SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VARI-L COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
GORSUCH KIRGIS L.L.C.
(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:
<PAGE>
VARI-L COMPANY, INC.
11101 East 51st Avenue
Denver, Colorado 80239
(303) 371-1560
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
TO THE SHAREHOLDERS OF VARI-L COMPANY, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of
Vari-L Company, Inc., a Colorado corporation, will be held at the Embassy
Suites, 4444 Havana Street, Denver, Colorado, on Friday, June 20, 1997, at
10:00 a.m. Mountain Daylight Time, and at any and all adjournments
thereof, for the purpose of considering and acting upon the following
matters:
1. The election of four (4) Directors of the Company to serve until
the next Annual Meeting of Shareholders and until their successors have
been duly elected and qualified;
2. The ratification of the appointment of Haugen, Springer & Co. as
the independent public accountants of the Company for the calendar year
ending December 31, 1997;
3. The approval and ratification of the terms of the Company's 1997
private placement of securities consisting of convertible subordinated
debentures and warrants to purchase shares of the Company's $.01 par value
Common Stock;
4. The approval of certain amendments to the Stock Option and Stock
Appreciation Rights Plan to conform with recent amendments to SEC Rule
16b-3, and to permit greater flexibility in the administration of the
Plan;
5. The approval of certain amendments to the Stock Grant Plan to
conform with recent amendments to SEC Rule 16b-3, and to permit greater
flexibility in the administration of the Plan; and
6. The transaction of such other business as may properly come
before the meeting or any adjournment thereof.
A Proxy Statement explaining the matters to be acted upon at the
meeting is enclosed. Please read it carefully.
Only holders of record of the $.01 par value Common Stock of the
Company at the close of business on Friday, April 11, 1997, will be
entitled to notice of and to vote at the Meeting or at any adjournment or
adjournments thereof. The Proxies are being solicited by the Board of
Directors of the Company.
All Shareholders, whether or not they expect to attend the Annual
Meeting of Shareholders in person, are urged to sign and date the enclosed
Proxy and return it promptly in the enclosed envelope which requires no
additional postage if mailed in the United States. The giving of a Proxy
will not affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Denver, Colorado JOSEPH H. KISER
April ______, 1997 CHAIRMAN OF THE BOARD AND SECRETARY
VARI-L COMPANY, INC.
11101 East 51st Avenue
Denver, Colorado 80239
(303) 371-1560
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Vari-L Company, Inc., a Colorado corporation (the "Company"),
for use at the Company's Annual Meeting of Shareholders (the "Meeting") to
be held at the Embassy Suites, 4444 Havana Street, Denver, Colorado, on
Friday, June 20, 1996, at 10:00 a.m., Mountain Daylight Time, and at any
adjournment thereof. It is anticipated that this Proxy Statement and the
accompanying Proxy will be mailed to the Company's Shareholders on or
about April ___, 1997.
Any person signing and returning the enclosed Proxy may revoke it at
any time before it is voted by (i) giving a later dated written revocation
of Proxy to the Company, (ii) providing a later dated amended Proxy to the
Company, or (iii) voting in person at the Meeting. The expense of
soliciting Proxies, including the cost of preparing, assembling and
mailing this Proxy material to Shareholders, will be borne by the Company.
It is anticipated that solicitations of Proxies for the Meeting will be
made only by use of the mails; however, the Company may use the services
of its Directors, Officers and employees to solicit Proxies personally or
by telephone, without additional salary or compensation to them.
Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the Proxy soliciting materials to the beneficial owners of the
Company's shares held of record by such persons, and the Company will
reimburse such persons for the reasonable out-of-pocket expenses incurred
by them in that connection.
All shares represented by valid Proxies will be voted in accordance
therewith at the Meeting.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the
Company's $.01 par value common stock ("Common Stock"), and only
Shareholders of record at the close of business on Friday, April 11, 1997,
are entitled to notice of and to vote at the Meeting or any adjournment
thereof. On April 11, 1997, the Company had 3,826,940 shares of its
Common Stock outstanding, each share of which is entitled to one vote on
all matters to be voted upon at the Meeting, including the election of
Directors. Cumulative voting in the election of Directors is not
permitted.
A majority of the Company's outstanding Common Stock represented in
person or by Proxy and entitled to vote will constitute a quorum at the
Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
the Company's Common Stock owned beneficially, as of April 1, 1997, by any
person who is known to the Company to be the beneficial owner of 5% or
more of such Common Stock, and, in addition, by each Director and nominee
for Director of the Company, by each Executive Officer of the Company, and
by all Directors and Executive Officers of the Company as a group.
Information as to beneficial ownership is based upon statements furnished
to the Company by such persons. For purposes of this disclosure, the
amount of the Company's Common Stock beneficially owned is the aggregate
number of shares of the Common Stock outstanding on such date plus an
amount equal to the aggregate amount of Common Stock which could be issued
upon the exercise of stock options within 60 days of such date by each
individual.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name of Beneficial Owner Ownership Percent of Class
<S> <C> <C>
Joseph H. Kiser(1) 739,688 18.3%
11101 East 51st Avenue
Denver, Colorado 80239
David G. Sherman(2) 336,030 8.2%
11101 East 51st Avenue
Denver, Colorado 80239
Sarah L. Booher(3) 57,833 1.5%
4492 South Livonia Road
Livonia, New York 14487
David A. Lisowski(4) 4,000 *
4800 Dahlia
Denver, Colorado 80216
Daniel J. Wilmot(5) 35,250 *
11101 East 51st Avenue
Denver, Colorado 80239
Derek L. Bailey(6) 8,000 *
11101 East 51st Avenue
Denver, Colorado 80239
Jon L. Clark(7) 7,570 *
11101 East 51st Avenue
Denver, Colorado 80239
John E. Woodward, III(8) 309,400 8.1%
17 State Street, 26th Floor
New York, New York 10004
Forstmann-Leff Associates Inc. 400,000 10.5%
FLA Asset Management Inc.
55 East 52nd Street
New York, New York 10055
All Directors and Executive 1,188,371 shares 27.2%
Officers as a Group(9)
(7 Persons)
- ---------------------------
(1) Includes 247,863 shares beneficially owned by Mr. Kiser as the result
of certain trust arrangements. Also includes options to purchase
218,750 shares.
(2) Includes options to purchase 267,500 shares.
(3) Includes 19,920 shares held by Ms. Booher pursuant to trust
agreements. Also includes options to purchase 13,000 shares. Does
not include an additional 4,230 shares held by her husband, Robert
Booher, for which shares she has disclaimed beneficial ownership.
(4) Includes options to purchase 3,500 shares.
(5) Consists of options to purchase 35,250 shares.
(6) Consists of options to purchase 8,000 shares.
(7) Includes options to purchase 972 shares.
(8) Includes shares owned by Mr. Woodward directly and as general partner
of two private limited partnerships.
(9) Includes options to purchase 546,972 shares.
*Less than one percent.
</TABLE>
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the
four (4) nominees listed below. The Board's recommendation as nominees
includes all of the Directors elected at the last annual meeting of
Shareholders, except Alwin E. Branson who resigned as a Director effective
December 1, 1996. The four nominees, if elected, will hold office until
the next annual meeting of Shareholders and until their successors are
elected and qualified or until their earlier death, resignation or
removal. IT IS INTENDED THAT SHARES REPRESENTED BY PROXIES IN THE
ACCOMPANYING FORM WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED
BELOW UNLESS A CONTRARY DIRECTION IS INDICATED. If at the time of the
Meeting any of the nominees named below should be unable to serve, which
event is not expected to occur, the discretionary authority provided in
the Proxy will be exercised to vote for such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently
held by him, and the period during which he has served as a Director:
<TABLE>
<CAPTION>
All Positions and Period Served
Offices Held With as Director
Name Age the Company of the Company
<S> <C> <C> <C>
Joseph H. Kiser 59 Chairman, Chief Since 1965
Scientific Officer,
Secretary and Director
David G. Sherman 52 President, Chief Since 1991
Executive Officer,
Chief Financial Officer,
Treasurer and Director
Sarah L. Booher 55 Director Since 1994
David A. Lisowski 45 Director Since 1996
</TABLE>
None of the nominees hold directorships in any other company having a
class of securities registered under the Securities Exchange Act of 1934,
as amended, or in any company registered as an investment company under
the Investment Company Act of 1940, as amended.
MEETINGS AND COMMITTEES OF THE BOARD
The Company's Audit Committee oversees the accounting controls for
the Company. During the last fiscal year the Committee was comprised of
David G. Sherman, Sarah L. Booher and William P. O'Connor Jr. until the
resignation of Mr. O'Connor as a Director and as a member of the Committee
on September 27, 1996 and the appointment of David A. Lisowski effective
as of the same date. This Committee held two meetings during the last
calendar year.
The Company also has a Compensation Committee, which Committee makes
recommendations on executive compensation and selects those persons
eligible to receive grants of options and appreciation rights under the
Company's Tandem Stock Option and Stock Appreciation Rights Plan and
grants of Common Stock under the Company's Stock Grant Plan. The
Committee is composed of its two outside directors. During fiscal 1996
Sarah L. Booher and William P. O'Connor Jr. served on the Committee until
Mr. O'Connor's resignation as a member of the Committee on September 27,
1996. As of that date Mr. Lisowski replaced Mr. O'Connor. The Committee
held one meeting during the last calendar year and six other meetings were
conducted by unanimous written consent of the members of the Committee.
The Board of Directors met in person seven times during the last
calendar year. Two other meetings were conducted by unanimous written
consent of the Directors. There were no incumbent Directors who during
the last fiscal year attended fewer than 75% of the aggregate of all
meetings of the Board and of all committees of the Board on which he or
she serves.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names of all Directors and Executive Officers
of the Company, their ages, all positions and offices held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during the last five years:
JOSEPH H. KISER. Mr. Kiser, age 59, currently serves as Chairman of
the Board, Chief Scientific Officer, Secretary and as a Director of the
Company. He has been employed by the Company since 1954 in various
capacities including President, C.E.O. and Vice President of Engineering.
In 1992, Mr. Kiser stepped down from his position as President of the
Company in order to concentrate his efforts on engineering and new product
development. Mr. Kiser, whose father founded the Company in 1953, has
been largely responsible for many of the technological successes and
innovations of the Company for the past 37 years. The Company believes
that Mr. Kiser's direction of the Company's engineering efforts ensures
that the Company will continue to aggressively pursue meaningful and
valuable research and development projects, including but not limited to
the development and the continuous improvement of its new commercial, high
volume, standardized products. Mr. Kiser earned a BSEE degree in
Electrical Engineering from Cooper Union in 1967. Mr. Kiser is the
brother of Sarah L. Booher, a Director of the Company.
DAVID G. SHERMAN. Mr. Sherman, age 52, was elected as President and
Chief Executive Officer in June 1992, and has been a Director of the
Company since 1991. Mr. Sherman has 27 years of experience in financial
and operations management and has been continuously employed by the
Company since 1987 in various capacities, including Controller, Vice
President-Finance, Treasurer and Assistant Secretary. Mr. Sherman was
also previously employed by the Company from 1977 to 1979 as Controller.
In the past few years, Mr. Sherman has led the Company through a series of
successful private and public stock offerings, an expanded presence in the
commercial marketplace and the highly successful development of
international markets for both its commercial and military products. Mr.
Sherman served as Executive Vice President and Chief Operating Officer for
Mincomp Corporation, an oil and gas seismic exploration and data
processing firm in Englewood, Colorado from 1984 to 1987, and as President
and Chief Executive officer for Linc Drilling, an oil and gas drilling
exploration company in Denver, Colorado, from 1982 to 1984. Prior to that
time and in addition to his prior employment with the Company, Mr.
Sherman's employment included executive and managerial positions with
Petro-Silver, Inc., Denver, Colorado, Prairie Drilling Company, Casper,
Wyoming, Electro Medical Systems, Englewood, Colorado, Jefferson County
Mental Health Center, Lakewood, Colorado and Clifton Gunderson & Company,
Boulder, Colorado. Mr. Sherman attended American University in
Washington, DC where he received a BSBA in Accounting/Computer Science in
1968.
SARAH L. BOOHER. Ms. Booher, age 55, was appointed as a Director of
the Company on January 18, 1994. Ms. Booher was the Executive Director of
the Park Ridge Foundation, a nonprofit health care foundation located in
Rochester, New York, from February 15, 1988 until September 1, 1996.
