SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VARI-L COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
-------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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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:
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3) Filing Party:
4) Date Filed:
<PAGE>
VARI-L COMPANY, INC.
4895 Peoria Street
Denver, Colorado 80239
(303) 371-1560
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1999
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 18, 1999 at
9:00 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 five (5) 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, 1999;
3. The approval of an amendment to the Company's Tandem Stock
Option and Stock Appreciation Rights Plan to increase the number of shares
reserved under the Plan; and
4. 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 Wednesday, April 21, 1999, 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
May 10, 1999 CHAIRMAN OF THE BOARD AND SECRETARY
VARI-L COMPANY, INC.
4895 Peoria Street
Denver, Colorado 80239
(303) 371-1560
----------------------------------
PROXY STATEMENT
----------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1999
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 18, 1999, at 9:00 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 May 10, 1999.
Any person signing and returning the enclosed Proxy may revoke it at
any time before it is voted by giving a later dated written revocation of
Proxy to the Company, providing a later dated amended Proxy to the
Company, or 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 Wednesday, April 21,
1999, are entitled to notice of and to vote at the Meeting or any
adjournment thereof. On April 21, 1999, the Company had 5,495,358 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 21, 1999, 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 Percent
Name of Beneficial Owner Ownership of Class
- ------------------------ ----------------- --------
<S> <C> <C>
Joseph H. Kiser(1) 789,543 13.6%
4895 Peoria Street
Denver, Colorado 80239
David G. Sherman(2) 487,230 8.3%
4895 Peoria Street
Denver, Colorado 80239
Sarah L. Booher(3) 58,533 1.1%
4492 South Livonia Road
Livonia, New York 14487
David A. Lisowski(4) 16,700 *
4800 Dahlia
Denver, Colorado 80216
Anthony B. Petrelli(5) 10,000 *
5680 S. Bellaire Ct.
Greenwood Village, Colorado 80121
Daniel J. Wilmot(6) 92,290 1.7%
4895 Peoria Street
Denver, Colorado 80239
Derek L. Bailey(7) 74,290 1.3%
4895 Peoria Street
Denver, Colorado 80239
Jon L. Clark(8) 53,296 1.0%
4895 Peoria Street
Denver, Colorado 80239
Dimensional Fund Advisors Inc. 394,200 7.2%
1299 Ocean View Avenue, 11th Floor
Santa Monica, California 90401
All Directors and Executive 1,571,832 24.3%
Officers as a Group(9)
(8 Persons)
</TABLE>
- --------------------------
(1) Includes 247,863 shares beneficially owned by Mr. Kiser as the result
of certain trust arrangements. Also includes options to purchase
325,000 shares.
(2) Includes options to purchase 410,000 shares.
(3) Includes 19,920 shares held by Ms. Booher pursuant to trust
arrangements. Also includes options to purchase 22,000 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 15,000 shares.
(5) Includes options to purchase 5,000 shares.
(6) Consists of options to purchase 92,290 shares.
(7) Consists of options to purchase 74,290 shares.
(8) Includes options to purchase 34,366 shares.
(9) Includes options to purchase 977,946 shares.
*Less than one percent.
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the
five (5) nominees listed below. The Board's recommendation as nominees
includes all of the Directors elected at the last annual meeting of
Shareholders. The five 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 61 Chairman, Chief Since 1965
Scientific Officer,
Secretary and Director
David G. Sherman 54 President, Chief Since 1991
Executive Officer
and Director
Sarah L. Booher 57 Director Since 1994
David A. Lisowski 46 Director Since 1996
Anthony B. Petrelli 46 Director Since 1997
</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 David A. Lisowski. 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. During the
last fiscal year the Committee was composed of two of the outside
directors, Sarah L. Booher and David A. Lisowski until June 18, 1998, when
Anthony B. Petrelli replaced Ms. Booher on the Committee. The Committee
held two meetings during the last calendar year and one other meeting was
conducted by unanimous written consent of the members of the Committee.
