SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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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
Display Technologies, Inc.
--------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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DISPLAY TECHNOLOGIES, INC.
5029 Edgewater Drive
Orlando, Florida 32810
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
Time: 9:30 a.m. (local time), Thursday, November 18, 1999
Place: Holiday Inn Orlando North, 626 Lee Road, Orlando, Florida 32810
Agenda: To consider and act upon the following:
1. The election of the following persons to the Board of Directors:
To serve until the 2000 annual meeting of shareholders:
Gary D. Bell Lester Jacobs
Kevin L. Jackson Robert M. Smither, Jr.
To serve until the 2001 annual meeting of shareholders:
Gary J. Arnold Larry L. Johnson
Thomas N. Grant William A. Retz
To serve until the 2002 annual meeting of shareholders:
J. William Brandner Lou A. Papais
Terry J. Long J. Melvin Stewart
2. Approval of the Company's 1999 Stock Incentive Plan;
3. Ratification of the appointment of BDO Seidman LLP as independent
auditors of the Company for the 2000 fiscal year;
4 The transaction of such other business as may properly come before the
meeting and any adjournments of it.
Record Date: Holders of common stock of the Company at the close of business
on September 27, 1999 are entitled to vote.
The attached proxy statement contains more information about the agenda.
By Order of the Board of Directors
Orlando, Florida MARSHALL S. HARRIS
October 1, 1999 Secretary
WE URGE YOU TO GRANT A PROXY.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. IF YOU DECIDE TO ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
DISPLAY TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:30 A.M. NOVEMBER 18, 1999
AT THE HOLIDAY INN ORLANDO NORTH
626 LEE ROAD, ORLANDO, FLORIDA 32810
INTRODUCTION
We are furnishing this proxy statement to our shareholders in connection with
our 1999 annual meeting of shareholders.
Our Board of Directors is soliciting your proxy to vote your shares of the
Company's common stock ("Company Stock") or Series A preferred stock at the
annual meeting. These proxy materials, which have been prepared by our
management for the Board, are first being sent to our shareholders on or about
October 1, 1999.
"We," "our" and the "Company" each refers to Display Technologies, Inc. The
mailing address of our principal executive office is 5029 Edgewater Drive,
Orlando, Florida 32810.
VOTING
You are entitled to vote your Company Stock at the annual meeting if our records
show that you held your shares as of the close of business on September 27,
1999, the date our Board has selected as the record date for this meeting. At
that time, a total of 7,318,464 shares of Company Stock and 50,000 shares of
Series A preferred stock were outstanding and entitled to vote. Each share of
Company Stock has one vote. The Series A preferred stock is convertible into
Company Stock at the present conversion price of $3.50 per share. Holders of
Series A preferred stock have the right to vote with holders of Company Stock on
an "as converted" basis, i.e., each share of Series A preferred stock represents
28.57 votes. The accompanying proxy card shows the number of shares you are
entitled to vote.
Shareholders at the annual meeting will consider the election of directors and
the other items listed on the preceding page. You can vote in favor of all
nominees for director or you can withhold your vote from some or all of the
nominees. For all other proposals, you may vote for or against, or you may
abstain from voting.
You can vote in person at the annual meeting, or you can grant a proxy by
signing, dating and returning the proxy card in the postage-paid envelope
provided. Check your proxy card or the information forwarded by your bank,
broker or other holder of record for instructions. (A shareholder of record is
one whose stock is registered in the name of that shareholder.)
Your shares will be voted as you instruct. The persons named as proxies on the
proxy card will vote as recommended by our Board of Directors on any matter for
which you have not given instructions. The Board's recommendations appear on
page 3.
We are not aware of any other matters to be presented at the annual meeting
except for those described in this proxy statement. If any other matters
properly come before the annual meeting, your shares will be voted in the
discretion of the persons named as proxies on the proxy card.
If the annual meeting is adjourned, your shares will be voted when the meeting
is reconvened as well, unless you have revoked your proxy.
REVOKING YOUR PROXY
You can revoke your proxy and change your votes any time before your proxy is
voted. There are three ways to do this:
(1) Give written notice of revocation to the Secretary of the Company
prior to the annual meeting;
(2) Change your vote by granting a later-dated proxy (you can sign, date
and deliver a later-dated proxy card prior to the meeting); or
(3) Come to the annual meeting and vote your shares in person.
QUORUMS AND VOTE COUNTING
The annual meeting requires the presence of a quorum, which for this meeting
means a majority of the shares issued and outstanding at the record date. If
you grant a proxy or attend the meeting in person, your shares will be counted
to determine whether a quorum is present, even if you abstain from voting on
some or all matters introduced at the meeting. "Broker nonvotes" also count for
quorum purposes. If you hold your shares through a broker, bank or other
nominee, generally the nominee may vote the shares it holds for you in
accordance with your instructions. However, if the nominee has not received
your instructions within 10 days of the meeting, the nominee may vote in its
discretion only on matters that are considered routine. If a nominee cannot
vote on a particular matter because it is not routine, there is a "broker
nonvote" on that matter.
The 12 nominees for director who receive the highest vote totals will be elected
as directors. All other matters must be approved by a majority of the votes
cast by the holders of Company Stock who are present or represented and entitled
to vote at the annual meeting. Abstentions and broker nonvotes are counted as
present and entitled to vote, but they are not counted as votes for or against
any proposal.
2
COSTS OF PROXY SOLICITATION
We are paying the costs of the proxy solicitation. Morrow & Co. is our proxy
solicitor. We expect Morrow & Co.'s fees and expenses for its services to be
approximately $8,000. Proxy solicitation costs also will include charges of
brokers, banks, fiduciaries and custodians for forwarding proxy materials to
their principals and obtaining their proxies. Additionally, some of our
directors, officers or employees may solicit proxies by mail, telephone or
personal contact. None of these solicitors will receive any additional or
special compensation for doing this.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
FOR the election of the following persons to the Board of Directors
to serve until the 2000 annual meeting of shareholders:
Gary D. Bell Lester Jacobs
Kevin L. Jackson Robert M. Smither, Jr.
to serve until the 2001 annual meeting of shareholders:
Gary J. Arnold Larry L. Johnson
Thomas N. Grant William A. Retz
to serve until the 2002 annual meeting of shareholders:
J. William Brandner Lou A. Papais
Terry J. Long J. Melvin Stewart
FOR approval of the Company's 1999 Stock Incentive Plan;
FOR ratification of BDO Seidman, LLP's appointment as independent auditors of
the Company for the 2000 fiscal year.