After that date she became a fund raising consultant for PMA Associates of
the Genesee Valley, Inc. Ms. Booher serves as President of the Genesea
Chapter of the National Society of Fundraising Executives, a nonprofit
organization. She received a BA degree from the University of Colorado in
1964. Ms. Booher is the sister of Joseph H. Kiser, an Executive Officer
and Director of the Company.
DAVID A. LISOWSKI. Mr. Lisowski, age 44, was elected as a Director
on June 26, 1996. Mr. Lisowski has been the General Manager and Chief
Executive Officer of the Denver Wholesale Florist Company, a national
wholesale florist, since 1993. He was employed by Central Bank of Denver,
N.A., a commercial bank in Colorado, and various affiliated banks from
1972 to 1992. His employment with Central Bank included serving as Senior
Vice President of Commercial Lending in Southern Colorado as well as
various other positions. Mr. Lisowski attended Metropolitan State College
where he received a BS degree in Finance in 1988.
DANIEL J. WILMOT. Mr. Wilmot, age 31, was elected Vice President of
Engineering in November 1993. He joined the Company in August 1992 as
Product Development PLL Design Engineer and was promoted to Director of
Advanced Products/Development Engineer in 1993. Prior to coming to the
Company, Mr. Wilmot was an RF Lead Engineer with Rockwell International
where he worked in management, design, development, and cost management
and containment for PLLs and VCOs, among other hybrid RF devices, since
1988. Mr. Wilmot earned a BSEE from the University of California in 1986
and an MSEE from California State University in 1991.
DEREK L. BAILEY. Mr. Bailey, age 32, was elected Vice President of
Sales in October 1995. He joined the Company in May 1994 as Eastern
Regional Sales Manager and was promoted to National Sales Manager in
October 1994. Mr. Bailey has been associated with the Company in various
sales capacities since April 1990. Prior to joining the Company, he
worked for CEtech Electronics Corporation in Annapolis Junction, Maryland
as an RF/Microwave Sales Engineer from April 1990 to May 1994, selling the
Company's products among others. Before that, Mr. Bailey held the
positions of Engineer, RF Design Engineer and Project Engineer with Adams
Russell - Microtel Division in Hunt Valley, Maryland, where he was
involved with the design and development of covert intelligence
surveillance receivers, since 1986. Mr. Bailey received his BSEET degree
from the Ohio Institute of Technology in October 1985.
JON L. CLARK. Mr. Clark, age 50, was elected Vice President of
Finance and Treasurer of the Company in September 1996. He began working
for the Company in May 1994 as the Controller. Prior to joining the
Company, Mr. Clark was an Associate with RLK Associates from January 1991
to May 1994, a credit training and management consulting company. Mr.
Clark was Vice President of Commercial Lending with Colorado National Bank
for 19 years prior to May 1994. He attended the University of Nebraska
and the University of Colorado. He earned an advanced degree in bank
management from the Southwestern Graduate School of Banking, Southern
Methodist University in 1983.
The Company's Executive Officers are elected by the Board of
Directors at the first meeting after each annual meeting of Shareholders,
and hold office until the next such meeting of Directors or their earlier
resignation or removal.
There is no arrangement or understanding between any such Director or
Executive Officer and any other person or persons pursuant to which he or
she was or is to be selected as a Director or Executive Officer nor is
there any family relationship between or among any of the Company's
Directors or Executive Officers, except that Joseph H. Kiser and Sarah L.
Booher are brother and sister.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation for the years ended
December 31, 1996, 1995 and 1994 of the Company's Chief Executive Officer
and next most-highly compensated Executive Officers whose salary and bonus
exceeded $100,000:
<TABLE>
<CAPTION>
Annual Compensation
Other
Name and Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
<S> <C> <C> <C> <C>
Joseph H. Kiser 1996 $245,592 $94,876 $ 6,157(1)
Chairman of the 1995 241,676 22,993 5,820(3)
Board, Chief 1994 213,742 -0- 900(4)
Scientific
Officer
David G. Sherman 1996 $139,992 $94,876(5) $ 6,034(6)
President, CEO, 1995 135,067 22,883 5,216(7)
CFO 1994 128,817 -0- 576(4)
Alwin E. Branson 1996 $133,767 $94,876 $ 6,157(9)
Executive V.P. 1995 137,656 22,883 10,270(10)
COO(8) 1994 128,817 -0- 576(4)
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
Awards
Securities
Restricted Underlying
Name and Stock Options
Principal Position Award(s)($) SARs(#)
<S> <C> <C>
Joseph H. Kiser -0- 150,000(2)
Chairman of the -0- 100,000
Board, Chief -0- -0-
Scientific
Officer
David G. Sherman -0- 200,000(2)
President, CEO, -0- 100,000
CFO -0- -0
Alwin E. Branson -0- 150,00(2)
Executive V.P. -0- 100,000
COO(8) -0- -0-
(1) Includes an IRA contribution of $3,707; automobile expense
reimbursement of $1,550; and tax reimbursement of $900.
(2) Includes 100,000 options granted in June 1995 and repriced in October
1996. See "Compensation Committee Report" below.
(3) Includes an IRA contribution of $3,370; automobile expense
reimbursement of $1,550; and tax reimbursement of $900.
(4) Consists of a tax reimbursement.
(5) Payment of Mr. Sherman's 1996 bonus was deferred until fiscal 1997.
(6) Includes an IRA contribution of $4,188; automobile expense
reimbursement of $1,270; and tax reimbursement of $576.
(7) Includes an IRA contribution of $3,370; automobile expense
reimbursement of $1,270; and tax reimbursement of $576.
(8) Mr. Branson resigned as an Executive Officer and as a Director of the
Company effective December 1, 1996.
(9) Includes an IRA contribution of $3,707; automobile expense
reimbursement of $1,550; and tax reimbursement of $900.
(10) Includes an IRA contribution of $3,370; automobile expense
reimbursement of 6,000; and tax reimbursement of $900.
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth the information concerning individual
grants of stock options and appreciation rights during the last fiscal
year to each of the named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
Percent
Number of of Total
Securities Options/SARs Exercise
Underlying Granted or
Options/SARs to Employees Base Price Expiration
Name Granted(#) in Fiscal Year ($/Sh) Date
<S> <C> <C> <C> <C>
Joseph H. Kiser 100,000(1) 14.2%(2) $8.25(3) 6-14-05
50,000(1) 7.1%(2) $8.25(3) 1-1-06
David G. Sherman 100,000(4) 14.2%(2) $8.25(3) 6-14-05
100,000(1) 14.2%(2) $8.25(3) 1-1-06
Alwin E. Branson 100,000(4) 14.2%(2) $8,25(3) 6-14-05
50,000(6) 7.1%(2) $8.25(3) 1-1-06
(1) Of this grant, all were nonqualified stock options.
(2) This percentage includes options granted in 1995 to all employees
which were repriced in 1996. See "Compensation Committee Report on
Repricing" below.
(3) On October 1, 1996, the Compensation Committee repriced certain
previously granted stock options, including the ones granted to the
foregoing named Executive Officers in 1995 and 1996. See
"Compensation Committee Report on Repricing" below.
(4) Of this grant, 90,477 were nonqualified stock options and 9,523 were
incentive stock options.
(5) Of this grant, 92,921 were nonqualified stock options and 7,079 were
incentive stock options.
(6) Of this grant, 42,921 were nonqualified stock options and 7,079 were
incentive stock options..
</TABLE>
Compensation Committee Report on Repricing
On October 1, 1996, the Compensation Committee agreed to reprice
certain stock options previously granted to employees of the Company to
the current fair market value of $8.25 per share. The Committee
recognized that certain previously granted stock options were "underwater"
because the exercise prices were $10.50 and $14.125, the fair market value
on the respective dates of grant, June 14, 1995 and January 1, 1996. The
Company believed that these stock options were not perceived by the
Company's employees to be a benefit to the employees and that this
perception had led to a significant adverse effect on the morale and
enthusiasm of the Company's employees at a critical time in the
development of the Company's business. The Committee determined that,
even though the grants were originally made to provide incentives and
rewards for the employees to induce them to continue to provide diligent
and valuable services to the Company in the future and thereby enhance the
value of the Company's stock to the benefit of the Company's shareholders
and employees, the effect of the consistently lower trading prices had
been to negate that incentive. While the Committee recognized that the
repricing of options has been criticized as unfairly protecting the
interests of employees over shareholders, to whom repricing is not
available, but concluded that, under these circumstances, repricing was in
the best interests of the Company's shareholders as well as its employees.
After considering various methods of effecting a repricing, the
Committee agreed that it was fair and reasonable for the Committee to
grant new incentive stock options ("New Options") as replacements for, and
with the identical terms as, the underwater options issued in June 1995
and January 1996 ("Old Options") to all employees, except for those issued
to Messrs. Kiser, Sherman and Branson (the "Senior Officers"). The New
Options would be exercisable at the current fair market value of $8.25 per
share, but their vesting and exercise periods would remain the same as in
the Old Option grants.
The Committee also agreed to offer an exchange of New Options at the
current fair market value of the Common Stock of $8.25 per share on a one-
for-one basis for the Senior Officers' Old Options which, if the offer was
accepted, would retain the same duration as the Old Options, but such New
Options would vest over two years at 12.5% per calendar quarter from the
original date of grants of the Old Options on June 14, 1995 and January 1,
1996, respectively. The Old Options did have not previously have any
vesting schedule, but the Committee believed that the benefit of the
repricing should include the vesting restriction to be more on par with
other employees. The exchange offer was accepted by all of the Senior
Officers as follows: Each of Messrs. Kiser, Sherman and Branson exchanged
fully vested options to purchase 100,000 shares at $10.50 per share
granted June 14, 1995 for the same number of New Options exercisable at
$8.25 per share with a two year vesting period beginning in September of
1995. In addition, Messrs. Kiser and Branson exchanged fully vested
options to purchase 50,000 shares, and Mr. Sherman exchanged fully vested
options to purchase 100,000 shares, exercisable at $14.125 per share
granted January 1, 1996 for New Options exercisable at $8.25 per share
with a two year vesting period beginning in April of 1996.
Dated: January 24, 1997 SARAH L. BOOHER
DAVID A. LISOWSKI
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year End Option/SAR Values
The following table sets forth information concerning each exercise
of stock options during the last fiscal year by each of the named
Executive Officers and the fiscal year end value of unexercised options:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs Options/SARs
on Value at Fiscal at Fiscal
Name Exercise(#) Realized($) Year-End(#) Year-End($)(1)
<S> <C> <C> <C> <C>
J.H. Kiser 131,250 $821,625 93,750/56,250 $0/0
D.G. Sherman 0 $0 130,000/105,000 $103,513/$103,513
A.E. Branson 8,750 $91,131 102,500/73,750 $51,756/$103,513
- --------------------------
(1) Based on the fair market value of the Common Stock on December 31,
1996 of $8.125, being the closing price as quoted on the Nasdaq
National Market.
</TABLE>
DIRECTORS' COMPENSATION
The Company currently has an arrangement whereby each outside
Director receives $500 per day for attendance in person (including lengthy
meetings held by telephonic conference) at any meeting of the Board of
Directors or a committee thereof. Outside Directors are reimbursed for
their expenses in attending meetings of the Board of Directors and its
committees.
In addition, pursuant to the Company's Tandem Stock Option and Stock
Appreciation Rights Plan, members of the Compensation Committee receive,
on the date of each meeting of the Board of Directors or a committee
thereof attended in person by such Director, a grant of ten-year, fully
vested options to purchase 500 shares of Common Stock.
Under the Company's Stock Grant Plan the outside Directors receive a
grant of 50 shares each of Common Stock per month.
EMPLOYMENT AGREEMENTS
In 1992, the Company entered into employment agreements with Joseph
H. Kiser and David G. Sherman (the "Senior Officers") and with Alwin E.
Branson for an initial term of four years commencing November 12, 1992.
On each June 1 beginning in 1994, the agreements provide that they are
automatically extended for an additional year unless the Company or the
employee gives notice of non-extension more than ninety days before May 31
of such year. Because no such notice was given in 1996 for Messrs. Kiser
and Sherman, their agreements currently expire in 1998. Mr. Branson's
agreement was terminated by mutual agreement on December 1, 1996.
