<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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 (S) 240.14a-11(c) or (S) 240.14a-12
SYLVAN
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
LOGO SYLVAN
333 Main Street, Saxonburg, PA 16056
------------
Notice of Annual Meeting of Shareholders
------------
<TABLE>
<S> <C>
Date: Thursday, April 29, 1999
Place: Two Mellon Bank Center, Room 1128
Pittsburgh, Pennsylvania
Time: 10:00 a.m.
Record date: Wednesday, March 3, 1999
</TABLE>
Matters to be voted upon are:
. the election of directors to hold office for the term of one year or
until their successors are elected and qualified;
. the adoption of the amendment and restatement of Sylvan's 1990 Stock
Option Plan; and
. such other business as may properly come before the meeting.
You are cordially invited to attend the meeting. If you plan to do so,
please mark the box provided on your proxy card. However, whether or not you
plan to attend the meeting, it is important that your shares be represented.
Accordingly, please complete, date and sign the enclosed proxy and return it
promptly. Sending in your proxy will not prevent you from voting in person at
the meeting.
Fred Y. Bennitt
Secretary
April 5, 1999
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Voting by Proxy........................................................... 1
Voting at the Meeting..................................................... 1
Common Stock Ownership of Certain Beneficial Owners....................... 2
Common Stock Ownership of Directors and Executive Officers................ 4
Item 1. Election of Directors............................................. 4
Board Meetings............................................................ 6
Board Committees.......................................................... 6
Director Compensation..................................................... 7
Transactions with the Company............................................. 7
1999 Stock Option and Compensation Committee Report on Executive
Compensation............................................................. 7
Stock Option and Compensation Committee Interlocks and Insider
Participation............................................................ 9
Management Compensation and Benefit Plans
Summary Compensation Table.............................................. 10
Option Grants in the Year Ended January 3, 1999......................... 11
Aggregated Option Exercises for the Year Ended January 3, 1999.......... 12
Qualified Retirement Benefit Plan....................................... 12
Shareholder Return Performance Graph...................................... 13
Section 16(a) Beneficial Ownership Reporting Compliance................... 13
Item 2. The Adoption of the Amendment and Restatement of the 1990 Stock
Option Plan.............................................................. 13
Proxy Solicitation and Expenses of Solicitation........................... 17
Independent Public Accountants............................................ 17
Deadline for Shareholder Proposals........................................ 17
Annual Report on Form 10-K................................................ 18
Appendix A: Sylvan Inc. 1990 Stock Option Plan............................ 19
</TABLE>
-i-
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
Thursday, April 29, 1999
Two Mellon Bank Center, Room 1128
Pittsburgh, Pennsylvania
------------
VOTING BY PROXY
It is anticipated that this proxy statement and the accompanying proxy card
will be mailed on or about April 5, 1999 to shareholders of record as of the
close of business on the March 3, 1999 record date. The accompanying proxy is
being solicited by the board of directors and, if it is properly executed,
returned to the board of directors and not revoked, it will be voted in
accordance with the instructions printed on the form. If no instructions are
given with respect to any matter specified in the Notice of Annual Meeting to
be acted upon at the meeting, the persons named as proxies will vote the
shares represented in favor of the proposals set forth in the Notice of Annual
Meeting and in accordance with their best judgment on any other matters which
may properly come before the meeting. Each shareholder who has executed a
proxy and returned it to the board of directors may revoke the proxy by notice
in writing to the secretary of Sylvan at any time prior to the voting of the
proxy. Presence at the meeting does not itself revoke the proxy.
VOTING AT THE MEETING
The board of directors has fixed the close of business on March 3, 1999 as
the record date for determining the shareholders entitled to notice of and to
vote at the meeting. On March 3, 1999, there were 6,368,836 shares of common
stock, par value $.001 per share, issued and outstanding and entitled to vote.
Each share of common stock entitles the holder thereof to one vote. A majority
of the shares of common stock issued and outstanding and entitled to vote
constitutes a quorum. Abstentions and broker nonvotes are counted as present
in determining whether the quorum requirement is satisfied. The nominees for
election as directors who receive a plurality of the votes cast for each
director position at the meeting by the shares present in person or
represented by proxy shall be elected directors. Any other matters submitted
to a vote of the shareholders must be approved by the majority of shares
present in person or represented by proxy. Abstentions and broker nonvotes
will not be included in the vote total in the election of directors and will
have no effect on the outcome of the vote. An abstention from voting will have
the practical effect of voting against any other matters since it is one less
vote for approval.
1
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best of the company's knowledge, the only persons or firms that may
be deemed to beneficially own five percent or more of Sylvan's common stock as
of the footnoted dates are the following:
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership (a) of Common Stock (h)
---------------- --------------------------- -------------------
<S> <C> <C>
Dennis C. Zensen........... 784,128 12.3%
333 Main Street
Saxonburg, PA 16056
FMR Corp................... 594,000(b) 9.3%
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates,
Inc....................... 524,000(c) 8.2%
100 East Pratt Street
Baltimore, MD 21202
Goldman, Sachs & Co........ 517,798(d) 8.1%
85 Broad Street
New York, NY 10004
Dimensional Fund Advisors
Inc....................... 495,576(e) 7.8%
1299 Ocean Avenue
Santa Monica, CA 90401
Investment Counselors of
Maryland, Inc............. 444,000(f) 7.0%
803 Cathedral Street
Baltimore, MD 21201
David L. Babson & Company,
Inc....................... 383,700(g) 6.0%
One Memorial Drive
Cambridge, MA 02142
</TABLE>
- ------
(a) Under Regulations of the Securities and Exchange Commission, a person who
directly or indirectly has or shares voting or investment power with
respect to a security is considered a beneficial owner of the security.
Voting power is the power to vote or direct the voting of shares;
investment power is the power to dispose of or direct the disposition of
shares.
(b) According to a Schedule 13G Amendment dated February 1, 1999, Fidelity
Management & Research Company (Fidelity), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly owned subsidiary of FMR Corp. and an
investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, is the beneficial owner of 594,000 shares, or 9.3%,
of the company's common stock as a result of acting as investment advisor
to various investment companies registered under Section 8 of the
Investment Company Act of 1940. All of the shares are owned by one
investment company--Fidelity Low-Priced Stock Fund. Fidelity Low-Priced
Stock Fund has its principal business office at 82 Devonshire Street,
Boston, Massachusetts 02109. Edward C. Johnson 3rd; FMR Corp.; through
its control of Fidelity, and the Fund each has sole power to dispose of
the 594,000 shares owned by the Fund. Neither FMR Corp. nor Edward C.
Johnson 3rd, chairman of FMR Corp., has the sole power to vote or direct
the voting of the shares owned directly by the Fidelity Funds, which
power resides with the Funds' boards of trustees. Fidelity carries out
the voting of the shares under written guidelines established by the
Funds' boards of trustees. Members of the Edward C. Johnson 3rd family
and trusts for their benefit are the predominant owners of Class B shares
of common stock of FMR Corp., representing approximately 49.0% of the
voting power of FMR Corp. Mr. Johnson owns 12.0% and Abigail P. Johnson
owns 24.5% of the aggregate outstanding voting stock of FMR Corp. Mr.
Johnson is chairman of FMR Corp. and Abigail P. Johnson is a director of
FMR Corp. The Johnson family group and all other Class B shareholders
have entered into a shareholders' voting agreement under which all Class
B shares will be voted in accordance with the majority vote of Class B
shares. Accordingly, through their ownership of voting common stock and
the execution of the shareholders' voting
2
<PAGE>
agreement, members of the Johnson family may be deemed, under the
Investment Company Act of 1940, to form a controlling group with respect to
FMR Corp.
(c) According to a Schedule 13G Amendment dated February 12, 1999, these
securities are owned by various individual and institutional investors,
including T. Rowe Price Small Cap Value Fund, Inc. (which owns 500,000
shares, representing 7.9% of the shares outstanding), to which T. Rowe
Price Associates, Inc. serves as investment advisor with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities.
However, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(d) According to a Schedule 13G Amendment dated February 14, 1999, The
Goldman Sachs Group, L.P. and Goldman, Sachs & Co., each disclaims
beneficial ownership of the indicated shares beneficially owned by any
client accounts with respect to which Goldman Sachs or employees of
Goldman Sachs have voting or investment discretion, or both, and certain
investment entities, of which a subsidiary of The Goldman Sachs Group or
Goldman Sachs is the general partner, managing general partner or other
manager, to the extent interests in such entities are held by persons
other than The Goldman Sachs Group, Goldman Sachs or their affiliates.
(e) According to a Schedule 13G Amendment dated February 11, 1999,
Dimensional Fund Advisors Inc., a registered investment advisor,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the
"Portfolios.") In its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over Sylvan's
securities that are owned by the Portfolios. All securities reported in
this schedule are owned by the Portfolios, and Dimensional disclaims
beneficial ownership of such securities.