The Board of Directors met in person five times during the last
calendar year and one other meeting was conducted by unanimous written
consent of the Directors. There are 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 61, 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 40 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 is also primarily responsible
for the Company's rapidly expanding and highly successfully commercial
product line. 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 54, was elected as President and
Chief Executive Officer in June 1992, and has been a Director of the
Company since 1991. Mr. Sherman has 30 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 six years, Mr. Sherman has led the Company through a series of
successful private and public stock offerings, new bank financings, a
highly successful expansion into the commercial marketplace and the
equally successful development of international markets for both
commercial and military products. Prior to his employment with the
Company, Mr. Sherman's employment included executive and managerial
positions with Mincomp Corporation, Englewood, Colorado, Linc Drilling,
Denver, Colorado, 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 57, was appointed as a Director of
the Company on January 18, 1994. She has been a managing partner of Good
Earth Farm, a horse breeding farm, since 1992. 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 remained as a consultant to the Foundation until
August 30, 1997. After September 1, 1996, she became Vice President of
PMA Associates of Genesee Valley, Inc., a nonprofit strategic planning
corporation in Livonia, New York, where she remains as a consultant and
Secretary/Treasurer. She has also been a fund raising consultant for the
Cordelia A. Greene Library in Castile, New York, and the Hope Hall School
of Rochester, New York since 1998. During 1996 and 1997, Ms. Booher
served as President of the Genesee Valley New York Chapter of the National
Society of Fundraising Executives, a nonprofit organization, where she
also served on the Board of Directors from 1986 to 1997. 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 46, was elected as a Director
on June 26, 1996. Mr. Lisowski is the President and a Director 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.
ANTHONY B. PETRELLI. Mr. Petrelli, age 46, was elected as a Director
on October 17, 1997. Mr. Petrelli has served as Senior Vice President of
Investment Banking Services at Neidiger, Tucker, Bruner, Inc, an
investment banking firm and registered broker-dealer in Denver, Colorado,
since May of 1987. He also serves as a Director of Guardian Acceptance
Corp., a consumer finance company in Denver, Colorado, for which he served
as President from September 1996 until December 1997. Mr. Petrelli
received a BS degree in Business in 1974 and an MBA in 1979 from the
University of Colorado.
DANIEL J. WILMOT. Mr. Wilmot, age 34, 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 34, was elected Vice President of
Sales and Marketing 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 and other products. 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 52, was elected Vice President of
Finance and Treasurer of the Company in June 1996. In March 1998 Mr.
Clark was appointed as the Company's Chief Financial Officer. 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, 1998, 1997 and 1996 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 1998 $295,000 $75,000 $103,070(1)
Chairman of the 1997 278,547 50,000 93,663(3)
Board, Chief 1996 232,284 50,000 63,126(4)
Scientific Officer
David G. Sherman
President and CEO 1998 $195,000 $75,000 $88,031(6)
1997 183,746 50,000 57,192(7)
1996 139,992 50,000(8) 50,910(9)
Daniel J. Wilmot
Vice President of
Engineering 1992 $114,712 $37,000 $24,578(10)
1997 93,462 25,025 5,617(11)
1996 79,904 20,000 5,201(12)
Derek L. Bailey
Vice President
Sales and
Marketing 1998 $114,712 $37,000 $23,851(14)
1997 93,462 21,879 14,151(15)
1996 83,481 20,000 5,201(16)
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
Awards
Securities
Restricted Underlying
Stock Options/
Award(s) ($) SARs (#)
<S> <C> <C>
Joseph H. Kiser
Chairman of the $139,747(2) 100,000
Board, Chief 139,747 100,000
Scientific Officer -0- 150,000(5)
David G. Sherman
President and CEO $139,747(2) 100,000
139,747 100,000
-0- 200,000(5)
Daniel J. Wilmot
Vice President of -0- 47,700
Engineering -0- 25,000
-0- 45,000(13)
Derek L. Bailey
Vice President -0- 86,450
Sales and -0- 35,000
Marketing -0- 40,000(17)
</TABLE>
(1) Includes payment of $31,600 for accrued vacation earned but not
taken; an IRA contribution of $2,000; an automobile benefit of
$1,967; and a tax reimbursement of $67,503.
(2) Does not include 6,250 shares valued at $139,747 earned in 1997 but
not issued until 1998. See "Employment Agreements."
(3) Includes payment of $42,754 for accrued vacation earned but not
taken; an IRA contribution of $2,000; an automobile benefit of
$1,550; and a tax reimbursement of $47,359.