Pursuant to the agreements, the minimum base salaries for Messrs. Kiser
and Sherman are $221,223 and $133,326, respectively. The two remaining
agreements also provide for quarterly and/or year-end bonuses which are to
be set each year by the Board of Directors on the basis of merit and the
Company's financial success and progress. The employment agreements were
entered into by the Company to provide sufficient compensation to satisfy
certain personal obligations which the Senior Officers and Mr. Branson
assumed in connection with the January 31, 1992 Settlement Agreement with
a former officer of the Company, to provide a basis for calculation of
subsequent voluntary deferrals of their base compensation, and to reward
their personal guarantees of a portion of the Company's bank debt (which
has since been repaid).
The agreements further provide for severance pay equal to twice the
then annual base salary in the event of involuntary termination of
employment by the Company or one-third of annual base salary in the case
of a truly voluntary resignation by the officer. In the case of an
involuntary termination after a change of control of the Company, the
severance pay is payable immediately. If the involuntary termination does
not occur after a change of control, severance pay is payable over a two-
year period. In the case of a voluntary termination, severance pay is
payable over a four-month period. In the case of involuntary termination
which occurs after a change of control of the Company, the Senior Officers
have the right to require the Company to repurchase their shares of the
Company's Common Stock to the extent necessary to enable the Senior
Officers to repay certain personal financial obligations they have
undertaken on behalf of the Company.
In the event of a Senior Officer's death while the agreement is still
in force, the Company is obligated to pay to the Senior Officer's estate
an amount equal to the then annual base salary for the greater of one year
or the remaining term of the agreement. The amount otherwise payable upon
the Senior Officer's death will be reduced by the amount of proceeds paid
to the estate from life insurance policies purchased by the Company for
such purpose. In the event the Senior Officer becomes disabled during the
term of his employment, the Senior Officer will continue to receive his
annual base salary for up to six consecutive months, at which point the
Company has the option to terminate the agreement. Upon such termination,
the Senior Officer will receive disability benefits under the Company's
standard employee disability insurance policy as well as the supplemental
disability benefits, if any, obtained by the Company for the Senior
Officers. Mr. Kiser is currently provided with a supplemental disability
policy and the Company has agreed to make its best efforts to obtain
comparable coverage for Mr. Sherman.
The Senior Officers have agreed that, for a period of one year after
termination or expiration of their respective employment agreements or the
period covered by any severance allowance, whichever is greater, they will
not, directly or indirectly, control, be employed by, participate in, or
be connected in any manner with the ownership, management, operation, or
control of any business which competes with the Company. The Senior
Officers have also consented to the Company's purchase of key man life
insurance on each of their lives, naming the Company as beneficiary.
There are no arrangements, agreements or understandings for the Company to
provide the Senior Officers with any rights or benefits upon termination
other than those described above.
On December 1, 1996, Mr. Branson resigned as an Executive Officer and
Director of the Company. In lieu of the severance pay to which he was
entitled under his employment agreement, Mr. Branson agreed to enter into
a three year consulting agreement whereby he would be paid his full salary
for the first four months following his resignation, half salary for the
next eight months and $1 per year for the next two years. In addition,
Mr. Branson's previously granted stock options would remain exercisable
during the term of the consulting agreement. On each December 1 beginning
December 1, 1999, the consulting agreement provides that is automatically
extended for an additional year unless the Company or Mr. Branson gives
notice of non-extension at least thirty days before December 1 of such
year. Mr. Branson also retained use of a Company car and is entitled to
purchase health insurance at the same cost charged to other employees as
long as the consulting agreement is in force.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In the past, the Company has entered into various transactions with
its officers and major Shareholders. Transactions with such individuals
which subject the Company to continuing obligations are described below.
Certain of the Company's facilities are leased under long-term
operating leases from the Company's Chairman of the Board, Joseph H.
Kiser, and a partnership in which he is a partner. Minimum future annual
lease payments over the next five years are as follows:
1997 $ 105,513
1998 89,451
1999 48,000
2000 40,000
---------
$ 282,964
=========
Rent expense on these leases was $105,513 for 1996 and $79,608 for
1995. The Company believes that these amounts paid to Mr. Kiser or the
partnership are no greater than would be paid in an arms-length
transaction and that the terms of the leases are substantially similar to
leases of similar term on commercial properties in the same area.
On January 31, 1992, the Company entered into an agreement with an
individual, Carolyn Kiser, who, prior to June 1991, was an officer,
director, shareholder and employee of the Company and, prior to 1990, the
wife of Joseph H. Kiser. She was terminated as an officer, director and
employee of the Company as of June 19, 1991 and made a variety of claims
against the Company and Messrs. Branson, Sherman and Kiser (the "Executive
Officers"). Prior to her termination, Ms. Kiser had entered into a number
of agreements with the Company, including, but not limited to, an
employment agreement and a stock repurchase agreement which provided for
substantial benefits upon her termination. The settlement agreement
provided for (1) a severance package consisting of cash payments, health
and disability insurance premiums, and a consulting agreement, (2) the
sale of Ms. Kiser's stock in the Company to the Company and the Executive
Officers, (3) the release of claims made by Ms. Kiser against the Company
and the Executive Officers, and (4) a covenant not to compete against the
Company. The total cost of the settlement agreement to the Company at the
time of settlement (exclusive of the stock redemption) was approximately
$1.1 million. On March 23, 1993, the settlement agreement was amended to
modify the terms of certain promissory notes and the consulting agreement.
Ms. Kiser will receive payments totalling $55,520 from the Company
pursuant to the settlement agreement between December 31, 1996 and June
30, 1998. A portion of those payments (approximately $2,100 per month) is
paid in the form of rental payments on residential properties owned by Ms.
Kiser in Colorado and Mexico. The Company does not use the properties and
does not intend to use them in the future.
Prior to the settlement agreement, Ms. Kiser owned 432,145 shares of
the Company's outstanding Common Stock. The Company agreed to redeem
168,000 of those shares, and the Executive Officers agreed to individually
purchase the remaining shares. The stock owned by Ms. Kiser was purchased
at its then appraised value of $1.60 per share. The Executive Officers
issued promissory notes payable to Ms. Kiser as consideration for their
purchase of the stock, and the Company agreed to guarantee payment of
those notes. The Company's guarantee was given to Ms. Kiser in partial
consideration for the release of her claims against the Company. Ms.
Kiser received a collateral interest in a portion of the shares purchased
by the Senior Officers as security for the payment of the notes. On
January 28, 1997, Mr. Branson repaid his promissory note to Ms. Kiser and
the shares which secured his note were returned to him.
The Company distributed a real estate investment it owned and issued
a $160,800 promissory note payable to Ms. Kiser in redemption of her
168,000 shares. Prior to the redemption, the real estate had a book value
to the Company of $171,842. Of this amount, $108,000 (the $268,800 value
of the redeemed shares in excess of the $160,800 note payable) was
allocated as a cost of the redemption. The remaining $63,842 book value
was included with other costs, described below, capitalized as the cost of
the covenant not to compete. This promissory note was repaid in April
1994.
The Company capitalized a total of $572,067 as the cost of the
covenant not to compete which expired in October 1996.
Lastly, the agreement provided that Ms. Kiser would perform
consulting services for the Company through October 1996. Total estimated
cost to the Company, including the lease by the Company of certain
properties owned by Ms. Kiser and other benefits, will approximate $55,520
through the remaining life of the agreement, June 30, 1998.
All ongoing and future transactions between the Company and its
affiliates will be no less favorable to the Company than from unaffiliated
third parties and will be approved by a majority of the Company's
disinterested directors.
On February 23, 1996, the Company's Board of Directors approved the
adoption of a shareholders rights plan (the "Rights Plan") which became
effective March 15, 1996. Under the Rights Plan, if any person or group
acquires ownership of 25% or more of the Company's Common Stock or
announces a tender offer for 25% or more of the Common Stock, each right
will entitle Shareholders, except the acquiror, to buy shares of Common
Stock at a 50% discount to current market price (the "flip-in"). In
addition, after a person has acquired 25% or more of the Company's Common
Stock, if the acquiring person merges with the Company or buys 50% or more
of its assets or earning power, each right, except those held by the
acquiror, would entitle the holder to purchase stock of the surviving
company at 50% of current market value (the "flip-over"). Prior to a 25%
acquisition, the rights are redeemable for one-tenth of one cent per right
at the option of the Board of Directors. The rights will expire on March
15, 2006.
The Rights Plan is not intended to prevent a takeover and will not do
so. The Board may redeem the rights generated by the Rights Plan if a
tender offer or other acquisition proposal is made which the Board,
considering its fiduciary responsibilities to all the Company's
shareholders, determines to be fair. Thus, a potential acquiror is
encouraged to negotiate its offer with the Board. Measures such as the
Rights Plan are expressly authorized by the Colorado Business Corporation
Act, Colo. Rev. Stat. Sec. 7-106-205 (1994).
Should the flip-in or flip-over provisions of the Rights Plan be
triggered (as described above), currently authorized but unissued shares
of the Company's Common Stock, other than those reserved for another
purpose, could be purchased by the Shareholders through exercise of their
rights. The number of such shares would be determined by the market value
of the shares at the time the flip-in or flip-over occurs.
Issuance of the rights did not have any dilutive effect on existing
Shareholders, was not taxable to the Company or the Shareholders and will
not change in any way the way in which Shareholders presently trade the
Company's shares. As explained in detail above, the rights will only be
exercisable if and when the situation arises which they were created to
address. They will then operate to protect Shareholders against being
deprived of their fair share of the full measure of the Company's long-
term potential.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accounting firm of Haugen, Springer & Co.
("Haugen") audited the financial statements of the Company for the period
ended December 31, 1996. Although ratification of the appointment of
Haugen for the fiscal year ending December 31, 1997 is not required by
Colorado law, the Company's Articles of Incorporation or Bylaws, the Board
of Directors believes a decision of this nature should be made with the
consideration of the Shareholders. Accordingly, the Shareholders are
being asked to consider the ratification of the appointment of Haugen,
Springer & Co. for the calendar year ending December 31, 1997. If a
significant number of shares are voted against the appointment or if
either the services or price offered by Haugen are not satisfactory to the
Board of Directors, the Board of Directors will reconsider the selection
of Haugen for the calendar year ending December 31, 1997. It is expected
that a representative of Haugen, Springer & Co. will be present at the
Meeting to respond to appropriate questions and be given the opportunity
to make a statement if he so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF HAUGEN, SPRINGER & CO. AS THE INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE CALENDAR YEAR ENDING DECEMBER 31,
1997.
* * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * * * *
APPROVAL AND RATIFICATION OF
1997 PRIVATE PLACEMENT OF SECURITIES
On February 27, 1997, the Board of Directors approved the proposed
private placement of $7,500,000 in convertible subordinated debentures
(the "Debentures) and warrants to purchase 750,000 shares of the Company's
Common Stock (the "Warrants") pursuant to the terms of a Securities
Purchase Agreement dated March 4, 1997 (the "Agreement") between the
Company and thirteen (13) accredited investors. The Board is now
recommending that the Agreement and the transactions contemplated thereby
be approved and ratified by the Shareholders of the Company.
The Board of Directors and management of the Company believe that the
issuance of the Debentures and the Warrants pursuant to the Agreement is
in the best interests of the Company and its Shareholders. The additional
capital made available to the Company by this transaction will permit the
Company, among other things, to repay some of its existing debt, to invest
in inventory and equipment and to fund its portion of its joint venture to
produce commercial products in China, including narrow band voltage
controlled oscillators ("VCOs") and phase locked loop synthesizers
("PLLs").
On March 4, 1997, the effective date of the Agreement, the Company
sold $5,000,000 in convertible subordinated debentures and warrants to
purchase 500,000 shares of the Company's Common Stock. The Agreement also
granted to purchasers in the offering the option to purchase an additional
$2,500,000 of Debentures and 250,000 Warrants for a period of 150 days
from March 4, 1997, or August 1, 1997. The Debentures and Warrants were
sold as units each consisting of a $100,000 Debenture and a Warrant to
purchase 10,000 shares of Common Stock. After deducting the costs of the
offering (estimated at $675,000), if all $7,500,000 in Debentures offered
are sold, the Company would receive net proceeds of $6,825,000 which are
presently expected to be utilized as follows:
Purchase of Raw Materials, Inventory and Equipment $4,000,000
Investment in China Joint Venture 510,000
Retire Line of Credit (to be available for future expansion) 1,850,000
Working Capital 465,000
----------
Total use of proceeds $6,825,000
Subject to the restrictions described below, the unpaid principal
amount of the Debentures plus accrued interest are convertible into Common
Stock at the option of the holder with the conversion price equal to the
lower of (i) $9.50 per share, or (ii) 84% of the average closing bid price
of the Company's Common Stock on the Nasdaq National Market for the ten
trading days prior to the date that a written request to convert is
received by the Company (the "Formula Price"). If the Formula Price at
the time of a proposed conversion is less than $8 per share, the Company
has the right to decline to permit such conversion and instead redeem the
Debenture by payment of 116% of the principal amount of the Debenture,
plus accrued interest. The Debentures have a term of four years, unless
sooner converted, and bear interest at 7% per annum, payable upon maturity
or conversion, whichever occurs first.
