PARLEX CORPORATION One Parlex Place, Methuen, Massachusetts 01844
October 30, 1998
Dear Stockholder,
I am pleased to invite you to attend Parlex Corporation's annual
meeting. The meeting will be held on Tuesday, December 1, 1998, at 9:30 a.m.
at the Fleet Bank Building, eighth floor, One Federal Street, Boston,
Massachusetts.
As the accompanying notice and proxy statement describe, the only
actions scheduled for this year's meeting are (1) the approval of the
amendment to the Company's 1989 Employees' Stock Option Plan; and (2) the
election of three directors each for a term of three years.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
ACCORDINGLY, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY AT YOUR
EARLIEST CONVENIENCE.
I look forward to meeting as many of our stockholders as possible and
hope you can be present on December 1st.
Sincerely,
/s/ HERBERT W. POLLACK
HERBERT W. POLLACK
Chairman of the Board
Parlex
Corporation
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Parlex Corporation:
The Annual Meeting of Stockholders of Parlex Corporation will be held
on the eighth floor of the Fleet Bank Building, One Federal Street, Boston,
Massachusetts, on Tuesday, December 1, 1998, at 9:30 a.m. for the following
purposes:
1. to elect three Class I members of the Board of Directors to serve
for a period of three years and until their successors are elected
and qualified;
2. to consider and act upon a proposal to amend the Company's 1989
Employees' Stock Option Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 300,000 shares to
an aggregate of 750,000 shares; and
3. to consider and act upon any other matter that properly comes
before the meeting or any adjournment thereof.
By Order of the Board of Directors
JILL POLLACK KUTCHIN
Clerk
Methuen, Massachusetts
October 30, 1998
PARLEX CORPORATION
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
DECEMBER 1, 1998
This statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Parlex Corporation (the
"Company") for use at the Company's Annual Meeting of Stockholders to be
held on Tuesday, December 1, 1998, at the time and place set forth in the
notice of the meeting, and at any adjournment(s) thereof. The approximate
date on which this Proxy Statement and form of proxy are first being sent to
stockholders is October 30, 1998.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to any particular matter to be acted upon, proxies
will be voted in favor thereof. Any person giving the enclosed form of
proxy has the power to revoke it by voting in person at the meeting, or by
giving written notice of revocation to the Clerk of the Company at any time
before the proxy is exercised.
The holders of a majority of the number of shares of common stock
issued, outstanding, and entitled to vote are required to be present in
person or be represented by proxy at the meeting in order to constitute a
quorum for the transaction of business. If a quorum is present, the election
of directors will be determined by a plurality of the votes cast.
The Company will bear the costs of this solicitation. It is expected
that the solicitation will be made primarily by mail, but regular employees
of the Company (none of whom will receive any extra compensation for their
activities) may also solicit proxies by telephone, facsimile and in person
and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to their principals at the
expense of the Company.
As of the current date, the management of the Company is not aware of
any other matters to be presented for action at the meeting. If any matter
other than that described does properly come before the meeting, the
individuals named in the enclosed proxy will vote the shares represented
thereby in accordance with their best judgment.
The Company's principal executive offices are located at One Parlex
Place (formerly known as 145 Milk Street), Methuen, Massachusetts 01844,
telephone number (978) 685-4341.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on October 16,
1998, are entitled to notice of and to vote at the meeting. At the close of
business on that date, the Company had outstanding and entitled to vote
4,640,836 shares of Common Stock, par value $.10 per share ("Common Stock").
Each outstanding share of the Company's Common Stock entitles the record
holder to one vote.
ELECTION OF DIRECTORS
The Company's Restated Articles of Organization provide for a Board of
Directors consisting of seven members divided into three classes and elected
by stockholders for staggered terms of three years each. Of the current
total of seven directors, three Class I Directors have terms expiring at the
1998 Annual Meeting, two Class II Directors have terms expiring at the 1999
Annual Meeting and two Class III Directors have terms expiring at the 2000
Annual Meeting. The three directors whose terms expire at the 1998 Annual
Meeting have been nominated by the Board of Directors for election at such
meeting. All of the nominees for director are now Class I members of the
Board of Directors. Each Class I Director elected at the 1998 Annual Meeting
will serve until the 2001 Annual Meeting of Stockholders or Special Meeting
in lieu thereof, and until that director's successor is elected and
qualified.
The individuals named in the enclosed form of proxy will, if so
authorized, vote to elect as Class I Directors the persons named below under
the caption Class I Director Nominees. The management of the Company is not
aware of any reason why the nominees for director would not be able to
serve. If any of the nominees are unable to serve, the individuals named in
the enclosed form of proxy will vote in favor of such other person as the
Board of Directors may at the time recommend. Information regarding these
nominees is set forth below.
Class I Director Nominees
Lester Pollack (age 65).
Mr. Pollack is a Managing Director of Centre Partners Management LLC,
a private investment firm, and has been Senior Managing Director of
Corporate Partners since 1988, Managing Director of Lazard Freres & Co. LLC
since 1986 and Chief Executive Officer of Centre Partners L.P. since 1986.
He is also a Director of Firearms Training Systems, Inc., SunAmerica, Inc.,
LaSalle Re Holdings Limited and Tidewater Inc. Lester Pollack is the brother
of Herbert W. Pollack. He has been a Director of the Company since 1970.
Benjamin M. Rabinovici (age 76).
Dr. Rabinovici was President of Tympanium Corporation, a manufacturer
of electronic products, from 1980 to March 1996. He has been a Director of
the Company since 1970.
Richard W. Hale (age 60).
Mr. Hale has been President and Chief Executive Officer of VXI
Corporation, a manufacturer of electronic products for the telephone and
computer industry, since April 1998. He was President and Chief Executive
Officer of Watson Technologies, Inc., a manufacturer of electronic products,
from 1996 to March 1998. In addition, he has been Chairman and Chief
Executive Officer of Hale Industries, Inc., a private investment firm, since
August 1993. From 1988 to July 1993, he was Executive Vice President and
Chief Operating Officer and a member of the Board of Directors of M/A-Com,
Inc. He has been a Director of the Company since February 1995.
The following persons will continue to be Directors of the Company:
Class II Directors
(term of office to expire with the annual meeting of stockholders to be
held in December 1999)
M. Joel Kosheff (age 60).
Mr. Kosheff has been Principal of M.J. Kosheff Associates, a financial
consulting firm, since January 1989. He has been a Director of the Company
since 1989.
Peter J. Murphy (age 49).
Mr. Murphy has been President of the Company since July 1, 1995, and
on July 1, 1997, was elected to the office of Chief Executive Officer. He
was Chief Operating Officer and Executive Vice President from May 1994 to
July 1995 and Vice President and General Manager of Flexible Circuit
Products from February 1993 to May 1994. Mr. Murphy initially served as
Assistant to the President from December 1992 to February 1993. From 1989 to
December 1992, he was President of Teledyne Electo-Mechanisms, a
manufacturer of flexible circuits. Mr. Murphy is a Director of Nashua
Corporation. He has been a Director of the Company since 1994.