PRINCIPAL SHAREHOLDERS
The identity of every person or entity known to us to beneficially own more than
five percent (5%) of the Company Stock at September 27, 1999 appears below.
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICAL OWNER BENEFICIALLY OWNER/1/ CLASS/1/2/
- ------------------- --------------------- ------------
Lou A. Papais 1,128,771 15.4%
3133 North Ad Art Road
Stockton, CA 95215
Raymond James Capital Partners, L.P. 1,262,857/3/ 14.7%
880 Carillon Parkway
St. Petersburg, FL 33716
3
Renaissance Capital Growth
& Income Fund III, Inc. 706,896/4/ 8.9%
808 North Central Expressway
Suite 210-LB59
Dallas, TX 75206
Renaissance U.S. Growth & Income Trust PLC 706,196/4/ 8.9%
808 North Central Expressway
Suite 210-LB59
Dallas, TX 75206
J. Melvin Stewart 597,394/5/ 8.0%
2201 Cantu Court, Suite 217
Sarasota, FL 34232
Terry J. Long 387,193/6/ 5.2%
3133 North Ad Art Road
Stockton, CA 95215
_______________________
/1/ Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), includes as beneficial owners of securities, among
others, any person who directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares
voting power and/or investment power with respect to such securities,
and any person who has the right to acquire beneficial ownership of
securities within 60 days, including without limitation, through the
exercise of any option, warrant or conversion of a security.
/2/ Based upon 7,318,464 shares of Company Stock issued and outstanding.
/3/ Includes: (a) 1,142,857 shares of Company Stock issuable upon
conversion of 40,000 shares of the Company's Series A Convertible
Preferred Stock prior to July 30, 2004 at the present conversion price
of $3.50 per share; and (b) 120,000 shares of Company Stock issuable
upon exercise of common stock purchase warrants prior to July 30, 2004
at the present exercise price of $3.50 per share.
/4/ Includes, with respect to each such entity: (a) 142,857 shares of
Company Stock issuable upon conversion of 5,000 shares of the
Company's Series A Convertible Preferred Stock prior to July 30, 2004
at the present conversion price of $3.50 per share; (b) 15,000 shares
of Company Stock issuable upon exercise of the Company's common stock
purchase warrants prior to July 30, 2004 at the present exercise price
of $3.50 per share; (c) 386,842 shares of Company Stock issuable upon
conversion of the Company's 8.75% Convertible Debentures Due March 2,
2005 at the present conversion price of $4.52; and (d) 105,000 shares
of Company Stock issuable upon exercise of common stock purchase
warrants prior to March 2, 2005 at the present exercise price of $4.11
per share.
/5/ Includes: (a) 127,339 shares purchasable within 60 days of the record
date upon exercise of employee stock options; (b) 320,250 shares held
in a voting trust among Mr. Stewart, his six children and a trust for
the benefit of a grandchild which has a term of 10 years commencing
May 19,1998 and under which Mr. Stewart serves as sole trustee and has
full voting power with respect to such shares; (c) 123,751 shares held
in a trust of which Mr. Stewart is the sole trustee and beneficiary;
and (d) 17,872 shares held in a trust of which he is the sole trustee
and the sole beneficiary is his spouse, Nancy W. Stewart.
/6/ Includes 105,000 shares issuable within 60 days of the record date
upon exercise of employee stock options.
4
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
Our Board of Directors currently has 12 members. Our Bylaws were amended August
27, 1999 to provide for directors to be elected in three classes, with the
classes being as equal in number as practicable, for staggered terms of three
years each. Accordingly, our shareholders are being asked to elect directors in
all three classes at the annual meeting.
The Board has nominated Gary D. Bell, Kevin L. Jackson, Lester Jacobs and Robert
M. Smither, Jr. for a term expiring at our 2000 annual meeting of shareholders.
The Board has nominated Gary J. Arnold, Thomas N. Grant, Larry L. Johnson and
William A. Retz for terms expiring at our 2001 annual meeting of shareholders.
The Board has nominated J. William Brandner, Terry J. Long, Lou A. Papais and J.
Melvin Stewart for terms expiring at our 2002 annual meeting of shareholders.
Each of the nominees has consented to serve if elected. If before the annual
meeting any of them becomes unable to serve or chooses not to serve, the Board
may nominate a substitute, and if that happens, the persons named as proxies in
the proxy card will vote for the substitute. Alternatively, the Board could
either choose to let the vacancy stay unfilled until an appropriate candidate is
located, or to reduce the size of the Board to eliminate the unfilled seat.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends that you vote FOR the election
of Gary D. Bell, Kevin L. Jackson, Lester Jacobs and Robert M. Smither, Jr. as
directors to hold office until the 2000 annual meeting of shareholders, that you
vote FOR the election of Gary J. Arnold, Thomas N. Grant, Larry L. Johnson and
William A. Retz as directors to hold office until the 2001 annual meeting of
shareholders, and that you vote FOR the election of J. William Brandner, Terry
J. Long, Lou A. Papais and J. Melvin Stewart as directors to hold office until
the 2002 annual meeting of shareholders, all until their respective successors
are elected and qualified.
INFORMATION CONCERNING DIRECTORS
Information regarding the principal occupations (which have continued for at
least the past five years unless otherwise noted) of the directors and nominees
for directors, as well as certain other information, is set forth below. The
information is given as of the date of this proxy statement.
5
NOMINEES FOR ELECTION TO TERM EXPIRING 2000
GARY D. BELL............. 50, has served as a Director since October 1995.
(PHOTO OF GARY D. BELL) He also serves as President and Chief Executive
Officer of our subsidiary Don Bell Industries,
Inc.
KEVIN L. JACKSON......... 38, has served as President and Chief Executive
(PHOTO OF KEVIN L. Officer of Advanced Information Systems Group,
JACKSON) Inc., a computer systems integrator, since 1992.