Debentures are subordinated in right of payment to the Company's
secured debt in favor of banks, savings and loan associations,
institutions or other asset-based lenders, in an amount up to $25,000,000.
The amount of such debt currently totals $6,400,000. The Debentures will
be in default if the Company fails to pay principal or interest at
maturity, or if the Company fails to observe or perform certain covenants,
conditions and agreements set forth in the Agreement, or if the Company
becomes bankrupt or insolvent. No periodic evidence is required to be
furnished as to the absence of default or as to compliance with the terms
of the Debentures. Subject to the restrictions described below, Warrants
may be exercised for a period of three years at an exercise price of $9.50
per share. Warrants are not redeemable by the Company. Holders of
Debentures and Warrants have certain rights to registration under the
Securities Act of 1933 of the Common Stock underlying the Debentures and
Warrants, pursuant to the terms of the Agreement. If the Common Stock
into which the Debentures are convertible is not registered with the SEC
by July 2, 1997, the Debentures will bear interest at the rate of 15% from
that date until the first to occur of the maturity date, the conversion
date or the effectiveness of such registration.
The Company is submitting this transaction to a vote of the
Shareholders to ensure its compliance with Nasdaq Stock Market Rule
4460(i)(1)(D), which requires shareholder approval for the
issuance in a transaction not involving a public offering of voting
securities equal to twenty percent (20%) or more of the total voting
securities of the Company at less than fair market value prior to such
issuance. While the Agreement provides that the Debentures are not
convertible into more than 765,367 shares of Common Stock (approximately
19.9% of the 3,826,840 shares outstanding at the time of the Agreement)
unless Shareholder approval is obtained, the variable nature of the
Formula Price makes the issuance of more than 765,367 shares possible. If
Shareholder approval is not obtained by March 4, 1998, or if a
registration statement registering the Common Stock underlying the
Debentures and Warrants has not been declared effective by the Securities
and Exchange Commission by that time, holders of unconverted Debentures
may require the Company to redeem the Debentures at 115% of the principal
amount of the Debenture plus accrued interest. The Warrants are not
exercisable unless Shareholder approval is obtained.
The Company sold the Debentures subject to conversion at the Formula
Price on the basis of arms length negotiations with representatives of the
accredited investors who purchased Debentures and Warrants. The decision
to raise the capital needed for expansion, including but not limited to
the joint venture in China, by means of a private placement of Debentures
convertible at the Formula Price and Warrants exercisable at $9.50 rather
than by a public offering at market price, was carefully considered by the
Company's management. It was management's conclusion that the Company's
immediate need for the additional capital, coupled with the additional
time necessary for the Company to conduct a successful public offering, as
well as the market risks attendant to any public offering, in 1997,
outweighed the benefit of a potentially higher stock price in a public
offering.
While the Company recognizes that the effect of the Formula Price is
to give purchasers of Debentures pursuant to the Agreement a discount from
the price which would otherwise be available to the public on the date of
conversion and that the $9.50 exercise price of the Warrants may also be
lower than the market price on the date of their exercise, management
considers the overall effect of the sale of the Debentures and the
Warrants to be positive for the trading price of the Company's Common
Stock on Nasdaq. In particular, because the $9.50 exercise price of the
Warrants was higher than the market price of $9.25 on the effective date
of the Agreement and was the same as the maximum Formula Price, purchasers
of Debentures and Warrants will have an incentive not to sell the shares
received upon conversion of the Debentures at a price less than the $9.50
exercise price of the Warrants. Naturally, the Company cannot predict
whether the exercise price of the Warrants will be higher or lower than
the prevailing market prices on Nasdaq in the future but, on balance, the
Company believes that the sale of the Debentures and Warrants pursuant to
the Agreement will not adversely affect the market price of the Company's
Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
RATIFICATION OF THE COMPANY'S 1997 PRIVATE PLACEMENT OF
SECURITIES.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE TANDEM STOCK OPTION
AND STOCK APPRECIATION RIGHTS PLAN
The Tandem Stock Option and Stock Appreciation Rights Plan (the
"Tandem Plan") was adopted by the Company in 1987 and amended June 14,
1990, June 20, 1994 and February 23, 1996. On January 24,1997, the
Compensation Committee (the "Committee") approved further amendments to
the Tandem Plan to conform to recent changes in 17 C.F.R. 240.16b-3 ("Rule
16b-3"), under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and to permit greater flexibility in administration of
the Tandem Plan. It is now proposed to approve these amendments to the
Tandem Plan which would (i) eliminate the requirement that members of the
Committee administering the Tandem Plan be "disinterested persons" as had
been previously required by Rule 16b-3; (ii) while the Committee is
expected to continue to administer the Tandem Plan for the foreseeable
future, permit the Board of Directors to make grants of stock options or
otherwise administer the Tandem Plan if and to the extent such
administration would be consistent with applicable law; (iii) permit the
Board of Directors or the Committee administering the Tandem Plan to
determine the fair market value of the Company's Common Stock for purposes
of the Tandem Plan by averaging the price over a period of up to 90 days
preceding the grant of any option or stock appreciation right; (iv) permit
the Board of Directors or the Committee administering the Tandem Plan to
make grants of nonqualified stock options or stock appreciation rights
with exercise prices of not less than 50% of the fair market value of the
Company's Common Stock; (v) permit, to the extent consistent with
applicable law, discretionary grants of options and stock appreciation
rights to members of the Board of Directors or the Committee administering
the Tandem Plan; (vi) require shareholder approval of amendments to the
Tandem Plan only if the amendment would (A) increase the total number of
shares of Common Stock authorized for issuance pursuant to the Tandem Plan
or (B) require shareholder approval under applicable law; (vii) include in
the amount which may be loaned to participants exercising options the
amount of any tax liability incurred by them in connection with such
exercise; and (viii) give the Board of Directors or the Committee
administering the Tandem Plan the discretion to permit a participant to
effect a net exercise of an option without tendering shares of the
Company's stock as payment for the option.
The Company's Board of Directors and its Compensation Committee
(consisting of Sarah L. Booher and David A. Lisowski, its two outside
Directors) believe that these changes are important to permit the Company
to continue to attract and retain officers, directors, key employees,
advisors and consultants, to encourage stock ownership by employees and
management and to give the Committee flexibility in administering the
Tandem Plan to provide incentives and promote the financial success and
progress of the Company.
Below is a summary description of the Tandem Plan, as proposed to be
amended:
Description of the Tandem Plan
ADMINISTRATION
The Tandem Plan is administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee
presently consists of Ms. Booher and Mr. Lisowski. Subject to the Tandem
Plan, the Committee has the authority to determine to whom stock options
or stock appreciation rights may be granted, the time or times at which
options and rights are granted, the number of shares covered by each such
grant, and the duration of the options or rights. All decisions,
determinations and interpretations made by the Committee are binding on
participants of the Tandem Plan.
Prior to the proposed amendments, all members of the Committee were
required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Insofar as Rule 16b-3 has been amended
to delete this requirement, the Tandem Plan is also proposed to be amended
to remove the requirement. In addition, the Tandem Plan is being amended
to permit the Board of Directors to administer the Tandem Plan if and to
the extent that such administration would be consistent with applicable
law.
UNDERLYING SECURITIES
The securities underlying stock options and stock appreciation rights
under the Tandem Plan are shares of the Company's $.01 par value Common
Stock. Pursuant to the Tandem Plan the maximum number of shares of Common
Stock that may be issued upon exercise or payment will not exceed
3,000,000 shares. Pursuant to the terms of the Tandem Plan, shares
subject to stock options or stock appreciation rights which for any reason
expire or are terminated unexercised as to such shares may again be the
subject of a grant under the Tandem Plan. In addition, for purposes of
calculating the maximum number of shares which may be issued under the
Tandem Plan, only shares issued as a result of the exercise of stock
appreciation rights are counted and any shares tendered as payment of the
exercise price of an option will be added back to the Tandem Plan.
The market value of the total shares authorized as of April ____,
1997 was $_________.
ELIGIBLE EMPLOYEES AND OTHERS
Stock options and stock appreciation rights may be granted under the
Tandem Plan to officers, directors and employees of, and advisors and
consultants to, the Company. Options granted under the Tandem Plan that
are incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code (the "Code") may only be granted to employees
(including officers and directors who are employees) of the Company.
Advisors and consultants may receive grants only if they provide bona fide
services that are not rendered in connection with the offer or sale of
securities or in a capital-raising transaction. The Committee's
discretion in granting options or stock appreciation rights to its members
is limited. See "Option Grants to Committee Members" below. Subject to
the Tandem Plan, no participant may be granted more than 300,000 options
over any three year period under the Tandem Plan.
As of April ____, 1997, the Company had approximately ___ employees
and other persons eligible to receive grants under the Tandem Plan.
OPTION GRANTS TO COMMITTEE MEMBERS
On the date of each meeting of the Board of Directors or a committee
thereof, each member of the Committee that attends such meeting in person
will receive a grant of ten year, fully vested, nonqualified stock options
to purchase 500 shares of the Company's Common Stock at the fair market
value determined in accordance with the Tandem Plan based on a valuation
period of 30 days. See "Option Price and Duration" below. Upon approval
of the proposed amendments, the Committee would have discretion in
granting options or stock appreciation rights to members of the Committee
only to the extent permitted by applicable law.
Prior to the proposed amendments, the exercise price for automatic
options was determined by reference to a single quoted price on the date
of the meeting attended and the Committee had no discretion in granting
options or stock appreciation rights to members of the Committee.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts to be
received by or allocated to each of the named persons or groups under the
Tandem Plan. The Committee determines the number of stock options or
stock appreciation rights which may be granted to officers, directors and
employees of, and advisors and consultants to, the Company under the
Tandem Plan. Because such number, if any, is entirely in the discretion
of the Committee, the future benefits or amounts to be received by or
allocated to those persons, except for the two outside Directors, are not
determinable. The two outside Directors are both members of the Committee
and they receive stock options through the provisions for automatic grants
to Committee Members described above. See "Option Grants to Committee
Members."
<TABLE>
<CAPTION>
TANDEM PLAN
Dollar Number of
Name and Position Value ($)(1) Shares
<S> <C> <C>
Joseph H. Kiser, Chairman of the
Board and Chief Scientific Officer(2) -0- 250,000
David G. Sherman, President and -0- 335,000
Chief Executive Officer and
Chief Financial Officer(3)
Executive Officer Group (5 persons)(4) -0- 780,680
Non-Executive Officer Director
Group (2 persons)(5) -0- 16,500
Nominee for Director Group (4 persons)(6) -0- 601,500
Associate of Director, Executive
Officer or Nominee Group (0 persons) -0- -0-
5% or More Recipient Group (0 persons) -0- -0-
Non-Executive Officer Employee
Group (_____ persons) -0- 80,564
- ----------------------------
(1) All options have been granted at not less than the fair market value
on the date of grant. The dollar value to the grantee is solely
dependent on the increase in the stock price subsequent to the date
of grant. On October 1, 1996, the Compensation Committee repriced
certain of the previously granted options. See "Compensation
Committee Report on Repricing" above.
(2) Mr. Kiser was granted 100,000 options in 1995 and 50,000 options in
1996 which are subject to a vesting schedule, and was granted 100,000
options in 1997.
(3) Mr. Sherman was granted 43,750 options in 1993 (of which 8,750 have
been exercised), 100,000 options in 1995 and 100,000 options in 1996
which are subject to a vesting schedule, and 100,000 options in
fiscal 1997.
(4) In addition to Messrs. Kiser and Sherman, three other executive
officers were granted an aggregate of 43,750 options in 1993, 38,000
in 1995, 51,860 in 1996 and 62,250 in 1997.
(5) Ms. Booher was granted 1,000 options in 1994, 5,000 options in 1995,
5,000 options in 1996 and 2,000 options in 1997. Mr. Lisowski was
granted 1,500 options in 1996 and 2,000 options in 1997.
