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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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 Tandem 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 30, 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 30, 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
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. She
remains as a consultant to the Foundation. After that date she became
Vice President of PMA Associates of the Genesee Valley, Inc., a nonprofit
strategic planning corporation. 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 is the President of the Denver Wholesale
Florist Company, a national wholesale florist, for which he has been the
General Manager and Chief Executive Officer 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 June 1996. He began working for
the Company in May 1994 as the Controller, which position he held until
his promotion to Vice President in June 1996. 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 January 1991. 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 dates of grant of the Old Options on June 14, 1995 and January 1,
1996, respectively. The Old Options did 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 it 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 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 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 and phase locked loop synthesizers.
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 prohibits 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 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 22, 1997
was $22,500,000.
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 22, 1997, the Company had approximately 202 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 (2 persons)(7) -0- 585,000
Non-Executive Officer Employee
Group (195 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.
(7) Includes Messrs. Kiser and Sherman.
</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 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 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 22, 1997 was $750,000.
ELIGIBLE EMPLOYEES AND OTHERS
Awards may be granted to those officers, directors, employees,
consultants, advisors, and independent contractors of the Company that are
selected by the Committee. The Committee's discretion in making stock
grants to its members is limited. See "Grants to Committee Members"
below.
As of April 22, 1997, the Company has approximately 202 employees and
other persons eligible to receive grants under the Stock Plan.
GRANTS TO COMMITTEE MEMBERS
Each Committee member is entitled to receive an automatic grant of 50
shares per month on the first day of each month. Upon approval of the
proposed amendments, the Committee would have discretion in making stock
grants to members of the Committee only to the extent permitted by
applicable law. Stock certificates issued to Committee members bear a
legend stating that the stock must be held for a minimum of six (6) months
prior to sale by the Committee member.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts received
or to be received by or allocated to each of the named persons or groups
under the Stock Plan. The Committee determines the number of stock grants
which may be granted to officers, directors, employees, consultants,
advisors and independent contractors under the Stock Plan. Because such
number, if any, is entirely in the discretion of the Committee, the future
benefits or amounts to be received by or allocated to such persons are not
determinable, except for automatic grants to Committee members. See
"Grants to Committee Members" above.
<TABLE>
<CAPTION>
STOCK GRANT PLAN
Dollar Number of
Name and Position Value ($) 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 (195 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 awards 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 ratification and 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 1998
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 31, 1997, in order to be included in
the Company's proxy statement and proxy relating to that meeting.
Denver, Colorado JOSEPH H. KISER
April 30, 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 TANDEM 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.
