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
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
Microlog Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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 is determined)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary proxy 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
February 28, 2000
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<PAGE>
MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 30, 2000
To our Shareholders:
The 2000 annual meeting of shareholders of Microlog Corporation will be
held on March 30, 2000, at 10:00 a.m., local time, at Microlog's corporate
headquarters, located at 20270 Goldenrod Lane, Germantown, Maryland 20876, for
the following purposes:
(1) to consider and vote upon a proposal to elect three directors of
Microlog; and
(2) to transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
All holders of record of shares of Microlog Corporation common stock at the
close of business on February 3, 2000, the record date, will be entitled to vote
at the annual meeting or any postponements or adjournments of the meeting.
If there are not sufficient votes to approve a proposal at the time of the
annual meeting, Microlog may adjourn the annual meeting in order to permit
further solicitation of proxies.
By Order of the Board of Directors,
/s/ John C. Mears
-----------------------------------
John C. Mears
Chief Operating Officer
Germantown, Maryland
February 28, 2000
PLEASE FILL OUT, DATE, AND SIGN THE ENCLOSED PROXY FORM AND MAIL IT PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES
PERSONALLY AT THE MEETING.
<PAGE>
MICROLOG CORPORATION
20270 GOLDENROD LANE
GERMANTOWN, MD 20876-4070
(301) 428-9100
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the board of directors of Microlog Corporation, a Virginia
corporation, for use at Microlog's 2000 annual meeting of shareholders to be
held on March 30, 2000 at 10:00 a.m., local time, at Microlog's corporate
headquarters, located at 20270 Goldenrod Lane, Germantown, Maryland 20876, and
at any adjournments or postponements thereof. The purpose of the annual meeting
and the matters to be acted upon are set forth in the accompanying notice of
annual meeting.
Microlog will pay the cost of proxy solicitation. In addition to the
solicitation of proxies by use of the mails, officers and other employees of
Microlog and its subsidiaries may solicit proxies by personal interview,
telephone, facsimile and telegram. None of these individuals will receive
compensation for such services, which will be performed in addition to their
regular duties. Microlog may also make arrangements with brokerage firms, banks,
custodians, nominees and other fiduciaries to forward proxy solicitation
material for shares held of record by them to the beneficial owners of such
shares. Microlog will reimburse such persons for their reasonable out-of-pocket
expenses in forwarding such material.
The proxy statement and the enclosed proxy are first being mailed to
Microlog's shareholders on or about February 29, 2000.
VOTING AND REVOCABILITY OF PROXIES
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of Microlog's common stock represented by a properly executed proxy, if
such proxy is received in time and not revoked, will be voted at the annual
meeting in accordance with the instructions indicated in the proxy. If no
instructions are indicated, the shares will be voted "FOR" approval of each
proposal considered at the annual meeting. Discretionary authority is provided
in the proxy as to any matters not specifically referred to in the proxy.
Management is not aware of any other matters which are likely to be brought
before the annual meeting. If any other matter is properly presented at the
annual meeting for action, the persons named in the accompanying proxy will vote
on such matter in their own discretion.
A shareholder who has given a proxy may revoke it at any time before its
exercise at the annual meeting by (1) giving written notice of revocation to the
Corporate Secretary of Microlog, (2) properly submitting to Microlog a duly
executed proxy bearing a later date or (3) voting in person at the annual
meeting. Unless revoked, the shares represented by each such proxy will be voted
at the meeting and any adjournment or postponement of the meeting. Presence at
the meeting of a shareholder who has signed a proxy but does not provide a
notice of revocation or request to vote in person does not revoke that proxy.
All written notices of revocation or other communications with respect to
revocation of proxies should be addressed as follows: Microlog Corporation,
20270 Goldenrod Lane, Germantown, MD 20876-4070, Attention: Corporate Secretary.
VOTING PROCEDURE
All holders of record of the common stock at the close of business on
February 3, 2000 will be eligible to vote at the annual meeting. Each holder of
common stock is entitled to one vote at the annual meeting for each share held
by such shareholder. As of February 3, 2000, there were 6,990,635 shares of
common stock outstanding.
The holders of a majority of the shares of common stock issued and
outstanding and entitled to vote at the annual meeting, present in person or by
proxy, will constitute a quorum at the annual meeting. Abstentions and any
broker non-votes, which are described below, will be counted for purposes of
determining the presence of a quorum at the annual meeting.
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Votes cast in person or by proxy at the annual meeting will be tabulated by
the inspector of election appointed for the annual meeting, who will determine
whether or not a quorum is present. Except as otherwise provided, votes
generally may be cast for, against or as abstentions. Broker-dealers who hold
their customers' shares in street name may, under the applicable rules of the
exchange and other self-regulatory organizations of which the broker-dealers are
members, sign and submit proxies for such shares and may vote such shares on
routine matters, which under such rules, typically include the election of
directors. Broker-dealers may not vote such shares on other matters without
specific instructions from the customers who beneficially own such shares.
Proxies signed and submitted by broker-dealers which have not been voted on
matters described in the previous sentence are referred to as broker non-votes.
Broker non-votes on a particular matter are not deemed to be shares present and
entitled to vote on such matters and, assuming the presence of a quorum, will
not affect whether the proposal for election of directors is approved at the
annual meeting.
The election of the board of directors' nominees for director will require
the affirmative vote of a plurality of the shares entitled to vote thereon and
who vote in person or by proxy at the annual meeting. In order to approve the
transaction of any other business as may properly come before the annual
meeting, or any adjournments or postponements thereof, the votes cast at the
annual meeting approving the action must exceed the votes cast opposing the
action. Abstentions and broker non-votes will not be counted as either approving
or opposing the action.