6
LESTER JACOBS............ 61, has served as a Director and a member of the
(PHOTO OF LESTER JACOBS) Audit Committee since October 1997. He served as a
member of the Compensation Committee from October
1997 to August 1999, at which time he was
appointed to serve as a member and Chairman of the
Nominating Committee. Mr. Jacobs has served as
Chairman of C 12 Group since 1992, an interactive
peer study and support system for individuals who
own or are chief executive officers of small-to
medium-sized businesses in the Florida cities of
Tampa, Bradenton and Sarasota, and in Houston,
Texas. J. Melvin Stewart is a member of the C 12
Group in Sarasota, Florida.
ROBERT M. SMITHER, JR.... 45, has served as a Director and member of the
(PHOTO OF ROBERT M. Compensation Committee since October 1995. Mr.
SMITHER) Smither has also served as a member and Chairman
of the Audit Committee since March 1996 and has
been Vice President and Treasurer of Worrell
Enterprises, Inc. since before 1990.
7
NOMINEES FOR ELECTION TO TERM EXPIRING 2001
GARY J. ARNOLD........... 44, is a full-time investor, an activity he
(PHOTO OF GARY J. ARNOLD) engaged in beginning in June 1997 after a
successful 20 year career as a Certified Public
Accountant and business executive. He is also
founder and Managing Director of Sarasota
Ventures, LLC, a venture capital firm, formed in
August 1999, which offers early stage financing
and consulting services to high-tech companies in
the Southeastern United States. From January 1998
to February 1999, Mr. Arnold also served as Vice
President and Corporate Controller of Beall's,
Inc., a national retailer. From December 1994 to
May 1997, he served as Vice President and
Corporate Controller of Boston Scientific
Corporation, a Fortune 500 manufacturer of high-
tech medical devices.
THOMAS N. GRANT.......... 53, has served as a Director, as a member and
(PHOTO OF THOMAS N. GRANT) Chairman of the Compensation Committee of the
Board of Directors since October 1995, as a member
of the Audit Committee from March 1996 until
October 1997, and as a member of the Executive
Committee since October 1997. Since January 1997,
Mr. Grant has been First Vice President, Financial
Institutions, SunTrust Bank, Central Florida, N.A.
From 1993 to 1996, he served as Senior Vice
President and Senior Lending Officer of The Bank
of Winter Park, Winter Park, Florida.
8
LARRY L. JOHNSON.............. 39, has served as President and Chief
(PHOTO OF LARRY L. JOHNSON) Executive Officer of our subsidiary Lockwood
Sign Group, Inc. and its predecessor since
1992.
WILLIAM A. RETZ............... 59, Rear Admiral USN (Ret.), is a self-
(PHOTO OF WILLIAM A. RETZ) employed consultant. He has served as a
Director and member of the Audit and
Compensation Committees since October 1997. He
has also served since 1996 as Vice President,
Government Services, for Aramark Corp., a
large privately-held company which provides
food and other services to a variety of
industries. Admiral Retz served in the United
States Navy from 1963 to 1995 with a variety
of sea commands and shore assignments,
including several U.S. Navy personnel
management positions and command of naval
bases, including closure of the U.S. Navy base
in Philadelphia, Pennsylvania.
9
NOMINEES FOR ELECTION TO TERM EXPIRING 2002
J. WILLIAM BRANDNER........... 62, has served as President and Chief
(PHOTO OF J. WILLIAM BRANDNER) Executive Officer and as a Director since
April 1994, and also serves as a member and
Chairman of the Executive Committee and as a
member of the Nominating Committee. From April
1991 to July 1993, Mr. Brandner served as
Chairman and President of American Integrity
Corporation, a public insurance holding
company with revenues of more than $100
million. From July 1971 to October 1990, Mr.
Brandner served as Vice Chairman, Director and
in various other senior executive positions
with Harcourt Brace Jovanovich, Inc., a $1.8
billion diversified public company with
publishing, insurance and theme park
operations.
TERRY J. LONG................. 54, has served as a Director since February
(PHOTO OF TERRY J. LONG) 1998. He has served as President and Chief
Executive Officer of our subsidiary Ad Art
Electronic Sign Corporation and its
predecessor companies since 1985.
10
LOU A. PAPAIS................. 73, has served as a Director, as a member of
(PHOTO OF LOU A. PAPAIS) the Nominating Committee, and as a consultant
to Ad Art Electronic Sign Corporation since
February 1998. Mr. Papais founded Ad Art's
predecessor with his brother John in 1958 and
was its principal shareholder prior to its
acquisition by the Company.
J. MELVIN STEWART............. 80, has served as a Director of the Company
(PHOTO OF J. MELVIN STEWART) since February 1994 and as Chairman of the
Board since September 29, 1994. He also serves
as a member of the Executive Committee and the
Nominating Committee, and serves as Chairman
of the Board, President and Chief Executive
Officer of our subsidiaries J.M. Stewart
Corporation and J.M. Stewart Industries, Inc.
11
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Our Board of Directors has established four standing committees: an Executive
Committee, an Audit Committee, a Compensation Committee, and a Nominating
Committee.
The Executive Committee, between meetings of the Board of Directors, may
exercise the powers of the Board of Directors, except with respect to a limited
number of matters, such as amending the articles of incorporation or the bylaws
of the Company and recommending to the shareholders of the Company a merger of
the Company, the sale of all or substantially all of the assets of the Company,
or the dissolution of the Company. Members are J. William Brandner (Chairman),
Gary J. Arnold, Thomas N. Grant, Lou A. Papais and J. Melvin Stewart. The
Executive Committee met once and took action by written consent on three
occasions in fiscal 1999.
The Audit Committee recommends to the Board of Directors the engagement of the
independent auditors of the Company. It also reviews with the independent
auditors the scope and results of the audits, reviews the adequacy and
effectiveness of the Company's internal controls, reviews the quality and
integrity of the Company's annual and interim external financial reports,
reviews the professional services furnished by the independent auditors to the
Company, and handles any other matters the Board deems appropriate. Members are
Robert A. Smither (Chairman), Kevin L. Jackson, Lester Jacobs and William A.
Retz. The Audit Committee met once in fiscal 1999.
The Compensation Committee reviews and approves all salary arrangements,
including annual and long-term incentive awards and other remuneration, for
officers of the Company and certain officers of subsidiaries. It also is
responsible for administration of the Company's stock option and other
compensation plans. Members are Thomas N. Grant (Chairman), Gary J. Arnold,
Kevin L. Jackson, William A. Retz, and Robert A. Smither. The Compensation
Committee met three times and took action by written consent once in fiscal
1999.