Class III Directors
(term of office to expire with the annual meeting of stockholders to be
held in December 2000)
Herbert W. Pollack (age 71).
Mr. Pollack has served as Chairman of the Board and Treasurer of the
Company since it was founded in 1970. He was President of the Company from
1970 to July 1, 1995, and Chief Executive Officer from 1970 to June 1997.
Mr. Pollack is the brother of Lester Pollack and the father of Jill Pollack
Kutchin.
Sheldon Buckler (age 67).
Dr. Buckler has been Chairman of the Board of Commonwealth Energy
System, a supplier of energy products, since May 1995. He was employed by
Polaroid Corporation from 1964 until his retirement as Vice Chairman of the
Board of Directors in May 1994. Dr. Buckler is a Director of Aseco
Corporation, Cerion Technology Corporation, Nashua Corporation and Spectrum
Information Technologies Corporation. He has been a Director of the Company
since February 1995.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during fiscal year 1998.
Each outside director received a $10,000 annual retainer for his services,
plus $1,500 for each directors' meeting he attended.
The Board has an Audit Committee and a Compensation Committee but does
not have a nominating committee. All Directors attended at least 75% of all
meetings of the Board. All Directors attended at least 75% of all meetings
of the committees of the Board on which they served.
During fiscal year 1998, the Audit Committee, of which Messrs.
Buckler, Kosheff and Lester Pollack were members, held two meetings. The
Audit Committee reviews the internal controls of the Company. It meets with
appropriate Company financial personnel as well as the Company's independent
auditors. The Committee reviews the scope and results of the professional
services provided by the Company's independent auditors and the fees charged
for such services and makes such recommendations to the Board as it deems
appropriate, including recommendations as to the appointment of independent
auditors. The Committee is composed entirely of independent outside
directors.
During fiscal year 1998, the Compensation Committee, of which Messrs.
Hale, Kosheff and Rabinovici were members, held two meetings. This is the
committee of the Board responsible for establishing the compensation of the
Chief Executive Officer and setting policy for compensation at the senior
levels of the Company, as well as administering various employee stock
option plans. The Committee is composed entirely of independent outside
directors.
In order to continue to attract and retain outside directors of
exceptional ability, the Company maintains the 1989 Outside Directors' Stock
Option Plan (the "1989 Director Plan") covering 112,500 shares of Common
Stock and the 1996 Outside Directors' Stock Option Plan (the "1996 Director
Plan") covering 150,000 shares of Common Stock. Options are granted pursuant
to the 1989 Director Plan only to non-employee members of the Board of
Directors of the Company. Each member of the Company's Board of Directors
who is neither an employee nor an officer of the Company who becomes a
member of the Board of Directors for the first time on or after August 22,
1989, will be automatically granted on the date such membership on the Board
of Directors commences, without further action by the Board, an option to
purchase 7,500 shares of the Company's Common Stock. In addition, each
incumbent member of the Company's Board of Directors who is neither an
employee nor an officer of the Company and who has been a member of the
Board of Directors for at least five years shall receive an automatic grant
on the first business day following his fifth year in office, without
further action by the Board, of an option to purchase 7,500 shares of the
Company's Common Stock. Options granted under the 1989 Director Plan become
exercisable in equal installments on each of the first five anniversaries of
the date of the option grant. The exercise price per share of options
granted under the 1989 Director Plan shall be the closing sale price of a
share of the Company's Common Stock on the date the option is granted as
listed on the Nasdaq National Market.
Options are granted pursuant to the 1996 Director Plan only to non-
employee members of the Board of Directors of the Company. Commencing on
August 20, 1996, and on the date of each annual meeting of stockholders
thereafter beginning with the 1997 annual meeting of stockholders, each
member of the Company's Board of Directors who is not an employee of the
Company will be automatically granted an option to purchase 1,500 shares of
the Company's Common Stock. Options granted under the 1996 Director Plan
become fully exercisable one year from the date of the option grant. In
addition to the formula option referred to above, the Board of Directors may
award options on an annual basis to purchase up to 2,250 shares of the
Company's Common Stock to non-employee members of the Board of Directors in
recognition of extraordinary efforts and contributions to the Board. Except
for the specific options referred to above, no other options shall be
granted under the 1996 Director Plan. The exercise price per share of
options granted under the 1996 Director Plan shall be the closing sale price
of a share of the Company's Common Stock on the date the option is granted
as listed on the Nasdaq National Market.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 16, 1998,
by: (i) each person who is known by the Company to own beneficially more
than 5% of the outstanding Common Stock; (ii) each of the Company's
directors and nominees for director; (iii) each of the executive officers
named in the Summary Compensation Table on page 8; and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares of
Common Stock % of Outstanding
Owned Common Stock
Stockholder Beneficially(1) Owned Beneficially
----------- --------------- ------------------
<S> <C> <C>
Herbert W. Pollack(2)(3)(4) 782,639 16.9
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Sandra Pollack 232,600 5.0
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Walter A. Winshall(5) 457,624 9.9
3 Ferndale Road
Weston, MA 02193
Standish, Ayer & Wood, Inc.(6) 265,400 5.7
One Financial Center
Boston, MA 02111
Benjamin M. Rabinovici(2)(7) 214,900 4.6
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Peter J. Murphy(2)(3)(8) 70,300 1.5
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Lester Pollack(2)(9) 48,120 1.0
c/o Centre Partners L.P.
One Rockefeller Plaza
New York, NY 10020
M. Joel Kosheff(2)(10) 22,500 *
31 Pier 7
Charlestown, MA 02129
Alfred R. Calvetti(3)(11) 15,500 *
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Steven M. Millstein(3)(12) 8,750 *
c/o Parlex Corporation
One Parlex Place
Methuen, MA 01844
Sheldon Buckler(2)(13) 6,000 *
200 Dudley Road
Newton Centre, MA 02159
Richard W. Hale(2)(14) 4,500 *
c/o VXI Corporation
One Front Street
P.O. Box 490
Rollinsford, NH 03869
All directors and officers
as a group (10 persons)(15) 1,316,933 28.4
- --------------------
<F*> Less than one percent.
<F1> For purposes of this table, any person who directly or indirectly has
or shares voting or investment power with respect to shares of Common
Stock is deemed a beneficial owner of those shares. Thus, more than
one person may be the beneficial owner of particular shares. Each
person listed above is deemed to have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
<F2> Denotes a director or a director nominee of the Company.
<F3> Denotes an executive officer of the Company.
<F4> The shares shown as owned by Herbert W. Pollack include 232,600
shares, of which he disclaims beneficial ownership, owned directly by
his wife, Sandra Pollack. The shares shown as owned by Mr. Pollack
include 75,000 shares which he has the right to acquire within 60 days
of October 16, 1998, by the exercise of stock options granted under
the Company's 1989 Employees' Stock Option Plan (the "1989 Option
Plan").
