<PAGE>
Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EVANS & SUTHERLAND COMPUTER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on the 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) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO] EVANS & SUTHERLAND
April 20, 1999
Dear Evans & Sutherland Shareholder:
You are cordially invited to attend Evans & Sutherland's 1999 annual
meeting of shareholders to be held on Thursday, May 20, 1999 at 11:00 a.m.,
local time, at our 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 our
progress 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,
/s/ James R. Oyler
James R. Oyler
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
/ / 600 Komas Drive / / Salt Lake City, Utah 84108 / / TEL 801-588-1000
/ / FAX 801-588-4500 / / WEB es.com
<PAGE>
EVANS & SUTHERLAND
COMPUTER CORPORATION
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
TO THE SHAREHOLDERS:
The annual meeting of shareholders of Evans & Sutherland Computer
Corporation will be held on Thursday, May 20, 1999 at 11:00 a.m., local time,
at 600 Komas Drive, Salt Lake City, Utah. At the meeting, you will be asked:
1. To elect one director to serve until the 2002 annual meeting of
shareholders;
2. To approve an amendment to the 1998 Stock Option Plan;
3. To ratify the appointment of KPMG LLP as independent auditors of
Evans & Sutherland for the fiscal year ending December 31, 1999; and
4. To transact such other business as may properly be presented at the
annual meeting.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
If you were a shareholder of record at the close of business on April 2,
1999, you may vote at the annual meeting and any adjournment(s) thereof.
We invite all shareholders to attend the meeting in person. If you
attend the meeting, you may vote in person even if you previously signed and
returned a proxy.
FOR THE BOARD OF DIRECTORS
Mark C. McBride
VICE PRESIDENT AND
SECRETARY
Salt Lake City, Utah
April 20, 1999
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. TO ASSURE REPRESENTATION OF YOUR SHARES, PLEASE
COMPLETE, SIGN AND DATE 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 THE ANNUAL MEETING OF SHAREHOLDERS
GENERAL
Evans & Sutherland Computer Corporation, a Utah corporation, is
soliciting this proxy on behalf of its Board of Directors to be voted at the
1999 annual meeting of shareholders to be held on Thursday, May 20, 1999 at
11:00 a.m., local time, or at any adjournment or postponement thereof. The
annual meeting of shareholders will be held at Evans & Sutherland's principal
executive offices located at 600 Komas Drive, Salt Lake City, Utah 84108.
METHOD OF PROXY SOLICITATION
These proxy solicitation materials were mailed on or about April 20, 1999
to all shareholders entitled to vote at the meeting. Evans & Sutherland will
pay the cost of soliciting these proxies. 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 the proxy material. E&S has engaged the firm of Morrow &
Company, Inc., a proxy solicitation firm, to assist E&S in the solicitation
of proxies for the meeting. Evans & Sutherland will pay approximately $5,000
in fees for Morrow's services and will reimburse Morrow for reasonable out of
pocket expenses. Directors, officers, or employees of E&S may also solicit
proxies without additional compensation.
VOTING OF PROXIES
Your shares will be voted as you direct on your signed proxy card. If
you do not specify on your proxy card how you want to vote your shares, we
will vote signed returned proxies (1) FOR the election of the board's nominee
for director, (2) FOR the amendment to the Evans & Sutherland 1998 Stock
Option Plan and (3) FOR ratification of the appointment of KPMG LLP as Evans
& Sutherland's independent auditors for the fiscal year ending December 31,
1999. E&S does not know of any other business that may be presented at the
annual meeting. If a proposal other than those listed in the notice is
presented at the annual meeting, your signed proxy card gives authority to
the persons named in the proxy to vote your shares on such matters in their
discretion.
REQUIRED VOTE
Record holders of shares of Evans & Sutherland's common stock, par value
$.20 per share, at the close of business on April 2, 1999 may vote at the
meeting. Each shareholder has one vote for each share of common stock the
shareholder owns. At the close of business on April 2, 1999, there were
9,594,001 shares of common stock outstanding.
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. Evans & Sutherland's
bylaws provide that a majority of the shares entitled to vote, represented in
person or by proxy, constitute a quorum for transaction of business. An
automated system administered by Evans & Sutherland's transfer agent
tabulates the votes. Abstentions and broker non-votes are counted as present
for purposes of establishing a quorum. Each is tabulated separately.
Abstentions are counted as voted and broker non-votes are counted as unvoted
for determining the approval of any matter submitted to the shareholders for
a vote. A broker non-vote occurs when a broker votes on some matters on the
proxy card but not on others because he does not have the authority to do so.