The Nominating Committee considers candidates for election to the Board and
makes recommendations for Board nominees to the full Board. In order for the
Nominating Committee to consider shareholder recommendations for nominees, such
shareholder recommendations must be received in writing by the President of the
Company not less than 120 days prior to the annual meeting of shareholders.
Members are Lester Jacobs (Chairman), J. William Brandner, Lou A. Papais and J.
Melvin Stewart. The Nominating Committee met once during fiscal 1999.
In fiscal 1999, the Board of Directors held five meetings. Each director
attended at least 75 percent of the total of all meetings of the Board and each
committee on which he served.
COMPENSATION OF DIRECTORS
We pay outside directors (directors who are not officers, employees or
consultants) meeting fees of $1,000 for each meeting of the Board attended.
During fiscal 1999, we paid the directors a total of $17,000 in fees. Each
director is entitled to be reimbursed for reasonable expenses of attending a
meeting of the Board or a Board committee.
In accordance with the requirements of our 1992 stock option plan, in 1999 each
nonemployee director was granted an option to purchase 10,500 shares of Company
Stock at the exercise price of $5.06 per share. The options are exercisable
until November 16, 2008, or for shorter periods following the director's death
or disability.
12
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table shows the number of shares of Company Stock owned
beneficially by each director, each nominee for director, each other "named
executive officer" (see "Executive Compensation -- Summary of Cash and Certain
Other Compensation" below), and by all directors and executive officers as a
group. The amounts are as of September 27, 1999 except as otherwise indicated.
All persons shown in the table have sole voting and investment power with regard
to the shares shown, unless otherwise indicated.
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED/1/ CLASS/1//2/
- -------------------------------------- --------------------- ----------
Gary J. Arnold 0 0.0%
5440 Azure Way
Sarasota, Florida 34242
Gary D. Bell 194,994 /3//7/ 2.6%
365 Oak Place
Port Orange, Florida 32127
J. William Brandner 332,890 /3//7/ 4.5%
5029 Edgewater Drive
Orlando, Florida 32810
Thomas N. Grant 28,360 /3/ *
200 South Orange Avenue
Orlando, Florida 32810
Marshall S. Harris 30,128 /4//5//7/ *
5029 Edgewater Drive
Orlando, Florida 32810
Kevin L. Jackson -0- 0.0%
2180 West S.R. 434, Suite 6150
Longwood, FL 32779
Lester Jacobs 21,075 /3/ *
656 Flamingo Drive
Apollo Beach, Florida 33572
Larry L. Johnson 302,950 /5/ 4.2%
10850-M Hanna Street
Beltsville, MD 20705
Terry J. Long 387,193 /3//7/ 5.2%
3133 Ad Art Road
Stockton, California 95215
13
Lou A. Papais 1,128,771 15.5%
3133 Ad Art Road
Stockton, California 95215
William A. Retz 21,075 /3/ *
280 South Ridley Creek Road
Media, Pennsylvania 19063
Robert M. Smither, Jr. 0 0.0%
1450 South Dixie Highway
Boca Raton, FL 33432
J. Melvin Stewart 597,394 /3//6//7/ 8.0%
2201 Cantu Court
Sarasota, Florida 34232
Todd D. Thrasher 40,631 /3//7/ *
5029 Edgewater Drive
Orlando, Florida 32810
All Executive Officers and Directors 3,091,235 38.8%
as a Group (14 persons)
*Represents less than 1% of the outstanding shares of Company Stock.
_______________________
/1/ Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), includes as beneficial owners of securities, among
others, any person who directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares
voting power and/or investment power with respect to such securities, and
any person who has the right to acquire beneficial ownership of securities
within 60 days, including without limitation, the exercise of any option,
warrant or conversion of a security.
/2/ Based upon 7,318,464 shares of Company Stock issued and outstanding.
/3/ Includes the following number of shares purchasable within 60 days of the
record date upon exercise of employee stock options: Gary D. Bell 171,083
shares; J. William Brandner 138,915 shares; Thomas N. Grant 26,045 shares;
Lester Jacobs 21,075 shares; Terry J. Long 105,000 shares; William A. Retz
21,075 shares; J. Melvin Stewart 127,339 shares; and Todd D. Thrasher
33,075 shares.
/4/ Includes 28,576 shares held in a self-directed independent retirement
account.
/5/ Does not include the following shares issuable upon exercise of options
not presently exerciseable: Marshall S. Harris 78,350 shares; Larry L.
Johnson 100,000 shares.
/6/ Includes: (a) 320,250 shares held in a voting trust among Mr. Stewart, his
six children and a trust for the benefit of a grandchild which has a term
of 10 years commencing May 19,1998 and under Mr. Stewart serves as sole
trustee and has full voting power with respect to such shares; (b) 123,751
shares held in a trust of which Mr. Stewart is the sole trustee and
beneficiary; and (c) 17,872 shares held in a trust of which he is the sole
trustee and the sole beneficiary is his spouse, Nancy W. Stewart.
/7/ Includes the following shares allocated to the following persons' accounts
under the Company's 401(k) plan: J. William Brandner 9,937 shares; Gary D.
Bell 1,218 shares; Marshall S. Harris 1,552 shares; Terry J. Long 545
shares; J. Melvin Stewart 8,309 shares; and Todd D. Thrasher 1,130 shares.
14
As of September 27, 1999, the Company did not know of any arrangement,
including any pledge by any person of securities of the Company, the operation
of which may result at a subsequent date in a change in control of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations thereunder
require the Company's executive officers and directors and certain persons who
own more than 10% of Company Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
the New York Stock Exchange. Executive officers, directors, and certain persons
owning more than ten percent of Company Stock are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based on its review of the copies of such forms
received by it and written representations from each such person who did not
file an Annual Statement of Changes in Beneficial Ownership on Form 5 that no
Form 5 was due, and except as reported in prior proxy statements, the Company
believes that all filing requirements applicable to such persons have been
complied with in fiscal 1999 and prior years.
PENSION PLANS
The Display Technologies, Inc. 401(k) profit sharing plan covers all employees
with more than six months of service and allows employees to defer up to 15% of
their income and contribute to the plan. The Company contributes to the plan at
a discretionary matching rate of 50% of the first 6% contributed by the
employee. Company contributions are in the form of the Company's common stock.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning compensation
paid by the Company to or on behalf of certain of our executive officers during
the fiscal year ending June 30, 1999 and the two preceding fiscal years. The
officer group, referred to as the named executive officers, is composed of J.