<F5> The shares shown as owned by Walter A. Winshall are as reported in a
Statement on Form 4 filed by him with respect to his holdings of
Common Stock as of September, 1997.
<F6> The shares shown as owned by Standish, Ayer & Wood, Inc. are as
reported by Standish, Ayer & Wood, Inc. in a Statement on Schedule 13G
with respect to its holdings of Common Stock as of February 5, 1998.
<F7> The shares shown as owned by Dr. Rabinovici include 81,400 shares, of
which he disclaims beneficial ownership, owned directly by his wife.
The shares shown as owned by Dr. Rabinovici also include 15,000 shares
which he has the right to acquire within 60 days of October 16, 1998,
by the exercise of stock options granted under the Company's 1989
Director Plan and the Company's 1996 Director Plan.
<F8> The shares shown as owned by Mr. Murphy include 47,500 shares which he
has the right to acquire within 60 days of October 16, 1998, by the
exercise of stock options granted under the Company's 1989 Option
Plan.
<F9> The shares shown as owned by Lester Pollack include 15,000 shares
which he has the right to acquire within 60 days of October 16, 1998,
by the exercise of stock options granted under the Company's 1989
Director Plan and the Company's 1996 Director Plan.
<F10> The shares shown as owned by Mr. Kosheff include 15,000 shares which
he has the right to acquire within 60 days of October 16, 1998, by the
exercise of stock options granted under the Company's 1989 Director
Plan and the Company's 1996 Director Plan.
<F11> The shares shown as owned by Mr. Calvetti are shares which he has the
right to acquire within 60 days of October 16, 1998, by the exercise
of stock options granted under the Company's 1985 Employees' Non-
Qualified Stock Option Plan (the "1985 Option Plan") and the Company's
1989 Option Plan.
<F12> The shares shown as owned by Mr. Millstein include 500 shares which he
has the right to acquire within 60 days of October 16, 1998, by the
exercise of stock options granted under the Company's 1989 Option
Plan.
<F13> The shares shown as owned by Dr. Buckler include 4,500 shares which he
has the right to acquire within 60 days of October 16, 1998, by the
exercise of stock options granted under the Company's 1989 Director
Plan and the Company's 1996 Director Plan.
<F14> The shares shown as owned by Mr. Hale are shares which he has the
right to acquire within 60 days of October 16, 1998, by the exercise
of stock options granted under the Company's 1989 Director Plan and
the Company's 1996 Director Plan.
<F15> The number of shares shown as beneficially owned by officers and
directors include 193,000 shares which they have the right to acquire
within 60 days of October 16, 1998, by the exercise of stock options.
</TABLE>
--------------------
EXECUTIVE OFFICERS
The executive officers of the Company, together with a description of
the business experience backgrounds of all of them except Herbert W. Pollack
and Peter J. Murphy (whose backgrounds are described under the caption
Election of Directors) are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <S>
Herbert W. Pollack 71 Chairman of the Board of Directors and
Treasurer
Peter J. Murphy 49 President, Chief Executive Officer and
Director
Alfred R. Calvetti 55 Vice President and General Manager-
Laminated Cable Products
Jill Pollack Kutchin 46 Vice President-Corporate Affairs and
Clerk
Steven M. Millstein 54 Vice President-Finance
</TABLE>
Mr. Calvetti joined the Company in July 1971 and has served in a
variety of technical and managerial roles. From December 1988 to February
1993, he was Vice President and General Manager of Laminated Cable Products.
In February 1993, he became a Corporate Vice President and General Manager
of Laminated Cable Products.
Ms. Kutchin joined the Company in January 1977 and served as Manager-
Marketing Administration until December 1983, when she became Vice
President-Corporate Affairs. Since November 1980, she has also been Clerk of
the Company. Ms. Kutchin is the daughter of Herbert W. Pollack.
Mr. Millstein joined the Company in March 1977, serving initially as
Controller and from February 1979 to February 1988 as Vice President-
Controller. In February 1988, he became Vice President-Finance.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the fiscal years ending June 30, 1998,
1997, and 1996, all compensation earned or paid to the Company's Chief
Executive Officer and each of the Company's most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000 in
each year for all services rendered in all capacities to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------ ---------------------
Awards
------
Securities Underlying
Name and Stock Options All Other
Principal Position Year Salary($) Bonus($)(1) (Number of Shares) Compensation($)
------------------ ---- --------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Herbert W. Pollack(2)(3) 1998 $218,640 - - -
Chairman and Treasurer 1997 218,640 - - -
1996 218,640 - - -
Peter J. Murphy(4) 1998 $210,000 $25,000 - -
President and Chief 1997 192,504 50,000 - -
Executive Officer 1996 175,008 25,000 - -
Alfred R. Calvetti 1998 $115,560 $64,000 - -
Vice President and General 1997 110,016 54,000 - -
Manager-Laminated Cable 1996 105,936 46,375 - -
Products
Steven M. Millstein(5) 1998 $100,008 $ 5,000 - -
Vice President-Finance 1997 96,224 5,000 - -
- --------------------
<F1> Amounts shown were earned in the years indicated. Bonuses are
generally paid in the first quarter of the following fiscal year.
<F2> For a description of the employment agreement between the Company and
Mr. Pollack, see EMPLOYMENT AGREEMENTS below.
<F3> The amount shown for Mr. Pollack for fiscal year 1996 includes a fee
as Chairman of the Board of Directors in the amount of $1,800 per
month.
<F4> For a description of the employment agreement between the Company and
Mr. Murphy, see EMPLOYMENT AGREEMENTS below.
<F5> Mr. Millstein became an executive officer for reporting purposes for
the first time in fiscal year 1997 and, therefore, no information is
provided for earlier years.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Pollack in
July 1997, for a period of three years ending June 30, 2000, which provides
for current compensation of $8,210 twice a month. The agreement provides for
a death benefit payment equal to 75% of his current compensation for a
period of 24 months after his death. The agreement also provides that the
employee will not own, operate, or manage any business in competition with
that of the Company so long as he is employed by the Company and, in certain
instances, for a one-year period thereafter.
The Company entered into an employment agreement with Mr. Murphy in
June 1996, for a period of three years ending June 30, 1999, which provides
for current compensation of $8,750 twice a month. The agreement provides for
a death benefit payment equal to 75% of his current compensation for a
period of 24 months after his death. The agreement also provides that the
employee will not own, operate, or manage any business in competition with
that of the Company so long as he is employed by the Company and, in certain
instances, for a one-year period thereafter.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information relating to stock option
grants to the named executive officers during fiscal year 1998. Pursuant to
applicable Securities and Exchange Commission regulations, the amounts shown
under the heading "Potential Realizable Value" are based on arbitrarily
assumed annualized rates of stock price appreciation of five percent and ten
percent, compounded annually, from the date of grant to the end of the ten
year option term. Actual stock appreciation on options exercised are
dependent on the future performance of the Company's Common Stock and
overall stock market conditions. There can be no assurance that these values
will be achieved.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Five-Year Option Term
----------------------- ----------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise
Granted in Fiscal Price Expiration
Name (#) Year 1998 ($/Share) Date 5%($) 10%($)
---- ---------- ---------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Herbert W. Pollack - - - - - -
Peter J. Murphy(1) 40,000 42 $18.75 8/20/07 $471,671 $1,195,307
Alfred R. Calvetti(1) 2,000 2 18.75 8/20/07 23,584 59,765
Steven M. Millstein(1) 2,000 2 18.75 8/20/07 23,584 59,765
- --------------------
<F1> The shares were granted under the 1989 Option Plan, at an exercise
price equal to the fair market value of the Company's stock on the
date of grant and become exerciseable in increments of 25% over the
first five years of the ten year period, the first 25% becoming
exercisable one year after the grant date.