You may revoke your proxy by giving written notice to the Secretary of Evans
& Sutherland, by delivering a later proxy, or by attending the meeting and
voting in person.
<PAGE>
PROPOSAL ONE
------------
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, currently
consisting of one or two directors each, whose terms expire at successive
annual meetings. One director will be elected at the 1999 annual meeting to
serve for a three-year term expiring at Evans & Sutherland's annual meeting
in the year 2002. The nominee elected as a director will continue in office
until his respective successor is duly elected and qualified.
The Board of Directors has nominated MR. STEWART CARRELL for election at
the 1999 annual meeting. Unless you specify otherwise, your returned signed
proxy will be voted in favor of the nominee. In the event a nominee is
unable to serve, your proxy may vote for another person nominated by the
board to fill that vacancy. The Board of Directors has no reason to believe
that the nominee will be unavailable. All directors have served continuously
since first elected as a director.
VOTE REQUIRED
A plurality of the votes represented at the meeting is required to elect
a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
NOMINEE LISTED ABOVE.
DIRECTORS
Set forth below is the principal occupation of, and certain other
information regarding, the nominee and other directors whose terms of office
will continue after the annual meeting.
DIRECTOR NOMINEE - TERM ENDING IN 2002
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: 65.
DIRECTORS CONTINUING IN OFFICE - TERMS ENDING IN 2000
PETER O. CRISP, Director of Evans & Sutherland since 1980. From 1969 to
October 1997, Mr. Crisp was a General Partner of Venrock Associates, a
venture capital firm based in New York. He is also a Director of American
Superconductor Corporation, Novacare, Inc., Thermedics, Inc., Thermo Electron
Corporation, Thermo Power Corporation, ThermoTrex Corporation and United
States Trust Corporation. Age: 66.
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: 60.
DIRECTORS CONTINUING IN OFFICE - TERMS ENDING IN 2001
GERALD S. CASILLI, Director of Evans & Sutherland since 1997. Mr.
Casilli is Chairman of the Board of Ikos Systems, Inc. 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: 59.
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: 53.
2
<PAGE>
BOARD MEETINGS AND COMMITTEES
In fiscal year 1998 the Board of Directors held eight board meetings
either in person or telephonically. Each member of the Board of Directors
attended at least 75% of the meetings of the Board of Directors. 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, Peter O. Crisp and
Ivan E. Sutherland.
The principal functions of the Audit Committee are to recommend
engagement of Evans & Sutherland's independent auditors, to consult with
Evans & Sutherland'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 Evans & Sutherland's operating results and to review
Evans & Sutherland's financial control procedures and personnel. The Audit
Committee held two meetings in 1998.
The Compensation and Stock Options Committee reviews compensation and
benefits for Evans & Sutherland's executives and administers the grant of
stock options under Evans & Sutherland's existing plans. Pursuant to
delegated authority from the Board of Directors, Mr. Oyler, as Chief
Executive Officer, determines all salaries except for Evans & Sutherland's
corporate officers. There were no separate meetings of the Compensation and
Stock Options Committee held in 1998.
The Nomination Committee makes recommendations to the Board of Directors
concerning candidates for election as directors. The Nomination Committee
considers nominees recommended by shareholders for election as a director.
Such recommendations should be sent to the Secretary of Evans & Sutherland
for presentation to the Nomination Committee. There were no separate
meetings of the Nomination Committee held in 1998.
COMPENSATION OF DIRECTORS
Members of the Board of Directors employed by E&S do not receive any
separate compensation for services performed as a director. Evans &
Sutherland's non-employee directors 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, which was approved by the shareholders on
May 16, 1989. The Non-Employee Directors Plan was subsequently amended on
February 20, 1996 and May 20, 1998. 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 E&S, serving at
such time, received an option on May 16, 1989 to purchase 10,000 shares,
which option was immediately exercisable. Each person, who becomes an
eligible director (non-employee) subsequent to the date of adoption of the
plan, receives an automatic grant, on the date of his first appointment or
election to the board, of an option to purchase 10,000 shares. Such options
are exercisable in three annual installments on the first, second and third
anniversaries of the date of the grant.
In addition to the initial grants, each eligible director is
automatically granted additional options to purchase 10,000 shares of Evans &
Sutherland'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
three installments on the first, second and third anniversaries of the date
of the grant. Currently, the board consists of three non-employee directors.
As of April 20, 1999, 239,650 shares remain available for future option
grants under the Non-Employee Directors Plan.