Microlog is required to file an annual report on Form 10-K for the fiscal
year ended October 31, 1999 with the SEC. Shareholders can obtain, free of
charge, a copy of the annual report by writing to Microlog Corporation, 20270
Goldenrod Lane, Germantown, MD 20876-4070, Attention: Corporate Secretary.
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<PAGE>
SECURITY OWNERSHIP
The information presented below regarding beneficial ownership of the
common stock has been presented in accordance with rules of the SEC and is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership of common stock includes any shares as to
which a person, directly or indirectly, has or shares voting power or investment
power and also any shares as to which a person has the right to acquire such
voting or investment power within 60 days through the exercise of any stock
option or other right.
As of January 14, 2000, there were 6,989,113 shares of common stock
outstanding.
PRINCIPAL SHAREHOLDERS
The following table presents, as of January 14, 2000, information based
upon Microlog's records and filings with the SEC regarding each person known to
Microlog to be the beneficial owner of more than 5% of the common stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- ----------
<S> <C> <C>
TFX Equities, Inc (1). 2,666,667 38.2%
630 West Germantown Pike
Plymouth Meeting, PA. 19462
Hathaway & Associates, Ltd. (2) 373,000 5.3%
119 Rowayton Ave.
Rowayton, CT 06853
</TABLE>
----------
(1) Based upon information provided to Microlog by TFX Equities, Inc. TFX
Equities has sole dispositive power and sole voting power with respect
to all of the shares shown.
(2) Based upon a Schedule 13G dated January 10, 1995. Hathaway &
Associates, Ltd. reports that it has sole voting power and sole
dispositive power with respect to all of the shares shown.
SECURITY OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table presents, as of January 14, 2000, information regarding
the beneficial ownership of the common stock by each director and nominee for
director, each executive officer of Microlog named in the summary compensation
table under the "Executive Compensation" section of this proxy statement, and
all directors and executive officers of Microlog as a group. The information is
based upon information provided by such persons to Microlog. Unless otherwise
indicated, the persons shown in the table are believed to have sole voting and
investment power with respect to the entire number of shares reported.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP OWNERSHIP (2)
- -------------------- ---------------------- -------------
<S> <C> <C>
Steven R. Delmar 119,300 (3) 1.7%
Randall P. Gaboriault 0 *
David M. Gische 54,500 (4) *
Robert E. Gray, Jr. 42,020 (5) *
Deborah M. Grove 64,711 (6) *
David B. Levi 65,500 (7) *
Joe J. Lynn 310,000 4.4%
John C. Mears 63,000 (8) *
John J. Sickler 0 *
Stephen D. Smith 0 *
All officers and directors as a group (10 persons) 719,031(9) 10.00%
</TABLE>
3
<PAGE>
- ----------
* Less than 1% of the shares outstanding.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner of a security for purposes of
the Rule if such person has or shares voting power or investment power with
respect to such security or has the right to acquire such ownership within
60 days. As used herein, "voting power" is the power to vote or direct the
voting of shares, and "investment power" is the power to dispose or direct
the disposition of shares.
(2) The percentage of beneficial ownership as to any person as of a particular
date is calculated by dividing the number of shares beneficially owned by
such person by the sum of the number of shares outstanding as of such date
and the number of shares as to which such person has the right to acquire
voting or investment power within 60 days. Except as noted, all persons
listed above have sole voting and investment power with respect to their
shares.
(3) Includes 66,000 shares that may be acquired by Mr. Delmar within 60 days of
the record date upon the exercise of stock options and approximately 24,300
shares in the Microlog Corporation 401(k) Retirement Savings Plan, referred
to as the 401(k) Plan.
(4) Includes 41,500 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Includes 3,000 shares held by Mr.
Gische's spouse. Mr. Gische disclaims beneficial ownership of such shares.
(5) Includes 31,500 shares that may be acquired within 60 days of the record
date upon the exercise of stock options that have been granted. Includes
6,500 shares held by Mr. Gray's spouse. Mr. Gray disclaims beneficial
ownership of such shares.
(6) Includes 32,000 shares that may be acquired by Ms. Grove within 60 days of
the record date upon the exercise of stock options.
(7) Includes 65,500 shares that may be acquired by Mr. Levi within 60 days
after the record date upon the exercise of stock options.
(8) Includes 35,000 shares that may be acquired by Mr. Mears within 60 days of
the record date upon the exercise of stock options and approximately 28,000
shares in the 401(k) Plan.
(9) Includes 271,500 shares that may be acquired within 60 days of the record
date upon the exercise of stock options.
4
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
NOMINEES FOR ELECTION AS DIRECTORS
Microlog's by-laws provide that the board of directors is to be divided
into three classes of directors, with the classes to be as nearly equal in
number as possible. The board of directors currently consists of eight
directors, with two classes having three directors and one class having two
directors. The term of office of the three current classes of directors expire
at this annual meeting, at the annual meeting of shareholders in the year 2001
and at the annual meeting of shareholders in the year 2002, respectively. Upon
the expiration of the term of office of each class, the nominees for such class
will be elected for a term of three years to succeed the directors whose terms
of office expire. Any director appointed to fill any vacancy occurring on the
board of directors, including any vacancy created by an increase in the number
of directors, shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or in which the vacancy
occurred.
Steven R. Delmar, Robert E. Gray, Jr., and John C. Mears have been
nominated for election to the class with a three-year term which will expire at
the annual meeting of shareholders in the year 2003. Each of the nominees are
currently serving as directors and have indicated a willingness to continue
serving if elected.