William Brandner, the President and Chief Executive Officer, and the four other
most highly compensated executive officers, determined as of June 30, 1999:
15
SUMMARY COMPENSATION TABLE
==================================================================================================================================
NAME AND YEAR ANNUAL COMPENSATION/1/ LONG-TERM COMPENSATION ALL
PRINCIPAL OTHER
POSITION COM-
PENSA-
TION
($)/3/
------------------------------------------------------------------------------------
Salary Bonus/2/ Other Awards Payout
($) ($) Annual
Com-
pensa-
tion
($)
---------------------------------
Restricted Options LTIP
Stock /SARs Pay-
Awards(s) (#) outs
($) ($)
==================================================================================================================================
J. William 1999 209,950 46,360 -0- -0- -0- 6,994
Brandner,
President and Chief 1998 189,535 40,830 -0- -0- -0- -0- 6,298
Executive Officer
1997 175,000 29,070 -0- -0- -0- -0- 5,686
- ----------------------------------------------------------------------------------------------------------------------------------
J. Melvin Stewart, 1999 197,919 29,248 -0- -0- -0- 6,376
Chairman of the
Board 1998 183,384 28,976 -0- -0- -0- -0- 5,936
1997 170,000 26,786 -0- -0- -0- -0- 5,502
- ----------------------------------------------------------------------------------------------------------------------------------
Terry J. Long, 1999 175,000 -0- -0- -0- -0- -0- 5,205
President of Ad Art
Electronic Sign 1998 63,288 -0- -0- -0- 105,000 -0- 1,899
Corporation
1997 -0- -0- -0- -0- -0- -0- -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Marshall S. Harris, 1999 141,346 -0- -0- -0- 78,750 -0- 1,750
Vice President,
General Counsel & 1998 -0- -0- -0- -0- -0- -0- -0-
Secretary
1997 -0- -0- -0- -0- -0- -0- -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Todd D. Thrasher, 1999 80,429 25,058 -0- -0- -0- -0- 2,789
Vice President and
Treasurer (CFO) 1998 61,731 20,858 -0- -0- -0- -0- 2,165
1997 29,000 -0- -0- -0- 31,500 -0- 870
==================================================================================================================================
________________________
/1/ Excludes (a) benefits generally available to all employees on a
nondiscriminatory basis and (b), except as described in Note (3) below,
the following (which did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus earned by the named individuals for the 1999
Fiscal Year): (i) automobile maintenance expenses paid to or on behalf of
the named individual by the Company; and (ii) the cost to the Company of
personal use by the named individuals of automobiles owned or leased by
the Company.
/2/ Includes as awards under the senior management incentive plan: (a) with
respect to Mr. Brandner, 5,887 shares of Company Stock having a per share
value of $3.94 as of the June 30, 1999 award date and for 1998 6,049
shares of Company Stock having a per share fair market value of $3.38 as
of the June 30, 1998 award date; (b) with respect to Mr. Stewart, for 1999
3,714 shares of Company Stock having a per share value of $3.94 as of the
June 30, 1999 award date and for 1998 4,293 shares of Company Stock having
a per share fair market value of $3.38 as of the June 30, 1998 award date;
and (c) with respect to Mr. Thrasher, for 1999 3,182 shares of Company
Stock having a per share value of $3.94 as of the June 30, 1999 award date
and for 1998 3,090 shares of Company Stock having a per share value of
$3.38 as of the June 30, 1998 award date.
/3/ Represents Company contributions to the 401(k) accounts of the named
executive officers.
16
STOCK OPTIONS GRANTED
The following table contains information concerning the grant of stock options
during fiscal 1999 to the named executive officer.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
=======================================================================================================
NAME NUMBER OF % OF TOTAL EXERCISE EXPIRATION GRANT
SECURITIES OPTIONS OR DATE DATE
UNDERLYING GRANTED BASE PRICE PRESENT
OPTIONS GRANTED TO EMPLOYEES ($/SH) VALUE
IN FISCAL YEAR ($)/2/
=======================================================================================================
Marshall S. Harris/1/ 78,750 14.4% $3.39 August 28, 2008/1/ $72,750/2/
=======================================================================================================
- ----------------------
/1/ The agreement under which the options were granted provides that when the
options become exerciseable as provided in the agreement, they will remain
exerciseable for a period of time equal to the earlier of five years
following the August 28, 1998 grant date or August 28, 2008.
/2/ The "grant date present value" is based upon the Black-Scholes option
pricing model adapted for use in valuing executive stock options. The
actual value, if any, the executive may realize upon exercise of the
option will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so there is no assurance the
value realized by the executive will be at or near the value estimated by
the Black-Scholes model. The principal assumptions incorporated into the
valuation model by the Company are as follows: (i) dividend yield of 5%,
(ii) expected volatility of 40%, (iii) risk-free interest rate of 6%, and
(iv) expected life of 7 years. No assumptions were made regarding
nontransferability or risk of forfeiture. The assumptions chosen
materially impact the resulting valuations.
OPTION/SAR EXERCISES AND HOLDINGS
The following table provides information with respect to the named executive
officers concerning the exercise of options and/or stock appreciation rights
("SARs") during the last fiscal year and the number of unexercised options and
SARs held as of the end of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION AND SAR VALUES
==========================================================================================
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OPTIONS/SARS OPTIONS/SARS
OF SHARES VALUE AT FY-END AT FY-END
ACQUIRED ON REALIZED
NAME EXERCISE ($) EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
==========================================================================================
J. William Brandner, President and 113,447 $509,377 138,915/0 $466,366/0
Chief Executive Officer
- ------------------------------------------------------------------------------------------
J. Melvin Stewart 60,000 $265,650 211,399/0 $698,162/0
Chairman of the Board
==========================================================================================
17
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Each of the Company's employment agreements with its named executive officers
contains confidentiality and noncompetition provisions effective during the term
of the agreement and for a period following termination of employment. Certain
of the employment agreements also provide for indemnification of the executive
to the maximum extent permitted by Nevada law or the Company's Bylaws, whichever
is greater, and for the payment by the Company of any expense of the executive
incurred in enforcement proceedings with respect to his employment agreement if
he is successful.