(6) Includes Messrs. Kiser, Sherman and Lisowski and Ms. Booher.
</TABLE>
OPTION PRICE AND DURATION
Upon approval of the proposed amendments, for nonqualified options,
the option price may be less than the fair market value of the stock on
the date of grant, but in no event will the option price be less than 50%
of the fair market value of the stock on the valuation date. For ISOs,
the exercise price per share is 100% of the fair market value of the
Common Stock on the date of valuation, or in the case of ISOs granted to
employees holding more than 10% of the total combined voting power of all
classes of stock of the Company, 110% of the fair market value of the
Common Stock on the valuation date.
Pursuant to the proposed amendments, "fair market value" means (a) if
there is an established market for the Company's Common Stock on a stock
exchange, in an over-the-counter market or otherwise, the mean of the
highest and lowest quoted selling prices on the valuation date, or (b) if
there were no such sales on the valuation date, then in accordance with
Treas. Reg. Sec. 10.2031-2 or successor regulations. Unless otherwise
specified by the Committee at the time of grant or in the Tandem Plan (as
in the case of automatic grants to Committee members), the valuation date
for purposes of determining fair market value is the date of grant. The
Committee may, however, specify in any grant of an option or stock
appreciation right that, instead of the date of the grant, the valuation
date shall be a valuation period of up to ninety (90) days prior to the
date of grant, and fair market value for purposes of such grant shall be
the average over the valuation period of the mean of the highest and
lowest quoted selling prices on each date on which sales were made in the
valuation period.
Prior to the proposed amendments, the exercise price per share of all
options granted under the Tandem Plan was always the fair market value of
the Common Stock determined by a single quoted price on the grant date.
Unless otherwise prescribed by the Committee, options granted under
the Tandem Plan expire ten (10) years from the date of grant, or in the
case of ISOs granted to employees holding more than 10% of the total
combined voting power of all classes of stock of the Company, five (5)
years from the date of grant.
EXERCISE OF OPTIONS AND PAYMENT FOR STOCK
Options are exercisable in accordance with the terms and conditions
of the grant to the participant. The exercise price of options may be
paid in cash or in shares of the Company's Common Stock (valued at the
fair market value of the shares on the date of exercise) or by a
combination thereof. If the proposed amendments are approved, the
Committee may, in its discretion and subject to ratification by the entire
Board of Directors, loan one or more participants all or a portion of the
exercise price, together with the amount of any tax liability incurred by
the participant as a result of the exercise of the option, for up to three
(3) years with interest payable at the prime rate quoted in the Wall
Street Journal on the date of exercise. Members of the Committee may
receive such loans for the exercise of their options with Committee
approval or Board ratification. With respect to loans made to officers or
directors of the Company, approval of the amendments to the Tandem Plan,
will be deemed to be preapproval by, and/or prior notification of, the
shareholders for all loans permitted by, and subsequently made pursuant
to, the Tandem Plan for purposes of the Colorado Business Corporation Act.
In addition, pursuant to the amendments, the Committee or the Board of
Directors may elect to permit a participant to effect a net exercise of an
option without tendering shares of the Company's stock as payment for the
option. In such an event, the participant would be deemed to have paid
for the exercise of the option with shares of the Company's stock and
would receive from the Company a number of shares equal to the difference
between the shares that would have been tendered and the number of options
exercised. Previously the Tandem Plan did not expressly permit loans to
cover a participant's tax liability.
Prior to the proposed amendments, a participant who desired to use
shares of the Company's stock in payment of the exercise price for the
option being exercised was required to tender a stock certificate for the
appropriate number of shares of the Company's stock sufficient to pay the
exercise price.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted by the Committee only in
connection with an option granted under the Tandem Plan and any rights so
granted will be alternative to the related option. A stock appreciation
right entitles its holder to receive the excess of the fair market value
(at the date of exercise) of a share of Common Stock over the option price
provided for in the related option.
EXERCISE OF STOCK APPRECIATION RIGHTS
A stock appreciation right is exercisable at the same time or times
that the related option is exercisable. Exercise of a stock appreciation
right is effected by written notice to the Company. The Company may pay
the stock appreciation right in cash or shares of Common Stock in its sole
discretion. The exercise of a stock appreciation right automatically
results in the cancellation of the related option on a share-for-share
basis.
NONTRANSFERABILITY
During a participant's lifetime, an option may be exercisable only by
the participant. Options granted under the Tandem Plan and the rights and
privileges conferred thereby are not subject to execution, attachment or
similar process and may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise)
other than by will or by the applicable laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by applicable law
and Rule 16b-3, the Committee may (i) permit a recipient of a nonqualified
stock option to designate in writing during the participant's lifetime a
beneficiary to receive and exercise the participant's nonqualified stock
options in the event of such participant's death, (ii) grant nonqualified
stock options that are transferable to the immediate family or a family
trust of the recipient, and (iii) modify existing nonqualified stock
options to be transferable to the immediate family or a family trust of
the recipient. Any other attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any option under the Tandem Plan or of any right
or privilege conferred thereby contrary to the provisions of the Tandem
Plan would be null and void.
AMENDMENT, SUSPENSION AND TERMINATION
The Board of Directors or the Committee may at any time suspend,
terminate or amend the Tandem Plan, except that, without the approval of
the shareholders, (1) the total number of shares available for grants
under the Tandem Plan may not be increased, and (ii) no change may be made
that requires shareholder approval under applicable law. No amendment,
suspension or termination of the Tandem Plan will, without the
participant's consent, alter or impair any of the rights or obligations
under any option or stock appreciation right granted prior to that
amendment, suspension or termination. Unless earlier terminated by the
Committee, the Tandem Plan will terminate on January 28, 2004, and no
stock option or stock appreciation right may be granted after that date.
Prior to the proposed amendments, only the Committee had the
authority to amend the Tandem Plan and shareholder approval was required
for any amendment which materially modified the benefits to participants
or the eligibility requirements for grants under the Tandem Plan. In
addition, the Tandem Plan previously included a limit on the number of
amendments to the Committee's formula grants which was previously required
under Rule 16b-3.
FEDERAL INCOME TAX CONSEQUENCES
A. INCENTIVE STOCK OPTIONS. The following general rules are
applicable for Federal income tax purposes under existing law to employees
of the Company who receive and exercise ISOs granted under the Tandem
Plan:
1. Generally, no taxable income results to the optionee upon the
grant of an ISO or upon the issuance of shares to him or her upon exercise
of the ISO.
2. No tax deduction is allowed to the Company upon either grant
or exercise of an ISO under the Tandem Plan.
3. If shares acquired upon exercise of an ISO are not disposed
of prior to the later of (i) two years following the date the Option was
granted or (ii) one year following the date the shares are transferred to
the optionee pursuant to the exercise of the Option, the difference
between the amount realized on any subsequent disposition of the shares
and the exercise price will generally be treated as long-term gain or loss
to the optionee.
4. If shares acquired upon exercise of an ISO are disposed of
before the expiration of one or both of the requisite holding periods (a
"disqualifying disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the Option over the exercise price or (ii) the actual gain on disposition,
will be treated as compensation to the optionee and will be taxed as
ordinary income in the year of such disposition.
5. In any year that an optionee recognizes compensation income
on a disqualifying disposition of shares acquired by exercising an ISO,
the Company will generally be entitled to a corresponding deduction for
income tax purposes.
6. Any excess of the amount realized by the optionee as the
result of a disqualifying disposition over the sum of (i) the exercise
price and (ii) the amount of ordinary income recognized under the above
rules will be treated as either long-term or short-term capital gain,
depending upon the time elapsed between receipt and disposition of such
shares.
7. The bargain element at the time of exercise of an ISO, i.e.,
the amount by which the fair market value of the Common Stock acquired
upon exercise of the ISO exceeds the exercise price, may be taxable to the
optionee under the "alternative minimum tax" provisions of the Code.
B. NONQUALIFIED OPTIONS. Nonqualified Options are taxed in
accordance with Section 83 of the Code and the Regulations issued
thereunder. The following general rules are applicable to United States
holders of such options and to the Company for Federal income tax purposes
under existing law:
1. The optionee does not realize any taxable income upon the
grant of a Nonqualified Option, and the Company is not allowed a business
expense deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income at
the time of exercise of a Nonqualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. The Company will require employees to
make appropriate arrangements for the withholding of taxes on this amount.
3. When the optionee sells the shares, he or she will recognize
a capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (i.e., the exercise price plus the amount taxed to the optionee as
compensation income). If the optionee holds the shares for longer than
one year, this gain or loss will be a long-term capital gain or loss.
4. In general, the Company will be entitled to a tax deduction
in the year in which compensation income is recognized by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO
THE TANDEM STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE STOCK GRANT PLAN
The Stock Grant Plan (the "Stock Plan") was adopted by the Company on
June 16, 1995 and approved by the shareholders on June 26, 1996. On
January 24, 1997, the Committee approved certain amendments to the Stock
Plan to conform to recent changes in Rule 16b-3 under the Exchange Act,
and to permit greater flexibility in administration of the Stock Plan. It
is now proposed to approve these amendments to the Stock Plan which would
(i) eliminate the requirement that members of the Committee administering
the Stock Plan be "disinterested persons" as had been previously required
by Rule 16b-3; (ii) while the Committee is expected to continue to
administer the Stock Plan for the foreseeable future, permit the Board of
Directors to make grants of stock or otherwise administer the Stock Plan
if and to the extent such administration would be consistent with
applicable law; (iii) permit, to the extent consistent with applicable
law, discretionary grants of stock to members of the Board of Directors or
the Committee administering the Stock Plan; and (vi) require shareholder
approval of amendments to the Stock Plan only if the amendment would (A)
increase the total number of shares of Common Stock authorized for
issuance pursuant to the Stock Plan or (B) require shareholder approval
under applicable law.
The Company's Board of Directors and its Compensation Committee
(consisting of Sarah L. Booher and David A. Lisowski, its two outside
Directors) believe that these changes are important to permit the Company
to continue to attract and retain officers, directors, key employees,
advisors and consultants, to encourage stock ownership by employees and
management and to give the Committee flexibility in administering the
Stock Plan to provide incentives and promote the financial success and
progress of the Company.
The following is a summary description of the Stock Plan as proposed
to be amended:
DESCRIPTION OF THE STOCK PLAN
ADMINISTRATION
The Stock Plan is administered by the Compensation Committee of the
Board of Directors of the Company. The Committee presently consists of
Ms. Booher and Mr. Lisowski. Subject to the Stock Plan, the Committee has
the authority to determine the terms of the grants, including number of
shares of stock in each grant and may impose conditions on awards, such as
a vesting schedule, which may differ from one grant to another. Stock
which is granted subject to conditions, such as a vesting schedule, is not
transferable, assignable, nor may it be hypothecated until such time as
the stock is no longer subject to such conditions. All decisions,
determinations and interpretations made by the Committee are binding on
participants of the Stock Plan.
Prior to the proposed amendments, all members of the Committee were
required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Insofar as Rule 16b-3 has been amended
to delete this requirement, the Stock Plan is also proposed to be amended
to remove the requirement. In addition, the Stock Plan is being amended
to permit the Board of Directors to administer the Stock Plan if and to
the extent that such administration would be consistent with applicable
law.
UNDERLYING SECURITIES
The securities underlying the Stock Plan are shares of the Company's
$.01 par value Common Stock. Pursuant to the Stock Plan, the maximum
number of shares that may be issued is 100,000 shares. The market value
of those shares on April ___, 1997 was $_________.
ELIGIBLE EMPLOYEES AND OTHERS
Awards may be granted to those officers, directors, employees,
consultants, advisors, and independent contractors of the Company that are
selected by the Committee. The Committee's discretion in making stock
grants to its members is limited. See "Grants to Committee Members"
below.
As of April ___, 1997, the Company has approximately ___ employees
and other persons eligible to receive grants under the Stock Plan.
GRANTS TO COMMITTEE MEMBERS
Each Committee member is entitled to receive an automatic grant of 50
shares per month on the first day of each month. Upon approval of the
proposed amendments, the Committee would have discretion in making stock
grants to members of the Committee only to the extent permitted by
applicable law. Stock certificates issued to Committee members bear a
legend stating that the stock must be held for a minimum of six (6) months
prior to sale by the Committee member.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts received
or to be received by or allocated to each of the named persons or groups
under the Stock Plan. The Committee determines the number of stock grants
which may be granted to officers, directors, employees, consultants,
advisors and independent contractors under the Stock Plan. Because such
number, if any, is entirely in the discretion of the Committee, the future
benefits or amounts to be received by or allocated to such persons are not
determinable, except for automatic grants to Committee members. See
"Grants to Committee Members" above.
