Year End at Fiscal Year-End (1)
--------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler - $ - 183,334 136,666 $2,787,089 $1,005,411
Ronald R. Sutherland 20,000 327,250 26,667 58,333 302,919 436,456
John T. Lemley - - 66,667 53,333 566,670 415,831
Charles R. Maule - - 13,334 36,666 108,339 282,911
Gary E. Meredith 11,000 176,875 22,334 30,000 287,845 228,750
</TABLE>
(1) Based on the closing price of the Company's common stock as reported on the
NASDAQ Stock Market on December 31, 1997 of $29.00.
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
The Board of Directors of the Company has approved, and recommends that
the shareholders approve, the adoption of the Evans & Sutherland Computer
Corporation 1998 Stock Option Plan (the "Plan") for employees, officers and
executives of, and consultants and independent contractors to, the Company and
any subsidiary. The Plan authorizes grants of Incentive Stock Options ("ISOs")
or Non-qualified Stock Options ("NQSOs"). The Plan has been established to
provide a simplified mechanism for the granting of stock options to eligible
individuals and will operate in conjunction with and in addition to the Evans &
Sutherland 1995 Long-Term Incentive Equity Plan. See Proposal Two, "Evans &
Sutherland Computer Corporation 1998 Stock Option Plan", on page four of this
Proxy Statement.
The Board believes that the issuance of stock options under the Plan will
be beneficial to the Company as a means to promote the success and enhance the
value of Evans & Sutherland Computer Corporation by linking the personal
interests of its employees, officers, executives, consultants and independent
contractors to those of its shareholders and by providing such individuals with
an incentive for outstanding performance. These incentives also provide the
Company flexibility in its ability to attract and retain the services of
individuals upon whose judgement, interest, and special effort the successful
conduct of the Company's operation is largely dependent. The Plan, if approved
by shareholders, will have an effective date of April 13, 1998. The following
summary is qualified by reference to the Plan, a copy of which will be made
available to any shareholder upon request.
ADMINISTRATION
The Plan will be administered by either the Board or a committee appointed
by the Board consisting of at least two (2) non-employee directors who also
qualify as "outside directors" under section 162(m) of the Internal Revenue Code
of 1986, as amended ("Code"). If the Board does not appoint a Committee, any
reference herein to the Committee shall be to the Board. Additionally, the
Company's CEO is permitted to grant options under the Plan except to those
individuals who are subject to Section 16 of the Securities Exchange Act of 1934
(i.e. insiders). The committee (and the CEO when granting options) will have the
exclusive authority to administer the Plan, including the power to determine
eligibility, the types and sizes of options, and the price and timing of
options.
ELIGIBILITY
Persons eligible to participate in the Plan include all employees,
officers, and executives of, and consultants and independent contractors to, the
Company and its subsidiaries, as determined by the Committee, including
employees who are members of the Board, but excluding directors who are not
employees.
RETIREMENT PROVISION
The Plan provides that in the event an individual ceases to be employed
due to normal retirement from the Company, each option shall become fully vested
and exercisable and shall remain exercisable after such termination until the
expiration date of such option.
LIMITATION ON OPTIONS AND SHARES AVAILABLE
An aggregate of 400,000 shares of the Company's common stock are available
for grant under the Plan. The maximum number of shares of stock that may be
subject to one or more options to a single participant under the Plan during any
fiscal year is 250,000.
DESCRIPTION OF THE AVAILABLE OPTIONS
INCENTIVE STOCK OPTIONS
An ISO is a stock option that satisfies the requirements specified in Code
Section 422. Under the Code, ISOs may only be granted to employees. 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 10 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 stock is either
transferable or is not subject to a substantial risk of forfeiture under Section
83 of the Code.
<PAGE>
If 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 stock is transferred to the optionee, any gain or
loss resulting from its disposition will be treated as capital gain or loss. If
such stock is disposed of before the expiration of the above-mentioned holding
periods, a "disqualifying disposition" will occur. If a 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 stock on the date of exercise and the exercise price, or the selling
price of the 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 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 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.
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 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 stock acquired through
exercise of an NQSO, the optionee will realize 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.
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. 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 Plan that are intended to qualify as performance-based compensation
will have an exercise price at least equal to the fair market value of the
underlying stock on the date of grant.
AMENDMENT AND TERMINATION
The Committee, subject to approval of the Board, may terminate, amend, or
modify the Plan at any time; provided, however, that shareholder approval is
required for any amendment to the extent necessary or desirable to comply with
any applicable law, regulation, or stock exchange rule.