(f) According to a Schedule 13G dated March 19, 1998, all of the shares are
owned by various investment advisory clients of Investment Counselors of
Maryland, Inc., which is deemed to be a beneficial owner of those shares
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, due to
its discretionary power to make investment decisions over such shares for
its clients and its ability to vote such shares. In all cases, persons
other than Investment Counselors of Maryland, Inc. have the right to
receive, or the power to direct the receipt of, dividends from, or the
proceeds from the sale of the shares. No individual client holds more
than five percent of the class.
(g) According to a Schedule 13G dated February 1, 1999, David L. Babson &
Company, Inc. serves as an investment advisor to numerous investment
counseling clients.
(h) Based on 6,368,836 shares of the company's common stock issued and
outstanding on the record date.
3
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 3, 1999, the number of shares of
Sylvan common stock beneficially owned by each director, each of the executive
officers named in the Summary Compensation Table and all directors and
executive officers as a group. Unless otherwise indicated in the footnotes,
each person has sole voting and investment power as to all shares listed
opposite his name
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name of Beneficial Ownership Common Stock (h)
- ---- ----------------------- ----------------
<S> <C> <C>
Dennis C. Zensen...................... 784,128(a) 12.3%
William L. Bennett.................... 19,902(b) *
Monir K. Elzalaki..................... 38,472(c) *
Virgil H. Jurgensmeyer................ 28,000(d) *
Donald T. Pascal...................... 23,000(d) *
Donald A. Smith....................... 2,668(e) *
Gary D. Walker........................ 39,130(f) *
Michael A. Walton..................... 35,000(e) *
All directors and executive officers
of Sylvan
as a group (10 persons including
those named)......................... 974,966(g) 15.3%
</TABLE>
- ------
* Less than 1%
(a) The indicated number of shares consists of 512,610 shares directly owned
by Mr. and Mrs. Zensen as joint tenants, and 271,518 shares held directly
by Mr. Zensen.
(b) Includes 13,000 shares subject to options exercisable within 60 days of
the record date as well as 2,000 shares held in Mr. Bennett's 401(k)
account and 240 shares held by trusts for the benefit of Mr. Bennett's
minor children, with respect to which he disclaims beneficial ownership.
(c) Includes 25,000 shares subject to options exercisable within 60 days of
the record date.
(d) Includes 16,000 shares subject to options exercisable within 60 days of
the record date.
(e) All are shares subject to options exercisable within 60 days of the
record date.
(f) Includes 35,000 shares subject to options exercisable within 60 days of
the record date.
(g) Includes 144,334 shares subject to options exercisable within 60 days of
the record date.
(h) Based on 6,368,836 shares of the company's common stock issued and
outstanding on the record date.
ITEM 1. ELECTION OF DIRECTORS
Five directors have been nominated by the board of directors for election at
the annual meeting. They will serve until the next annual meeting of
shareholders or until each individual's successor is duly elected or appointed
and qualified. No family relationship exists between any director, executive
officer or person nominated to become a director.
Unless otherwise specified, the enclosed proxy will be voted in favor of the
persons named below, all of whom are now directors of Sylvan. In the event
that any of the individuals should become unavailable for election for any
reason, at present unknown, it is intended that votes will be cast pursuant to
the accompanying proxy for such substitute nominees, if any, as the board of
directors may designate. The following table sets forth information about the
nominees as of March 3, 1999.
4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Director
Name and Age Present Position with Sylvan Employment, If Different Since
- ------------ ---------------------------- ------------------------ --------
<S> <C> <C> <C>
Dennis C. Zensen (60) Chairman, President and Chief April 1989
Executive Officer of Sylvan Inc.
William L. Bennett (49) Director Vice-Chairman and Director July 1994
of HealthPlan Services
Corporation
Monir K. Elzalaki (43) President of Sylvan December 1998
America, Inc.
Virgil H. Jurgensmeyer (69) Director Chairman of J-M Farms, Inc. June 1992
and J-M Foods, Inc.
Donald T. Pascal (39) Director Managing Director November 1991
Commonfund Capital, Inc.
</TABLE>
Dennis C. Zensen was elected chairman of Sylvan's board in July 1990 and has
served as a director, president and chief executive officer of Sylvan since
April 1989.
William L. Bennett has served as a director since July 1994 and is vice-
chairman and director of HealthPlan Services Corporation, a leading provider
of managed health care services. Until March 1995, he served as chairman and
chief executive officer of Noel Group, Inc. (a holding company which conducts
its principal operations through small-sized and medium-sized operating
companies in which it holds controlling or other significant equity
interests). Previously, Mr. Bennett served as chairman of the board and chief
executive officer of Noel from April 1988 until November 1991 and as co-
chairman and chief executive officer of Noel from November 1991 until July
1994. Mr. Bennett is also a director of Allegheny Energy Inc. (an electric
utility holding company).
Monir K. Elzalaki was appointed a director of Sylvan in December 1998 to
fill a vacancy created by the resignation of Richard F. Lazzarini, Jr. Mr.
Elzalaki has served as president of the company's Sylvan America, Inc. spawn
production subsidiary in Pennsylvania since March 1992 and as president of the
company's Nevada spawn subsidiary since December 1992.
Virgil H. Jurgensmeyer was elected to the board of directors in June 1992.
He has served as chairman of the board of J-M Farms, Inc. (a grower and
marketer of fresh mushrooms) since April 1979 and as chairman of the board of
J-M Foods, Inc. (a producer and marketer of fresh-cut salads) since January
1991. Mr. Jurgensmeyer is part owner and a director of Ohio Valley Mushroom
Farm, Inc. (a grower and marketer of fresh mushrooms) and serves as a director
of Mid-West Custom Mixing Co. (a mixer of rubber compounds), Miami Industrial
Supply and Manufacturing Co. (a manufacturer of mushroom production equipment)
and Miken Computer Co. (a retailer of personal computer hardware, software and
services). He is also a member of the board of directors of the Department of
Agriculture of the State of Oklahoma.
Donald T. Pascal has served as a director since November 1991. Mr. Pascal is
a managing director of Commonfund Capital, Inc. (a wholly owned subsidiary of
Commonfund Group), which manages private capital investments for endowments.
He served as a managing director of Victory Ventures LLC (a venture capital
fund) from September 1997 until August 1998, when he joined Commonfund. He
served as a managing director of Noel Group, Inc. and as a vice-president of
The Prospect Group between 1986 and 1997 (Prospect is a holding company that
conducts its major operations through subsidiaries acquired in management
buyout transactions).
5
<PAGE>
BOARD MEETINGS
During 1998, the board of directors of the company held four meetings. All
of Sylvan's directors attended all of the meetings of the board of directors
and of the committees on which they served during 1998.
BOARD COMMITTEES
The Executive Committee, Audit Committee and Stock Option and Compensation
Committee are the only standing committees of the board. There is no formal
nominating committee.
Executive Committee
Members: Mr. Zensen (chairman), Mr. Jurgensmeyer and Mr. Pascal
Number of meetings in 1998: One
Functions:
. exercises all of the powers and authority of the board in the
management of the business and affairs of the company between
meetings of the full board, except the power or authority to amend
the certificate of incorporation, adopt an agreement of merger or
consolidation, recommend to the shareholders the sale, lease or
exchange of all or substantially all of the company's property and
assets, recommend to the shareholders a dissolution of the company
or a revocation of a dissolution, or amend the bylaws of the company
Audit Committee
Members: Mr. Bennett (chairman) and Mr. Jurgensmeyer
Number of meetings in 1998: Two
Functions:
. consults with Sylvan's independent public accountants and such other
persons as the members deem appropriate
. reviews the preparations for and scope of the audit of the company's
annual financial statements
. makes recommendations as to the engagement and fees of the
independent auditors
. performs such other duties relating to the company's financial
statements as the board may assign from time to time
Stock Option and Compensation Committee
Members: Mr. Jurgensmeyer (chairman) and Mr. Bennett
Number of meetings in 1998: Four
Functions:
. exercises all the powers of the board of directors, including the
authority to issue Sylvan stock, with respect to matters relating to
the administration of the company's 1990 Stock Option Plan
. sets the compensation of the company's chief executive officer, the
four other most highly compensated executive officers and other
persons performing substantial services for the company
. reviews and approves transactions between the company and any
substantial shareholder, officer, director or affiliate of the
company
DIRECTOR COMPENSATION
Sylvan paid each nonemployee director an annual retainer of $10,000 and a
fee of $1,000 for each board meeting attended and for each committee meeting
attended. During 1998, the directors as a group were paid $56,000 on that
basis. Directors are also reimbursed for out-of-pocket expenses incurred in
attending meetings.