J. William Brandner. The Company is party to an employment agreement with
Mr. Brandner under which he serves as President and Chief Executive Officer of
the Company. The agreement is extended automatically for one-year periods each
April 28 unless the Company or Mr. Brandner provides written notice to the
contrary not less than six months prior to the extension date. The agreement
provides that Mr. Brandner is to receive an annual base salary of not less than
$150,000. Mr. Brandner presently receives $233,130 base salary per year. The
agreement also provides for the payment of severance in the event the Company
elects to terminate the agreement without cause. Should either the Board of
Directors or the Chairman of the Board deliver written notice of termination
without "cause" (as defined in the employment agreement) to Mr. Brandner, then
his employment agreement will be terminated effective not less than 60 days from
the date of such notice and after termination the Company will be required to
pay Mr. Brandner an amount equal to 200% of his base salary (defined as total
annual cash salary excluding bonuses) then in effect. Any such severance
payments, less required withholdings, are to be made in equal installments
corresponding to what would have been Mr. Brandner's regular pay dates and
amounts.
Marshall S. Harris. The Company is party to an employment agreement with
Mr. Harris under which he serves as Vice President and General Counsel of the
Company for a three-year term that commenced on September 1, 1998 and which is
renewable for successive one-year terms thereafter unless either party gives
notice to the other of its election not to renew the agreement not later than
120 days prior to the expiration of the initial term or any renewal term. The
agreement provides that Mr. Harris is to receive an annual base salary of not
less than $175,000 per year. Mr. Harris presently receives $190,000 base salary
per year. The agreement provides that he is to participate in the Company's
senior management incentive plan commencing with the fiscal year ending June 30,
2000. The agreement also provides that if Mr. Harris' employment is terminated
other than for cause, death or disability, he will be entitled to receive an
amount equal to the greater of 100% of his base salary then in effect or the
base salary that would otherwise have been payable to him for the remainder of
the employment term then in effect.
Terry J. Long. The Company and Ad Art Electronic Sign Corporation are
parties to an employment agreement under which Mr. Long serves as President of
Ad Art. The agreement renews for one-year terms on each February 18 unless
either the Company or Mr. Long elects not to renew by delivering written notice
to the other party not later than 90 days prior to the renewal date. Mr. Long
presently receives an annual base salary of $205,000. The agreement provides
that Mr. Long be designated a participant under and participate in the Company's
Senior Management Incentive Plan commencing with the fiscal year ending June 30,
2000. If Mr. Long's employment is terminated other than for cause, death or
disability, he is entitled to receive severance in an amount equal to 66 2/3% of
his base salary then in effect or the base salary that would otherwise have been
payable to him for the remainder of the employment term.
J. Melvin Stewart. J.M. Stewart Corporation, an indirect wholly-owned
subsidiary of the Company, is party to an employment agreement with Mr. Stewart,
under which he is to serve as President of each of J.M. Stewart Corporation and
J.M. Stewart Industries, Inc. He presently receives a base salary of $212,528
per year over a two-year term that commenced in January 1999 and which is
subject to automatic renewals for
18
successive two-year terms thereafter unless either party provides written notice
to the contrary not less than 30 days prior to the expiration of the renewal
term. The agreement permits the Company to terminate his status as an officer
and convert him to a consultant of the Company for a three-year period. In such
status, Mr. Stewart would be required to work only 750 hours per year and would
be entitled to 50 percent of his base salary. The agreement also allows Mr.
Stewart to convert to semi-retired status for a period of three years and in
such status to work part-time for the Company (1,200 hours per year) for
compensation equal to 75% of his base salary for the first two years and 50% of
his base salary for the remaining year.
Each of the above agreements of Messrs. Brandner, Harris and Stewart provides
that in the event of a "Change of Control" (as defined below), the term of
employment will be automatically renewed for a three-year term, the employee
will be entitled to severance in the event of termination of employment other
than for cause or death in an amount equal to the greater of 200% of his then
annual base salary or his annual base salary for the remainder of the three-year
term. The employment agreements define a "Change of Control" as having occurred
when: (a) any person or any persons acting together as a "group" for purposes of
Section 13(d) of the Exchange Act consummates a tender offer, a plan of open-
market purchases or an exchange offer for shares of Company Stock, or
consummates a proxy solicitation, which, in the judgment of a majority of the
members of the Board of Directors of the Company, is reasonably likely to permit
such person or group to obtain control of a sufficient number of voting
securities of the Company to elect a majority of the members of the Board of
Directors of the Company; or (b) there occurs within any period of 12
consecutive months other than as the result of resignations or proxies solicited
by, or votes cast by, management of the Company, (i) a change in 35% of the
persons who, as of August 31, 1995, constituted the Board of Directors of the
Company or (ii) an increase of 25% or more in the number of members of the Board
of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Compensation Committee establishes and
reviews the salaries and other compensation paid to the Company's executive
officers. The Company's executive compensation policy as implemented by the
committee is designed to provide a competitive compensation program that will
enable the Company to attract, motivate, reward and retain executives who have
the skills, experience and talents required to promote the short- and long-term
financial performance and growth of the Company. The compensation policy is
based on the principle that the financial rewards to the executives must be
aligned with the financial interests of the shareholders of the Company. In
this manner, the Company seeks to meet its ultimate responsibility to its
shareholders.
The Company's executive compensation has three elements: base salary, annual
incentive compensation and long-term incentive compensation. The following is a
summary of the considerations underlying each element.
Base Salary. The committee determines the salary ranges for each of the
executive officer positions of the Company, based upon the level and scope of
the responsibilities of the office and the pay levels of similarly positioned
executive officers in comparable companies. The evaluation of the Chief
Executive Officer is of paramount importance in setting base salaries of other
executive officers. The comparison of compensation levels is based on surveys
of various companies both within and outside the sign manufacturing industry.
Certain of these companies are included in the peer group represented in the
index used for stock performance comparisons elsewhere in this Proxy Statement
under the caption "Comparison of Five-Year Cumulative Total Returns." The
committee is satisfied that it has reasonably accurate information with respect
to salary ranges for the surveyed companies.
19
The committee begins its annual compensation review in August, and it generally
acts in the first quarter of each fiscal year to set the compensation of the
Company's executive officers and review annual goals set for each executive.