Stephen D. Smith, a director of Microlog since June 1999, resigned as a
director and as President and Chief Executive Officer effective February 16,
2000. Upon his resignation as a director, the board of directors increased the
size of the board from seven directors to eight directors and elected Messrs.
Delmar and Mears to fill the vacancy created by Mr. Smith's resignation and the
new board seat.
Approval of the nominees requires the affirmative vote of a plurality of
the votes cast at the annual meeting. Unless authority to do so is withheld, it
is the intention of the persons named in the proxy to vote such proxy for the
election of each of the nominees. In the event that any nominee should become
unable or unwilling to serve as a director, the persons named in the proxy
intend to vote for the election of such substitute nominee for director as the
board of directors may recommend. It is not anticipated that any nominee will be
unable or unwilling to serve as a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF MICROLOG VOTE
"FOR" THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.
Biographical information concerning each of the nominees and each of the
directors continuing in office is presented below.
NOMINEES FOR ELECTION FOR THREE-YEAR TERMS
NAME AGE DIRECTOR SINCE
- ---- --- --------------
Steven R. Delmar 44 2000
Robert E. Gray, Jr. 58 1977
John C. Mears 46 2000
STEVEN R. DELMAR became Co-Managing Director, Sales and Marketing effective
February 16, 2000. Prior to that time, Mr. Delmar had been Executive Vice
President of Microlog since October 1989 and Chief Financial Officer of Microlog
since July 1992. Mr. Delmar was President of Microlog Corporation of Maryland, a
wholly-owned subsidiary of the Company, from May 1991 to July 1992. He was
Microlog's Chief Financial Officer from January 1987 to May 1991. He served as
Chief Operating Officer of Microlog from May 1991 until July 1992, when,
following the hiring of Mr. Richard Thompson as President and Chief Operating
Officer, Mr. Delmar resumed his position as Chief Financial Officer. He also was
Vice President of the Company from January 1987 to October 1989. Since 1979, Mr.
Delmar has held various offices with the Company and its subsidiaries, including
Assistant Comptroller, Comptroller, General Manager and Vice President. A
certified public accountant, Mr. Delmar held accounting positions with Bechtel
Power Corporation, a commercial construction firm, and the Veterans
Administration prior to his employment with Microlog.
ROBERT E. GRAY, JR. is currently Executive Vice President of Prosperity
Bank and Trust, in Springfield, Virginia. Mr. Gray was appointed to Prosperity
Bank and Trust's Board of Directors in December 1997. He was employed by
Hallmark Bank & Trust Co. from 1985 to 1992 - as Director and Executive Vice
President from 1989
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<PAGE>
to 1992, and prior thereto as Senior Vice President and Chief Lending Officer.
From 1992 to 1993, he served as Senior Vice President of Suburban Bank of
Virginia, NA in McLean, Virginia.
JOHN C. MEARS became Managing Director, Chief Operating Officer upon
Stephen Smith's resignation effective February 16, 2000. Mr. Mears was the
Executive Vice President Operations beginning in December 1999, and was the
Senior Vice President Product Development for Microlog from August 1996 until
December 1999. Mr. Mears was with International Business Machines (IBM) from
1990 to 1996 in key management positions associated with their IVR, CTI, and
Network product departments. From 1978 to 1990 he held various technical,
business development, and management positions in multiple divisions of IBM. Mr.
Mears holds both a bachelor's and master's degree in electrical engineering from
the University of Florida.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
NAME AGE DIRECTOR SINCE
- ---- --- --------------
David M. Gische 50 1985
David B. Levi 67 1997
DAVID M. GISCHE, an attorney, has been associated with the law firm of
Ross, Dixon & Bell in Washington, D.C. since November 1983. From September 1978
until November 1983, Mr. Gische was associated with the Washington, D.C. law
firm of Hogan & Hartson LLP, counsel to Microlog.
DAVID B. LEVI served as President and Chief Executive Officer of Microlog
on an interim basis between March and June of 1999. From November 1998 through
March 1999, Mr. Levi also has served as a consultant to Microlog. Mr. Levi
served as President of Natural MicroSystems Corporation, a provider of hardware
and software for developers of high-value telecommunications solutions, from
June 1991 to April 1995. In November 1995, Mr. Levi became President of Voice
Processing Corp. (VPC) and Mr. Levi served as Chief Operating Officer of VCS
until his retirement in October 1997. Prior to 1991, Mr. Levi held Chief
Executive Officer and Chief Operating Officer positions at Raytheon Data Systems
(a division of Raytheon Corp.), Centronics Data Computer Corp., and Raster
Technologies, Inc., and consulted to regional Bell operating companies.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
NAME AGE DIRECTOR SINCE
- ---- --- --------------
Randall P. Gaboriault 30 1999
Joe J. Lynn 68 1969
John J. Sickler 57 1999
RANDALL P. GABORIAULT is the Director of Information Technology for
Teleflex Incorporated; he has held the post since early 1998. His position at
Teleflex concentrates on leading the strategic and tactical use of technology on
a global basis in conjunction with the business market strategy. This includes
information systems, e-commerce and the Internet. Additionally, Mr. Gaboriault
is a member of the Teleflex corporate management team working with the M&A group
and participating in the development of business strategy. Mr. Gaboriault
graduated from Temple University and served as a member of the Board of
Trustees. Prior to Teleflex, Mr. Gaboriault managed his own technology
consulting practice and is also a founding principal in a Philadelphia based
internet service provider and data security firm which he has since sold. Mr.
Gaboriault has spoken at technology related conferences and is regarded for his
expertise in the Internet arena.
JOE J. LYNN retired from his position as Chief Development Officer of
Microlog, in which he served from January 1, 1997 through January 15, 1998.