6
<PAGE>
In addition, under the terms of the 1993 Stock Option Plan for Nonemployee
Directors, each nonemployee director is automatically granted nonincentive
options to purchase 10,000 shares of common stock on the first business day
following the annual meeting which follows the date such individual becomes a
Sylvan nonemployee director. In addition, he is automatically granted
nonincentive options to purchase 1,000 shares of common stock on the first
business day following the day of each annual meeting of shareholders. The
exercise price per share of the common stock of each option granted is the
closing price of the common stock on the date of grant as reported on The
Nasdaq Stock Market(R).
Directors who are employees of the company or its subsidiaries receive no
compensation for services as directors or committee members, but are eligible
to participate in the company's 1990 Stock Option Plan. Members of the Stock
Option and Compensation Committee are not eligible to participate in the 1990
Stock Option Plan while they are serving on such committee.
TRANSACTIONS WITH THE COMPANY
During 1998, various mushroom business interests of Mr. Jurgensmeyer, a
member of the company's board, purchased spawn and compost supplements at fair
value totaling approximately $668,000, purchased mushrooms at fair market
value totaling approximately $33,000, and sold various machine parts and
supplies at fair value totaling approximately $14,000 in trading with the
company's subsidiaries.
1999 STOCK OPTION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee administers the 1990 Stock
Option Plan and exercises responsibility with respect to the compensation of
Sylvan's chief executive officer, four other highly compensated executive
officers and persons performing other substantial services for the company.
Compensation Structure and Administration
The executive compensation program is composed of salary, cash bonuses and
stock options utilized through an integrated and managed approach. In
administering the program during 1998, the Committee sought to:
. support a pay-for-performance policy that differentiated compensation
based on corporate, business unit and individual performance;
. motivate senior officers to achieve strategic business initiatives and
reward them for their accomplishments; and
. align the interests of Sylvan's key employees with the long-term
interests of shareholders through award opportunities that resulted in
ownership of the company's common stock.
The Committee utilized several measures of corporate and individual
performance in applying the following process for establishing compensation
for the individuals whose compensation determination is the Committee's
responsibility.
Base Salaries: The Committee reviewed the covered officers' base salaries,
paying particular attention to prevailing levels of compensation for qualified
executives, the responsibilities of each individual's position and the
contributions to the company which each officer makes and is expected to make
in the future.
Cash Bonuses: Cash bonuses are based upon Sylvan's overall financial
performance and upon an executive officer's performance as measured against
the company's progress in expanding its businesses throughout the world and
aggressively introducing new products and services to its customers.
7
<PAGE>
Stock Options: Stock option grants carry an exercise price equal to the fair
market price of the company's common stock on the date of the grant and
typically do not fully vest until three years following the date of the grant.
Awards are based on the attainment of operating goals as well as progress
toward specific long-term quality, profitability and growth goals.
Measurement Meetings: Measurements of a covered officer's progress toward
the achievement of the goal components of the total compensation package were
made by the Committee in the course of four meetings with the chief executive
officer during 1998. During the first meeting, performance goals for each
individual were established and, during the remaining meetings, performance
evaluations were reviewed and updated.
Corporate Performance Goals and Awards
The measurement of corporate performance for 1998 was based on earnings per
share (EPS), the continued development of Sylvan's strong global franchise,
annual revenue growth and return on shareholders' equity (ROE). Annual bonuses
for the chief executive officer and the chief financial officer are based on
an equal weighting of these factors as they relate to overall corporate
performance. Annual bonuses for the other most highly compensated executive
officers are also based on an equal weighting of these factors, except that
revenue growth and ROE are calculated on the performance of the operating
division for which each individual is responsible. In all cases, performance
is measured over the four quarters preceding the awarding of the bonuses.
With respect to overall corporate performance, EPS and ROE trends were below
expectations during the measurement period that ended at the end of the third
quarter of 1998, while corporate revenue growth met expectations. Sylvan's
European operating division and, to a lesser extent, the U.S. spawn division
exhibited positive performances in spite of difficult strategic environments,
but the operating results of the Quincy Farms fresh mushroom operations were
disappointing.
The Committee elected not to award bonuses to the executive officers listed
on the Summary Compensation Table due primarily to the company's disappointing
financial results in 1998.
Compensation for the Chief Executive Officer
The Committee awarded Mr. Zensen a salary increase of $100,000 per year in
April 1998 and instituted annual supplemental contributions of $75,000 to the
company's Nonqualified Target Benefit Annuity Purchase Program on his behalf
at the end of the year. The Committee believes that Mr. Zensen's salary is
commensurate with the wide area of responsibility that he must exercise and
the broad activities that he must perform. Mr. Zensen's base salary was last
adjusted in April 1996.
Compensation for Other Executive Officers
Donald Smith became chief financial officer in December 1998, but no salary
adjustments were made with respect to that office during the year. The
Committee granted a base salary increase of $50,000 in 1998 to Mr. Elzalaki
and of (Pounds)20,000 to Mr. Walton to reward merit and to reflect various job
scope changes.
Consistent with the Committee's philosophy of aligning the interests of its
managers with shareholders, options for 209,000 shares of Sylvan's common
stock were granted by the Committee to 53 employees during 1998. Of the total,
15,000 shares, or 7%, were granted to Mr. Elzalaki; 20,000 shares, or 10%,
were granted to Mr. Walton; 15,000 shares, or 7%, were granted to Mr. Walker;
and 10,000 shares, or 5%, were granted to Mr. Smith. One of the remaining
grantees was an executive officer. The grants, made at the prevailing market
values of the underlying shares, were based on an evaluation of each grantee's
ability to influence the company's long-term growth and profitability. With
input from Mr. Zensen, the Committee established the number of options granted
to each recipient.
8
<PAGE>
Consideration of Internal Revenue Code Section 162(m)
The Committee intends to monitor the impact of Section 162(m) of the
Internal Revenue Code in making its compensation decisions. Although it
provides for certain exceptions, this law generally disallows a tax deduction
to public companies for compensation over $1 million paid to the company's
chief executive officer and four other most highly compensated executive
officers.
Virgil H. Jurgensmeyer, Committee
Chairman
William L. Bennett
STOCK OPTION AND COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
As stated above, the Stock Option and Compensation Committee was composed of
Messrs. Jurgensmeyer and Bennett, neither of whom is an executive officer of
the company. During 1998, no executive officer of the company served on a
compensation committee (or other board committee performing equivalent
functions) or board of directors of any entity related to any member of
Sylvan's board of directors.
9
<PAGE>
MANAGEMENT COMPENSATION AND BENEFIT PLANS
Summary Compensation Table
The following table sets forth certain information regarding compensation
received by the chief executive officer and the five other most highly
compensated executive officers of the company and its subsidiaries for 1998,
1997 and 1996 in all of the capacities in which they served. Sylvan has not
granted any restricted stock awards or made any long-term incentive plan pay-
outs.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
----------------- ---------------------------------
Other Number of Shares
Annual Underlying Stock All Other
Name and Principal Position Year Salary Bonus Compensation Options Granted Compensation (j)
- --------------------------- ---- ------ ----- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Zensen 1998 $566,667 -- $146,254(c) -- $210,029
President and Chief 1997 500,000 $175,000 37,662(c) -- 54,085
Executive Officer 1996 481,000 175,000 383,172(d) -- 74,598
Monir K. Elzalaki 1998 253,333 -- 8,984(c) 15,000 15,006
President 1997 220,000 50,000 92,533(e) -- 9,093
Sylvan America, Inc. 1996 192,500 50,000 57,429(f) 10,000 7,105
Michael A. Walton 1998 218,500 -- -- 20,000 11,798
Manager 1997 174,783 32,730 -- -- 9,832
European Operations 1996 146,334 33,320 -- 20,000 8,780
Richard F. Lazzarini, Jr. (a) 1998 210,000 -- 8,098(c) -- 13,525
President 1997 196,667 40,000 117,823(g) 10,000 9,454
Quincy Corporation 1996 190,000 80,000 105,740(h) -- 8,464
Gary D. Walker 1998 180,000 -- -- 15,000 --
President 1997 165,336 30,000 -- -- --
Sylvan Bioproducts, Inc. 1996 158,004 -- 24,073(i) -- --
Donald A. Smith (b) 1998 100,008 -- -- 10,000 --
Chief Financial Officer 1997 -- -- -- -- --
1996 -- -- -- -- --
</TABLE>
- ------
(a) Mr. Lazzarini resigned as a member of Sylvan's board of directors in
October 1998 and as president of Quincy in December 1998.
(b) Mr. Smith became chief financial officer in December 1998. Previously, he
was Sylvan's corporate controller and was not an executive officer of the
company.