The committee considers (i) the Company's performance as evidenced in changes in
the price of the Common Stock during the year as compared to changes in its
industry and the broader economic environment, (ii) the Chief Executive
Officer's recommendations with respect to a particular officer, (iii) the
officer's individual performance, (iv) any significant changes in the officer's
level of responsibility, and (v) each officer's then-current salary within the
range of salaries for such position. The committee includes significant
qualitative components in evaluating the individual performance of each
executive officer. These components include the officer's leadership, the
accomplishment of goals set at the beginning of the year, teambuilding and
motivational skills. They also include adaptability to rapid change and
assimilation of new technical knowledge to meet the demands of the industry's
customers. In this qualitative evaluation, the committee exercises its
collective judgment as to the officer's contributions to the growth and success
of the Company during the prior year and the expected contributions of such
officer in the future. Generally, salary increases are made retroactive to July
1 of the current fiscal year.
Annual Incentive Compensation. The senior management incentive plan calls
for the establishment annually of an incentive pool to be distributed if four
out of the following seven corporate goals are achieved: (1) consolidated
operating income must increase a minimum of 15% over the prior fiscal year; (2)
consolidated pre-tax income must increase a minimum of 15% over the prior fiscal
year; (3) consolidated net income from continuing operations must increase a
minimum of 15% over the prior fiscal year; (4) consolidated net income must
increase a minimum of 15% over the prior fiscal year; (5) diluted earnings per
share from continuing operations must increase a minimum of 15% over the prior
fiscal year; (6) diluted earnings per share must increase a minimum of 15% over
the prior fiscal year; and (7) the quoted closing price per share of the Company
Stock at fiscal year-end must be 15% higher than the quoted closing price at the
end of the previous fiscal year. For the 1999 fiscal year, the Company achieved
the goals described in items (1) through (4) and (7) above.
The criteria for establishing the amount of the incentive pool is determined by
the Compensation Committee at the beginning of each year. Each participant has
specific individual goals based on his direct responsibilities and his
contributions to the attainment of the corporate goals. These objectives are
established at the beginning of each fiscal year by the Chief Executive Officer
and submitted to the Compensation Committee for approval. The goals are
communicated to the participants as the basis for making awards. Awards to
participants are one-third in cash, one-third in newly issued shares of Company
Stock and one-third as an adjustment of annual base salary.
The following awards were made under the senior management plan for the 1999
fiscal year:
======================================================================
CASH NO. OF SHARES OF
PARTICIPANT BONUS COMPANY STOCK BASE SALARY INCREASE
======================================================================
J. William Brandner $23,180 5,887 $23,180
- ----------------------------------------------------------------------
J. Melvin Stewart $14,624 3,714 $14,624
- ----------------------------------------------------------------------
Todd D. Thrasher $12,529 3,182 $12,529
======================================================================
20
Shares of Company Stock included in the above awards were issued under the 1994
stock compensation plan. The number of shares issued was calculated on the basis
of the $3.94 per share average of the high and low trade prices for the Company
Stock on June 30,1999. The foregoing persons received the increases in their
base salary effective July 1, 1999. The two named executive officers not
included in the above table commence participating in the management incentive
plan this fiscal year.
Long-Term Incentive Compensation. The Compensation Committee believes that
long-term incentive compensation in the form of stock options is the most direct
way of making executive compensation dependent upon increases in shareholder
value. The Company's stock option plans provide the means through which
executive officers can build an investment in Company Stock which will align the
officers' economic interest with the interest of shareholders. The value of
stock options historically has increased as the result of increases in the price
of the Company Stock, and such options are highly valued by employees. The
committee believes that the granting of stock options has been a particularly
important component of its success in retaining talented management employees.
The exercise price of each option has generally been the market price of the
Company Stock on the date of grant. The committee believes that stock options
give the Company's executive officers greater incentives throughout the term of
the options to strive to operate the Company in a manner that directly effects
the financial interest of the shareholders both on a long-term, as well as a
short-term, basis.
In determining the number of options to grant to executive officers, the
committee considers on a subjective basis the same factors as it does in
determining the other components of compensation, with no single factor accorded
special weight. The recommendation of the Chief Executive Officer is of
paramount importance in determining awards to persons other than himself.
Compensation of the Chief Executive Officer. In setting the compensation
of Mr. Brandner, the Company's President and Chief Executive Officer, the
Compensation Committee applied the quantitative, performance-based criteria of
the senior management incentive plan described above. In determining the
portion of the bonus pool under the plan to be allocated to Mr. Brandner, the
committee considered such qualitative criteria as his management
responsibilities, his efforts in aiding the Company in achieving the performance
goals contained in the senior management incentive plan, and the results of his
efforts in helping the Company increase profitable growth generally. The total
compensation package of Mr. Brandner is designed to be competitive while
creating awards for performance in line with the financial interests of our
shareholders. The committee believes that the 1999 compensation package for Mr.
Brandner was entirely consistent with this policy.
THE COMPENSATION COMMITTEE
October 1, 1999
Thomas N. Grant, Chairman Lester Jacobs
William A. Retz Robert M. Smither, Secretary
21
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
A line graph presentation appears below, showing a five-year comparison of the
cumulative total return on Company Stock to the S&P 500 index, the Nasdaq Stock
Market index and an index of peer group companies selected by the Company. The
peer group consists of Daktronics, Inc., Trans-Lux Corporation, Mikohn Gaming
Corporation, Trans-Industries, Inc. and Federal Sign Corp. The graph assumes
$100 invested on June 30, 1994, in Company Stock and in each index, with the
subsequent reinvestment of dividends on a quarterly basis.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURNS AMONG
THE COMPANY, S&P 500 INDEX, NASDAQ INDEX AND PEER GROUP INDEX
[GRAPH]
DATE Company Stock S&P 500 Index Nasdaq Index Peer Group
- ---- ------------- ------------- ------------ ----------
06/30/94 100.00 100.00 100.00 100.00
06/30/95 50.00 126.27 133.48 94.41
06/30/96 79.81 159.32 171.38 156.24
06/30/97 169.62 214.81 208.42 144.63
06/30/98 228.98 280.34 279.43 240.41
06/30/99 280.54 343.74 392.51 156.52
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF LOCKWOOD SIGN GROUP, INC.