CHANGE OF CONTROL
In the event of a change of control of the Company: all options under the
Plan shall become immediately exercisable. Under the Plan, a change in control
occurs upon any of the following events: (a) any person becoming the beneficial
owner of 30% or more of the Company's stock; (b) during any two-year period, the
persons who are on the Company's Board of Directors at the beginning of such
period and any new person elected by two-thirds of such directors cease to
constitute a majority of the persons serving on the Board of Directors; (c) the
Company undergoes a change of control required to be reported in response to
item 6(e) of Schedule 14A under the Securities Exchange Act of 1934; or (d) the
Company's shareholders approve (1) a merger or consolidation of the Company with
another corporation where the Company is not the surviving entity, or (2) any
sale of substantially all of the Company's assets.
<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 1997 expense for the Pension Plan of
$892,700 was 2.4% of the total remuneration of those participants covered by the
Pension Plan for the fiscal year 1997. Under the pension provisions, the
credited years of service for the Named Executive Officers listed in the
preceding Summary Compensation Table are as follows: Messrs. James R. Oyler, 3
years; Ronald R. Sutherland, 16 years; John T. Lemley, 2 years; Charles R.
Maule, 2 years; and Gary E. Meredith, 21 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 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, Charles R.
Maule, and Gary E. Meredith are currently participating in the SERP and have 4,
17, 3, 2, and 21 years 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 1997, compensation taken into
account under the Pension Plan for any individual in any year was limited
to $160,000.
<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 or 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 all of the 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 Henry N. Christiansen Ivan E. Sutherland
Gerald S. Casilli Peter O. Crisp John E. Warnock
<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.
In connection with the resignation of Mr. Gary E. Meredith as Senior Vice
President and Secretary, the Company has agreed to pay him an amount equal to
one and a half times his current year's base salary, plus the amount 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.
<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 December 31, 1992 in stock or index, including
reinvestment of 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
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Evans & Sutherland ............... 105 82 138 155 179
Hambrecht & Quist ............... 105 130 187 249 338
Standard & Poor 500............... 110 112 153 189 252
<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
31, 1997 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 1999 Annual Meeting of Shareholders must
be received by the Company on or before December 18, 1998 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
Mark C. McBride
Vice President and
Secretary
<PAGE>
APPENDIX A
EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
ARTICLE 1 - PURPOSE
1.1 GENERAL. The purpose of the Evans & Sutherland Computer Corporation
1998 Stock Option Plan (the "Plan") is to promote the success, and enhance the
value, of Evans & Sutherland Computer Corporation (the "Company") by linking the
personal interests of its officers, employees, and consultants or independent
contractors to those of Company stockholders and by providing its officers,
employees, and consultants or independent contractors with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to
the Company in its ability to motivate, attract, and retain the services of
officers, employees, and consultants or independent contractors upon whose
judgment, interest, and special effort the successful conduct of the Company's
operation is largely dependent. Accordingly, the Plan permits the grant of stock
options from time to time to officers, employees, and consultants or independent
contractors.
ARTICLE 2 - EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan is effective as of April 13, 1998
(the "Effective Date").
--------------
ARTICLE 3 - DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means any of the following: (i) 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 Company's common stock is converted into or
exchanged for stock or securities of any other corporation, cash, or
any other thing of value; (ii) the Company executes a definitive
agreement to sell or otherwise dispose of substantially all its assets;
(iii) the Company undergoes a change of control of the nature required
to be reported in response to item 6(e) of Schedule 14A promulgated
under the Securities Exchange Act of 1934, as amended; (iv) 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
(v) a change is made in the membership of the Board resulting in a
membership of which less than a majority were also members of the Board
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 last two-thirds of the
directors then still in office who were directors on the date two years
prior to such change.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the committee of the Board described in
Article 4.
(e) "Disability" shall mean any illness or other physical or
mental condition of a Participant which renders the Participant
incapable of performing his customary and usual duties for the Company,
or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder
which in the judgment of the Committee is permanent and continuous in
nature. The Committee may require such medical or other evidence as it
deems necessary to judge the nature and permanency of the Participant's
condition.
(f) "Fair Market Value" means, as of any given date, the fair
market value of stock or other property on a particular date determined
by such methods or procedures as may be established from time to time
by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of stock as of any date shall be the closing price
for the stock as reported on the NASDAQ National Market System (or on
any national securities exchange on which the stock is then listed) for
that date or, if no closing price is so reported for that date, the
closing price on the next preceding date for which a closing price was
reported.
(g) "Incentive Stock Option" means an option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
<PAGE>
(h) "Non-Employee Director" means a member of the Board who
qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3)
of the Exchange Act, or any successor definition adopted by the Board.