(c) Reflects reimbursement for income taxes incurred as a result of
contributions made by the company on behalf of the officer to its
Nonqualified Target Benefit Annuity Purchase Program.
(d) Consists of Mr. Zensen's recognition of the $331,225 difference between
the exercise and market prices of stock option plan shares which were
exercised in 1993, but which vested and were acquired by him during 1996,
and $51,947 reimbursement for income taxes incurred as a result of
contributions made on his behalf by the company to its Nonqualified Target
Benefit Annuity Purchase Program.
(e) Reflects Mr. Elzalaki's recognition of the $87,089 difference between the
exercise and market prices of stock options which he exercised during 1997
and $5,444 reimbursement for income taxes incurred as a result of
contributions made on his behalf by the company to its Nonqualified Target
Benefit Annuity Purchase Program.
(f) Reflects Mr. Elzalaki's recognition of the $53,175 difference between the
exercise and market prices of stock options which he exercised during 1996
and $4,254 reimbursement for income taxes incurred as a
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<PAGE>
result of contributions made on his behalf by the company to its
Nonqualified Target Benefit Annuity Purchase Program.
(g) Reflects Mr. Lazzarini's recognition of the $110,816 difference between
the exercise and market prices of stock options which he exercised during
1997 and $7,007 reimbursement for income taxes incurred as a result of
contributions made on his behalf by the company to its Nonqualified
Target Benefit Annuity Purchase Program.
(h) Reflects Mr. Lazzarini's recognition of the $100,080 difference between
the exercise and market prices of stock options which he exercised during
1996 and $5,660 reimbursement for income taxes incurred as a result of
contributions made on his behalf by the company to its Nonqualified
Target Benefit Annuity Purchase Program.
(i) Reflects Mr. Walker's recognition of the difference between the exercise
and market prices of stock options which vested and were acquired by him
during 1996.
(j) Reflects income imputed to each individual as a result of contributions
made by the company to its Nonqualified Target Benefit Annuity Purchase
Program or, in Mr. Walton's case, to Sylvan's British subsidiaries'
contributory pension benefit plan, in which Mr. Walton is a participant.
Option Grants in the Year Ended January 3, 1999
The following table sets forth as to the persons named in the Summary
Compensation Table information with respect to the Sylvan stock options
granted during the company's last fiscal year, including the potential
realizable value from the stock options assuming they are exercised at the end
of the option term and assuming 5% and 10% annual rates of stock price
appreciation during the option term.
<TABLE>
<CAPTION>
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Shares Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term (d)
Options Employees in Price Expiration --------------------------
Name Granted (a) Fiscal Year (b) Per Share(c) Date 5% 10%
- ---- ----------- --------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Zensen -- -- -- -- -- --
Richard F. Lazzarini, Jr. -- -- -- -- -- --
Monir K. Elzalaki 15,000 7.2% $15.00 6-6-08 $ 141,501 $ 358,592
Michael A. Walton 20,000 9.6 15.00 6-6-08 188,668 478,123
Gary D. Walker 15,000 7.2 15.00 6-6-08 141,501 358,592
Donald A. Smith 10,000 4.8 13.00 1-11-09 81,756 207,187
</TABLE>
- ------
(a) The options granted become exercisable over a three-year period in
increments of one-third of the total per year beginning with the first
anniversary of the date of the grant.
(b) Sylvan granted options representing 209,000 shares to employees and 3,000
shares to its nonemployee directors.
(c) The fair market value on the date of grant.
(d) Based on the closing sales price of Sylvan's common stock as reported on
The Nasdaq Stock Market(R) on the date immediately prior to the date of
the grant. The actual value realized may be greater than or less than the
potential realizable value set forth in the table.
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<PAGE>
Aggregated Option Exercises for the Year Ended January 3, 1999
The following table sets forth as to the persons named in the Summary
Compensation Table, information with respect to the Sylvan stock options
exercised during 1998, the net value of any shares received or cash realized
upon such exercise, the number of shares covered by unexercised stock options
held at January 3, 1999 and the value of such stock options at January 3,
1999.
<TABLE>
<CAPTION>
No. of Shares Underlying Value of Unexercised
No. of Unexercised Options In-The-Money Options
Shares at 1/3/99 at 1/3/99 (b)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Zensen -- -- -- -- --
Richard F. Lazzarini, Jr. 8,336 $27,717(a) 6,668 6,667 $ 18,756 $ 12,501
Monir K. Elzalaki -- -- 25,000 18,334 94,175 11,053
Michael A. Walton -- -- 28,334 26,666 111,043 153,325
Gary D. Walker -- -- 35,000 15,000 166,200 --
Donald A. Smith -- -- 2,668 11,000 10,904 21,940
</TABLE>
- ------
(a) Market value on the date of exercise less the option price.
(b) The fair market value of Sylvan's common stock at January 3, 1999 was
$14.75 per share based on the closing sales price as reported on The
Nasdaq Stock Market(R).
Qualified Retirement Benefit Plan
Sylvan has a defined benefit pension plan covering eligible salaried
employees of its Sylvan America, Inc. and Sylvan Foods, Inc. subsidiaries, and
former salaried employees of its now closed Moonlight Mushrooms, Inc.
subsidiary. The pension plan is funded solely by employer contributions, but
the company ceased accruing benefits for the plan as of January 3, 1993.
Annual pension benefits under the plan are determined by multiplying 1.25%
times the employee's average salary as reported on such employee's Form W-2
over the five highest earnings years of service prior to January 3, 1993,
times the employee's number of years of service prior to January 3, 1993.
Pension benefits are not subject to deductions for Social Security benefits.
Mr. Elzalaki is the only person named in the Summary Compensation Table who
participated in the plan. Mr. Elzalaki has two years of credited service as of
January 3, 1993 and an accrued benefit of approximately $324 per month at age
65.
12
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return on
Sylvan's common stock for the years 1994 through 1998 against the total return
of Standard and Poor's 500 Stock Index and the Russell 2000 Small Stock Index.
The company utilizes the Russell index because it has not been able to
construct a peer group which exhibits Sylvan's product and geographical
components. The graph assumes a $100 investment on December 31, 1993 in the
company's common stock, the S&P stocks and the Russell index stocks, and the
cumulative total return assumes the reinvestment of dividends, if any.
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
--------------------------------------------------------------------------------
Sylvan Inc. 100.00 127.20 139.71 152.94 164.71 175.00
S & P 500 100.00 101.32 139.40 171.40 228.59 293.91
Russell 2000 100.00 98.18 126.10 146.90 179.74 175.18
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors, executive officers and persons who own more than ten percent of a
registered class of the company's equity securities to file with the
Securities and Exchange Commission 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 Commission regulation to furnish the company with copies of all
Section 16(a) forms which they file.
The company believes that all filing requirements applicable to its officers
and directors were complied with in 1998. In making these disclosures, the
company has relied solely on the written and oral representations of its
directors and executive officers and copies of the reports that they filed
with the Commission.
ITEM 2. THE ADOPTION OF THE AMENDMENT AND RESTATEMENT OF
THE 1990 STOCK OPTION PLAN
Sylvan's 1990 Stock Option Plan was originally adopted by the board of
directors on November 1, 1990 and approved by Sylvan's shareholders on June
11, 1991. On February 10, 1999, the board of directors approved certain
amendments to the plan and the restatement of the plan as described below. The
affirmative vote of the
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<PAGE>
shareholders on or prior to February 9, 2000 is required for approval of the
amendment and restatement of the plan.
If Sylvan's shareholders do not approve the amendments as proposed in this
proxy statement, the plan shall remain in effect without including the
amendments. However, as required by Section 162(m) of the Internal Revenue
Code (described below), if the amendments are not approved, no further grants
will be made to the company's chief executive officer or any of the other four
highest compensated executive officers under the plan.
A summary of the amended plan is provided below, but the summary is
qualified in its entirety by the full text of the amended plan, which is set
forth as Appendix A to this proxy statement.
Amendments. In general, the amendments were adopted to increase the number
of shares which may be issued and sold pursuant to the plan by 500,000, to
1,700,000 shares, to extend the plan until February 9, 2009, and to make
certain additional changes to the plan. The additional changes:
. add a limit on the number of stock options that can be granted to any
one individual each year;
. define who may serve on the committee which administers the plan;
. expand the definition of what constitutes a "change of control" of
Sylvan, under which event the stock options may become immediately
exercisable;
. clarify the definition of the price at which incentive stock options may
be granted by eliminating unnecessary provisions relating to the par
value of Sylvan common stock;
. add a new section to provide that fair market value of Sylvan common
stock is the mean between the high and low prices as reported by The
Nasdaq Stock Market(R); and
. eliminate the requirement that no option may be exercisable during the
first six months of its term.