The exercise price for options granted under the Non-Employee Directors
Plan is equal to the fair market value of the common stock as of the last
trading day immediately prior to the date the option is granted. The options
have a term of ten years. However, each option expires 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 E&S. 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.
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. In the event of a sale of the option, the optionee recognizes
ordinary income on the difference between the option
3
<PAGE>
exercise price and the sale price. No tax deduction is available to E&S with
respect to the grant of the option or the sale of stock acquired upon
exercise of the option. Evans & Sutherland should be entitled to a deduction
equal to the amount of ordinary income recognized by the optionee as a result
of the exercise of the nonqualified stock option. Generally, the recipients
will be subject to the restrictions of Section 16(b) of the 1934 Act.
PROPOSAL TWO
------------
AMENDMENT TO THE
EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
The Board of Directors of Evans & Sutherland has approved and recommends
that the shareholders approve, an amendment to the Evans & Sutherland
Computer Corporation 1998 Stock Option Plan to increase the aggregate number
of shares of Evans & Sutherland's common stock available for grant under the
plan from 400,000 shares to 850,000 shares.
The 1998 Stock Option Plan is an essential element of Evans &
Sutherland's compensation package that it uses 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 plan utilizes vesting periods to encourage key
employees to continue in the employ of E&S and thereby acts as a retention
device for those employees as well as encourages them to maintain a long-term
perspective.
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, E&S repurchased 595,000 shares of its common
stock, largely offsetting grants made in 1998. Evans & Sutherland intends to
continue the stock repurchase program and currently has 816,000 shares
remaining under the board's repurchase authorization to offset the 450,000
shares available for grant under this proposal.
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 of E&S was granted stock options and since then every new
employee has received options when starting employment. Since 1996, options
have been granted to key contributors below the executive level. Evans &
Sutherland believes that these practices have had a positive effect on
performance and plans to continue them in the future.
The amendment to the 1998 Stock Option Plan, if approved by shareholders,
will increase the number of shares available for grant under the plan. Evans
& Sutherland intends to register the new 450,000 shares available under the
1998 Stock Option Plan on Form S-8 under the Securities Act of 1933 as soon
as practicable after receiving shareholder approval. The plan is described
in more detail under the heading "Evans & Sutherland Computer Corporation
1998 Stock Option Plan," beginning on page nine of this proxy statement and
is qualified in its entirety by reference to the 1998 Stock Option Plan.
VOTE REQUIRED
The affirmative vote of a majority of a quorum of shareholders is
required for the amendment of the Evans & Sutherland 1998 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THIS PROPOSAL.
4
<PAGE>
PROPOSAL THREE
--------------
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
KPMG LLP, 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 E&S for the fiscal year ending December
31, 1999 and the board recommends that the shareholders vote for ratification
of such selection. Shareholder ratification of the selection of KPMG as
Evans & Sutherland's independent auditors is not required by Evans &
Sutherland's bylaws or otherwise. However, the board is submitting the
selection of KPMG for shareholder ratification as a matter of good corporate
practice. KPMG has audited Evans & Sutherland'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 E&S and its shareholders.
Neither KPMG, nor any of its members has any financial interest, direct
or indirect, in E&S, nor has KPMG, nor any of its members ever been connected
with E&S 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 THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS EVANS & SUTHERLAND'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
5
<PAGE>
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Evans & Sutherland's common stock as of April 2, 1999, (i) by
each person who is known by E&S to own beneficially more than five percent of
Evans & Sutherland's common stock, (ii) by each of Evans & Sutherland's
directors, (iii) by the Chief Executive Officer and each of Evans &
Sutherland's four most highly compensated executive officers who served as
executive officers at December 31, 1998 and (iv) by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Directors, Officers and -------------------------
Principal Shareholders (1) Number Percent
- -------------------------- ------ -------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
Intel Corporation (2).......................................... 1,282,128 11.8
2200 Mission College Blvd., Santa Clara, California 95052-8119
Vanguard/PRIMECAP Fund, Inc. (3)............................... 840,000 8.8
P.O. Box 2600, Valley Forge, Pennsylvania 19482-2600
State of Wisconsin Investment Board (4)........................ 780,000 8.1
P.O. Box 7842, Madison, Wisconsin 53707
I.G. Investment Management, Ltd. (5)........................... 584,900 6.1
447 Portage Avenue, One Canada Centre, Winnipeg, MB R3C CB6
EQSF Advisers, Inc. (6)........................................ 354,400 3.7
767 Third Avenue, New York, New York 10017-2023
M.J. Whitman Advisers, Inc. (6)................................ 187,750 2.0
767 Third Avenue, New York, New York 10017-2023
DIRECTORS
Stewart Carrell (7)........................................... 34,750 *
Gerald S. Casilli............................................. 6,592 *
Peter O. Crisp (8)............................................ 57,437 *
James R. Oyler (9)............................................ 262,000 2.7
Ivan E. Sutherland (10)....................................... 80,280 *
OTHER EXECUTIVE OFFICERS
Ronald R. Sutherland (11)..................................... 90,000 *
John T. Lemley (12)........................................... 15,000 *
Charles R. Maule (13)......................................... - *
William C. Gibbs (14)......................................... 25,000 *
All directors and executive officers as a
group - 19 persons (15)..................................... 740,719 7.4
</TABLE>
- -------------------
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as ""beneficially'' owned include (a) shares subject to options or
warrants currently exercisable or which will be exercisable within 60
days of the record date, (b) shares attainable through conversion of
other securities, (c) shares held by unincorporated entities and in
trusts and estates over which an individual holds at least shared voting
or investment powers and (d) 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
executive officers of E&S have sole voting and investment power over the
shares of Evans & Sutherland's common stock held in their names, except
as noted in the following footnotes.