Previously, Mr. Lynn was Chief Executive Officer of Microlog from May 1, 1991
through January 1, 1997, and President of Microlog from October 1989 to June
1992, and prior thereto he served as Executive Vice President of Microlog and as
President of Microlog's subsidiary, Microlog Corporation of Maryland. From 1966
until 1970, Mr. Lynn was employed as a manager with DBA Systems, Inc. From 1961
to 1966, he served as a manager at the Kennedy Space Flight Center for RCA,
which is presently a subsidiary of General Electric Company.
JOHN J. SICKLER served in various management positions with Teleflex
Incorporated over the last 25 years, including Chief Financial Officer of the
company and President of the Aerospace group. In 1990, he assumed his present
position relating to business development. His current focus includes
acquisitions and mergers, alliances and ventures, and expanding the company's
technology base. Mr. Sickler graduated from Wilkes University in Pennsylvania.
He is a CPA, having joined Teleflex from an early career at Price Waterhouse. He
is a director of New Century Bank. He also serves as Chairman of the Board of
Trustees for Phoenixville Area YMCA, is an
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<PAGE>
advisory member for the Board of Trustees of Phoenixville Hospital of the
University of Pennsylvania Health System, and a Director of Phoenixville
Community Health Foundation.
Of the incumbent directors immediately before the annual meeting, Randall
P. Gaboriault and John J. Sickler were appointed to the board of directors in
accordance with the investment agreement, dated as of July 1, 1999, between
Microlog and TFX Equities, Inc. Mr. Sickler was appointed to the board of
directors upon the purchase by TFX Equities of 854,563 shares of common stock
for an aggregate of $1.3 million, effective July 1, 1999, and Mr. Gaboriault was
appointed to the board of directors upon the purchase by TFX Equities of an
additional 1,812,104 shares of common stock for an aggregate of $2.7 million,
effective October 4, 1999.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal 1999, there were seventeen meetings, including regularly
scheduled and special meetings, of the board of directors. Each of the directors
attended at least 75% of the total number of meetings held during the period he
served as a director and the total number of meetings held by each committee of
the board of directors on which he served during the period for which he served.
The board of directors currently has standing audit and compensation
committees, but does not have a nominating committee. The audit and compensation
committees each consist of Messrs. Gische, Gray, and Levi. Mr. Levi served on
these committees from December 1997 until November 1998, when he became a
consultant to Microlog. Mr. Levi was re-elected to these committees June 21,
1999, upon the completion of his role as interim President and CEO.
The audit committee is primarily responsible for approving the services
performed by Microlog's independent accountants. The audit committee met once
during fiscal year 1999.
The function of the compensation committee is to make recommendations to
the board of directors with respect to the compensation of certain officers and
employees, including the executive officers, and the granting of stock options
to officers and employees. The compensation committee met six times during
fiscal year 1999.
DIRECTOR COMPENSATION
Employee Directors. Employee directors do not receive any compensation,
including fees or stock options, for attending meetings of the board of
directors.
Non-employee Directors. Each non-employee director, other than the two
directors from TFX Equities, are entitled to receive an annual grant of a
non-incentive stock option to purchase 4,000 shares of common stock, pursuant to
the Microlog Corporation 1989 Non-Employee Director Non-Qualified Stock Option
Plan (the "Director Plan") and monetary compensation of $10,000 per year for
serving as a director. Effective January 1, 1999, however, the board of
directors unanimously agreed to suspend monetary compensation to the board
during the 1999 calendar year, determining to compensate directors in some other
manner. During fiscal 1999, the board and the shareholders adopted an amendment
to the Director Plan which provides that so long as the board of directors'
suspension of monetary compensation to non-employee directors continues, each
non-employee director is entitled to receive an additional annual option to
purchase up to 6,000 shares of common stock, provided however, that such
non-employee director is not entitled to receive such options for periods during
which such non-employee director served as an employee of, or otherwise received
compensation for consulting services rendered to, Microlog.
The option exercise price under the Director Plan is equal to 100% of the
fair market value of the common stock on the date the option is granted. Options
granted under the Director Plan expire if not exercised within 10 years from the
date of grant.
During fiscal 1999, David M. Gische, Robert E. Gray, Jr., and David M. Levi
received the annual grant of options to purchase 4,000 shares of common stock.
Also, in June 1999, Messrs. Gische and Gray received options to purchase 6,000
shares of common stock in June 1999 in lieu of receiving the monetary portion of
their compensation for serving as directors during the 1999 calendar year.
Messrs. Gische, Gray and Levi each also received $2,500 during fiscal 1999 as
compensation for serving as directors prior to the January 1, 1999 cash fee
suspension.
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
Deborah Grove, age 47, was elected the Vice President Business Development
of Professional Services in October 1999, when Old Dominion Systems Incorporated
of Maryland merged and became a division of Microlog
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Corporation of Maryland. Ms. Grove was previously President of Old Dominion
Systems Incorporated of Maryland, a wholly-owned subsidiary of Microlog, from
May 1991 until October 1999. From 1983 until May 1991, Ms. Grove was Vice
President of Old Dominion Systems Incorporated of Maryland and from 1985 until
May 1991, Vice President of Old Dominion Services, Inc. Ms. Grove holds a Master
of Science degree in Business and Finance and a Bachelor of Science degree in
Business Administration.