The amendments to the Plan described in the first two bulleted items above
are included to allow grants of stock options to qualify for an exception to
the limits on deductibility under Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code disallows federal income tax
deductions to a company for compensation paid to the chief executive officer
and any of the other four highest compensated executive officers in excess of
$1 million each in any taxable year, subject to certain exceptions. One
exception involves compensation paid pursuant to shareholder-approved
compensation plans that are performance based.
General. The purposes of the amended plan are to permit employees and other
persons who perform substantial services for or on behalf of Sylvan and its
subsidiaries to share in the future growth of Sylvan's business. All employees
of Sylvan and its subsidiaries are eligible to be granted incentive stock
options. All employees of Sylvan and its subsidiaries and other persons who
perform substantial services for and on behalf of Sylvan, its subsidiaries,
affiliates, and other entities in which Sylvan has an interest are eligible to
be granted nonincentive stock options.
The aggregate net number of shares of Sylvan common stock that may be issued
under the plan is 1,700,000 shares, subject to the proportionate adjustment in
the event of stock splits and similar events. No stock options may be granted
under the plan subsequent to February 9, 2009.
Administration. The amended plan is administered by the Stock Option and
Compensation Committee, which consists of not less than two members of the
board of directors (see "Board Committees" on page 6). The members of the
committee must be "nonemployee" directors and otherwise meet the
"disinterested administration" rules of Rule 16b-3 under the Securities
Exchange Act of 1934, and "outside directors" under Section 162(m)(4)(c) of
the Internal Revenue Code. Members of the committee are selected by the board
and may be removed by the board at any time.
14
<PAGE>
Subject to the provisions of the amended plan, the committee has complete
authority, in its discretion, to interpret the amended plan, to determine the
terms and provisions of any option agreements entered into under the amended
plan, to determine the grantees to whom each grant is made, to determine the
times and prices at which stock options are granted, to determine whether
stock options are incentive stock options or nonincentive stock options and to
determine the number of shares covered by each stock option. The committee may
consider the nature of the services rendered by the grantee, the grantee's
present and potential contributions to the success of Sylvan and such other
factors as the committee may deem relevant.
Terms of Stock Options. The amended plan provides for the grant of
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
or "nonincentive stock options," which are stock options that do not qualify
under Section 422 of the Internal Revenue Code. The option price for each
stock option granted under the amended plan is determined by the committee, in
its discretion, but may not be less than 100% of the fair market value of the
shares of Sylvan common stock covered by the stock option on the date of
grant. Fair market value for all purposes under the amended plan is the mean
between the publicly reported highest and lowest sales prices per share of
Sylvan common stock, currently measured as reported by The Nasdaq Stock
Market(R), Inc., as quoted in The Wall Street Journal, on the date as of which
-----------------------
fair market value is determined. As of March 19, 1999, the fair market value
of a share of Sylvan common stock, as so computed, was $10.50. In the case of
an incentive stock option granted to an individual who, immediately prior to
such grant, owns actually or constructively, pursuant to the rules contained
in Section 424(d) of the Internal Revenue Code, stock possessing more than 10%
of the total combined voting power of all classes of stock of Sylvan or any
subsidiary (10% employee), the option price may be not less than 110% of fair
market value on the date of grant.
An exercisable stock option may be exercised in whole or in part as
specified in the applicable agreement. No stock option may be exercised after
the expiration of ten years from the date of grant (five years in the case of
a 10% employee). Each incentive stock option granted under the amended plan
may be exercised during such employee's employment by Sylvan or a subsidiary
or during the three month period (12 months in the case of disabled employees)
after the termination of such employee's employment. To the extent specified
in the stock option agreement, in the event of the death of the optionee
during employment, any then outstanding incentive stock option is exercisable
in full by the person or persons entitled to do so under the will of the
optionee, or if the optionee shall fail to make testamentary disposition of
the stock option or shall die intestate, by the legal representative of the
optionee, in either case at any time prior to the expiration of the stock
option or within one year after the date of death, whichever is the shorter
period. Each nonincentive stock option granted under the amended plan may be
exercised following termination of employment or service with Sylvan or a
subsidiary or affiliate during the period specified in the applicable stock
option agreement.
The option price for each incentive stock option is payable in full in cash
at the time of exercise. However, in lieu of cash the person exercising the
stock option may pay the option price in whole or in part by delivering shares
of Sylvan common stock having a fair market value on the date of exercise of
the stock option equal to the option price for the shares being purchased. The
option price for each nonincentive stock option shall be payable as set forth
in the applicable stock option agreement.
No stock option granted under the amended plan is transferable other than by
will or by the laws of descent and distribution, and a stock option may be
exercised during an optionee's lifetime only by the optionee.
Subject to the foregoing and the other provisions of the amended plan, stock
options granted under the amended plan may be exercised at such times and in
such amounts and be subject to such restrictions and other terms and
conditions, if any, as shall be determined in its discretion, by the
committee.
Miscellaneous. The board of directors may terminate or amend the amended
plan at any time except that, without approval of the Sylvan shareholders, no
alteration or amendment may increase the total number of shares which may be
issued or sold pursuant to stock options under the amended plan or make any
changes in the designation of employees eligible to receive incentive stock
options or the class of employees eligible to be granted nonincentive stock
options under the amended plan. In addition, no termination or amendment of
the
15
<PAGE>
amended plan may, without the consent of the holder of a stock option
theretofore granted under the amended plan, materially adversely affect the
rights of such holder with respect thereto.
Amended Plan Benefits
In the year ended January 3, 1999, a total of 209,000 stock options were
granted under the plan. The following table sets forth information regarding
options granted under the plan in that year for the named executive officers
in the Summary Compensation Table, all executive officers of the company as a
group, all nonexecutive officer employees of the company as a group and any
additional persons who received more than 5% of the options granted in each
instance.
<TABLE>
<CAPTION>
Name and Principal Position No. of Shares
--------------------------- -------------
<S> <C>
Monir K. Elzalaki, President of Sylvan America, Inc. 15,000
Michael A. Walton, Manager of European Operations 20,000
Gary D. Walker, President of Sylvan Bioproducts, Inc. 15,000
Donald A. Smith, Chief Financial Officer 10,000
All executive officers as a group (7 persons) 65,000
All nonexecutive officer employees as a group (48 persons) 144,000
</TABLE>
Possible Anti-takeover Effect
The provisions of the amended plan providing for the acceleration of the
exercise date of outstanding stock options upon the occurrence of a change of
control may be considered as having an anti-takeover effect.
Federal Income Tax Consequences
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of awards under present law.
Incentive Stock Options. An optionee will not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of an incentive stock option. The exercise
of an incentive stock option generally will result in an increase in an
optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares, any amount realized in excess
of the optionee's tax basis in the shares disposed of will be treated as a
long-term capital gain, and any loss will be treated as a long-term capital
loss. In the event of a "disqualifying disposition," the difference between
the fair market value of the shares received on the date of exercise and the
option price (limited, in the case of a taxable sale or exchange, to the
excess of the amount realized upon disposition over the optionee's tax basis
in the shares) will be treated as compensation received by the optionee in the
year of disposition. Any additional gain will be taxable as a capital gain and
any loss as a capital loss, which will be long-term or short-term, depending
on whether the shares were held for more than one year. Under proposed
regulations, special rules apply in determining the compensation income
recognized upon a disqualifying disposition if the option price of the
incentive stock option is paid with shares of Sylvan common stock. If shares
of Sylvan common stock received upon the prior exercise of an incentive stock
option are transferred to Sylvan in payment of the option price of an
incentive stock option within either of the periods referred to above, the
transfer will be considered a "disqualifying disposition" of the shares
transferred, but, under proposed regulations, only compensation income
determined as stated above, and no capital gain or loss, will be recognized.
16
<PAGE>
Neither Sylvan nor any of its subsidiaries will be entitled to a deduction
with respect to shares received by an optionee upon exercise of an incentive
stock option and not disposed of in a "disqualifying disposition." If an
amount is treated as compensation received by an optionee because of a
"disqualifying disposition," Sylvan or one of its subsidiaries generally will
be entitled to a corresponding deduction in the same amount for compensation
paid.
Nonincentive Stock Options. An optionee will not recognize any taxable
income for Federal income tax purposes upon receipt of a nonincentive stock
option. Upon the exercise of a nonincentive stock option the amount by which
the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price will be treated as compensation received by
the optionee in the year of exercise. If the option price of a nonincentive
stock option is paid in whole or in part with shares of Sylvan common stock,
no income, gain or loss will be recognized by the optionee on the receipt of
shares equal in value on the date of exercise to the shares delivered in
payment of the option price. The fair market value of the remainder of the
shares received upon exercise of the nonincentive stock option, determined as
of the date of exercise, less the amount of cash, if any, paid upon exercise
will be treated as compensation income received by the optionee on the date of
exercise of the stock option. Sylvan or one of its subsidiaries generally will
be entitled to a deduction for compensation paid in the same amount treated as
compensation received by the optionee.