6
<PAGE>
(2) Intel Corporation has sole voting power and sole dispositive power as to
1,282,128 shares, according to Schedule 13D filed with the Securities
and Exchange Commission dated August 3, 1998. The number of shares
attributable to Intel includes 901,408 shares of common stock that Intel
has a right to acquire upon conversion of 901,408 shares of Series B
Preferred Stock and 378,462 shares of common stock that Intel has a
right to acquire upon exercise of a warrant for 378,462 shares of Series
B Preferred Stock and upon conversion of such Series B Preferred Stock.
(3) Vanguard/PRIMECAP Fund, Inc. has sole voting power and shared
dispositive power as to 840,000 shares according to Schedule 13G/A filed
with the Securities and Exchange Commission dated February 10, 1999.
(4) State of Wisconsin Investment Board has sole voting power and sole
dispositive power as to 780,000 shares according to Schedule 13G/A filed
with the Securities and Exchange Commission dated January 16, 1999.
(5) 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 April 2, 1999.
(6) EQSF Advisers, Inc. has sole voting power and sole dispositive power as
to 354,400 shares and M.J. Whitman Advisers, Inc. has sole voting power
and sole dispositive power as to 187,750 shares according to Schedule
13G filed with the Securities and Exchange Commission dated February 12,
1999. EQSF Advisers, Inc., M.J. Whitman Advisers, Inc. and Martin
Whitman, Chief Executive Officer and controlling person of EQSF and M.J.
Whitman, filed a joint Schedule 13D. Consequently, Martin Whitman has
voting power and dispositive power of an aggregate of 542,150 shares.
(7) In addition to being a director, Mr. Carrell is also Chairman of the
Board of Evans & Sutherland. 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 20,000 shares subject to outstanding stock options which are
currently exercisable or will be exercisable on or before June 1, 1999.
(8) The number of shares attributable to Mr. Crisp includes 42,437 shares of
common stock and 15,000 shares subject to outstanding stock options that
are currently exercisable or will be exercisable on or before June 1,
1999.
(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 12,000 shares of common stock and
250,000 shares subject to outstanding stock options that are currently
exercisable or will be exercisable on or before June 1, 1999.
(10) The number of shares attributable to Mr. Ivan E. Sutherland includes
53,530 shares of common stock and 26,750 shares subject to outstanding
stock options that are currently exercisable or will be exercisable on
or before June 1, 1999. Of the 53,530 shares of common stock, 26,750
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) As of December 31, 1998, Mr. Ronald R. Sutherland was Vice President and
General Manager of Government Simulation. The number of shares
attributable to Mr. Sutherland includes 90,000 shares subject to
outstanding stock options that are currently exercisable. Mr.
Sutherland retired in February 1999.
(12) Mr. Lemley is Vice President and Chief Financial Officer of Evans &
Sutherland.
(13) Mr. Maule is Vice President and General Manager of the Workstation Group
of Evans & Sutherland.
(14) Mr. Gibbs is Vice President of Corporate Development of Evans &
Sutherland. The number of shares attributable to Mr. Gibbs includes
25,000 shares subject to outstanding stock options that are currently
exercisable.