EXECUTIVE COMPENSATION
The following table shows compensation paid to the chief executive officers
and each of the three other executive officers whose salary and bonus
compensation exceeded $100,000 in fiscal 1999, referred to collectively as the
named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS ($) COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
--------------------------- ------ ------ --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven R. Delmar (3) 1999 160,881 - 8,000(8) 7,992
Managing Director, Sales & Marketing 1998 165,006 - - 11,443
1997 143,333 - - 10,618
John C. Mears (4) 1999 160,875 8,000(8) 7,734
Managing Director, Chief Operating 1998 135,013 - - 10,281
Deborah M. Grove 1999 146,250 - 8,000(8) 11,166
V.P. Business Development 1998 135,013 - 23,674 - 10,525
Professional Services 1997 123,334 10,000 18,332 - 9,732
Stephen D. Smith(5) 1999 72,820 77,520 275,000 -
David B. Levi(6) 1999 45,500 45,000
Richard A. Thompson(7) 1999 89,580 - 35,181 - 135,059
1998 215,000 - 22,952 - 11,491
1997 181,664 - 23,952 - 12,035
</TABLE>
(1) The amounts shown in the "Other Annual Compensation" column for fiscal 1998
and fiscal 1997 for Ms. Grove include $7,500, and $6,396 which relates to
supplemental health insurance payments, respectively, $10,674, and $8,686
which relates to personal leave / vacation payout, respectively, and $5,500
and $3,250 which relates to auto expenses/allowances, respectively. The
amounts shown in the "Other Annual Compensation" column for fiscal years
1999, 1998 and 1997 for Mr. Thompson include $3,178, $8,271, and $5,980
which relates to supplemental health insurance payments, respectively,
$27,204, $4,962, and $3,707 which relates to personal leave / vacation
payout, respectively, and $4,800, $9,720, and $14,264 relating to auto
expenses/allowance, respectively. Except as set forth above, in accordance
with SEC rules, information about other compensation in the form of
perquisites and other personal benefits has been omitted because such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the named executive
officers.
(2) The amounts shown in the "All Other Compensation" column consist of the
following: (a) for Mr. Delmar, $2,000, $1,843 and $1,831 in matching
contributions by Microlog to the Microlog Corporation 401(k) Retirement
Savings Plan, referred to as the 401(k) Plan, in fiscal 1999, 1998 and
1997, respectively, and $5,992, $9,600 and $8,787 in matching contributions
by Microlog to its pension plan in fiscal 1999, 1998 and 1997,
respectively; (b) for Mr. Mears, $2,000, $2,084 and $2,320 in matching
contributions by Microlog to the 401(k) plan in fiscal 1999, 1998 and 1997,
respectively, and $5,734, $8,197 and $818 in matching contributions by
Microlog to its pension plan in fiscal 1999, 1998 and 1997, respectively;
(c) for Ms. Grove, $2,000, $1,801 and $1,798 in matching contributions by
Microlog to the 401(k) plan in fiscal 1999, 1998 and 1997, respectively,
and $9,166, $8,724 and $7,934 in matching contributions by Microlog to its
pension plan in fiscal 1999, 1998 and 1997, respectively; and (d) for Mr.
Thompson, $1,677, $1,891 and $2,435 in matching contributions by Microlog
to the 401(k) plan in fiscal 1999, 1998 and 1997, respectively, and $7,970,
$9,600 and $9,600 in matching contributions by Microlog to its pension plan
in fiscal 1999, 1998 and 1997, respectively.
(3) Formerly Executive Vice President and Chief Financial Officer, Mr. Delmar
was elected Managing Director, Sales and Marketing, upon Mr. Smith's
resignation.
(4) Formerly Executive Vice President and Chief Technology Officer, Mr. Mears
was elected Managing Director, Chief Operating Officer, upon Mr. Smith's
resignation.
(5) Effective February 16, 2000, Mr. Smith resigned his positions as President
and Chief Executive Officer. The options to purchase 275,000 shares of
common stock he was granted during fiscal 1999 were forfeited upon his
resignation.
(6) Mr. Levi served as a consultant to Microlog's Office of the President from
November 1998 through March 29, 1999 and as President and Chief Executive
Officer on an interim basis from March 29, 1999 through June 21, 1999. Of
the amount shown under the salary column for Mr. Levi, $24,000.00
represents amounts paid to compensate him for his consulting services and
$19,000.00 represents Mr. Levi's salary as President and Chief Executive
Officer. Mr. Levi received $2,500.00 for director's fees in fiscal 1999.
The options to purchase 45,000 shares of common stock shown in the table
were granted to Mr. Levi in consideration of his consulting services.
(7) Mr. Thompson served as President and Chief Executive Officer from June 1,
1992 through March 29, 1999. Upon his resignation from Microlog, Mr.
Thompson's existing base salary was required to be paid in monthly
installments for the remainder of his employment term, which expired
December 31, 1999.
(8) Mr. Delmar, Ms. Grove, and Mr. Mears each agreed to a 5% reduction in their
salaries effective May 1, 1999, in exchange for a grant of options to
purchase 8,000 shares of common stock. Options to purchase 4,000 of these
shares vested on May 12, 1999, the date of grant. The options to purchase
the remaining 4,000 shares vest after the expiration of two years from the
date of grant.
8
<PAGE>
STOCK OPTIONS GRANTS IN FISCAL 1999
The following table contains information concerning all stock options
granted during fiscal 1999 to the named executive officers.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE
APPRECIATION FOR
% OF TOTAL OPTION TERM (1)
NUMBER OF OPTIONS GRANTED ------------------------
SHARES UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- --------------- -------------- ------------ ---- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Steven R. Delmar 8,000(2) 1.1% $2.3125 5/12/09 $1,047 $12,624
Deborah M. Grove 8,000(2) 1.1% $2.3125 5/12/09 $1,047 $12,624
John C. Mears 8,000(2) 1.1% $2.3125 5/12/09 $1,047 $12,624
Stephen D. Smith 275,000(3) 38.1% $1.6875 6/21/09 $207,859 $605,839
David B. Levi 45,000(4) 6.2% $0.875 4/08/09 $70,546 $135,700
</TABLE>
- ----------
(1) The potential realizable value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of the option,
assuming that the shares appreciate in value from the option grant date
compounded annually until the end of the option term at the rate specified,
5% or 10%, and that the option is exercised and sold on the last day of the
option term for the appreciated share price. Potential realizable value is
net of the option exercise price. The assumed rate of appreciation are
specified in the rules and regulations of the SEC and do not represent
Microlog's estimate or projection of future prices of the shares. There is
no assurance provided to any named executive officer or any other holder of
common stock that the actual stock price appreciation over the term of the
applicable options will be at the assumed 5% and 10% levels or at any other
defined level.