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information relating to the aggregate
exercised and unexercised stock options held by the named executive officers
during fiscal year 1998 and the value of their unexercised stock options as
of June 30, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money
Acquired Options at 6/30/98(#) Options at 6/30/98($)(1)
on Value --------------------------- ------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert W. Pollack - - 75,000(2) - $668,250 -
Chairman and Treasurer
Peter J. Murphy 32,250 $498,424 37,500(2) 40,000(2) $349,875 $0
President and Chief
Executive Officer
Alfred R. Calvetti - - 15,000(3) 2,000(2) $142,500 $0
Vice President and General
Manager-Laminated Cable
Products
Steven M. Millstein 3,750 $ 50,925 - 2,000(2) - $0
Vice President-Finance
- --------------------
<F1> The "value of unexercised in-the-money options at June 30, 1998" was
calculated by determining the difference between the fair market value
of the underlying Common Stock at June 30, 1998, (closing price of the
Company's Common Stock on the Nasdaq National Market on June 30, 1998,
was $13.50 per share) and the exercise prices of the stock options. An
option is "in-the-money" when the fair market value of the underlying
Common Stock exceeds the exercise price of the option.
<F2> These shares were granted under the 1989 Option Plan.
<F3> These shares were granted under the 1985 Option Plan.
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate other
filings with the Securities and Exchange Commission, including this Proxy
Statement, in whole or in part, the following report and the Stock
Performance Graph on page 12 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Committee
The Compensation Committee (the "Committee") is comprised of Messrs.
Hale, Kosheff and Rabinovici. This is the committee of the Board responsible
for establishing the compensation of the Chief Executive Officer and setting
policy for compensation at the senior levels of the Company, as well as
administering various employee stock option plans. The Committee is composed
entirely of independent outside directors.
Compensation Philosophy
The Committee maintains a philosophy that executive compensation
levels should be competitive and consistent with flexible interconnect
industry standards to enable the Company to attract, motivate and retain
executive officers of outstanding ability who are capable of making
significant contributions which are critical to the Company's success. The
Committee believes that such compensation also should be meaningfully
related to both an individual's job performance, as measured by the
achievement of qualitative objectives, and the performance of the Company,
as measured by its profitability, the value created for stockholders and the
realization of the Company's short- and long-term strategic goals. The
Company's compensation policies are designed to attract and retain talented
managers and motivate such managers to enhance the Company's performance,
thereby building value into the Company's business. The Company also seeks
to align the interests of its executives with the long-term interests of
stockholders in the enhancement of stockholder value through stock option
awards that can result in the ownership of the Company's common stock.
At present, compensation of the Company's executive officers is
composed of the following elements: annual base salary, annual performance
incentives in the form of cash bonuses and long-term performance incentives
in the form of stock option awards under the 1985 Option Plan and the 1989
Option Plan.
Base Salary
The Committee's general approach to compensating executive officers is
to pay cash salaries competitive with industry standards based upon the
individual's experience and past and potential contribution to the success
of the Company. In determining industry standards, the Committee compares
compensation levels paid by a self-selected group of flexible interconnect
industry companies that compete in the Company's line of business. Such
compensation information is obtained from various publicly available
sources.
The Committee also believes that compensation should be meaningfully
related to the value created by individual executive officers for the
stockholders. Accordingly, the Committee considers the quality of an
individual executive's contribution to the Company's overall profitability
and success in determining the executive's salary. The Committee reviews on
an annual basis the salaries of its executive officers in light of the
foregoing factors. The Company believes that the base salaries of its
executive officers have been at or below the median of the base salaries for
executive officers in the flexible interconnect industry.
Annual Incentives
The Company has traditionally paid employee performance bonuses once a
year, usually during the first quarter of the following fiscal year for
which the bonus is earned. Bonuses are traditionally based on both
individual performance and Company performance. Except for a particular
incentive bonus arrangement entered into with Mr. Calvetti, the Board has
not utilized any specific formula for determination of bonus amounts. For
fiscal year 1998, Mr. Calvetti received a bonus based upon the achievement
of financial and operating performance objectives as provided in his
incentive bonus arrangement and Mr. Millstein received a bonus in
recognition of his individual performance and the Committee's assessment of
his role in promoting the long-term strategic growth of the Company.
Stock Options
Stock options are used as the primary long-term incentive vehicle. The
Committee believes that reliance upon such incentives is advantageous to the
Company because they foster a long-term commitment by the recipient to the
Company and motivate the employees to seek to improve the long-term market
performance of the Company's stock. Thus, stock option grants provide an
incentive for the executive to manage the Company from the perspective of an
owner with an equity stake in the business. During fiscal year 1998, the
Board authorized the grant of stock options under the 1989 Option Plan to
executive officers and other key employees. Stock option grants to executive
officers are discretionary and reflect the relative value of the
individual's position as well as the current performance and continuing
contribution of that individual to the Company. The Board does not utilize
any specific formula for determination of option grants.
Compensation of the Chief Executive Officer
On July 1, 1997, Mr. Murphy was promoted to Chief Executive Officer of
the Company. In fiscal year 1998, Mr. Murphy's annual base salary was
increased to $210,000 in order to bring his salary in line with the
competitive salary range for his position. In fiscal year 1998, the
Committee granted to Mr. Murphy an option to purchase 40,000 shares under
the 1989 Option Plan at an exercise price equal to the fair market value of
the Company's stock on the date of grant. The option expires after ten years
and becomes exercisable in increments of 25% over the first five years of
the ten year term of the option. The first 25% become exercisable one year
after the date of grant. The purpose of this grant was to reward Mr. Murphy
for his expanded role and responsibilities, and to enable him to purchase
and maintain an equity interest in the Company and to share in the
appreciation of the value of the stock.
Benefits
The Company provides medical, life insurance and profit sharing
benefits to the executive officers that generally are available to all
Company employees.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986 (the "Code")
limits a company's ability to take a deduction for federal tax purposes for
certain compensation paid to its executives. The Company currently expects
that all compensation payable to executive officers during fiscal year 1998
will be deductible by the Company for federal income tax purposes. The
Committee's policy with respect to compensation to be paid to executive
officers is to structure compensation payments to executive officers so as
to be deductible under Section 162(m).