(15) The total for directors and officers as a group includes 299,430 shares
of common stock and 441,289 shares subject to outstanding stock options
that are currently exercisable or will be exercisable on or before June
1, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of
the Chief Executive Officer and the four most highly compensated executive
officers of E&S for the fiscal years ended December 31, 1998, December 31,
1997 and December 27, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------------ -------
Other Restricted All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus (1) Sation Award(s) Sars Payouts Sation (2)
- ------------------ ---- --------- --------- ------- ---------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Oyler 1998 $ 344,400 $ - - - 137,000 - $ 50,912
President and 1997 328,000 194,500 - - 70,000 - 46,854
Chief Executive Officer 1996 310,000 174,100 - - 100,000 - 76,890
Ronald R. Sutherland 1998 209,900 14,000 - - 105,000 - 51,741
Vice President, 1997 199,900 131,100 - - 25,000 - 376,358
Government Simulation 1996 190,000 152,800 - - 50,000 - 183,911
John T. Lemley 1998 217,400 - - - 132,000 - 39,190
Vice President and 1997 208,000 112,100 - - 20,000 - 36,266
Chief Financial Officer 1996 200,000 102,100 - - - - 30,994
Charles R. Maule 1998 185,300 - - - 103,000 - 26,438
Vice President, 1997 171,600 112,000 - - 10,000 - 21,612
Workstation Group 1996 145,962 46,200 - - 40,000 - 111,650
William C. Gibbs (3) 1998 13,800 - - - 75,000 - -
Vice President of 1997 - - - - - - -
Corporate Development 1996 - - - - - - -
</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 1998, 1997 and
1996.
(2) All other compensation for fiscal year 1998 includes (i) premiums paid for
executive life insurance policies (Mr. Oyler $29,091, Mr. Sutherland
$35,653, Mr. Lemley $23,802 and Mr. Maule $12,364); (ii) matching
contribution to Evans & Sutherland's Executive Savings Plan (Mr. Oyler
$17,021, Mr. Sutherland $11,288, Mr. Lemley $10,588 and Mr. Maule $9,274);
and (iii) matching contribution to Evans & Sutherland's 401(k) Deferred
Savings Plan (Mr. Oyler $4,800, Mr. Sutherland $4,800, Mr. Lemley $4,800
and Mr. Maule $4,800).
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 and Mr. Maule $11,400); (ii) matching
contribution to Evans & Sutherland'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 Evans & Sutherland's 401(k) Deferred Savings
Plan (Mr. Oyler $4,750, Mr. Sutherland $4,750, Mr. Lemley $4,750 and Mr.
Maule $3,981,); (iv) premiums paid for group term life insurance policies
(Mr. Oyler $1,453, Mr. Sutherland $1,707, Mr. Lemley $980 and Mr. Maule
$691); and (v) option exercise income that exceeds 10% of base salary (Mr.
Sutherland $327,250).
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 and Mr. Maule $10,838); (ii) matching
contribution to Evans & Sutherland'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 Evans & Sutherland's 401(k) Deferred Savings
Plan (Mr. Sutherland $4,750 and Mr. Lemley $462); (iv) premiums paid for
group term life insurance policies (Mr. Oyler $1,314, Mr. Sutherland
$2,286, Mr. Lemley $1,314 and Mr. Maule $763); (v) option exercise income
that exceeds 10% of base salary (Mr. Sutherland $134,720); and (vi)
reimbursement for relocation expenses (Mr. Oyler $32,218 and Mr. Maule
$94,170).
(3) Mr. Gibbs commenced his employment with E&S in December 1998. Mr. Gibbs
currently receives an annual salary of $275,000 and is eligible for an
incentive bonus based upon achievement of corporate objectives.
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted
during fiscal year 1998 to the named executive officers. No stock
appreciation rights ("SARs") were granted in 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS Potential Realizable Value
------------------------------------------------------- at Assumed Annual Rates
Number of % of Total Exercise of Stock Price Appreciation
Options/ Options/SARs or Base For Option Term (2)
SARs Granted to Price Expiration ---------------------------
Name Granted (1) Employees per Share Date At 5% at 10%
- -------------------- ----------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler 45,000 (3) 2.6% $22.50 06/10/08 $636,756 $1,613,664
92,000 5.4% 13.56 09/29/08 784,584 1,988,291
Ronald R. Sutherland 25,000 (3) 1.5% 22.50 06/10/08 353,753 896,480
80,000 4.7% 13.56 09/29/08 682,234 1,728,914
John T. Lemley 20,000 (3) 1.2% 22.50 06/10/08 283,003 717,184
112,000 6.6% 13.56 09/29/08 955,132 2,420,492
Charles R. Maule 35,000 (3) 2.1% 22.50 06/10/08 495,255 1,255,072
68,000 4.0% 13.56 09/29/08 579,899 1,469,580
William C. Gibbs 75,000 4.4% 13.25 10/12/08 624,964 1,583,782
</TABLE>
- -------------------
(1) The options are all granted to employees under Evans & Sutherland's 1995
Long-Term Incentive Equity Plan or 1998 Stock Option 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 E&S. The total number of options granted to employees during
fiscal year 1998 was 1,705,204 shares, of which 1,354,000 were granted as a
result of the option repricing on September 29, 1998.