(2) Mr. Delmar, Ms. Grove, and Mr. Mears each agreed to a 5% reduction in their
salaries effective May 1, 1999, in exchange for a grant of options to
purchase 8,000 shares of common stock. Options to purchase 4,000 of these
shares vested on May 12, 1999, the date of grant. The options to purchase
the remaining 4,000 shares vest over two years, with 50% vesting upon each
of the first and second anniversaries of the date of grant.
(3) The options to purchase these shares, of which 59,250 would have vested on
each of the first four anniversaries of the grant date and the remaining
38,000 options would have vested on June 21, 2004, were forfeited upon Mr.
Smith's resignation as President and Chief Executive Officer effective
February 16, 2000.
(4) Mr. Levi served as interim Chief Executive Office from March 29, 1999
through June 21, 1999. Mr. Levi was granted an option to purchase 45,000
shares of common stock in connection with his service as a member of the
office of the president.
STOCK OPTION EXERCISES IN FISCAL 1999
The following table provides information concerning all stock options
exercised during fiscal 1999 and unexercised stock options held at the end of
that fiscal year by the named executive officers.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE MONEY OPTIONS AT
UNEXERCISED OPTIONS 10/31/99 ($)
AT 10/31/99 (#)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- --------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Steven R. Delmar 0 0 66,000/7,000 $0 / $0
Deborah M. Grove 0 0 32,000/21,000 $6,125 / $4,500
John C. Mears 0 0 25,000/58,000 $0 / $16,875
Stephen D. Smith (2) 0 0 0/275,000 $0 / $0
David B. Levi(3) 0 0 45,000/0 $28,125 / $0
Richard A. Thompson (4) 0 0 190,000/40,000 $0 / $0
</TABLE>
- ----------
(1) Calculations based on the $1.50 closing price of the common stock on
October 31, 1999.
(2) Mr. Smith, who was appointed President and Chief Executive Officer on June
21, 1999, resigned those offices effective February 16, 2000, at which time
all of his stock options were forfeited.
(3) Mr. Levi served as President and Chief Executive Officer on an interim
basis from March 29, 1999 through June 21, 1999.
(4) Mr. Thompson resigned as President and Chief Executive Officer effective
March 29, 1999.
10
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
Microlog entered into a letter agreement, dated May 6, 1999, with Stephen
D. Smith, pursuant to which Mr. Smith was employed on an at-will basis as
Microlog's president and chief executive officer. The letter provided that, in
addition to his annual base salary, Mr. Smith would be entitled to receive
annual cash incentives up to 40% of his annual base salary, incentive stock
options to purchase 275,000 shares of common stock (upon approval by the
compensation committee), relocation expenses not to exceed $50,000, and certain
other executive perquisites. The letter also provided that, if Mr. Smith was
terminated by Microlog other than for "cause," Microlog would provide Mr. Smith
with a nine-month severance package which would include base salary payments,
standard employee benefits and the vesting of all incentive stock options.
Until Mr. Thompson's resignation as president and chief executive officer
in March 1999, Microlog was a party to an employment agreement with Mr.
Thompson. The agreement provided for employment of Mr. Thompson through December
31, 1999. Mr. Thompson's annual salary under his employment agreement was
subject to increase and discretionary bonuses each year as determined by the
board of directors. The employment contract entitled Mr. Thompson to certain
fringe benefits, including insurance coverage and various executive perquisites.
Upon termination of employment without cause, the existing base salary, plus all
benefits, were required to be paid in monthly installments for the remainder of
the term of the agreement or, in certain cases, for twelve months. The
employment agreement also entitled Mr. Thompson to continue to serve as a
director of Microlog for so long as he continued to be an officer of Microlog.
Following his resignation, Microlog entered into a separation agreement and
general release with Mr. Thompson. This agreement entitles Mr. Thompson to the
severance specified in his employment agreement, continuation of his vested
stock options for their full term and the continued use of some of Microlog's
business materials and equipment. In the agreement, Mr. Thompson provided
Microlog with a release and agreed to provide consulting services to Microlog,
to the extent requested by Microlog, for the remainder of the term for which he
receives severance compensation.
TRANSACTIONS WITH RELATED PARTIES
From November 1998 through March 1999, Mr. Levi was a non-employee member
of Microlog's office of the president. Microlog compensated Mr. Levi in the
amount of $1,000 per week for assisting the office of the president, commencing
on November 5, 1998. This arrangement continued until Mr. Levi's appointment as
the interim president and chief executive officer in March 1999, at which time
Microlog began paying Mr. Levi $2,000 per week. Microlog also granted to Mr.
Levi in April 1999 an option to purchase 45,000 shares of common stock in
connection with his service as a member of the office of the president.