(i) "Non-Qualified Stock Option" means an option that is not
intended to be an Incentive Stock Option.
(j) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase stock at a specified price during
specified time periods. An option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(k) "Option Agreement" means any written agreement, contract,
or other instrument or document evidencing an option.
(l) "Participant" means a person, who as an officer, employee,
consultant or independent contractor of the Company or a Subsidiary,
including an individual who is also a member of the Board, has been
granted an option under the Plan.
(m) "Plan" means the Evans & Sutherland Computer Corporation
1998 Stock Option Plan, as amended from time to time.
(n) "Retirement" means a Participant's termination of
employment with the Company after attaining any normal or early
retirement age specified in any pension, profit sharing or other
retirement program sponsored by the Company or such other event
designated as a Retirement by the Committee in an Option Agreement.
(o) "Stock" means the common stock of the Company and such
other securities of the Company that may be substituted for stock
pursuant to Article 9.
(p) "Subsidiary" means any corporation of which a majority of
the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
ARTICLE 4 - ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Board or a
Committee appointed by, and which serves at the discretion of, the Board. If the
Board appoints a Committee, the Committee shall consist of at least two
individuals, each of whom qualifies as (i) a Non-Employee Director, and (ii) an
"outside director" under Code Section 162(m) and the regulations issued
thereunder; provided, however, that the Chief Executive Officer of the Company
shall have the authority to grant options to individuals who are not subject to
Section 16 of the Securities Exchange Act of 1934. When the Chief Executive
Officer is acting to grant options under this Plan, solely for purposes of this
Plan, the Chief Executive Officer shall be deemed to be acting as the Board or
the Committee, as the case may be. Additionally, reference to the Committee
shall also refer to the Board if the Board does not appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive
power, authority and discretion to:
(a) Designate Participants to receive options;
(b) Determine the type or types of options to be granted
to each Participant;
<PAGE>
(c) Determine the number of options to be granted and the
number of shares of stock to which an option will relate;
(d) Determine the terms and conditions of any option granted
under the Plan including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the
option, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an option, and accelerations or
waivers thereof, based in each case on such considerations as the
Committee in its sole discretion determines;
(e) Determine whether, to what extent, and under what
circumstances an option may be settled in, or the exercise price of an
option may be paid in, cash, stock, other options, or other property,
or an option may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Option Agreement, which need
not be identical for each Participant;
(g) Decide all other matters that must be determined in
connection with an option;
(h) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
options granted under the Plan, any Option Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5 - SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment as provided in Article 9.1
below, the maximum aggregate number of shares of stock that may be subject to
options under the Plan is 400,000. The shares may be authorized but unissued or
reacquired shares of stock.
5.2 LAPSED OPTIONS. To the extent that an option terminates, expires or
lapses for any reason, any shares of stock subject to the option will again be
available for the grant under the Plan.
5.3 STOCK DISTRIBUTED. Any stock distributed pursuant to an option may
consist, in whole or in part, of authorized and unissued stock, treasury stock
or stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO OPTIONS. Notwithstanding
any provision in the Plan to the contrary, and subject to the adjustment in
Article 9.1, the maximum number of shares of stock with respect to one or more
options that may be granted to any one Participant during the Company's fiscal
year shall be 250,000.
ARTICLE 6 - ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY. Persons eligible to participate in this Plan include
all officers, employees, and consultants or independent contractors of the
Company or a Subsidiary, as determined by the Committee, including officers,
employees, and consultants or independent contractors who are also members of
the Board. In order to assure the viability of options 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. For
purposes of this Plan, a change in status from (i) an Employee to a consultant
or advisor, or (ii) a consultant or advisor to an Employee will not constitute a
termination of employment.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom options shall be granted and shall determine the nature and amount
of each option. No individual shall have any right to be granted an option under
this Plan.
ARTICLE 7 - STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant options to
Participants on the following terms and conditions:
<PAGE>
(a) EXERCISE PRICE. The exercise price per share of stock
under an option shall be determined by the Committee and set forth in
the Option Agreement. It is the intention under the Plan that the
exercise price for any option shall not be less than the Fair Market
Value as of the date of grant; provided, however that the Committee
may, in its discretion, grant options (other than options that are
intended to be Incentive Stock Options) with an exercise price of less
than Fair Market Value on the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an option may be exercised. Notwithstanding anything in the Plan to the
contrary, a Participant's Option shall become fully vested and
exercisable and any restrictions shall lapse once the Participant
terminates employment on account of Retirement and such options shall
remain exercisable after such termination of employment until the
expiration of the option.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an option may be paid, the form of payment,
including, without limitation, cash, shares of stock (through actual
tender or by attestation), or other property (including broker-assisted
"cashless exercise" arrangements), and the methods by which shares of
stock shall be delivered or deemed to be delivered to Participants.