Other Tax Matters. The exercise by an awardee of a stock option, following
the occurrence of a change of control, in certain circumstances, may result in
a 20% Federal excise tax (in addition to Federal income tax) to the awardee on
certain payments of Sylvan common stock resulting from such exercise and the
loss of a compensation deduction which would otherwise be allowable to Sylvan
or one of its subsidiaries as explained above.
The board of directors recommends a vote FOR approval of amendment and
restatement of the plan.
PROXY SOLICITATION AND EXPENSES OF SOLICITATION
The cost of the solicitation of proxies will be paid by the company. In
addition to the solicitation of proxies by the use of the mails, management
and regularly engaged Sylvan employees may, without additional compensation
therefor, solicit proxies on behalf of the company by personal interviews,
telephone, telegraph or other means, as appropriate. The company has retained
ChaseMellon Shareholder Services L.L.C. to solicit proxies from the
shareholders at a fee of $7,500 plus out-of-pocket expenses. The company will,
upon request, reimburse brokers and others who are only record holders of
Sylvan's common stock for their reasonable expenses in forwarding proxy
material to, and obtaining voting instructions from, the beneficial owners of
such stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors engaged Arthur Andersen LLP, independent public
accountants, to audit the books and records of the company for the current
year and for the year ended January 2, 2000. Representatives of Arthur
Andersen LLP are expected to be present at the Meeting and, while they are not
expected to make a statement, they will have the opportunity to do so if they
desire. They will also be available to respond to appropriate questions.
DEADLINE FOR SHAREHOLDER PROPOSALS
Sylvan's bylaws require shareholders who wish to make proposals or nominate
directors at an annual meeting to give written notice to the secretary of
Sylvan not less than 30 days nor more than 60 days prior to the meeting or, if
Sylvan gives less than 40 days notice of the date of the meeting, then not
less than the tenth day
17
<PAGE>
after the notice of the date of the meeting was given. Shareholder proposals
to be included in the board of directors' proxy statement and form of proxy or
intended to be presented at the next annual meeting of shareholders, to be
held in 2000, must be received by the company at 333 Main Street, P. O. Box
249, Saxonburg, PA 16056-0249 on or before December 30, 1999.
ANNUAL REPORT ON FORM 10-K
The company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, is available to shareholders upon request and may be
obtained by writing to: Sylvan Inc., 333 Main Street, P. O. Box 249,
Saxonburg, PA 16056-0249.
By Order of the Board of Directors
Fred Y. Bennitt
Secretary
April 5, 1999
18
<PAGE>
APPENDIX A
SYLVAN INC. 1990 STOCK OPTION PLAN
Amended and Restated as of February 10, 1999
SECTION 1. Establishment. There is hereby established the Sylvan Inc. 1990
Stock Option Plan, pursuant to which employees and any other persons who
perform substantial services for or on behalf of Sylvan Inc. (the Company),
its subsidiaries and certain other entities may be granted options to purchase
shares of common stock of the Company, par value $.001 per share, and thereby
share in the future growth of the business. The subsidiaries of the Company
included in this Plan (the Subsidiaries) shall be any subsidiary of the
Company as defined in Section 424 of the Internal Revenue Code of 1986, as
amended (the Code).
SECTION 2. Status of Options. The options that may be granted pursuant to
this Plan will constitute either incentive stock options within the meaning of
Section 422 of the Code, or options that are not incentive stock options.
Incentive Stock Options and Nonincentive Stock Options shall be collectively
referred to herein as "options."
SECTION 3. Eligibility. All employees of the Company or the Subsidiaries who
are employed at the time of the adoption of this Plan or thereafter, and any
other persons who perform substantial services for or on behalf of the
Company, affiliates or any entity in which the Company has an interest
(collectively, the Grantees) shall be eligible to be granted Nonincentive
Stock Options to purchase shares of common stock under this Plan. All
employees of the Company or the Subsidiaries who are employed at the time of
adoption of this Plan or thereafter shall be eligible to be granted Incentive
Stock Options under this Plan. Notwithstanding the foregoing, any director who
is not an employee of the Company or a Subsidiary of the Company shall be
ineligible to receive options under this Plan.
SECTION 4. Number of Shares Covered by Options; No Preemptive Rights. The
total number of shares of common stock which may be issued and sold pursuant
to options granted under this Plan shall be 1,700,000 (or the number and kind
of shares of stock or other securities which, in accordance with Section 9 of
this Plan, shall be substituted for such shares of common stock or to which
said shares shall be adjusted. Hereinafter, all references to shares of common
stock are deemed to be references to said substituted shares or shares so
adjusted.) The maximum aggregate number of shares of common stock that shall
be available for the grant of stock options to any one individual under the
Plan during any calendar year shall be limited to 50,000 shares. The
limitation in the preceding sentence shall be interpreted and applied in a
manner consistent with Section 162(m) of the Code. If any outstanding option
granted under this Plan expires or is terminated, for any reason, the shares
of common stock subject to the unexercised portion of the option will again be
available for options issued under this Plan.
SECTION 5. Administration.
(a) This Plan shall be administered by the committee (the Committee)
referred to in paragraph (b) of this Section 5. Subject to the express
provisions of this Plan, the Committee shall have complete authority,
in its discretion, to interpret this Plan; to prescribe, amend and
rescind rules and regulations relating to it; to determine the terms
and provisions of the respective option agreements (which need not be
identical); to determine the Grantees to whom, and the times and
prices at which, options shall be granted; to determine the option
periods, the number of shares of common stock to be subject to each
option and whether each option shall be an Incentive Stock Option or a
Nonincentive Stock Option; and to make all other determinations
necessary or advisable for the administration of the Plan. Each option
shall be clearly identified at the time of grant as to its status. In
making such determinations, the Committee may take into account the
nature of the services rendered by the respective Grantees, their
present and potential contributions to the success of the Company and
such other factors as the Committee, in its discretion, shall deem
relevant. Nothing contained in this Plan shall be deemed to
19
<PAGE>
give any Grantee the right to be granted an option to purchase shares of
common stock except to the extent and upon such terms and conditions as
may be determined by the Committee. The Committee's determination on all
of the matters referred to in this Section 5 shall be conclusive.
(b) The Committee shall consist of not less than two members of the Board
who (1) are nonemployee directors and otherwise meet the
"disinterested administration" rules of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and (2) are "outside
directors" under Section 162(m)(4)(c) of the Code, or any successor
provision. The Committee shall be appointed by the Board, which may at
any time, and from time to time, remove any member of the Committee,
with or without cause, appoint additional members to the Committee and
fill vacancies, however caused, in the Committee. A majority of the
members of the Committee shall constitute a quorum and all
determinations of the Committee shall be made by a majority of such
quorum. Any decision or determination of the Committee reduced to
writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made at a meeting duly called and
held.
(c) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that, upon the exercise
of such options, the Company will loan to the holder thereof such
amount as shall equal the purchase price of the shares of common stock
issuable upon such exercise. Such loan shall be on terms and
conditions deemed appropriate by the Committee, except that any loan
made with respect to an Incentive Stock Option shall bear interest at
a rate such that no portion of the principal amount of the loan shall
be treated as unstated or imputed interest or result in original issue
discount under Treasury Regulation (S)1.421-7(e) and Sections 483 or
1272-1275 of the Code, or under corresponding provisions of any future
Internal Revenue laws or regulations.
(d) Notwithstanding any provisions hereof to the contrary, the Committee
shall have sole and exclusive authority with respect to the grant of
options to employee directors.
(e) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that, upon the exercise
of such options, the person exercising such options may require the
Company to withhold from the number of shares or other securities to
which such person would otherwise be entitled upon exercise of such
options a number of shares or other securities with an aggregate fair
market value (as determined in accordance with Section 6(h) below)
equal to the amount of any withholding taxes payable as a result of
such exercise.
(f) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that upon a "Change of
Control" of the Company, as defined below, all of the options covered
thereby shall become immediately exercisable.
For purposes of this Section 5(f), the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the
Plan.
(3) "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other
than the common stock to elect directors by a separate class
vote); and a specified percentage of "Voting Power" of a company
shall mean such number of the Voting Shares as shall enable the
holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without
consideration of the rights of any class of stock other than the
common stock to elect directors by a separate class vote).
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(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Company (other than such an offer made
by the Company or any Subsidiary), whether or not such offer is
approved or opposed by the Board.