Microlog entered into a consulting agreement, dated as of January 1, 1998,
with Mr. Lynn, pursuant to which Mr. Lynn served as a consultant to Microlog
through December 31, 1999. The consulting agreement provided for Mr. Lynn to
perform consulting services reasonably requested by Microlog. Mr. Lynn received
annual compensation of approximately $118,000 per year and certain benefits,
generally those available to Microlog's executive officers, but not including
participation in the incentive stock option plan or executive bonus plan.
Effective May 1, 1999, Mr. Lynn agreed to a 5% reduction to his annual
compensation as part of Microlog's efforts to implement various cost-cutting
measures.
Microlog entered into a noncontributory deferred compensation agreement,
dated June 4, 1988, with Mr. Lynn, under which Microlog is obligated to make
payments to Mr. Lynn, or his beneficiaries, over the ten-year period subsequent
to his retirement on or after the age 65, which period began on June 4, 1988.
The aggregate amount owed to Mr. Lynn under this agreement is payable either in
equal monthly installments over the ten-year period or in an appropriately
discounted single sum payment (at the election of Mr. Lynn). Mr. Lynn has
elected to be paid in equal monthly installments. As of October 31, 1999,
Microlog has paid Mr. Lynn an aggregate of $47,854 pursuant to this agreement.
Pursuant to this agreement, an aggregate of $27,345 was paid to Mr. Lynn during
fiscal 1999 and Microlog is obligated to pay Mr. Lynn an aggregate of $198,251
from November 1, 1999 through the remainder of the agreement's term.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of Microlog Corporation's (the "Company")
executives generally are made by the compensation committee of the board. Each
member of the compensation committee is a non-employee director.** All decisions
by the compensation committee relating to the compensation of the Company's
executive officers are reviewed by the full board. Set forth below is a report
submitted by the compensation committee addressing the Company's compensation
policies for fiscal 1999 as they affected the Company's executive officers,
including the president and chief executive officer and the named executive
officers.
11
<PAGE>
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS. The Company's executive
compensation policies are designed to provide competitive levels of
compensation, assist the Company in attracting and retaining qualified
executives, reward superior corporate performance, and recognize individual
initiative and achievement. Measurement of corporate performance is primarily
based upon Company goals and industry performance levels. The Company considers
compensation paid to its executive officers to be deductible for purposes of
Section 162(m) of the Internal Revenue Code. Target levels of the executive
officers' overall compensation are intended to be consistent with other
executives in the Company's industry, including members of its peer group,
taking into account the size and financial results of these respective
companies. In the past few years, this policy has resulted in certain executive
officers' overall compensation falling between the lower end and the middle of
executive compensation in the Company's industry and peer group (based upon
compensation surveys available to the compensation committee). The compensation
committee believes that stock ownership by management and stock-based
performance compensation arrangements are beneficial in aligning management's
and shareholders' interests in the enhancement of shareholder value.
RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION. Compensation paid to the
Company's executive officers in fiscal 1999, which related to the performance of
the Company, consisted of the following components: base salary, cash bonuses,
grants of stock options under stock option plans, and executive perquisites.
Base Salary. The compensation committee reviews executive base salaries on
a regular basis. In view of the Company's financial performance during fiscal
1998, base salaries for Messrs. Thompson and Delmar remained the same for fiscal
1999. Effective November 1, 1998, in view of the financial performance of Old
Dominion Systems of Maryland during fiscal 1998, Ms. Grove's base salary was
increased to $150,000. Also effective November 1, 1998, Mr. Mears' base salary
was increased to $165,000 because of his role in the development of the
Company's uniQue(R) contact center products. Effective May 1, 1999, due to the
financial condition of the Company, Mr. Delmar, Mr. Mears, and Ms. Grove agreed
to a 5% reduction to their respective annual base salaries. As consideration for
this reduction, the Company granted to each of Mr. Delmar, Mr. Mears, and Ms.
Grove options to purchase 8,000 shares of common stock under the Company's 1995
Stock Option Plan (the "Employee Plan") at the exercise price of $2.3125. The
right to purchase 4,000 of such shares vested immediately and the right to
purchase the remaining 4,000 shares, subject to each such option, will vest in
May 2001.
Cash Bonuses. The compensation committee also determines, generally on an
annual basis, whether to award bonuses to executive officers based upon their
individual performance or on the performance of the Company as a whole. In prior
years, the board, at the recommendation of the compensation committee, has
adopted specific incentive compensation arrangements for executive officers
which consist of cash bonuses payable if the Company achieved certain pre-tax
(and pre-bonus) profit and sales goals. The Company utilizes an executive bonus
plan under which a pool of funds, determined by formula, is set aside for
selected executives. The amount of funds set aside for the bonus pool is based
on the Company's sales and pre-tax income.
Stock Options. The Company provides a long-term incentive through the 1995
Employee Stock Option Plan (the "Employee Plan"). The Employee Plan is intended
to foster management team cohesion and align management and shareholder
interests. Key employees, including executive officers, are eligible for grants
under the Employee Plan. The Employee Plan is administered by the compensation
committee, which consists exclusively of non-employee directors. Awards are
intended to provide incentives for executive officers to enhance long-term
corporate performance, as reflected in stock price, thereby increasing
shareholder value, and to provide non-cash compensation to such officers as part
of their overall compensation package. The Company believes that the Employee
Plan encourages superior performance that can result in significantly enhanced
shareholder value. The option price of shares granted under the Employee Plan
may be less than the fair market value of the shares underlying the option on
the date of grant, but such options generally have been granted at fair market
value. Options granted under the Employee Plan generally terminate automatically
upon termination of employment or service with the Company, except in cases of
disability or death.
Executive Perquisites. The Company provides certain perquisites for its
executive officers, which the compensation committee has determined are
customary for similar companies.