(d) EVIDENCE OF GRANT. All options shall be evidenced by a
written Option Agreement between the Company and the Participant. The
Option Agreement shall include such provisions as may be specified by
the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be granted
only to employees and the terms of any Incentive Stock Options granted under the
Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option may not be less than the Fair Market Value as of
the date of the grant.
(b) EXERCISE. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the following circumstances:
(1) The Incentive Stock Option shall lapse ten years
from the date it is granted, unless an earlier time is set in
the Option Agreement.
(2) Subject to Section 6.1, if the Participant
separates from employment for any reason other than Disability
or death, the Incentive Stock Option shall lapse three months
following the Participant's termination of employment, or such
other time as specified in the Participant's Option Agreement.
Notwithstanding anything in the Plan to the contrary, a
Participant's ISO shall become fully vested and exercisable
and any restrictions shall lapse once the Participant
terminates employment on account of Retirement and such ISO
shall remain exercisable after such termination of employment
until the expiration of the ISO; provided, however, that to
the extent such option is not exercised within three months
after such termination, such option shall thereafter be
considered a Non-Qualified Stock Option. To the extent that
this provision causes Incentive Stock Options to become first
exercisable by a Participant in excess of the limitation in
Section 7.2(d), the excess shall be considered Non-Qualified
Stock Options.
(3) If the Participant terminates employment on
account of Disability or death before the option lapses
pursuant to paragraph (1) or (2) above, the Incentive Stock
Option shall lapse, unless it is previously exercised, on the
earlier of (i) the date on which the option would have lapsed
had the Participant not become Disabled or lived and had his
employment status (i.e., whether the Participant was employed
by the Company on the date of his Disability or death or had
previously terminated employment) remained unchanged; or (ii)
12 months after the date of the Participant's termination of
employment on account of Disability or death. Upon the
Participant's Disability or death, any Incentive Stock Options
exercisable at the Participant's Disability or death may be
exercised by the Participant's legal representative or
representatives, by the person or persons entitled to do so
under the Participant's last will and testament, or, if the
Participant shall fail to make testamentary disposition of
such Incentive Stock Option or shall die intestate, by the
person or persons entitled to receive said Incentive Stock
Option under the applicable laws of descent and distribution.
<PAGE>
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an option is made) of all shares of
stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00 or such other limitation as imposed by Section 422(d) of
the Code, or any successor provision. To the extent that Incentive
Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company only if such option is granted at a
price that is not less than 110% of Fair Market Value on the date of
grant and the option is exercisable for no more than five years from
the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No option of an
Incentive Stock Option may be made pursuant to this Plan after the
tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant.
ARTICLE 8 - PROVISIONS APPLICABLE TO OPTIONS
8.1 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted option for a payment in cash, stock,
or another option (subject to Section 8.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
8.2 TERM OF OPTION. The term of each option shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option exceed a period of ten years from the date of its grant.
8.3 FORM OF PAYMENT FOR OPTIONS. Subject to the terms of the Plan and
any applicable law or Option Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an option may be made in
such forms as the Committee determines at or after the time of grant, including
without limitation, cash, stock, other options, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
8.4 LIMITS ON TRANSFER. No right or interest of a Participant in any
option may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no
option shall be assignable or transferable by a Participant other than by will
or the laws of descent and distribution.
8.5 BENEFICIARIES. Notwithstanding Section 8.4, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
option upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Option Agreement applicable to the
Participant, except to the extent the Plan and Option Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the option shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
8.6 STOCK CERTIFICATES. All stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on with the stock is listed, quoted, or traded. The
Committee may place legends on any stock certificate to reference restrictions
applicable to the stock.
8.7 TENDER OFFERS. In the event of a public tender for all or any
portion of the stock, or in the event that a proposal to merge, consolidate, or
otherwise combine with another company is submitted for stockholder approval,
the Committee may in its sole discretion declare previously granted options to
be immediately exercisable. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess options shall be deemed to be Non-Qualified Stock Options.
<PAGE>
8.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control
occurs, all outstanding options shall become fully exercisable. To the extent
that this provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess options shall be deemed to be
Non-Qualified Stock Options. Upon, or in anticipation of, such an event, the
Committee may cause every option outstanding hereunder to terminate at a
specific time in the future and shall give each Participant the right to
exercise options during a period of time as the Committee, in its sole and
absolute discretion, shall determine, except in the event that the surviving or
resulting entity agrees to assume the options on terms and conditions that
substantially preserve the Participant's rights and benefits of the option then
outstanding.