<TABLE>
<CAPTION>
STOCK GRANT PLAN
Dollar Number of
Name and Position Value ($) Shares
<S> <C> <C>
Joseph H. Kiser, Chairman of the
Board and Chief Scientific Officer -0- -0-
David G. Sherman, President and -0- -0-
Chief Executive Officer and
Chief Financial Officer
Executive Officer Group (5 persons) -0- -0-
Non-Executive Officer Director
Group (2 persons) $16,438(1) 1,500
Non-Executive Officer Employee
Group (___ persons) -0- -0-
____________________
(1) Each Committee member is entitled to receive an automatic grant of 50
shares per month on the first day of each month. The dollar value
was determined by using the closing price of the shares on the first
stock trading day of each month through March 1, 1997. Ms. Booher
was granted 900 shares in 1996 and 150 shares through March 1997.
Mr. Lisowski was granted 300 shares in 1996 and 150 shares through
March 1997.
</TABLE>
TAX WITHHOLDING
Recipients of stock grants are not required to pay for acquisition of
the stock but will be subject to tax consequences. The Company may
require employees and other recipients of stock grants to submit to the
Company an amount sufficient to pay withholding taxes due under state or
federal tax laws prior to delivery of stock.
FORFEITURE
If the recipient of an award ceases to be employed by the Company or
ceases to serve as a director, consultant, advisor or independent
contractor of the Company, or otherwise ceases to provide bona fide
services as specified in the eligibility requirements set forth above, any
portion of his or her award for which the conditions specified in the
grant of the award have not been satisfied will immediately terminate.
AMENDMENT, SUSPENSION AND TERMINATION
The Board of Directors or the Committee may at any time suspend,
terminate or amend the Stock Plan, except that, without the approval of
the shareholders, (i) the total number of shares available for grants
under the Stock Plan may not be increased, and (ii) no change may be made
that requires shareholder approval under applicable law. No amendment,
suspension or termination of the Stock Plan will, without the
participant's consent, alter or impair any of the rights or obligations
under any grant made prior to that amendment, suspension or termination.
Unless earlier terminated by the Committee, the Stock Plan will terminate
on June 15, 2005, and no grants of stock may be granted after that date.
Prior to the proposed amendments, only the Committee could amend the
Stock Plan and shareholder approval was required for any amendment which
materially modified the benefits to participants or the eligibility
requirements for grants under the Stock Plan. In addition, the Stock Plan
previously included a limit on the number of amendments to the Committee's
formula grants which was previously required under Rule 16b-3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO
THE STOCK GRANT PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was
not aware of any other matter to be presented at the Meeting other than as
set forth herein. However, if any other matters are properly brought
before the Meeting, the shares represented by valid Proxies will be voted
with respect to such matters in accordance with the judgment of the
persons voting them.
Under Colorado law, unless otherwise provided in the Company's
Articles of Incorporation: (i) for the election of directors, of the
shares represented in person or by proxy at the meeting and entitled to
vote, that number of candidates equalling the number of directors to be
elected having the highest number of votes cast in favor of their
election, are elected to the board of directors; and (ii) for the
ratification of auditors, the approval of the 1997 private placement, and
the amendments to the Tandem Plan and the Stock Grant Plan, of the shares
represented in person or by proxy at the meeting and entitled to vote, the
votes cast favoring the ratifications or approving the amendments must
exceed the votes opposing it. The Company's Articles of Incorporation do
not require a greater or lesser vote for any of these matters. Abstentions
and broker non-votes will be counted for purposes of establishing a quorum
only. Only those votes cast for the election of directors and the
proposals will be counted as votes in favor or affirmative votes.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31,
1996 accompanies this Proxy Statement. The audited financial statements
of the Company are included in such Annual Report. Copies of the Form 10-
KSB for the fiscal year ended December 31, 1996 are available from the
Company upon written request of a Shareholder. In addition, copies of the
exhibits thereto are available from the Company upon written request of a
Shareholder and payment of the Company's out-of pocket expenses.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN JUNE 1997
Any proposal from a Shareholder intended to be presented at the
Company's annual meeting of Shareholders to be held in June 1998, must be
received at the offices of the Company, 11101 East 51st Avenue, Denver,
Colorado 80239 no later than December ___, 1997, in order to be included
in the Company's proxy statement and proxy relating to that meeting.
Denver, Colorado JOSEPH H. KISER
April ___, 1997 CHAIRMAN OF THE BOARD
AND SECRETARY
APPENDICES
VARI-L COMPANY, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph H. Kiser and David G. Sherman,
each with the power to appoint his substitute, and hereby authorizes them
to represent and to vote as designated below, all the shares of common
stock of Vari-L Company, Inc. held of record by the undersigned on April
11, 1997, at the Annual Meeting of Shareholders to be held on June 20,
1997 or any adjournment thereof.
1. ELECTION OF FOUR DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the
contrary)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed below
Joseph H. Kiser David G. Sherman
Sarah L. Booher David A. Lisowski
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, CROSS OUT THAT NOMINEE'S NAME ABOVE.)
2. TO RATIFY THE APPOINTMENT OF HAUGEN, SPRINGER & CO. AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE AND RATIFY THE TERMS OF THE COMPANY'S 1997 PRIVATE
PLACEMENT OF SECURITIES CONSISTING OF CONVERTIBLE SUBORDINATED DEBENTURES
AND WARRANTS TO PURCHASE SHARES OF THE COMPANY'S $.01 PAR VALUE COMMON
STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO APPROVE OF CERTAIN AMENDMENTS TO THE STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN TO CONFORM WITH RECENT AMENDMENTS TO SEC RULE
16B-3, AND TO PERMIT GREATER FLEXIBILITY IN THE ADMINISTRATION OF THE
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE OF CERTAIN AMENDMENTS TO THE STOCK GRANT PLAN TO
CONFORM WITH RECENT AMENDMENTS TO SEC RULE 16B-3, AND TO PERMIT GREATER
FLEXIBILITY IN THE ADMINISTRATION OF THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5. THIS PROXY
CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR
DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement furnished herewith.
Dated: , 1997
----------------------------------------------
----------------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s)
stenciled hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should
submit powers of attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED
ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING OR TO SUBMIT A LATER DATED REVOCATION OR
AMENDMENT TO THIS PROXY ON ANY OF THE ISSUES SET FORTH ABOVE.
APPENDICES
TANDEM STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
As Amended and Restated February 23, 1996
As further Amended and Restated January 24, 1997
1. PURPOSE. Vari-L Company, Inc. (the "Company") hereby
establishes the Tandem Stock Option and Stock Appreciation Rights Plan
(the "Plan"). The purpose of the Plan is to advance the interests of the
Company and its stockholders by providing a means by which the Company
shall be able to attract and retain competent officers, directors, key
employees, advisors and consultants by providing them with an opportunity
to participate in the increased value of the Company which their effort,
initiative, and skill have helped produce.
2. GENERAL PROVISIONS.
(a) The Plan will be administered by the Compensation Committee
of the Board of Directors of the Company (the "Committee"). The Committee
shall be comprised of two or more independent outside directors designated
by the Board of Directors. The Committee shall have full power to
construe and interpret the Plan and to establish and amend rules and
regulations for its administration. Notwithstanding the foregoing, if it
would be consistent with all applicable law, including, without
limitation, Rule 16b-3 promulgated under the Securities Exchange Act of
1934 as amended ("Rule 16b-3") and the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder
(including, without limitation, the regulations relating to Section 162(m)
of the Code), then the Plan may be administered by the Board of Directors,
and if so administered all subsequent references to the Committee shall be
read as referring to the Board of Directors. Any action of the Committee
with respect to the Plan shall be taken by majority vote or by the
unanimous written consent of the Committee members.
(b) The Committee shall determine, in its sole discretion,
which participants under the Plan shall be granted stock options or stock
appreciation rights, the time or times at which options and rights are
granted, as well as the number of shares and the duration of the options
or rights which are granted to participants, provided, however, that no
participant may be granted more than 300,000 options during any three year
period under the Plan.
(c) The Committee shall also determine any other terms and
conditions relating to options and rights granted under the Plan as the
Committee may prescribe, in its sole discretion.
(d) The Committee may, in its discretion, delegate its
administrative duties with respect to the Plan to an officer or employees,
or to a committee composed of officers or employees, of the Company.
(e) The Committee shall make all other determinations and take
all other actions which it deems necessary or advisable for the
administration of the Plan.
(f) All decisions, determinations and interpretations made by
the Committee shall be binding and conclusive on all participants in the
Plan and on their legal representatives, heirs and beneficiaries.
(g) Notwithstanding anything to the contrary herein, the
Committee shall have no authority to determine the amount, price or timing
of grants hereunder to members of the Committee, unless, and only to the
extent that, its exercise of such authority is consistent with all
applicable laws, including, without limitation, Rule 16b-3.
3. ELIGIBILITY. Officers, directors and employees of the Company
and advisors and consultants to the Company shall be eligible to
participate in the Plan and to receive options and rights hereunder,
provided, however, that: (a) Incentive Stock Options may only be granted
to employees (including officers and directors who are employees) of the
Company or its subsidiaries; and (b) advisors and consultants shall be
eligible for grants only if they provide bona fide services that are not
rendered in connection with the offer or sale of securities or in a
capital-raising transaction.
4. NUMBER OF SHARES SUBJECT TO PLAN. The aggregate number of
shares of the Company's $.01 par value Common Stock which may be granted
to participants shall be 3,000,000 shares, subject to adjustment only as
provided in Sections 5(h) and 7 hereof. These shares may consist of
shares of the Company's authorized but unissued Common Stock or shares of
the Company's authorized and issued Common Stock reacquired by the Company
and held in its treasury or any combination thereof. If an option granted
under this Plan is surrendered, or for any other reason ceases to be
exercisable in whole or in part, the shares as to which the option ceases
to be exercisable shall be available for options to be granted to the same
or other participants under the Plan, except to the extent that an option
is deemed surrendered by the exercise of a tandem stock appreciation right
and that right is paid by the Company in stock, in which event the shares
issued in satisfaction of the right shall not be available for new options
or rights under the Plan.
5. STOCK OPTION.
(a) TYPE OF OPTIONS. Options granted on or after January 28,
1994 may be either Nonqualified Stock Options or Incentive Stock Options
as determined by the Committee in its sole discretion and as reflected in
the Notice of Grant issued by the Committee. All Options granted under
the Plan prior to January 28, 1994 were nonqualified stock options.
"Incentive Stock Option" means an option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
"Nonqualified Stock Option" means an option not intended to qualify as an
Incentive Stock Option or an Incentive Stock Option which is converted to
a Nonqualified Stock Option under Section 5(f) hereof.
(b) OPTION PRICE. The price at which options may be granted
under the Plan shall be determined as follows:
(i) For Incentive Stock Options the option price shall
be equal to 100% of the Fair Market Value of the stock on the date the
option is granted provided, however, that Incentive Stock Options granted
to any person who, at the time such option is granted owns (as defined in
Section 422 of the Code) shares possessing more than 10% of the total
combined voting power of all classes of shares of the Company or its
parent or subsidiary corporation, the Option Price shall be 110% of the
Fair Market Value.
(ii) For Nonqualified Stock Options the option price may
be less than the Fair Market Value of the stock on the date of grant, but
in no event shall the option price be less than fifty percent 50% of the
Fair Market Value of the stock on the date the option is granted.
(iii) For purposes of this Plan, and except as otherwise
set forth herein, "Fair Market Value" shall mean (a) if there is an
established market for the Company's Common Stock on a stock exchange, in
an over-the-counter market or otherwise, the mean of the highest and
lowest quoted selling prices on the valuation date, or (b) if there were
no such sales on the valuation date, then in accordance with Treas. Reg.
Sec. 20.2031-2 or successor regulations. Unless otherwise specified by
the Committee at the time of grant, or in the Plan (as in the case of
automatic grants to Committee members), the valuation date for purposes of
determining Fair Market Value shall be the date of grant. The Committee
may, however, specify in any grant of an Option or Stock Appreciation
Right that, instead of the date of the grant, the valuation date shall be
a valuation period of up to ninety (90) days preceding the date of grant,
and Fair Market Value for purposes of such grant shall be the average over
the valuation period of the mean on the highest and lowest quoted selling
prices on each date on which sales were made in the valuation period,
provided, however, that if the Committee fails to specify a valuation
period and there were no sales on the date of grant then Fair Market Value
shall be determined as if the Committee had specified a thirty (30) day
period for such determination, unless there is no established market for
the Company's Common Stock in which case the determination of Fair Market
Value shall be in accordance with clause (b) above.