(2) These potential realizable values are based on an assumed annual rate of
increase in the value of Evans & Sutherland'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 Evans & Sutherland's common stock and are not intended
to be a forecast of future appreciation in value of Evans & Sutherland's
common stock. The actual realizable value, if any, of these options is
dependent upon the actual future value of Evans & Sutherland's common
stock, which cannot be predicted with any assurance at this time.
(3) These options were repriced on September 29, 1998.
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 1998 by each of the named executive officers and
lists the value of their unexercised options on December 31, 1998. None of the
named executive officers exercised any stock options during 1998.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
At Fiscal Year End At Fiscal Year-end (1)
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James R. Oyler 216,667 125,333 $ 810,000 $ 373,990
Ronald R. Sutherland 10,000 80,000 53,750 325,200
John T. Lemley - 112,000 - 455,280
Charles R. Maule - 68,000 - 276,420
William C. Gibbs 25,000 50,000 109,375 218,750
</TABLE>
- -------------------
(1) Based on the closing price of Evans & Sutherland's common stock as reported
on the NASDAQ Stock Market on December 31, 1998 of $17.625.
9
<PAGE>
10-YEAR OPTION/SAR REPRICINGS
The following table sets forth information regarding stock options that were
repriced during fiscal year 1998 that were previously awarded to the named
executive officers. No SARs were repriced during 1998.
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Original Term
Underlying of Stock Exercise Price New Remaining at
Options/SARs at Time of at Time of Exercise Date of
Name Date Repriced Repricing Repricing Price Repricing
- -------------------- -------- ------------ ------------ --------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James R. Oyler 09/29/98 56,000 $ 13.56 $ 22.38 $ 13.56 8 years 5 months
36,000 13.56 22.50 13.56 9 years 8 months
Ronald R. Sutherland 09/29/98 40,000 13.56 20.88 13.56 7 years 4 months
20,000 13.56 22.38 13.56 8 years 5 months
20,000 13.56 22.50 13.56 9 years 8 months
John T. Lemley 09/29/98 80,000 13.56 20.50 13.56 7 years 2 months
16,000 13.56 22.38 13.56 8 years 5 months
16,000 13.56 22.50 13.56 9 years 8 months
Charles R. Maule 09/29/98 32,000 13.56 20.88 13.56 7 years 2 months
8,000 13.56 22.38 13.56 8 years 5 months
28,000 13.56 22.50 13.56 9 years 8 months
</TABLE>
EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
The Board of Directors of Evans & Sutherland has approved and recommends
that the shareholders approve, an amendment of the Evans & Sutherland
Computer Corporation 1998 Stock Option Plan for employees, officers and
executives of, and consultants and independent contractors to, E&S and any
subsidiary. The plan authorizes grants of Incentive Stock Options ("ISOs")
or Non-qualified Stock Options ("NQSOs"). The plan was established to
provide a simplified mechanism for the granting of stock options to eligible
individuals and operates in conjunction with and in addition to the Evans &
Sutherland 1995 Long-Term Incentive Equity Plan. See Proposal Two,
"Amendment to the 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 is
beneficial to E&S 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 E&S
flexibility in its ability to attract and retain the services of individuals
upon whose judgement, interest and special effort the successful conduct of
Evans & Sutherland's operation is largely dependent. The following summary is
qualified by reference to the 1998 Stock Option Plan, a copy of which is
attached hereto as Appendix A.
ADMINISTRATION
The plan is 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,
Evans & Sutherland'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.
10
<PAGE>
ELIGIBILITY
Persons eligible to participate in the plan include all employees,
officers and executives of, and consultants and independent contractors to,
E&S 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 E&S, 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 Evans & Sutherland's common stock are
available for grant under the plan. The proposed amendment would increase to
850,000 the aggregate shares of Evans & Sutherland's common stock 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.