ARTICLE 9 - CHANGES IN CAPITAL STRUCTURE
9.1 GENERAL. In the event a stock dividend is declared upon the stock,
the shares of stock then subject to each option (and the number of shares
subject thereto) shall be increased proportionately without any change in the
aggregate purchase price therefor. In the event the stock shall be changed into
or exchanged for a different number or class of shares of stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of stock then subject to each option the number and class of
shares of stock into which each outstanding share of stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each option.
ARTICLE 10 - AMENDMENT, MODIFICATION AND TERMINATION
10.1 AMENDMENT, MODIFICATION AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that to the extent necessary and desirable
to comply with any applicable law, regulation, or stock exchange rule, the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
10.2 OPTIONS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any option
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 11 - GENERAL PROVISIONS
11.1 NO RIGHTS TO OPTIONS. No Participant , employee, or other person
shall have any claim to be granted any option under the Plan, and neither the
Company nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.
11.2 NO STOCKHOLDERS RIGHTS. No option gives the Participant any of the
rights of a stockholder of the Company unless and until shares of stock are in
fact issued to such person in connection with such option.
11.3 WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.
11.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Option
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
11.5 UNFUNDED STATUS OF OPTIONS. The Plan is intended to be an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an option, nothing contained in the Plan or
any Option Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.
11.6 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
<PAGE>
11.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
11.8 EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
11.9 TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
11.10 FRACTIONAL SHARES. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
11.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
void to the extent permitted by law and voidable as deemed advisable by the
Committee.
11.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of options in stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
11.13 GOVERNING LAW. The Plan and all Option Agreements shall be
construed in accordance with and governed by the laws of the State of Utah.
<PAGE>
1
APPENDIX B
EVANS & SUTHERLAND COMPUTER CORPORATION
1989 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
Section 1. Purpose.
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 "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.
<PAGE>
(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 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,
<PAGE>
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 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.
<PAGE>
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 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;
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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"), which was approved by the
shareholders on May 16, 1989. The Plan was amended several times thereafter to
increase the number of shares available under the Plan. By this instrument, the
Corporation desires to again amend the Plan effective as of May 21, 1998.
1. This Amendment shall amend only those provisions specified
herein and those provisions amended hereby shall remain in
full force and effect.
2. Section 4(d)(ii) of the Plan is hereby amended and restated in its
entirety as follows:
New Directors Options and Annual Options granted pursuant to
Section 4(b)(ii) and (iii) shall become exercisable in three
equal annual installments on the first, second, and third
anniversaries of the date each such Option is granted.
3. Section 7 of the Plan is hereby amended and restated in its entirety
as follows:
Upon the Grantee ceasing to be a Non-Employee Director on
account of retirement from the Board after attaining age 57,
each outstanding Option then held by the Non-Employee Director
shall become fully vested and exercisable and shall remain
exercisable until the expiration date of each Option.
Upon the Grantee ceasing to be a Non-Employee Director for any
reason other than retirement, each option shall expire on the
earlier of (i) its expiration date, or (ii) 90 days from the
date the Grantee ceased to be a Non-Employee Director. During
such time, the Grantee shall be entitled to exercise the
number of shares to which he was entitled to exercise at the
date the Grantee ceased to be a Non-Employee Director. If a
Non-Employee Director changes his status to that of an
employee of, or consultant to, the Company or a subsidiary, he
shall not be considered to have terminated service on the
Board until he subsequently terminates employment or
consulting services to the Company or a subsidiary for
purposes of determining his ability to exercise any Option
granted prior to the date he actually ceased to be a
Non-Employee Director. This provision shall not be interpreted
as permitting an individual to receive additional grants under
this Plan after the date he actually ceases to be a
Non-Employee Director.
4. This Amendment shall be effective May 21, 1998.
<PAGE>
SIDE 1
PROXY
EVANS & SUTHERLAND COMPUTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James R. Oyler, John T. Lemley, and Mark C.
McBride 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 27,
1998, at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
Thursday, May 21, 1998 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 ADOPT THE 1998 STOCK OPTION PLAN, "FOR" THE AMENDMENT TO THE
1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, 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.)
<PAGE>
SIDE 2
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 2001 and until their
respective successors are duly elected and qualified.
Nominees: Gerald S. Casilli
James R. Oyler.
2. Proposal to adopt the Evans & Sutherland 1998 Stock Option Plan.
3. Proposal to amend the 1989 Stock Option Plan for Non-Employee Directors.
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending December
31, 1998.
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.
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.