COMPENSATION COMMITTEE
Benjamin M. Rabinovici, Chairman
Richard W. Hale
M. Joel Kosheff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal year 1998, the Compensation Committee members were Benjamin
M. Rabinovici, Richard W. Hale and M. Joel Kosheff, none of whom has ever
been employed by the Company. Further, the Board of Directors is unaware of
any relationship of any member of the Compensation Committee required to be
disclosed under Item 402(j) or 404 of Regulation S-K promulgated by the
Securities and Exchange Commission.
STOCK PERFORMANCE GRAPH
The following Stock Performance Graph compares the cumulative total
shareholder return on the Company's Common Stock for a five year period
(July 1, 1993 to June 30, 1998) with the cumulative total return of the CRSP
Total Return Index for the Nasdaq National Market and a group of peer
companies. The companies included in the peer group are Adflex Solutions,
Inc., Altron Incorporated, Hadco Corporation, Merix Corporation and
Sheldahl, Inc. The Performance Graph assumes the investment of $100 on July
1, 1993, in the Company's Common Stock, in the Nasdaq National Market
companies and in the peer group and also assumes the reinvestment of all
dividends. The returns for each company in the peer group have been weighted
to reflect stock market capitalization.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
PARLEX CORPORATION, NASDAQ NATIONAL MARKET INDEX, AND PEER GROUP
<TABLE>
<CAPTION>
6/93 6/94 6/95 6/96 6/97 6/98
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Parlex $100 $ 98 $164 $208 $354 $324
Nasdaq $100 $101 $135 $173 $210 $278
Peer Group $100 $103 $265 $243 $345 $167
</TABLE>
PROPOSAL TO AMEND THE PARLEX CORPORATION
1989 EMPLOYEES' STOCK OPTION PLAN
The 1989 Option Plan was originally approved by the stockholders in
1989 and was amended by a vote of the stockholders on December 6, 1994, to
include an additional 150,000 shares of Common Stock. On August 25, 1998,
the Board of Directors unanimously adopted, subject to stockholder approval,
an amendment to the 1989 Option Plan. The amendment to the 1989 Option Plan
will increase the number of shares reserved for issuance thereunder by
300,000 shares, from 450,000 to 750,000 shares of Common Stock. As of
October 16, 1998, 70,442 of these shares remained available for future
issuance under the 1989 Option Plan. The Board of Directors believes that
stockholder approval of the amendment to the 1989 Option Plan will provide
the Company with equity award opportunities to continue to attract, retain
and motivate the best available talent for the successful conduct of its
business and further align the interests of the Company's employees with
those of its stockholders. The Board of Directors believes that the number
of shares currently available for issuance under the 1989 Option Plan will
be insufficient to accomplish these purposes.
The purposes of the 1989 Option Plan are to encourage and enable
employees of the Company to acquire a proprietary interest in the Company
through the ownership of its Common Stock in order to assure a closer
identification of their interests with those of the Company and provide
appropriate incentives for such employees. The amendment to the 1989 Option
Plan will become effective only upon the approval thereof by the
stockholders of the Company.
As of October 16, 1998, there were approximately 100 employees of the
Company eligible to participate in the 1989 Option Plan and approximately 50
employees participating in the 1989 Option Plan. The Company cannot now
determine the number of shares to be received by all current executive
officers as a group and all employees, including all current officers, who
are not executive officers, as a group, in the event they participate in the
1989 Option Plan. Members of the Board of Directors of the Company who are
not employed as regular salaried officers or employees of the Company may
not participate in the 1989 Option Plan. The closing price of a share of
Common Stock on the Nasdaq National Market on October 16, 1998 was $9.63.
The proceeds received by the Company from the sale of Common Stock pursuant
to the 1989 Option Plan will be used for the general corporate purposes of
the Company. Grants of the options under the 1989 Option Plan to the named
executive officers during fiscal year 1998 are shown in the table on page 9.
The following is a brief summary of the 1989 Option Plan, as amended,
the full text of which is set forth in Exhibit A to the Proxy Statement.
This summary is qualified in its entirety by reference to such Exhibit.
Grant and Exercise of Options. Under the amended 1989 Option Plan, a
maximum of 750,000 shares of Common Stock may be issued upon the exercise of
options granted under the 1989 Option Plan subject to adjustment under
certain circumstances.
Options to purchase shares of Common Stock may be granted under the
1989 Option Plan to such key employees of the Company as may be selected by
the Board of Directors. The 1989 Option Plan provides for the grant of
options that are intended to qualify as "incentive stock options"
("Incentive Options") under Section 422A of the Code, as well as the grant
of non-qualified options ("Non-qualified Options"). The exercise price per
share of the Non-qualified Options granted under the 1989 Option Plan shall
in no case be less than the par value of the Common Stock. The exercise
price per share of the Incentive Options granted under the 1989 Option Plan
shall be equivalent to the closing price of a share of the Company's Common
Stock on the date of grant as listed on the Nasdaq National Market.
Options granted under the 1989 Option Plan will be exercisable at such
time or times as the Board of Directors determines. However, no option will
be exercisable more than ten years after the date of grant and, generally,
options are not exercisable less than one year after the date of grant.
Options granted under the 1989 Option Plan are exercisable during the
lifetime of the grantee only by such grantee, and are transferable only by
will or under the laws of descent and distribution. If a grantee's
employment or service with the Company terminates for any reason (other than
death), all options which were not presently exercisable on the date of such
termination of employment terminate immediately. If a grantee dies while in
the employ of the Company, his options will, to the extent exercisable on
the date of such grantee's death, be exercisable by the grantee's personal
representative during the earlier of the six month period following the
grantee's death or the date specified for termination of the option pursuant
to the 1989 Option Plan, unless the grantee's will specifically disposes of
such option in which case such exercise shall be made only by the recipient
of such specific disposition. Such representative or recipient shall be
bound by the terms and conditions of the 1989 Option Plan.
Administration and Amendment. The 1989 Option Plan is administered by
the Company's Board of Directors, which may, at any time, delegate to a
committee of no fewer than three directors, none of whom are eligible to
participate in the 1989 Option Plan (the "Committee"), full power to grant
options, to construe and interpret the 1989 Option Plan, to establish and
amend rules for its administration and to make certain other decisions and
take certain other actions enumerated in the 1989 Option Plan. The Board
selects the key employees to whom options are granted and has full power to
interpret, construe and implement the provisions of the 1989 Option Plan and
to prescribe, amend and rescind rules and regulations relating thereto. The
determinations of the Board with respect to the 1989 Option Plan are
conclusive on the employees eligible to participate therein and their legal
representatives and beneficiaries.
The Board of Directors may terminate, modify or amend the 1989 Option
Plan at any time or from time to time, except that without prior approval of
the stockholders, the total number of shares that may be issued under the
1989 Option Plan may not be increased except as previously described in the
1989 Option Plan, provided that no such termination, modification or
amendment may adversely affect an option right previously granted without
the consent of the grantee.