(c) EXERCISE OF OPTION. The right to purchase shares covered
by any option or options under this Plan shall be exercisable only in
accordance with the terms and conditions of the grant to the participant.
Such terms and conditions may include a time period or schedule whereby
some of the options granted may become exercisable, or "vested", over time
and certain conditions, such as continuous service or specified
performance criteria or goals, must be satisfied for such vesting. The
determination as to whether to impose any such vesting schedule or
requirements, and the terms of such schedule or requirements, shall be
within the sole discretion of the Committee. These terms and conditions
may be different for different participants so long as all options satisfy
the requirements of the Plan.
Options shall be paid for in cash or in shares of the
Company's Common Stock, which shares shall be valued at the Fair Market
Value of the shares on the date of exercise, or any combination thereof.
The Committee may, in its discretion and subject to ratification by the
entire Board of Directors, loan one or more participants all or a portion
of the exercise price, together with the amount of any tax liability
incurred by the participant as a result of the exercise of the option, for
up to three (3) years with interest payable at the prime rate quoted in
the Wall Street Journal on the date of exercise. Members of the Committee
may receive such loans for the exercise of their options without Committee
approval or Board ratification.
The Committee may also permit a participant to effect a net
exercise of an option without tendering any shares of the Company's stock
as payment for the option. In such an event, the participant will be
deemed to have paid for the exercise of the option with shares of the
Company's stock and shall receive from the Company a number of shares
equal to the difference between the shares that would have been tendered
and the number of options exercised.
The Committee may also cause the Company to enter into
arrangements with one or more licensed stock brokerage firms whereby
participants may exercise options without payment therefor but with
irrevocable orders to such brokerage firm to immediately sell the number
of shares necessary to pay the exercise price for the option and the
withholding taxes, if any, and then to transmit the proceeds from such
sales directly to the Company in satisfaction of such obligations.
(d) DURATION OF OPTIONS. Unless otherwise prescribed by the
Committee or this Plan, options granted hereunder shall expire ten (10)
years from the date of grant, subject to early termination as provided in
Section 5(f) hereof.
(D) INCENTIVE STOCK OPTIONS LIMITATIONS. In no event shall an
Incentive Stock Option be granted to any person who, at the time such
option is granted, owns (as defined in Section 422 of the Code) shares
possessing more than 10% of the total combined voting power of all classes
of shares of the Company or of its parent or subsidiary corporation,
unless the option price is at least 110% of the Fair Market Value of the
stock subject to the Option, and such Option is by its terms not
exercisable after the expiration of five (5) years from the date such
Option is granted. Moreover, the aggregate Fair Market Value (determined
as of the time that option is granted) of the shares with respect to which
Incentive Stock Options are exercisable for the first time by any
individual employee during any single calendar year under the Plan shall
not exceed $100,000. In addition, in order to receive the full tax
benefits of an Incentive Stock Option, the employee must not resell or
otherwise dispose of the stock acquired upon exercise of the Incentive
Stock Option until two (2) years after the date the option was granted and
one (1) year after it was exercised.
(f) EARLY TERMINATION OF OPTIONS. In the event a participant's
employment with or service to the Company shall terminate as the result of
total disability or the result of retirement at 65 years of age or later,
then any options granted to such participant shall terminate and may no
longer be exercised three (3) months after the time such participant is no
longer an employee, officer or director of, or advisor or consultant to,
the Company. If the participant dies while employed or engaged by the
Company, to the extent that the option was exercisable at the time of the
participant's death, such option may, within one year after the
participant's death, be exercised by the person or persons to whom the
participant's rights under the option shall pass by will or by the
applicable laws of descent and distribution; provided, however, that an
option may not be exercised to any extent after the expiration of the
option as originally granted. In the event a participant's employment or
engagement by the Company shall terminate as the result of any
circumstances other than those referred to above, whether terminated by
the participant or the Company, with or without cause, then all options
granted to such participant under this Plan shall terminate and no longer
be exercisable as of the date of such termination, provided, however, that
if an employee with an Incentive Stock Option terminates employment prior
to its exercise, but after such termination becomes or remains a non-
employee officer, director, advisor or consultant eligible for
Nonqualified Stock Options hereunder, then the Incentive Stock Option
shall be converted to a Nonqualified Stock Option on the date the
Incentive Stock Option would otherwise have terminated.
An employee who is absent from work with the Company
because of total disability, as defined below, shall not by virtue of such
absence alone be deemed to have terminated such participant's employment
with the Company. All rights which such participant would have had to
exercise options granted hereunder will be suspended during the period of
such absence and may be exercised cumulatively by such participant upon
his return to the Company so long as such rights are exercised prior to
the expiration of the option as originally granted. For purposes of this
Plan, "total disability" shall mean disability, as a result of sickness or
injury, to the extent that the participant is prevented from engaging in
any substantial gainful activity and is eligible for and receives a
disability benefit under Title II of the Federal Social Security Act.
(g) AUTOMATIC GRANTS TO COMMITTEE MEMBERS. Except as provided
in Section 2(g) hereof, no action may be taken by the Committee to grant
any options to members of the Committee. Notwithstanding the foregoing
and irrespective of any action by the Committee, on the date of each
meeting of the Board of Directors or a committee thereof, each member of
the Committee that attends such meeting in person shall receive a grant of
a ten year, fully vested, Nonqualified Stock Option to purchase 500 shares
of the Company's Common Stock at an exercise price equal to the Fair
Market Value calculated in accordance with Section 5(b) with a valuation
period of thirty (30) days.
(h) RELOAD BY PAYMENT IN SHARES. To the extent that a
participant pays for the exercise of an option with shares of the
Company's stock rather than cash, the tendered shares shall be deemed to
be added back to the Plan, increasing the total number of shares subject
to and reserved for the Plan by that amount.
6. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted by the
Committee under this Plan upon such terms and conditions as it may
prescribe. A stock appreciation right may be granted only in connection
with an option previously granted to or to be granted under this Plan.
Each stock appreciation right shall become nonexercisable and be forfeited
if the related option is exercised. "Stock appreciation right" as used in
this Plan means a right to receive the excess of Fair Market Value, on the
date of exercise, of a share of the Company's Common Stock on which an
appreciation right is exercised over the option price provided for in the
related option and is issued in consideration of services performed for
the Company or for its benefit by the participant. Such excess is
hereafter called "the differential."
(b) EXERCISE OF STOCK APPRECIATION RIGHTS. Stock appreciation
rights shall be exercisable and be payable in the following manner:
(i) A stock appreciation right shall be exercisable by
the participant at the same time or times that the option to which it
relates could be exercised. A participant wishing to exercise a stock
appreciation right shall give written notice of such exercise to the
Company. Upon receipt of such notice, the Company shall determine, in its
sole discretion, whether the participant's stock appreciation rights shall
be paid in cash or in shares of the Company's Common Stock or any
combination of cash and shares and thereupon shall, without deducting any
transfer or issue tax, deliver to the person exercising such right an
amount of cash or shares of the Company's Common Stock or a combination
thereof with a value equal to the differential. The date the Company
receives the written notice of exercise hereunder is the exercise date.
The shares issued upon the exercise of a stock appreciation right may
consist of shares of the Company's authorized but unissued Common Stock or
of its authorized and issued Common Stock reacquired by the Company and
held in its treasury or any combination thereof. No fractional share of
Common Stock shall be issued; rather, the Committee shall determine
whether cash shall be given in lieu of such fractional share or whether
such fractional share shall be eliminated.
(ii) The exercise of a stock appreciation right shall
automatically result in the surrender of the related stock option by the
participant on a share for share basis. Likewise, the exercise of a stock
option shall automatically result in the surrender of the related stock
appreciation right. Shares covered by surrendered options shall be
available for granting further options under this Plan except to the
extent and in the amount that such rights are paid by the Company with
shares of stock, as more fully discussed in Section 4 hereof.
(iii) The Committee may impose any other terms and
conditions it prescribes upon the exercise of a stock appreciation right,
which conditions may include a condition that the stock appreciation right
may only be exercised in accordance with rules and regulations adopted by
the Committee from time to time.
(d) LIMITATION ON PAYMENTS. Notwithstanding any other
provision of this Plan, the Committee may from time to time determine,
including at the time of exercise, the maximum amount of cash or stock
which may be given upon exercise of any stock appreciation right in any
year, provided, however, that all such amounts shall be paid in full no
later than the end of the year immediately following the year in which the
participant exercised such stock appreciation rights. Any determination
under this paragraph may be changed by the Committee from time to time
provided that no such change shall require the participant to return to
the Company any amount theretofore received or to extend the period within
which the Company is required to make full payment of the amount due as
the result of the exercise of the participant's stock appreciation rights.
(e) EXPIRATION OR TERMINATION OF STOCK APPRECIATION RIGHTS.
(i) Each stock appreciation right and all rights and
obligations thereunder shall expire on the date on which the related
option expires or terminates.
(ii) A stock appreciation right shall terminate and may
no longer be exercised upon the expiration or termination of the related
option.
7. CAPITAL ADJUSTMENTS. The aggregate number of shares of the
Company's Common Stock subject to this Plan, the maximum number of shares
as to which options may be granted to any one participant hereunder, and
the number of shares and the price per share subject to outstanding
options, shall be appropriately adjusted by the Committee for any increase
or decrease in the number of shares of Common Stock which the Company has
issued resulting from any stock split, reverse stock split, stock
dividend, combination of shares or any other change, or any exchange for
other securities or any reclassification, merger, reorganization,
consolidation, redesignation, recapitalization, or otherwise. Similar
adjustments shall be made to the terms of stock appreciation rights.
8. NONTRANSFERABILITY. During a participant's lifetime, an option
may be exercisable only by the participant and options granted under the
Plan and the rights and privileges conferred thereby shall not be subject
to execution, attachment or similar process and may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of
law or otherwise) other than by will or by the applicable laws of descent
and distribution. Notwithstanding the foregoing, to the extent permitted
by applicable law and Rule 16b-3, the Committee may (i) permit a recipient
of a Nonqualified Stock Option to designate in writing during the
participant's lifetime a beneficiary to receive and exercise the
participant's Nonqualified Stock Options in the event of such
participant's death (as provided in Section 5(f)), (ii) grant Nonqualified
Stock Options that are transferable to the immediate family or a family
trust of the recipient, and (iii) modify existing Nonqualified Stock
Options to be transferable to the immediate family or a family trust of
the recipient. Any other attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any option under the Plan or of any right or
privilege conferred thereby, contrary to the provisions of the Plan shall
be null and void.
9. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN. The Board of
Directors or the Committee may at any time suspend or terminate the Plan
and may amend it from time to time in such respects as the Board of
Directors or the Committee may deem advisable in order that options and
rights granted hereunder shall conform to any change in the law, or in any
other respect which the Board of Directors or the Committee may deem to be
in the best interests of the Company; provided, however, that no such
amendment shall, without the participant's consent, alter or impair any of
the rights or obligations under any option or stock appreciation rights
theretofore granted to him under the plan; and provided further that no
such amendment shall, without shareholder approval: (a) increase the total
number of shares available for grants of options or rights under the Plan
(except as provided by Section 7 hereof); or (b) effect any change to the
Plan which is required to be approved by shareholder by law, including,
without limitation, the regulations promulgated under Section 422 and
Section 162(m) of the Code. In addition, the provisions of Section 5(g)
relating to the amount, price and timing of grants to members of the
Committee shall not be amended more than once every six (6) months other
than to comport with applicable changes to the Code, the Employee
Retirement Income Security Act or rules thereunder.
10. EFFECTIVE DATE. The effective date of the Plan shall be
December 31, 1987, provided, however, that the effective date of the Plan
as it relates to Incentive Stock Options shall be January 28, 1994 and no
Incentive Stock Option may be granted hereunder before January 28, 1994.
If the January 28, 1994 amendment to and restatement of the Plan is not
approved by the affirmative vote of a majority of the Company's
shareholders on or before January 28, 1995, then the Plan shall remain in
effect as it was last amended on June 14, 1990. The failure of the
shareholders to approve such amendment and restatement of the Plan shall
not, however, affect the validity, duration or any other terms and
conditions of options or rights granted prior to January 28, 1994, and
shall affect the terms and conditions of options or rights granted after
that date only to the extent required by law.