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.
Evans & Sutherland 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, E&S 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 E&S 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 E&S will be entitled to a
corresponding tax deduction.
11
<PAGE>
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 Evans & Sutherland.
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 E&S, all options under the 1998
Stock Option 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 Evans & Sutherland's stock;
(b) during any two-year period, the persons who are on Evans & Sutherland'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) E&S 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) Evans & Sutherland's shareholders
approve (1) a merger or consolidation of E&S with another corporation where
E&S is not the surviving entity, or (2) any sale of substantially all of
Evans & Sutherland's assets.
PENSION PLAN AND SERP
Evans & Sutherland 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 Evans & Sutherland who are not employees are not
eligible to participate in the Pension Plan and SERP. Evans & Sutherland's
1998 expense for the Pension Plan of $1,906,000 was 5% of the total
remuneration of those participants covered by the Pension Plan for the fiscal
year 1998. Under the pension provisions, the credited years of service for
the executive officers listed in the preceding Summary Compensation Table are
as follows: Messrs. James R. Oyler, 4 years; Ronald R. Sutherland, 17 years;
John T. Lemley, 3 years; Charles R. Maule, 3 years; and William C. Gibbs, 0
years.
Evans & Sutherland 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 E&S (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 Evans & Sutherland's 401(k) Plan
and the SERP.
Messrs. James R. Oyler, Ronald R. Sutherland, John T. Lemley, Charles R.
Maule and William C. Gibbs are currently participating in the SERP and have
5, 18, 4, 3 and 0 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. Evans & Sutherland 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 E&S for the after-tax cost of benefit payments, premiums, and
a factor for the cost of money.
12
<PAGE>
The following table illustrates the approximate annual retirement
benefits (not including social security benefits) under the Pension Plan and
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 E&S that
produces the highest annual average. For 1998, compensation taken into
account under the Pension Plan for any individual in any year was
limited to $160,000.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Evans & Sutherland has entered into separate agreements with certain
named executive officers of E&S, Mr. James R. Oyler, Mr. William C. Gibbs and
Mr. John T. Lemley, regarding severance and termination issues. Each of
these agreements provides that E&S will pay the executive two and one-half
times the executive's gross income for the year preceding the termination
date if (1) during a change of control, the executive's employment is
terminated by the executive for good reason or by E&S for any reason other
than death, disability or cause, or (2) the executive terminates such
executive's employment within one hundred eighty days of a change of control
that has not been approved by a majority of directors in office immediately
preceding the change of control.
13
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE
OF THE BOARD OF DIRECTORS
GENERAL
The following report shall not be deemed incorporated by reference into
any filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent that E&S 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
establishes and oversees the general compensation policies of E&S, which
include specific compensation levels for executive officers, cash incentive
initiatives for executives and the technical staff and stock option grants
from the stock option plans. 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 E&S. Evans & Sutherland
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 segment 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 are a survey published by the
American Electronics Association entitled "Executive Compensation in the
Electronics Industry," and a survey published by Radford Associates entitled
"Management Total Compensation Report." 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, which
provided financial incentives for certain key executives and managers of E&S
to achieve profitable growth. In 1998, participation was expanded to include
all employees of E&S. The plan incentive is based on achievement of
operating profit and other measures relative to the annual operating plan.
Measurement for corporate (functional) employees is total corporate
performance, while measurement for business segment employees is both
corporate and business segment performance. The plan 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 Evans & Sutherland's pension plan and SERP, the long-term
component of compensation for the Chief Executive Officer and other
executives is the 1998 Stock Option 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 long-term
objectives of Evans & Sutherland.
OPTION REPRICING
On September 29, 1998, the Board of Directors approved a stock option
repricing program whereby each eligible stock option could be amended to have
an exercise price equal to $13.56 (the September 29, 1998 closing price of
Evans & Sutherland's stock) if the optionee agreed to reduce the amount of
options repriced by 20% and to accept an amended vesting period. The vesting
period for the repriced options was amended to vest in one year for all
options that were vested as of September 29, 1998 and to vest ratably over
three years for all options that were not yet vested as of September 29,
1998. As a result, approximately 1,698,000 options were surrendered by
employees for approximately 1,354,000 repriced options. The repriced options
expire ten years from the date of the repriced grant.