Federal Income Tax Consequences. The Non-qualified Options granted
under the 1989 Option Plan are intended to be "non-qualified stock options"
subject to Section 83 of the Code. The grant of options under the 1989
Option Plan will not be treated as income to the grantee for Federal income
tax purposes, nor will such grant result in a deduction for tax purposes to
the Company. Upon exercise of a non-qualified stock option, the grantee will
generally recognize ordinary income in the year of exercise equal to the
excess of (a) the fair market value of the shares purchased, determined on
the date of exercise, over (b) the exercise price.* Income recognized in
connection with the exercise of a non-qualified stock option will be treated
as ordinary income to the grantee, and the Company will be required to
withhold tax on the amount of income realized by the grantee. The Company
will be entitled to an income tax deduction for its taxable year in which
the grantee realizes income with respect to a stock option, in an amount
equal to the income realized by the grantee. When a grantee disposes of
shares acquired pursuant to the exercise of a non-qualified stock option,
any amount received in excess of the fair market value on the date of
exercise will be treated as long-term or short-term capital gain. If the
amount is less than the fair market value on the date of exercise, the loss
will be treated as long or short-term capital loss.
[FN]
- --------------------
* In the case of a grantee subject to the "short-swing" insider trading
restrictions of Section 16(b) of the Securities Exchange Act of 1934,
the date six months after exercise may determine the amount of income
and the year in which such income is taxable.
</FN>
The Incentive Options granted under the 1989 Option Plan are intended
to qualify as incentive stock options, to the extent permissible, under
Section 422A of the Code. The grant of options under the 1989 Option Plan
will not be treated as income to the grantees for Federal income tax
purposes, nor will such grant result in a deduction for tax purposes to the
Company. In general, upon exercise of an incentive stock option while
employed by the Company or within the three month period after the
termination of employment, the grantee will not recognize any ordinary
income, and the Company will not be entitled to a deduction for tax
purposes. If the grantee does not dispose of shares acquired upon exercise
of an incentive stock option until more than two years from the date of
grant and one year from the date of exercise, the excess of the sale
proceeds over the aggregate exercise price of such shares will be long-term
capital gain.
Stockholder Voting on the Proposal. Approval of the amendment to the
1989 Option Plan requires the affirmative vote of the stockholders holding a
majority of the Company's shares present (in person or by proxy) and
entitled to vote at the annual meeting or any adjournment thereof.
The Board of Directors recommends a vote FOR approval of the amendment
to the 1989 Option Plan.
INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP to be the
independent auditors to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 1999. Deloitte & Touche LLP has
been regularly employed by the Company for audit of consolidated financial
statements and other purposes since the Company's organization in 1970.
Representatives of Deloitte & Touche LLP expect to be present at the
meeting, and, while they do not plan to make a statement at the meeting,
such representatives will be available to respond to appropriate questions
from stockholders in attendance.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders must be received by
the Clerk of the Company at One Parlex Place, Methuen, Massachusetts 01844,
no later than June 25, 1999. Under regulations adopted by the Securities and
Exchange Commission, if a proponent of a stockholder proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of
the prior year's proxy statement, then the proxies appointed herein shall be
allowed to use their discretionary voting authority when a proposal is
raised at the annual meeting, without any discussion of the matter in the
proxy statement.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required during the fiscal year ended June 30, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
AVAILABILITY OF FORM 10-K
Copies of the Company's Annual Report on Form 10-K with respect to the
fiscal year ended June 30, 1998 (without exhibits), as filed with the
Securities and Exchange Commission, are available to stockholders free of
charge by writing to: Investor Relations Department, Parlex Corporation, One
Parlex Place, Methuen, Massachusetts 01844.
By Order of the Board of Directors
JILL POLLACK KUTCHIN
Clerk
October 30, 1998
EXHIBIT A
PARLEX CORPORATION
1989 EMPLOYEES' STOCK OPTION PLAN
(As amended effective as of August 25, 1998)
The purposes of this 1989 Employees' Stock Option Plan (the "Plan")
are to encourage and enable employees of Parlex Corporation (the "Company")
or any of its subsidiary corporations to acquire a proprietary interest in
the Company through the ownership of shares of its Common Stock in order to
assure a closer identification of their interests with those of the Company
and to stimulate their efforts on behalf of the Company. These objectives
are sought to be achieved through the granting of "incentive stock options"
("Incentive Options") as defined in Section 422A(b) of the Internal Revenue
Code of 1986, as amended (the "Code") and non-qualified stock options ("Non-
qualified Options") as herein provided.
1. Authority to Grant Options.
Subject to the limitations herein contained, the Board of Directors of
the Company may, at any time beginning on the date hereof, grant options to
purchase shares of the Common Stock of the Company. The Board of Directors
may grant new options in exchange for the cancellation of options previously
granted under the Plan, and the option price of such new options shall be as
determined by the Board (and such option price may be lower than the option
price of canceled options).
2. Administration.
The Plan shall be administered by the Board of Directors of the
Company. The Board shall have, and may at any time delegate to a committee
(the "Committee") of no fewer than three Directors (none of whom are
eligible to participate in the Plan), full power to grant options, to
construe and interpret the Plan, and to establish and amend rules and
regulations for its administration. All action taken and decisions made by
the Board of Directors or the Committee pursuant to the provisions of this
Plan shall be binding and conclusive on all employees eligible to
participate in the Plan and on their legal representatives and
beneficiaries. No member of the Board of Directors or of the Committee shall
be liable for any determination made or action taken in good faith with
respect to the Plan or any option granted under the Plan.
3. Stock Subject to the Plan.
(a) The aggregate number of shares of Common Stock of the Company
which may be issued upon the exercise of options granted under this Plan
shall be 750,000 shares.
(b) If an option granted hereunder shall expire or terminate for any
reason, including, without limitation, cancellation by agreement in exchange
for the grant of new options under the Plan, without having been exercised
in full, the unpurchased shares subject thereto shall again be available for
the purposes of this Plan.
4. Eligible Persons.
Options may be granted under this Plan to such key employees of the
Company or of its subsidiaries (as defined in section 425 of the Code) as
may be selected by the Board of Directors of the Company. Directors of the
Company who are also employees of the Company or any of any subsidiary shall
be eligible to receive options. An employee who has been granted an option
may, if he is otherwise eligible, be granted an additional option or options
if the Board of Directors shall so determine; provided, however, to the
extent that the aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which options intended to be
Incentive Options are exercisable for the first time by an individual during
any calendar year shall exceed $100,000 (or such higher amount as may be
permitted from time to time under section 422A of the Code), such options
shall be treated as options which are not Incentive Options. In applying the
provisions of the preceding sentence, there shall be taken into account
solely (i) Incentive Options granted to the individual under this Plan after
December 31, l986 and (ii) incentive stock options granted to the individual
after December 31, l986 under all other stock option plans of the Company
and any subsidiary corporation thereof. The rule set forth here shall be
applied by taking options into account in the order in which they were
granted.