(4) Includes payment of $13,308 for accrued vacation earned but not
taken; an IRA contribution of $2,000; an automobile expense
reimbursement of $1,550; and a tax reimbursement of $46,268.
(5) Includes 100,000 options granted in June 1995 and repriced in October
1996.
(6) Includes an IRA contribution of $2,000; an automobile benefit of
$1,368; a tax reimbursement of $66,301; and a retroactive pay
increase from June 1, 1997 paid in 1998 of $18,362.
(7) Includes a deferred IRA contribution of $2,000; an automobile benefit
of $1,270; and a tax reimbursement of $53,922.
(8) Payment of Mr. Sherman's 1996 bonus was deferred until fiscal 1997.
(9) Includes an IRA contribution of $2,000; an automobile benefit of
$1,270; and a tax reimbursement of $47,640.
(10) Includes payment of $2,212 for accrued vacation earned but not taken;
an IRA contribution of $2,000; an automobile benefit of $1,270; and a
tax reimbursement of $19,096.
(11) Includes an IRA contribution of $2,000; an automobile benefit of
$1,270; and a tax reimbursement of $2,347.
(12) Includes an IRA contribution of $2,000; an automobile benefit of
$1,270; and a tax reimbursement of $1,931.
(13) Includes 20,000 options granted in June 1995 and repriced in October
1996.
(14) Includes an IRA contribution of $2,000; an automobile benefit of
$1,270; and a tax reimbursement of $20,581.
(15) Includes an IRA contribution of $2,000; an automobile benefit of
$1,270; and a tax reimbursement of $10,881.
(16) Includes an IRA contribution of $2,000; an automobile expense
reimbursement of $1,270; and a tax reimbursement of $1,931.
(17) Includes 15,000 options granted in October 1995 and repriced in
October 1996.
Option/SAR Grants in Last Fiscal Year
The following table sets forth the information concerning individual
grants of stock options and appreciation rights during the last fiscal
year to each of the named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
Number of Percent of
Securities Total Options/ Exercise
Underlying SARS Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
<S> <C> <C> <C> <C>
Joseph H. Kiser 100,000(1) 12% $9.42 3-26-08
David G. Sherman 100,000(2) 12% $9.42 3-26-08
Daniel J. Wilmot 27,700(3) 6% $8.49 1-22-08
20,000(1) $6.19 9-30-99
Derek L. Bailey 66,450(4) 10% $8.49 1-22-08
20,000(1) $6.19 9-30-99
</TABLE>
(1) Of this grant, all were nonqualified stock options.
(2) Of this grant, 89,452 were nonqualified stock options and 10,548 were
incentive stock options.
(3) Of this grant, 24,668 were nonqualified stock options and 3,032 were
incentive stock options.
(4) Of this grant, 62,446 were nonqualified stock options and 4,004 were
incentive stock options.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year End Option/SAR Values
The following table sets forth information concerning each exercise
of stock options during the last fiscal year by each of the named
Executive Officers and the fiscal year end value of unexercised options:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs Options/SARs
on Value at Fiscal at Fiscal
Exercise(#) Realized Year-End(#) Year-End($)(1)
Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C> <C> <C> <C>
J.H. Kiser -0- $0 275,000/75,000 $0/0
D.G. Sherman -0- $0 360,000/75,000 $187,355/$0
D.J. Wilmot -0- $0 52,750/90,700 $137,840/$0
D.L. Bailey -0- $0 26,000/135,450 $0/$0
</TABLE>
- ----------------------
(1) Based on the fair market value of the Common Stock on December 31,
1998 of $7.563, being the closing price as quoted on the Nasdaq
National Market.
Directors' Compensation
- -----------------------
The Company currently has an arrangement whereby each outside
Director receives $1,000 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, outside Directors, on the date of each meeting
of the Board of Directors, a committee thereof or a meeting with
management of the Company or other Directors for Company business or
affairs, attended in person (including lengthy meetings held by telephonic
conference) by such Director, receive a grant of ten-year, fully vested
options to purchase 500 shares of Common Stock.
Outside Directors also receive a grant of 50 shares each of Common
Stock per month from the Company's Stock Grant Plan.