(5) "Change of Control" shall mean the date upon which any of the
following events occurs:
(i) The Company acquires actual knowledge that any Person other
than the Company, a Subsidiary or any employee benefit
plan(s) sponsored by the Company has acquired the Beneficial
Ownership, directly or indirectly, of securities of the
Company entitling such Person to 25% or more of the Voting
Power of the Company;
(ii) A Tender Offer is made to acquire securities of the Company
entitling the holders thereof to 25% or more of the Voting
Power of the Company;
(iii) A solicitation subject to Rule 14a-11 under the 1934 Act (or
any successor rule) relating to the election or removal of
50% or more of the members of any class of the Board shall be
made by any person other than the Company; or
(iv) The shareholders of the Company shall approve a merger,
consolidation, share exchange, division or sale or other
disposition of assets of the Company as a result of which the
shareholders of the Company immediately prior to such
transaction shall not hold, directly or indirectly,
immediately following such transaction a majority of the
Voting Power of (a) in the case of a merger or consolidation,
the surviving or resulting corporation, (b) in the case of a
share exchange, the acquiring corporation or (c) in the case
of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which,
immediately following the transaction, holds more than 10% of
the consolidated assets of the Company immediately prior to
the transaction;
provided, however, that (i) if securities beneficially owned by a
Grantee are included in determining the Beneficial Ownership of a
Person referred to in paragraph 5(f)(5)(i), (ii) a Grantee is
required to be named pursuant to Item 2 of the Schedule 14D-1 (or
any similar successor filing requirement) required to be filed by
the bidder making a Tender Offer referred to in paragraph
5(f)(5)(ii), or (iii) if a Grantee is a "participant" as defined in
14a-11 under the 1934 Act (or any successor rule) in a solicitation
(other than a solicitation by the Company) referred to in paragraph
5(f)(5)(iii), then no Change of Control with respect to such Grantee
shall be deemed to have occurred by reason of such event.
SECTION 6. Terms of Incentive Stock Options. Each Incentive Stock Option
granted under this Plan shall be evidenced by an Incentive Stock Option
agreement which shall be executed by the Company and by the person to whom
such Incentive Stock Option is granted, and shall be subject to the following
terms and conditions:
(a) The price at which shares of common stock covered by each Incentive
Stock Option may be purchased pursuant thereto shall be determined in
each case on the date of grant by the Committee, but shall be an
amount not less than one hundred percent (100%) of the fair market
value of such shares on the date of grant, except as provided in
Section 6(e).
(b) The option price of the shares to be purchased pursuant to each
Incentive Stock Option shall be paid in full in cash, or by delivery
(i.e., surrender) of shares of common stock of the Company then owned
by the Grantee, at the time of the exercise of the Incentive Stock
Option. Shares of common stock so delivered will be valued on the day
of delivery for the purpose of determining the extent to which the
option price has been paid thereby, in the same manner as provided for
the purchase price of Incentive Stock Options as set forth in
paragraph (h) of this Section 6.
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(c) Each Incentive Stock Option agreement shall provide that such
Incentive Stock Option may be exercised by the Grantee, in such parts
and at such times as may be specified in such Agreement, within a
period specified in the Incentive Stock Option agreement which does
not exceed ten years after the date on which the Incentive Stock
Option is granted or such shorter period specified in Section 6(e)
(hereinafter called the "Incentive Stock Option Period"); and, in any
event, only during the continuance of the employee's employment by the
Company or the Subsidiaries during the period of three months (or
twelve months if the employee is disabled within the meaning of
Section 422(c)(6) of the Code or any successor provision) after the
termination of such employment to the extent that the right to
exercise such Incentive Stock Option had accrued at the date of such
termination; provided, however, that if Incentive Stock Options as to
100 or more shares are held by a Grantee, then such Incentive Stock
Options may not be exercised for less than 100 shares at any one time,
and if Incentive Stock Options for less than 100 shares are held by a
Grantee, then Incentive Stock Options for all such shares must be
exercised at one time; and provided, further, that, if the Grantee,
while still employed by the Company or the Subsidiaries, shall die
within the Incentive Stock Option Period, the Incentive Stock Option
may be exercised, to the extent specified in the Incentive Stock
Option Agreement, and as herein provided, but only prior to the first
to occur of: (1) the expiration of the period of one year after the
date of the Grantee's death, or (2) the expiration of the Incentive
Stock Option Period, by the person or persons entitled to do so under
the Grantee's will, or, if the Grantee shall fail to make testamentary
disposition of said Incentive Stock Option, or shall die intestate, by
the Grantee's legal representative or representatives.
(d) Each Incentive Stock Option granted under this Plan shall by its terms
be nontransferable by the Grantee except by will or by the laws of
descent and distribution, and each Incentive Stock Option shall by its
terms be exercisable during the Grantee's lifetime only by him.
(e) Notwithstanding the foregoing, if an Incentive Stock Option is granted
to a person at any time when such person owns, within the meaning of
Section 424(d) of the Code, more than 10% of the total combined voting
power of all classes of stock of the employer corporation (or a parent
or subsidiary of such corporation within the meaning of Section 424 of
the Code), the price at which each share of common stock covered by
such Incentive Stock Option may be purchased pursuant to such
Incentive Stock Option shall not be less than 110% of the fair market
value (determined as in paragraph (h) of this Section) of the shares
of common stock at the time the Incentive Stock Option is granted, and
such Incentive Stock Option Period during which such Incentive Stock
Option must be exercised may not exceed five years after the date on
which such Incentive Stock Option is granted.
(f) The Incentive Stock Option agreement entered into pursuant hereto may
contain such other terms, provisions and conditions not inconsistent
herewith as shall be determined by the Committee, including, without
limitation, provisions (1) requiring the giving of satisfactory
assurances by the Grantee that the shares are purchased for investment
and not with a view to resale in connection with a distribution of
such shares, and will not be transferred in violation of applicable
securities laws, (2) restricting the transferability of such shares
during a specified period, and (3) requiring the resale of such shares
to the Company at the option price if the employment of the employee
terminates prior to a specified time. In addition, the Committee, in
its discretion, may afford to holders of Incentive Stock Options
granted under this Plan the right to require the Company to cause to
be registered under the Securities Act of 1933, as amended, for public
sale by the holders thereof, shares of common stock subject to such
Incentive Stock Options upon such terms and subject to such conditions
as the Committee may determine to be appropriate.
(g) In the discretion of the Committee, a single option agreement may
include both Incentive Stock Options and Non-incentive Stock Options,
provided that each type of option is identified within the option
agreement, or those options may be included in separate option
agreements.
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<PAGE>
(h) For all purposes under the Plan, fair market value of the common stock
shall be the mean between the following prices, as applicable, for the
date as of which fair market value is to be determined as quoted in
The Wall Street Journal (or in such other reliable publication as the
-----------------------
Committee, in its discretion, may determine to rely upon): (1) if the
common stock is listed on the New York Stock Exchange, the highest and
lowest sales prices per share of the common stock as quoted in the
NYSE-Composite Transactions listing for such date, (2) if the common
stock is not listed on such exchange, the highest and lowest sales
prices per share of common stock for such date on (or on any composite
index including) the principal United States securities exchange
registered under the 1934 Act on which the common stock is listed, or
(3) if the common stock is not listed on any such exchange, the
highest and lowest sales prices per share of common stock for such
date on the National Association of Securities Dealers Automated
Quotations System or any successor system then in use (NASDAQ). If
there are no such sale price quotations for the date as of which fair
market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date,
then fair market value shall be determined by taking a weighted
average of the means between the highest and lowest sales prices per
share of common stock as so quoted on the nearest date before and the
nearest date after the date as of which fair market value is to be
determined. The average should be weighted inversely by the respective
numbers of trading days between the selling dates and the date as of
which fair market value is to be determined. If there are no such sale
price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then
fair market value of the common stock shall be the mean between the
bona fide bid and asked prices per share of common stock as so quoted
for such date on NASDAQ, or if none, the weighted average of the means
between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which
fair market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this Section 6(h). If the fair market value of the
common stock cannot be determined on the basis previously set forth in
this Section 6(h) on the date as of which fair market value is to be
determined, the Committee shall in good faith determine the fair
market value of the common stock on such date. Fair market value shall
be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
SECTION 7. Terms of Nonincentive Stock Options. Each Nonincentive Stock
Option granted under this Plan shall be evidenced by a Nonincentive Stock
Option agreement which shall be executed by the Company and by the person to
whom such Nonincentive Stock Option is granted, and shall be subject to the
following terms and conditions:
(a) The price at which shares of common stock covered by each Nonincentive
Stock Option may be purchased pursuant thereto shall be an amount not
less than one hundred percent (100%) of the fair market value of such
shares.
(b) Each Nonincentive Stock Option agreement shall provide that such
Nonincentive Stock Option may be exercised by the Grantee, in such
parts and at such times as may be specified in such agreement, within
a period up to and including ten years after the date on which the
Nonincentive Stock Option is granted.