11. TERMINATION DATE. Unless this Plan shall have been previously
terminated by the Committee, this Plan shall terminate on January 28,
2004, except as to options and rights theretofore granted and outstanding
under the Plan at that date, and no stock option or stock appreciation
rights shall be granted after that date.
12. RESALE OF SHARES PURCHASED. All shares of stock purchased under
this Plan may be freely resold, subject to applicable state and federal
securities laws restricting their transfer. As a condition to exercise of
an option, the Company may impose various conditions, including a
requirement that the person exercising such option represent and warrant
that, at the time of such exercise, the shares of Common Stock being
purchased are being purchased for investment and not with a view to resale
or distribution thereof. The resale of shares purchased upon the exercise
of Incentive Stock Options may, however, cause the employee to lose
certain tax benefits if the employee fails to comply with the holding
period requirements described in Section 5(e) hereof.
13. ACCELERATION OF OPTIONS. If the Company or its shareholders
enter into an agreement to dispose of all or substantially all of the
assets or stock of the Company by means of a sale, merger or other
reorganization, liquidation, or otherwise, any option granted pursuant to
the Plan shall become immediately exercisable with respect to the full
number of shares subject to that option during the period commencing as of
the date of the agreement to dispose of all or substantially all of the
assets or stock of the Company and ending when the disposition of assets
or stock contemplated by that agreement is consummated or the option is
otherwise terminated in accordance with its provisions or the provisions
of the Plan, whichever occurs first; provided that no option shall be
immediately exercisable under this Section on account of any agreement of
merger or other reorganization where the shareholders of the Company
immediately before the consummation of the transaction will own 50% or
more of the total combined voting power of all classes of stock entitled
to vote of the surviving entity (whether the Company or some other entity)
immediately after the consummation of the transaction. In the event the
transaction contemplated by the agreement referred to in this section is
not consummated, but rather is terminated, canceled or expires, the
options granted pursuant to the Plan shall thereafter be treated as if
that agreement had never been entered into.
14. WRITTEN NOTICE REQUIRED; TAX WITHHOLDING. Any option or right
granted pursuant to the Plan shall be exercised when written notice of
that exercise by the participant has been received by the Company at its
principal office and, with respect to options, when such notice is
received and full payment for the shares with respect to which the option
is exercised has been received by the Company. Participant agrees that,
to the extent required by law, the Company shall withhold or require the
payment by participant of any state, federal or local taxes resulting from
the exercise of an option or right, provided however that to the extent
permitted by law, the Committee may in its discretion, permit some or all
of such withholding obligation to be satisfied by the delivery by the
participant of, or the retention by the Company of, shares of its Common
Stock.
15. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be issued
with respect to any option or right granted under the Plan unless the
exercise of that option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state and
federal law, including without limitation the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder and the
requirements of any stock exchange or automated quotation system upon
which the shares may then be listed or traded, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. Further, each participant must consent to the imposition of a
legend on the certificate representing the shares of Common Stock issued
upon the exercise of the option or right restricting their transferability
as may be required by law, the option, or the Plan.
16. WAIVER OF VESTING RESTRICTIONS BY COMMITTEE. Notwithstanding
any provision of the Plan, in the event a participant dies, becomes
disabled, retires as an employee, officer or director of, or as an advisor
or consultant to, the Company, the Committee shall have the discretion to
waive any vesting restrictions on the retiree's options, or the early
termination of any Nonqualified Stock Options held by the retiree.
17. REPORTS TO PARTICIPANTS. The Company shall furnish to each
participant a copy of the annual report sent to the Company's
shareholders. Upon written request, the Company shall furnish to each
participant a copy of its most recent annual report and each quarterly
report to shareholders issued since the end of the Company's most recent
fiscal year.
18. NO EMPLOYEE CONTRACT. The grant of an option or right under the
Plan shall not confer upon any participant any right with respect to
continuation of employment by, or the rendition of advisory or consulting
services to, the Company, nor shall it interfere in any way with the
Company's right to terminate the participant's employment or services at
any time.
Adopted by the Board of Directors of the Company on January 29, 1994 and
approved by the Company's Shareholders on June 20, 1994. Adopted as
amended and restated by the Compensation Committee on February 23, 1996
and approved by the Company's Shareholders on June 26, 1996. Adopted as
amended and restated by the Compensation Committee on January 24, 1997 and
proposed to approved by the Company's Shareholders on June 20, 1997.
DAVID G. SHERMAN, JOSEPH H. KISER,
President Chairman of the Board
and Secretary
APPENDICES
VARI-L COMPANY, INC.
STOCK GRANT PLAN
June 16, 1995
As amended January 24, 1997]
Section 1. PURPOSE. The purpose of the Stock Grant Plan (the
"Plan") is to provide incentives for selected persons to promote the
financial success and progress of Vari-L Company, Inc. (the "Company")
through the award of shares of the Company's $.01 par value Common Stock
("Awards").
Section 2. GENERAL PROVISIONS OF THE PLAN.
a. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall be comprised of two or more independent outside directors
designated by the Board of Directors. Notwithstanding the foregoing, if
it would be consistent with all applicable laws, including, without
limitation, Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"), then the Plan may be administered by the
Board of Directors, and if so administered all subsequent references to
the Committee shall be read as referring to the Board of Directors. Any
action of the Committee with respect to the Plan shall be taken by
majority vote or by the unanimous written consent of the Committee
members.
b. The Committee shall have full power to construe, interpret
and administer the Plan and to establish, amend and rescind rules and
regulations for its administration, and to make all other determinations
and take all other actions which it deems necessary or advisable for the
administration of the plan.
c. The Committee shall determine, in its sole discretion,
which participants under the Plan shall be granted Awards, the time or
times at which Awards are granted, and the number of shares in each Award.
d. The Committee shall also determine any other terms and
conditions relating to Awards granted under the Plan as the Committee may
prescribe, in its sole discretion.
e. The Committee may, in its discretion, delegate its
administrative duties with respect to the Plan to an officer of employees,
or to a committee composed of officers or employees, of the Company.
f. All decisions, determinations and interpretations made by
the Committee shall be binding and conclusive on all participants in the
Plan and on their legal representative, heirs and beneficiaries.
g. Notwithstanding anything to the contrary herein, the
Committee shall have no authority to determine the amount, price or timing
of Awards hereunder to members of the Committee, unless, and only to the
extent that, its exercise of such authority is consistent with all
applicable laws, including, without limitation, Rule 16b-3.
Section 3. ELIGIBILITY. Subject to the terms of the Plan, Awards
may be granted only to such officers, directors, employees, consultants,
advisors, and independent contractors providing bona fide services to the
Company, as the Committee shall select from time to time in its sole
discretion provided that, with respect to consultants, advisors and
independent contractors such services may not be in connection with the
offer or sale of securities in a capital-raising transaction. A person
may be granted more than one Award under this Plan.
Section 4. NUMBER OF SHARES SUBJECT TO PLAN. The maximum
aggregate number of shares of the Company's Common Stock which may be
granted to participants shall be 100,000, subject to adjustment as
provided in this Plan. These shares may consist of shares of the
Company's authorized but unissued Common Stock or shares of the Company's
authorized and issued Common Stock reacquired by the Company and held in
its treasury, or any combination thereof.
Section 5. GRANTS OF AWARDS. The Committee may impose such
conditions on Awards granted under the Plan as it may, in its discretion,
determine. The terms and conditions of Awards granted under the Plan may
differ from one another as the Committee shall in its discretion determine
so long as all Awards granted under the Plan satisfy the requirements of
the Plan. No grant will be made if, in the judgment of the Committee,
such a grant would constitute a public distribution within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), or the
rules and relations promulgated thereunder, or corresponding state
securities laws.
Section 6. AUTOMATIC GRANTS TO COMMITTEE MEMBERS. Except as
provided in Section 2(g) hereof, no action may be taken by the Committee
to grant any Awards to members of the Committee. Notwithstanding the
foregoing and irrespective of any action by the Committee, each member of
the Committee shall receive an automatic grant of 50 shares per month on
the first day of each month, beginning with the first full month after
original approval of the Plan by the Company's Shareholders.
Section 7. TAX WITHHOLDING. The grant of any Award is subject to
the condition that if at any time the Company shall determine, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such grant, exercise or the delivery
or purchase of shares pursuant thereto, then in such event, the grant of
the Award shall not be effective unless such withholding shall have been
effected or obtained in a manner acceptable to the Company.
Section 8. DELIVERY OF AWARD STOCK. As promptly as practicable
after the Committee has authorized the grant of an Award, and the
recipient of the Award has satisfied the conditions, if any, specified by
the grant of the Award, a certificate or certificates registered in that
person's name, representing the number and shares of Common Stock that
were granted shall be issued and delivered. Shares shall not be issued
with respect to any Award granted under the Plan unless the grant of that
Award and the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including
without limitation the Securities Act, the rules and regulations
promulgated thereunder and the requirements of any stock exchange or
quotation system upon which the shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with
respect to such compliance. Further, each recipient of an Award shall
consent to the imposition of a legend on the certificate representing the
shares of Common Stock issued upon the grant of the Award restricting
their transferability as required by law, the Award, or by the Plan.
Section 9. EMPLOYMENT OF RECIPIENT. Nothing in the Plan or in
any Award granted hereunder shall confer upon any recipient of an Award
any right to continued employment or retainer by the Company, or limit in
any way the right of the Company at any time to terminate or alter the
terms of any employment or consulting arrangement.
Section 10. RIGHTS UPON TERMINATION OF EMPLOYMENT, CONSULTANT,
ADVISOR OR INDEPENDENT CONTRACTOR STATUS. If the recipient of an Award
ceases to be employed by the Company or ceases to serve as a consultant,
advisor or independent contractor of the Company, or otherwise ceases to
provide bona fide services as specified in the eligibility requirements
set forth in Section 3, any portion of his Award for which the conditions
specified in the grant of the Award have not been satisfied shall
immediately terminate.
Section 11. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the
authorization of an Award granted pursuant to the terms of the Plan, no
person shall have any of the rights or privileges of a shareholder of the
Company in respect of any shares of stock issuable upon the grant of an
Award until certificates representing the shares have been issued and
delivered. No shares shall be required to be issued and delivered upon
the authorization of any Award until there has been full compliance with
all of the conditions of the Award, the requirements of law and of all
regulatory agencies having jurisdiction over the issuance and delivery of
the securities.
Section 12. CAPITAL ADJUSTMENTS. If the outstanding shares of
Common Stock are increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split, an appropriate and proportionate adjustment shall be made in
the maximum number and kind of shares as to which Awards may be granted
under the Plan.
Section 13. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN. The
Board of Directors or the Committee may at any time suspend or terminate
the Plan and may amend it from time to time in such respects as the Board
of Directors or the Committee may deem advisable in order that the rights
granted hereunder shall conform to any change in the law, or in any other
respect which the Board of Directors or the Committee may deem to be in
the best interests of the Company; provided, however, that no such
amendment shall, without the participant's consent, alter or impair any of
the rights or obligations under any Award rights theretofore granted to
him under the plan; and provided further that no such amendment shall,
without shareholder approval: (a) increase the total number of shares
available for Awards under the Plan (except as provided by Section 12
hereof); (b) effect any change to the Plan which is required to be
approved by the Company's Shareholders by law, including, without
limitation, the Internal Revenue Code of 1986, as amended.
Section 14. WAIVER OF CONDITIONS. Notwithstanding any provision
of the Plan, in the event a participant dies, becomes disabled, retires as
an employee, officer or director of, or as an advisor, consultant or
independent contractor to, the Company, the Committee shall have the
discretion to waive any conditions in the retiree's Award.
Section 15. EFFECTIVE DATE. The effective date of the Plan is
June 16, 1995 (the "Effective Date").
Section 16. TERMINATION DATE. Unless the Plan shall have been
previously terminated by the Committee, it shall terminate on June 15,
2005, except as to any Awards that are outstanding under the Plan at that
time and no Awards shall be granted after that time.
Adopted by the Board of Directors on June 16, 1995 and approved by
the Company's Shareholders on June 26, 1996. Amended by the Compensation
Committee of the Board of Directors of the Company on January 24, 1997
with amendments to be approved by the Company's Shareholders on the
Company on June 20, 1997
DAVID G. SHERMAN, JOSEPH H. KISER,
President Chairman of the Board
and Secretary