In approving the option repricing, the Board of Directors acknowledged
that the retention of employees and directors is critical to Evans &
Sutherland's success and its ability to continue to meet its performance
objectives. The board also noted that the value of the options previously
granted to such individuals had eroded to such an extent that the intended
incentive had failed. The board believes that the option repricing provides a
good balance between employee retention and incentive issues and the concerns
of investors over the repricing of stock. This report is submitted by the
members of the Compensation and Stock Options Committee.
Stewart Carrell Ivan E. Sutherland
Gerald S. Casilli Peter O. Crisp
14
<PAGE>
COMPARATIVE STOCK PERFORMANCE CHART
The following graph presents a five year comparison of cumulative total
shareholder return for Evans & Sutherland'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, 1993 in stock or index,
including reinvestment of dividends. Total shareholder returns for prior
periods are not an indication of future investment returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC]
<TABLE>
<CAPTION>
Specific Plot Points
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Evans & Sutherland......... 78 130 147 170 130
Hambrecht & Quist.......... 124 179 237 323 620
Standard & Poor 500........ 101 139 171 229 294
</TABLE>
15
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Evans &
Sutherland's directors, executive officers and persons who own more than ten
percent of a registered class of Evans & Sutherland's equity securities to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of common stock and other equity
securities of E&S. Officers, directors and greater than ten-percent
beneficial owners are required by SEC regulation to furnish E&S with copies
of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to E&S
and written representations that no other reports were required, E&S believes
that there was compliance for the fiscal year ended December 31, 1998 with
all Section 16(a) filing requirements applicable to Evans & Sutherland's
officers, directors and greater than ten-percent beneficial owners.
SHAREHOLDER PROPOSALS
If you wish to submit proposals to be included in Evans & Sutherland's
year 2000 proxy statement, we must receive them on or before Friday, December
17, 1999. Please address your proposals to Corporate Secretary, Evans &
Sutherland Computer Corporation, 600 Komas Drive, Salt Lake City, Utah 84108.
If you wish to raise a matter before the shareholders at the year 2000
annual meeting, you must notify the Secretary in writing by not later than
March 2, 2000. Please note that this requirement relates only to matters
you wish to bring before your fellow shareholders at the annual meeting. It
is separate from the SEC's requirements to have your proposal included in the
proxy statement.
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 Evans &
Sutherland'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 Evans & Sutherland.
EVANS & SUTHERLAND COMPUTER CORPORATION
Mark C. McBride
VICE PRESIDENT AND
SECRETARY
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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
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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.
(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
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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;
(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.
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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:
(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.
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(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.
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(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-
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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.
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
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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.
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.
Adopted May 21, 1998
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AMENDMENT
TO THE EVANS & SUTHERLAND COMPUTER CORPORATION
1998 STOCK OPTION PLAN
On April 13, 1998, Evans & Sutherland Computer Corporation (the
"Corporation") adopted the Evans & Sutherland Computer Corporation 1998 Stock
Option Plan (the "Plan"), which was approved by the shareholders on May 21,
1998. By this instrument, the Corporation desires to amend the Plan
effective as of May 20, 1999.
1. This Amendment shall amend only those provisions specified herein and
those provisions amended hereby shall remain in full force and effect.
2. Section 5.1 of the Plan is hereby amended and restated in its
entirety as follows:
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 850,000. The shares may be
authorized but unissued or reacquired shares of stock.
3. This Amendment shall be effective May 20, 1999.
<PAGE>
SIDE 1
PROXY
EVANS & SUTHERLAND COMPUTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 20, 1999
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, held of record by the undersigned, on April 2, 1999, at the
annual meeting of shareholders to be held on Thursday, May 20, 1999 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 NOMINEE NAMED ON THE
REVERSE, "FOR" THE PROPOSAL TO AMEND THE 1998 STOCK OPTION PLAN, AND "FOR"
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL YEAR 1999. PLEASE COMPLETE, SIGN, AND DATE THIS PROXY
WHERE INDICATED AND RETURN PROMPTLY IN THE ACCOMPANYING PREPAID ENVELOPE.
(To be Signed on Reverse Side.)
SIDE 2
1. ELECTION OF DIRECTOR, Stewart Carrell, to serve for a three year term
expiring at the Company's annual meeting to be held in the year 2002 and
until his successor is duly elected and qualified.
/ / For / / Against / / Abstain
2. Proposal to amend the Evans & Sutherland 1998 Stock Option Plan.
/ / For / / Against / / Abstain
3. Proposal to ratify the appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 1999.
/ / For / / Against / / Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment
or postponement thereof.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
Signature Date Signature Date
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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.