Other Compensation. In addition to the compensation paid to executive
officers as described above, executive officers and other key employees receive
benefits under the Company's Medical Reimbursement Plan (along with the
Executive Medical Reimbursement Plan health benefits of up to $7,500 per
executive), and executive officers receive, along with and on the same terms as
other employees, contributions by the Company pursuant to the Company's Pension
Plan and matching contributions under the Company's Pre-Tax Savings Plan (401k).
On June 1, 1999, the Company ceased contributions to the Pension Plan for
employees of its voice processing operations. At that time, all of these
employees became 100% vested in the plan.
12
<PAGE>
CEO Compensation. The committee believes a significant performance-based
component of total compensation serves the interests of shareholders by directly
linking management compensation with corporate performance. The committee
applied this policy in determining Mr. Smith's salary and incentive compensation
from June 21, 1999, the date Mr. Smith was elected chief executive officer,
through the remainder of fiscal 1999. In setting Mr. Thompson's salary and
incentive compensation as chief executive officer for fiscal 1999, the
compensation committee also reviewed the Company's fiscal 1998 financial
performance and determined to maintain Mr. Thompson's salary for fiscal 1999.*
Based upon the interim nature of Mr. Levi's tenure as chief executive officer,
the committee elected to pay Mr. Levi a weekly salary and no incentive-based
compensation for his service as interim chief executive officer.**
Compensation Committee Report
Submitted by the Members of the Compensation Committee:
David M. Gische, Robert E. Gray, Jr., David B. Levi **
- ----------
* Mr. Thompson resigned as president and chief executive officer of Microlog
effective March 29, 1999.
** Mr. Levi ceased to serve on the compensation committee effective November
1998, when he became a consultant to Microlog, but he concurs with the
report of the compensation committee set forth above. Mr. Levi was interim
president and chief executive officer between March 29, 1999 and June 21,
1999. Mr. Levi was re-elected to the compensation committee upon the
completion of his role as interim president and chief executive officer,
effective June 21, 1999
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Prior to becoming a consultant to Microlog in November 1998 and interim
president and chief executive officer in March 1999, Mr. Levi ceased to serve on
the compensation committee of the board of directors. Microlog compensated Mr.
Levi in the amount of $1,000 per week for assisting the office of the president,
commencing on November 5, 1998. This arrangement continued until Mr. Levi's
appointment as the interim president and chief executive officer, in March 1999,
at which time Microlog began paying Mr. Levi $2,000 per week. Microlog also
granted to Mr. Levi in April 1999 an option to purchase 45,000 shares of common
stock in connection with his service as a member of the office of the president,
at the exercise price of $0.875 that vested immediately. Effective June 21,
1999, Mr. Levi was re-elected to the Compensation Committee upon the completion
of his role as interim president and chief executive officer.
13
<PAGE>
COMPARATIVE COMPANY PERFORMANCE
The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the NASDAQ Stock Market, and a peer
group index over the last five fiscal years. The peer group consists of Active
Voice Corporation, Centigram Communications Inc., Davox Corporation, Genesys
Telecomm Lab, Inc., Intervoice-Brite Inc., Syntellect, Inc., and TALX
Corporation.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
Among Microlog Corporation,
NASDAQ Market Index, and Peer Group Index
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
<S> <C> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 10/31/1994 10/31/1995 10/31/1996 10/31/1997 10/31/1998 10/31/1999
Microlog Cp 100.00 715.73 926.24 1220.95 178.93 252.61
Customer Selected Stock List 100.00 114.84 109.39 120.33 105.40 153.88
NASDAQ Market Index 100.00 118.62 139.30 182.56 206.42 340.72
</TABLE>
Assumes $100 Invested on Nov. 1, 1994
Assumes Dividends Reinvested
Fiscal Year Ending October 31, 1999
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and executive officer of Microlog, and each person who
beneficially owns more than 10% of Microlog's common stock, is required by
Section 16(a) of the Securities Exchange Act of 1934 to file reports with the
Securities and Exchange Commission ("SEC") of beneficial ownership of Microlog's
equity securities and certain changes to such ownership. Steve Delmar, John
Mears, Deborah Grove, David Levi, David Gische, John Gray, Jr. each filed one
late report with the SEC relating to a single grant of stock options to such
individual. John Sickler and Randy Gaboriault each filed one late report
relating to such individual's initial beneficial ownership of Microlog's common
stock. TFX Equities, Inc. filed one late report relating to its initial
beneficial ownership of Microlog's common stock and one late report relating to
a transaction involving a change in such beneficial ownership. Based solely upon
a review of Section 16(a) reports furnished to Microlog for fiscal 1999 or
written representations that no other reports were required, Microlog believes
that the foregoing reporting persons otherwise complied with all filing
requirements for fiscal 1999.
14
<PAGE>
SHAREHOLDER PROPOSALS AND OTHER MATTERS
Proposals of shareholders intended to be presented at Microlog's 2001
annual meeting of shareholders must be received at Microlog's principal
executive offices not later than October 20, 2000. Nothing in this paragraph
shall be deemed to require Microlog to include in the proxy statement and proxy
relating to the 2001 annual meeting of shareholders any shareholder proposal
that does not meet all of the requirements for such inclusion in effect at that
time.
The board of directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
annual meeting other than those specifically referred to herein. If, however,
any other matters should properly come before the annual meeting, it is the
intention of the person named in the enclosed proxy to vote the shares
represented thereby in accordance with the determination of a majority of the
board of directors.
The board of directors urges each shareholder, whether or not he or she
intends to be present at the annual meeting, to complete, sign, and return the
enclosed proxy as promptly as possible.
By Order of the Board of Directors
/s/ John C. Mears
----------------------------------
John C. Mears
Chief Operating Officer
15