Employment Agreements
- ---------------------
In April of 1998, the Company executed new employment agreements with
Joseph H. Kiser and David G. Sherman (the "Senior Officers") for an
initial term of four years commencing June 1, 1997. On each June 1
beginning in 1998, the agreements provide that they are automatically
extended for an additional year unless the Company or the Senior Officer
gives notice of non-extension more than sixty (60) days before May 31 of
such year. Because no such notice was given in 1999 for Messrs. Kiser and
Sherman, their agreements currently expire in 2003. Pursuant to the
agreements, the minimum base salaries for Messrs. Kiser and Sherman are
$295,000 and $195,000, respectively. The agreements also provide for
quarterly and/or year-end bonuses payable in cash or shares of the
Company's stock which are to be set each year by the Company's
Compensation Committee on the basis of merit and the Company's financial
success and progress in the prior fiscal year. In addition, each of the
agreements provide for a bonus of 25,000 shares of the Company's stock,
50% of which, or 12,500 shares, was granted upon execution of the
agreement, 25% or 6,250 shares was vested on March 12, 1999 and the
remaining 25%, or 6,250 shares, will vest on April 15, 2000 if the Senior
Officer achieves certain performance goals established by the Company's
Compensation Committee. The Committee determined that vesting of the
first 12,500 shares was reasonable and appropriate under the circumstances
in light of the record financial performance of the Company in fiscal 1996
and 1997 but vesting of the remaining 12,500 shares was deferred pending
future performance of the Company and the Senior Officers. The Committee
determined on March 12, 1999 that the performance goals of the Company for
1998 had been met and therefore determined to vest 6,250 shares on that
date. The agreements provide that all income and other taxes attributable
to the stock bonuses will be paid by the Company upon vesting. All
unvested stock bonuses and options and stock appreciation rights
previously granted to the Senior Officers will fully vest in the event of
a change of control or an involuntary termination. However, all or a
portion of the stock bonuses are subject to forfeiture if a Senior Officer
violates the non-compete clause in his agreement.
The agreements further provide for severance pay equal to the greater
of the Senior Officer's annual base salary multiplied by the remaining
term of the agreement or 2.99 times the Senior Officer's average annual
compensation over the last five years in the event of involuntary
termination of employment by the Company. In the case of a voluntary
retirement from employment or mandatory retirement from employment
pursuant to a retirement plan to which the Senior Officer was subject
prior to a change in control, he would be entitled to one-half of his
annual base salary as severance pay. In the case of an involuntary
termination after a change of control of the Company, the severance pay is
payable immediately. If an involuntary termination does not occur after a
change of control, severance pay is payable over a three-year period. In
the case of a voluntary termination, severance pay is payable over a six-
month period, provided, however, that if the Senior Officer provides
consulting services to the Company pursuant to the agreement, the
severance amount will be based upon his annual base salary at the time of
termination of employment but will not be payable to him until after
termination of the consulting services. In the event of voluntary
termination or retirement, the Company agrees to engage the Senior Officer
as a consultant to the Company for a period of up to five years for which
he will be paid a fee equal to 50% of his annual base salary on the date
of termination of employment. For each year or part thereof that the
Senior Officer provides consulting services to the Company, he will
receive a retirement benefit of 25% of his annual base salary at the time
of his voluntary termination or retirement for the same amount of time,
which retirement benefit will be paid to the Senior Officer in accordance
with the Company's existing payroll policies over a period of time equal
to the number of years or parts thereof that he provides consulting
services. 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 financial obligations to a former officer of the Company which
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
a Senior Officer's death will be reduced by the amount of proceeds paid to
his estate from life insurance policies purchased by the Company for such
purpose. In addition, the Company will utilize a portion of the proceeds
of the key man life insurance owned by the Company to purchase the shares
of the Company's stock beneficially owned by a Senior Officer or his
spouse at the time of death and all shares obtainable through the exercise
of stock options owned by a Senior Officer (up to a maximum of 750,000
shares) at fair market value at the time of his death. In the event a
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, a Senior Officer will
receive disability benefits under the Company's standard employee
disability insurance policy as well as the supplemental disability policy
obtained by the Company for him.