(c) Each Nonincentive Stock Option granted under this Plan shall by its
terms be nontransferable by the Grantee except by will or by the laws
of descent and distribution, and each Nonincentive Stock Option shall
by its terms be exercisable during the Grantee's lifetime only by him.
(d) The Nonincentive Stock Option Agreement entered into pursuant hereto
may contain such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the Committee, in its
sole discretion, including without limitation the terms, provisions
and conditions set forth in Section 6(f) with respect to Incentive
Stock Option agreements.
23
<PAGE>
SECTION 8. Limit on Option Amount. Notwithstanding any provision contained
herein or in any Option agreement, the aggregate fair market value (determined
under Section 6(h) as of the time such Incentive Stock Options are granted) of
the shares of common stock with respect to which Incentive Stock Options are
first exercisable by any employee during any calendar year (under all stock
option plans of the employee's employer corporation and its parent and
subsidiary corporation within the meaning of Section 424 of the Code) shall
not exceed $100,000. If the date on which one or more of such Incentive Stock
Options could first be exercised would be accelerated pursuant to any
provision of the Plan or any option agreement, and the acceleration of such
exercise date would result in a violation of the restriction set forth in the
preceding sentence, then, notwithstanding any such provision, but subject to
the provisions of the next succeeding sentence, the exercise dates of such
Incentive Stock Options shall be accelerated only to the date or dates, if
any, that do not result in a violation of such restriction and, in such event,
the exercise dates of the Incentive Stock Options with the lowest option
prices shall be accelerated to the earliest such dates. The Committee may, in
its discretion, authorize the acceleration of the exercise date of one or more
Incentive Stock Options even if such acceleration would violate the $100,000
restriction set forth in the first sentence of this paragraph and even if such
Incentive Stock Options are thereby converted in whole or in part to
Nonincentive Stock Options. The limit in this paragraph shall not apply to
options that are designated as Nonincentive Stock Options, and, except as
otherwise provided herein, there shall be no limit on the amount of such
options, which may be first exercisable in any year.
SECTION 9. Adjustment of Number of Shares. In the event that a dividend
shall be declared upon the shares of common stock payable in shares of common
stock, the number of shares of common stock then subject to any option granted
hereunder, the number of shares reserved for issuance pursuant to this Plan
but not yet covered by an option, and the number of shares which may be
awarded under the Plan to any one individual during any calendar year shall be
adjusted by adding to each of such shares the number of shares which would be
distributable thereon if such shares had been outstanding on the date fixed
for determining the shareholders entitled to receive such stock dividend. In
the event that the outstanding shares of common stock shall be changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares,
merger or consolidation, then there shall be substituted for each share of
common stock subject to any such option and for each share of common stock
reserved for issuance pursuant to the Plan but not yet covered by an option,
the number and kind of shares of stock or other securities into which each
outstanding share of common stock shall be so changed or for which each such
share shall be exchanged; provided, however, that in the event that such
change or exchange results from a merger or consolidation, and in the judgment
of the Board such substitution cannot be effected or would be inappropriate,
or if the Company shall sell all or substantially all of its assets, the
Company shall use reasonable efforts to effect some other adjustment of each
then outstanding option which the Board, in its sole discretion, shall deem
equitable. In the event that there shall be any change, other than as
specified above in this Section 9, in the number or kind of outstanding shares
of common stock or of any stock or other securities into which such shares of
common stock shall have been changed or for which they shall have been
exchanged, then, if the Board shall determine that such change equitably
requires an adjustment in the number or kind of shares theretofore reserved
for issuance pursuant to the Plan but not yet covered by an option and of the
shares then subject to an option or options, such adjustment shall be made by
the Board and shall be effective and binding for all purposes of this Plan and
of each option agreement. Notwithstanding the foregoing, if any adjustment in
the number of shares which may be issued and sold pursuant to options is
required by the Code or regulations issued pursuant thereto to be approved by
the shareholders in order to enable the Company to issue Incentive Stock
Options pursuant to this Plan, then no such adjustment shall be made without
the approval of the shareholders. In the case of any such substitution or
adjustment as provided for in this Section 9, the option price in each option
agreement for each share covered thereby prior to such substitution or
adjustment will be the total option price for all shares of stock or other
securities which shall have been substituted for each such share or to which
such share shall have been adjusted pursuant to this Section 9. No adjustment
or substitution provided for in this Section 9 shall require the Company, in
any option agreement, to sell a fractional share, and the total substitution
or adjustment with respect to each option agreement shall be limited
accordingly. Notwithstanding the foregoing, in the case of Incentive Stock
Options, if the effect of the adjustments or substitution is to cause the
Incentive Stock Option to fail to continue to qualify
24
<PAGE>
as an Incentive Stock Option or to cause a modification, extension or renewal
of such Incentive Stock Option within the meaning of Section 424 of the Code,
the Board shall use reasonable efforts to effect such other adjustment of each
then outstanding option as the Board, in its sole discretion, shall deem
equitable.
SECTION 10. Amendments. This Plan may be terminated or amended from time to
time by vote of the Board; provided, however, that no such termination or
amendment shall materially adversely affect or impair any then outstanding
option without the consent of the Grantee thereof and no amendment which shall
(a) change the total number of shares which may be issued and sold pursuant to
options granted under this Plan, or (b) change the designation of employees
eligible to receive Incentive Stock Options or the class of employees or other
persons eligible to receive options, shall be effective without the approval
of the shareholders. Notwithstanding the foregoing, the Plan may be amended by
the Committee to incorporate any amendments made to the Code which the
Committee deems to be necessary or desirable to (a) preserve incentive stock
option status for outstanding Incentive Stock Options and to preserve the
ability to issue Incentive Stock Options pursuant to this Plan, or (b) permit
stock options under the Plan to qualify for exemption from Section 16(b) of
the 1934 Act.
SECTION 11. Effective Date and Termination. The effective date and date of
adoption of this Plan shall be February 10, 1999, the date of adoption of the
amended and restated Plan by the Board, provided that such adoption of the
Plan by the Board is approved by shareholders in compliance with Nevada law at
a duly held meeting of the shareholders held on or prior to February 10, 2000,
at which a quorum representing a majority of the outstanding voting stock of
the Company is, either in person or by proxy, present and voting. No option
granted under the Plan may be exercised until after and is contingent upon
such approval. Except to the extent necessary to govern outstanding options,
this Plan shall terminate on, and no additional options shall be granted
after, ten years from the date that the Plan is adopted, or ten years from the
date the Plan is approved by the shareholders, whichever is earlier.
25
<PAGE>
SYLVAN INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS
Two Mellon Bank Center, Room 1128, Pittsburgh, Pennsylvania
Thursday, April 29, 1999, 10:00 a.m. (Pittsburgh time)
The undersigned shareholder of Sylvan Inc. does hereby appoint Dennis C. Zensen,
Donald A. Smith and Fred Y. Bennitt, or a majority of them who are present at
the meeting, as proxies of the undersigned to vote at Sylvan's annual meeting of
shareholders, to be held April 29, 1999 and at all adjournments thereof, all the
shares of Sylvan's common stock which the undersigned may be entitled to vote on
the matters set out on the reverse side of this card as described in the Proxy
Statement and, at their discretion, on any other business which may properly
come before the annual meeting.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given, such shares will be voted "FOR" Items 1
and 2.
(Continued, and to be signed, on the other side)
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/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark
your votes as
indicated in [ X ]
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
Item 1: Election of the following five Directors:
FOR all Nominees Withhold
listed to the right Authority
(except as marked to the to vote for all nominees
contrary) listed to the right
[ ] [ ]
Item 2: The adoption of amendments to "The
1990 Stock Option Plan."
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
William L. Bennett, Monir K. Elzalaki, Virgil H. Jurgensmeyer, Donald T. Pascal,
Dennis C. Zensen.
A vote FOR includes discretionary authority to vote for a substituted nominee if
any of the nominees listed becomes unable to serve or for good cause will not
serve.
(To withhold authority to vote for one or more nominees, print such nominee's or
nominees' name(s) on the line below.)
- ---------------------------------------------------------
I plan to attend the
annual meeting. [ ]
Please date and sign exactly as your name appears
hereon and return in the enclosed envelope. If acting
as attorney, executor, administrator, guardian or trustee,
please so indicate with your full title when signing. If a
corporation, please sign in full corporate name, by a
duly authorized officer. If shares are held jointly, each
shareholder named should sign.
Date , 1999
---------------------------------------
- ---------------------------------------------------
Signature
- ---------------------------------------------------
Signature
The signer hereby revokes all previous proxies for the
annual meeting, acknowledges receipt of the notice of
annual meeting of shareholders and Proxy Statement,
both dated April 5, 1999, and hereby ratifies all that
the said proxies may do by virtue hereof.
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/\ FOLD AND DETACH HERE /\