5. Grant of Option and Option Agreement.
Each option shall be set forth in an agreement whereby the Company
grants such option (the "Option Agreement") which shall be duly executed on
behalf of the Company and by the employee to whom such option is granted. No
option shall be granted within the meaning of the Plan and no purported
grant of any option shall be effective until an Option Agreement shall have
been duly executed on behalf of the Company and the employee, and until the
employee shall have assented to the terms and provisions of the Plan.
6. Terms and Conditions of Options.
Each option granted under this Plan shall be subject to the following
terms and conditions:
(a) The purchase price per share of Common Stock payable upon
exercise of a Non-qualified Option shall be determined by the Board of
Directors of the Company on the day the option is granted, but shall
in no event be less than the par value of the stock subject to the
option. The purchase price per share of Common Stock payable upon
exercise of an Incentive Option shall be equivalent to the closing
sale price of a share of the Common Stock as listed on the NASDAQ
National Market System on the date of grant (or the last closing sale
price in the event there were no such trades on the date of grant).
The Board may in its discretion allow the purchase price for a share
of Common Stock payable upon exercise of an option granted under this
Plan to be paid with stock of the Company valued at fair market value
as of the date payment is made with such stock as determined in good
faith by the Board. If an employee owns or is deemed to own (by reason
of the attribution rules applicable under Section 425(d) of the Code)
more than 10% of the combined voting power of all classes of stock of
the Company or any subsidiary and an Incentive Option is granted to
such employee, the option price of such Incentive Option (to the
extent required by the Code at the time of grant) shall be no less
than 110% of the closing sale price of a share of Common Stock as
listed on the NASDAQ National Market System on the date of grant.
(b) Each option shall be exercisable in such installments and at
such time or times as the Board of Directors of the Company shall
determine, but in no event after the expiration of ten years from the
date on which such option is granted. If an employee owns or is deemed
to own (by reason of the attribution rules of Section 425(d) of the
Code) more than 10% of the combined voting power of all classes of
stock of the Company or any subsidiary and an Incentive Option is
granted to such employee, the term of such Incentive Option (to the
extent required by the Code at the time of grant) shall be not more
than five (5) years from the date of grant.
(c) Each option and all rights thereunder shall expire on such
date as the Board shall designate provided, however, the Board shall
not designate a date later than ten (10) years from the day on which
such option is granted. Each option shall be subject to earlier
termination as provided herein.
(d) Any option granted under the Plan may be exercised by the
employee by delivering to the Company on any business day a written
notice (the "Notice") specifying the number of shares of Common Stock
with respect to which the option is being exercised. Payment for
shares of Common Stock purchased pursuant to the exercise of an option
shall be made either in (i) cash equal to the option price for the
number of shares specified in the Notice (the "Total Option Price"),
or (ii) if authorized by the applicable option agreement, shares of
Common Stock having a fair market value, as determined in good faith
by the Board of Directors, equal to or less than the Total Option
Price, plus cash in an amount equal to the excess, if any, of the
Total Option Price over the fair market value of such shares of Common
Stock.
(e) At the time an option is granted, the Board shall fix the
period during which the option may be exercised and the percentage of
shares subject to an option which may be exercised in each successive
year; provided, however, the period during which the option may be
exercised shall not in any event extend beyond ten (10) years from the
date of grant (the "Exercise Period"). When an option becomes
initially exercisable in whole or part by an employee, it shall remain
exercisable for the Exercise Period specified in the Option Agreement
and thereafter shall expire and no longer be exercisable; provided,
however, that the Board is directed to provide in the Option Agreement
for a different Exercise Period or an earlier termination of an option
granted under the terms of this Plan and the rights thereunder in
certain cases. Notwithstanding any provision contained herein, the
Board, in its sole discretion, may after an option is granted shorten
the period during which the option or any portion thereof may not be
exercised to the extent and with the effect allowed for incentive
stock options by regulations promulgated by the Secretary of the
Treasury or his delegate.
(f) No option shall be transferable by the employee to whom it
was granted otherwise than by will or by the laws of descent and
distribution and any option shall be exercisable during the lifetime
of such employee only by him.
(g) In the event an employee ceases to be an employee of the
Company for any reason other than death, any unexercised options
granted to such employee shall be immediately terminated and become
void.
(h) In the event an employee ceases to be an employee of the
Company by reason of his death, the accrual schedule shall be
accelerated to allow the employee or his legal representative to
exercise all then accrued unexercised options. Such options may be
exercised by the employee or his legal representative, as the case may
be, within one hundred eighty (180) days after the date of death, but
in no event later than the specified expiration date of the option.
Each option granted under this Plan shall be subject to such further
terms and considerations not inconsistent herewith as the Board of Directors
of the Company shall determine.
7. Compensating Cash Payments.
The Company acknowledges that whenever an employee acquires any shares
of Common Stock pursuant to the exercise of an option granted to him under
the Plan, the employee may incur additional taxable income by reason of said
exercise, and the Company will receive a corresponding tax deduction. In
certain circumstances, the Company may determine that, in light of such tax
consequences, it is appropriate for the Company to pay such employee a cash
bonus in an amount not to exceed the amount of the federal income tax
deduction to which the Company becomes entitled as a result of the exercise
of such option by such employee, and provided further that the Company shall
not be under any legal obligation to make any cash payments pursuant to this
Paragraph 7. The Board of Directors shall, in its sole discretion, determine
the situations, if any, in which such a cash payment shall be made, the
amount of any such cash payment, and the time when any such payment shall be
made, and its determination with respect to such matters shall be conclusive
and binding on all persons.
8. Amendment of the Plan.
The Plan may at any time or from time to time be terminated, modified
or amended by the Board of Directors and the Board may amend outstanding
option agreements in a manner not inconsistent with the Plan; provided,
however, that the termination or any modification or amendment of the Plan,
or any outstanding option agreement, shall not, without the consent of an
employee, affect his rights under an option previously granted to him; and
provided, further, that no action by the Board may, unless approved by the
stockholders of the Company in the manner stated in Section 14, change the
total number of shares of stock which are reserved for issue upon the
exercise of options granted under the Plan, except as contemplated in
Section 3 hereof or (b) change the class of employees eligible to receive
options.
9. Representations of Employee.
(a) Unless the shares to be issued upon exercise of an option granted
under the Plan have been effectively registered under the Securities Act of
1933, as amended, (the "Securities Act"), as now in force or hereafter
amended, the Company shall be under no obligation to issue any shares
covered by an option unless the person who exercises such option, in whole
or in part, shall give a written representation to the Company that he is
acquiring the shares issued pursuant to such exercise of the option as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares. Each share of stock issued pursuant to the
exercise of an option pursuant to this Plan may bear a reference to the
investment representation made in accordance with this Section 9.
(b) The representation made in accordance with this Section 9 along
with any restrictions which the Board in its discretion may impose on the
stock purchased under an option granted under the Plan shall be set forth in
the Option Agreement.
10. Notice of Disposition of Stock Prior to Expiration
of Specified Holding Period: Withholding.