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 amount, consulting arrangement or
retirement benefit, whichever is greater, they will not, directly or
indirectly, own, manage, operate, control, provide services to, be
employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business which is
similar to the type of business conducted by the Company and which
conducts such business or sells its products within and to the same market
as the Company's market at the time of the termination or expiration of
the agreement. 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.
In 1997, the Company entered into employment agreements with Daniel
J. Wilmot, Derek L. Bailey and Jon L. Clark (the "Officers") for a term of
three years commencing January 1, 1997. In January 1999, the agreements
were amended to provide that they are automatically extended for an
additional year on December 31, 1999, and each succeeding anniversary of
that date unless the Company or the Officer gives notice of non-extension
more than thirty (30) days before December 31 of such year. Pursuant to
the agreements, the minimum base salaries for the Officers range from
$75,000 to $90,000. The agreements also provide for year-end bonuses as
determined at the beginning of each fiscal year of the Company by the
Board of Directors based on the basis of merit and the Company's financial
success and progress. The agreements provide for severance pay equal to
the then annual base salary for periods ranging from six months to one
year in the event of involuntary termination. In the case of involuntary
termination or a change of control, the severance is payable immediately
upon termination. If involuntary termination does not occur after a
change of control, the severance is payable on regular bi-weekly payroll
dates for the applicable period.
In the event of the death of an Officer, the Company is obligated to
pay to the Officer's estate an amount equal to the then annual base salary
for one year. The amount otherwise payable upon their death would 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 that the
Officer becomes disabled during the term of his employment, the Company
may, at its option, terminate such person's employment and such person
would thereafter be eligible to receive disability under the Company's
standard employee disability insurance policy like any other employee.
The Officers have agreed that, for a period of one year after
termination of employment, they will not, directly or indirectly, own,
manage, operate, control, be employed by, participate in, or be connected
in any manner with the ownership, management, operation, or control of any
business which is similar to the type of business conducted by the Company
and which conducts such business or sells its products within and to the
same market as the Company's market at the time of the termination or the
expiration of the agreement. The Officers have also consented to the
Company's purchase of key man life insurance on each of their lives,
naming the Company as beneficiary.
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:
1999 $168,957
2000 168,957
2001 168,957
2002 159,565
2003 129,615
--------
$796,051
========
Rent expense on these leases was $127,287 for 1998 and $118,953 for
1997. 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.
In 1992, the Company entered into a settlement 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. 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. Ms. Kiser received payments totalling
$15,868 from the Company pursuant to the settlement agreement between
December 31, 1997 and June 30, 1998. A portion of those payments was paid
in the form of rental payments on residential properties owned by Ms.
Kiser in Colorado and Mexico. The rental payments totalled $8,595 in 1998
and $25,290 for 1997. The payments in 1998 completed the remaining rental
payments.
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.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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, 1998. Although ratification of the appointment of
Haugen for the fiscal year ending December 31, 1999 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, 1999. 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, 1999. 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, 1999.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE STOCK OPTION PLAN
The Tandem Stock Option and Stock Appreciation Rights Plan (the
"Plan") was adopted by the Company in 1987 in order to grant stock options
and stock appreciation rights to officers, directors, employees, advisors
and consultants of the Company. On April 2, 1999, the Compensation
Committee (the "Committee") approved an amendment to the Plan to increase
the number of shares reserved under the Plan. The Company's Board of
Directors and its Compensation Committee (presently consisting of David A.