(a) Whenever shares are to be issued in satisfaction of an option
granted hereunder, the Company shall have the right to require the employee
to remit to the Company an amount sufficient to satisfy Federal, state,
local or other withholding tax requirements if and to the extent required by
law prior to the delivery of any certificate or certificates for such
shares.
(b) The Company may require as a condition on the issuance of shares
covered by any option that the employee exercising such option give a
written representation to the Company which is satisfactory in form and
substance to its counsel and upon which the Company may reasonably rely,
that he will report to the Company any disposition of such shares prior to
the expiration of the holding periods specified by Section 422A of the Code.
If, and to the extent that, the realization of income in such a disposition
imposes upon the Company Federal, state, local or other withholding tax
requirements, the Company shall have the right to require that the employee
remit to the Company an amount sufficient to satisfy those requirements
prior to the transfer of any such shares and the Company may require as a
condition on the issuance of shares covered by any option that the party
exercising such option give a satisfactory written representation promising
to make such a remittance.
11. Rights as a Shareholder.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option until the date of issue of a
certificate to him for such shares. Except as otherwise expressly provided
in the Plan or the Option Agreement, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
12. Adjustment Upon Changes in Capitalization.
If the shares of Common Stock as a whole are increased, decreased,
changed into or exchanged for, a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment shall be
made in the number and kind of shares subject to the Plan, and in the
number, kind and per share exercise price of shares or other securities
subject to unexercised options or portions thereof granted prior to any such
change. In the event of any such adjustment in an outstanding option, the
employee thereafter shall have the right to purchase the number of shares or
securities under such option at the per share price or per unit price, as so
adjusted, which the employee could purchase at the total purchase price
applicable to the option immediately prior to such adjustment.
13. Non-Exclusivity of the Plan.
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board of
Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
14. Effective Date of Plan: Stockholder Approval.
The Plan shall be subject to approval by the affirmative vote of
stockholders holding a majority of the Company's shares present (in person
or by proxy) at the annual meeting or any adjournment thereof and the Plan
shall take effect as of the date of adoption immediately upon such approval.
15. Federal Income Tax Consequences.
The following is a brief summary of the principal United States
Federal income tax consequences of the grant and exercise of Plan options
under Federal income tax laws in effect on the date hereof. This is not
intended to be exhaustive and does not describe state, local or foreign tax
consequences.
The Non-qualified Options granted under the Plan are intended to be
"non-qualified stock options" subject to Section 83 of the Code. The grant
of Non-qualified Options under the Plan will not be treated as income to the
grantee for Federal income tax purposes, nor will such grant result in a
deduction for tax purposes to the Company. Upon exercise of a Non-qualified
Option, the grantee will generally recognize ordinary income in the year of
exercise equal to the excess of (a) the fair market value of the shares
purchased, determined on the date of exercise, over (b) the exercise price.*
Income recognized in connection with the exercise of a Non-qualified Option
will be treated as ordinary income to the grantee, and the Company will be
required to withhold tax on the amount of income realized by the grantee.
The Company will be entitled to an income tax deduction in the year in which
the grantee realizes income with respect to a stock option, in an amount
equal to the income realized by the grantee. When a grantee disposes of
shares acquired pursuant to the exercise of a Non-qualified Option, any
amount received in excess of the fair market value on the date of exercise
will be treated as a long-term or short-term capital gain. If the amount is
less than the fair market value on the date of exercise, the loss will be
treated as a long or short-term capital loss.
[FN]
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* In the case of a grantee subject to the "short-swing" insider trading
restrictions of Section 16(b) of the Securities Exchange Act of l934,
the date six months after exercise may determine the amount of income
and the year in which such income is taxable.
</FN>
The Incentive Options granted under the Plan are intended to qualify
as incentive stock options, to the extent permissible, under Section 422A of
the Code. The grant of Incentive Options under the Plan will not be treated
as income to the grantee for Federal income tax purposes, nor will such
grant result in a deduction for tax purposes to the Company. In general,
upon exercise of an Incentive Option while employed by the Company or within
the three month period after the termination of employment, the grantee will
not recognize any ordinary income, and the Company will not be entitled to a
deduction for tax purposes. If the grantee does not dispose of shares
acquired upon exercise of an Incentive Option until more than two years from
the date of grant and one year from the date of exercise, the excess of the
sale proceeds over the aggregate exercise price of such shares will be long-
term capital gain.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
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PARLEX CORPORATION
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Mark box at right if an address change has been noted on the
reverse side of this card. [ ]
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
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Stockholder sign here Co-owner sign here
For All With- For All
Nominees hold Except
1. To elect three Class I directors to hold [ ] [ ] [ ]
office for a term expiring with the annual
stockholders' meeting to be held in 2001
or until their successors are elected
and qualified.
Richard W. Hale
Lester Pollack
Benjamin M. Rabinovici
INSTRUCTIONS: To withhold authority to vote for a particular nominee, mark
the "For All Except" box and strike a line through that nominee's name.
For Against Abstain
2. To approve the amendment to the 1989 [ ] [ ] [ ]
Employees' Stock Option Plan as described
in the Company's Proxy Statement
3. In their discretion, to vote upon such other business as may properly
come before the meeting.
The undersigned hereby revokes any proxy previously given and acknowledges
receipt of written notice of, and the statement for the 1998 Annual Meeting
of Stockholders and the 1998 Annual Report of the Company.
DETACH HERE DETACH HERE
PARLEX CORPORATION
Dear Stockholders:
Please take note of the important information enclosed with this Proxy
Ballot. The issue related to the management and operation of the Company
requires your immediate attention and approval. This is discussed in detail
in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders on
December 1, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Parlex Corporation
PARLEX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock hereby constitutes and appoints
Herbert W. Pollack, Peter J. Murphy and Jill Pollack Kutchin, and each of
them, proxies with full power of substitution to each, to represent and vote
all shares of Common Stock of Parlex Corporation (the "Company") standing in
the name of the undersigned at the Annual Meeting of Stockholders to be held
on the eighth floor of the Fleet Bank Building, One Federal Street, Boston,
Massachusetts, on Tuesday, December 1, 1998, at 9:30 a.m., or any
adjournment(s) thereof, hereby granting full power and authority to act on
behalf of the undersigned at said meeting or any adjournment(s) thereof.
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS SPECIFIED ABOVE. IF
NO DIRECTION IS GIVEN AND THE PROXY IS VALIDLY EXECUTED, THE SHARES SHALL BE
VOTED "FOR" THE NOMINEES PROPOSED FOR ELECTION AS DIRECTORS AND FOR APPROVAL
OF THE AMENDMENT TO THE COMPANY'S 1989 EMPLOYEES' STOCK OPTION PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES PROPOSED FOR
ELECTION AS DIRECTORS AND "FOR" APPROVAL OF THE AMENDMENT TO THE COMPANY'S
1989 EMPLOYEES' STOCK OPTION PLAN AS INDICATED IN THE PROXY STATEMENT.
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PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE.
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Please sign this proxy exactly as your name(s) appear(s) on this card. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be
that of an authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED?
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