Lisowski and Anthony B. Petrelli, both of whom are outside Directors)
believe that an increase in the number of options available for grant is
important to provide flexibility to the Committee in its administration of
the Plan, to encourage stock ownership by employees and management, to
permit the Company to attract and retain officers, directors, key
employees, advisors and consultants, and to continue to provide incentives
and promote the financial success and progress of the Company. In
addition, the grant of stock options can be made without the expenditure
of the Company's limited cash or other liquid resources, which are being
preserved for the Company's expanded marketing efforts and its continuous
research and development programs to stay competitive in a rapidly
changing technological environment. Accordingly, the Shareholders are
being asked to increase the number of shares reserved under the Plan from
3,000,000 to 3,270,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE STOCK OPTION 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 equaling 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 and the approval of the amendment to the Tandem
Plan, of the shares represented in person or by proxy at the meeting and
entitled to vote, the votes cast favoring the ratification and approving
the amendment 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, the ratification of the auditors and the amendment to the
Tandem Plan will be counted as votes in favor or affirmative votes.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31,
1998 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, 1998 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.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the
common stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the exchange on
which the common stock is listed for trading. Those persons are required
by regulations promulgated under the Exchange Act to furnish the Company
with copies of all reports filed pursuant to Section 16(a). The Company
is not aware of any untimely filed reports for 1998.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN JUNE 2000
Any proposal from a Shareholder intended to be presented at the
Company's annual meeting of Shareholders to be held in June 2000, must be
received at the offices of the Company, 4895 Peoria Street, Denver,
Colorado 80239 no later than January 10, 2000, in order to be included in
the Company's proxy statement and proxy relating to that meeting.
Denver, Colorado JOSEPH H. KISER
May 10, 1999 CHAIRMAN OF THE BOARD
AND SECRETARY
<PAGE>
APPENDIX
PROXY CARD
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
21, 1999, at the Annual Meeting of Shareholders to be held on June 18,
1999 or any adjournment thereof.
1. ELECTION OF FIVE 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
Anthony B. Petrelli
(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, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S TANDEM STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED UNDER THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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 AND 3. 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: ----------------, 1999
------------------------------
------------------------------
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.
APPENDIX
VARI-L COMPANY, INC.
TANDEM STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
TABLE OF CONTENTS
1. Purpose 1
2. General Provisions. 1
3. Eligibility 2
4. Number of Shares Subject to Plan 2
5. Stock Option. 3
6. Stock Appreciation Rights. 6
7. Capital Adjustments 7
8. Nontransferability 8
9. Amendment, Suspension, or Termination of Plan 8
10. Effective Date 8
11. Termination Date 9
12. Resale of Shares Purchased 9
13. Acceleration of Options 9
14. Written Notice Required; Tax Withholding 10
15. Compliance with Securities Laws 10
16. Waiver of Vesting Restrictions by Committee 10
17. Reports to Participants 10
18. No Employee Contract 11
TANDEM STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
AS OF APRIL 2, 1999
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 directors designated by the Board of
Directors. If and to the extent that Securities Exchange Act Rule 16b-3 or
Internal Revenue Code Section 162 are applicable to the Plan, Committee
members shall qualify as "Non-Employee Directors" within the meaning of
Securities Exchange Act Rule 16b-3 and as "outside directors" within the
meaning of Treasury Regulation Section 1.162-27(e)(3). (In the event Rule
16b-3 or Treasury Regulation 1.162.27(3)(3) is amended, modified or
repealed, the requirements for being a member of the Committee shall
reflect the then current requirements of the successor rule or regulation,
if any.) Options granted under the Plan are intended to qualify for the
"qualified performance based compensation" exception to Internal Revenue
Code Section 162(m). 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
and Treasury Regulation 1.162-27(e)(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 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: (i) Incentive Stock Options may only be granted
to employees (including officers and directors who are employees) of the
Company or its subsidiaries; and (ii) 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 3,270,000 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 or
right 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 or right ceases to be exercisable shall be available for options or
rights to be granted to the same or other participants under the Plan,
except to the extent that an option or right 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 Internal
Revenue Code of 1986, as amended (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, provided,
however that any grant of a Nonqualified Stock Option at a price less than
Fair Market Value shall not qualify for the "qualified performance based
compensation" exception to Internal Revenue Code Section 162(m).
(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.
Section 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
valuation period. If there is no established market for the Company's
Common Stock, of if there were no sales during the applicable valuation
period, the determination of Fair Market Value shall be established by the
Committee in its sole discretion considering the criteria set forth in
Treasury Regulation Section 20.2031-2 or successor regulations.
(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.
(e) 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 and of the Audit Committee (other than members who are
officers or employees of the Company) 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 minus withholding taxes, if
any. 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.
(c) 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.
(d) 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: increase the total
number of shares available for grants of options or rights under the Plan
(except as provided by Section 7 hereof); or 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.
DAVID G. SHERMAN, JOSEPH H. KISER,
President Chairman of the Board
and Secretary