On July 30, 1999, but effective as of July 1, 1999 for accounting purposes, the
Company acquired Lockwood Sign Group, Inc., a commercial sign manufacturer with
facilities located in Marietta, Georgia, Charlotte, North Carolina and the
Washington D.C. area. Mr. Larry L. Johnson, a director since August 27, 1999
and a nominee for reelection as a director, received $1,387,000 cash and 302,950
shares of Company Stock for his 73% interest in Lockwood and is entitled to
receive up to an additional 219,000 shares of Company Stock upon Lockwood's
attainment of certain earnings levels for the 2000 fiscal year.
Following the Lockwood acquisition, the Company and Lockwood entered into an
employment agreement with Mr. Johnson to serve as President and Chief Executive
Officer of Lockwood. The agreement provides for a term of one year commencing
July 30, 1999 and renews automatically for additional one-year terms thereafter,
unless either Lockwood or Mr. Johnson provides written notice to the contrary
not less than 90 days prior to the expiration of the term. Under the agreement,
he receives an annual base salary of $165,000. For the fiscal year ending June
30, 2000, Mr. Johnson will be entitled to incentive compensation in an amount
equal to 6% of Lockwood's annual net income in excess of $625,000, up to an
amount equal to 50% of his annual base salary. If Mr. Johnson's employment is
terminated other than for cause, disability or death, he is entitled to receive
severance equal to the greater of 66 2/3% of his base salary or the base salary
that would otherwise have been payable to him for the remainder of the
employment term. The agreement provides that Mr. Johnson will be designated a
participant under the Company's Senior Management Incentive Plan commencing with
fiscal year ending June 30, 2001. The agreement also provides that the Company
will use its best efforts to cause Mr. Johnson to nominated and elected as a
Director of the Company.
The Company also granted Mr. Johnson options under its 1992 stock option plan to
purchase up to 100,000 shares of Company Stock at the exercise price of $3.72,
the fair market value per share of Company Stock on the August 27, 1999 grant
date. The agreement under which the options were granted provides that certain
conditions must be satisfied before the options become exerciseable.
PREFERRED STOCK OFFERING
On July 30, 1999, the Company completed a private sale of 50,000 shares of its
authorized preferred stock designated as Series A Convertible Preferred Stock
for gross proceeds of $5,000,000. The preferred stock is convertible into shares
of Company Stock at the conversion price of $3.50 per share, subject to certain
anti-dilution and other adjustments.
40,000 shares of the preferred stock were purchased by Raymond James Capital
Partners L.P., and the remaining 10,000 shares were purchased 5,000 each by
Renaissance Capital Growth & Income Fund III, Inc. and Renaissance U.S. Growth &
Income Trust PLC. The Company also issued Raymond James and the two Renaissance
entities warrants to purchase 120,000 shares, 15,000 shares and 15,000 shares,
respectively, of Company Stock at any time prior to July 30, 2004 at the
exercise price of $3.50 per share. The exercise price is subject to certain
anti-dilution and other adjustments.
The Series A Preferred Stock pays dividends at the rate of 5.25% per year on the
last day of March, June, September and December in each year and is required to
be redeemed by the Company on July 30, 2004. The Series A Preferred Stock is
entitled to a preference over Company Stock at liquidation at the liquidation
price of $100 per share plus any accrued but unpaid dividends.
23
Holders of the Series A Preferred Stock are entitled to vote with holders of
Company Stock as a single class on all matters on which holders of Company Stock
are entitled to vote. Each share of preferred stock is entitled to the number
of votes equal to the number of shares of Company Stock into which it is
convertible.
Part of the proceeds from the preferred stock sale were used by the Company to
finance part of the purchase price for Lockwood Sign Group, Inc.
AMERIVISION
Pursuant to an agreement dated June 28, 1999, the Company purchased 8,000 newly
issued shares of convertible preferred stock from AmeriVision Outdoor, Inc. for
$500,000. The preferred stock pays quarterly cumulative dividends at the rate
of 9% per year. Upon the satisfaction of certain conditions, the preferred
stock is convertible into common stock of AmeriVision at the price of $62.50 per
share, which upon issuance would be equal to 80% of the outstanding common stock
of AmeriVision. The Company also has the option, upon certain conditions, to
purchase the remaining 20% of the common stock of AmeriVision.
Part of the proceeds of the preferred stock was used by AmeriVision to purchase
the assets of AmeriVision Outdoor, LLC, a Nevada limited liability company. The
Nevada company used $106,000 of such proceeds to partially repay loans of
$182,000 from Terry L. Long, a director and executive officer of the Company.
The agreement between the Company and AmeriVision also provides that in
consideration of payment of a management fee, the Company has the right to
designate a representative to manage the day-to-day business operations of
AmeriVision and to serve on its board of directors. The Company has designated
Mr. Long to serve as such representative.
OHIO PARTNERSHIP
In June 1999, Ad Art Electronic Sign Corporation entered into a lease-purchase
transaction with an Ohio partnership, pursuant to which the partnership leases
from Ad Art an LED outdoor display board over a 60-month term for total lease
payments of approximately $1 million. The partnership has advised Ad Art that
it is in the process of consummating a transaction with a third party under
which the third party will pay Ad Art the remainder of the price of the board
and replace Ad Art as the lessor of the sign. Mr. Terry J. Long, a director and
executive officer of the Company, is a 50% non-managing partner of the Ohio
partnership.
SALE OF CONVERTIBLE DEBENTURES
On March 2, 1998, the Company issued and sold to each of Renaissance Capital
Growth & Income Fund III, Inc. and Renaissance U.S. Growth & Income Trust PLC
$1,750,000 principal amount of the Company's 8.75% Convertible Debentures Due
March 2, 2005. The debentures are convertible into shares of Company Stock at
the conversion price of $4.52 per share, subject to certain anti-dilution and
other adjustments. The Company also simultaneously issued to each of the
Renaissance entities warrants to purchase up to 100,000 shares of Company Stock
at any time prior to March 2, 2005. The present exercise price of these
warrants is $4.32 per share, which price is also subject to certain anti-
dilution and other adjustments.
The proceeds from the sale of the debentures was used by the Company to pay the
cash portion of the acquisition price of Ad Art Electronic Sign Corporation and
to provide operating capital to Ad Art.
24
ACQUISITION OF AD ART ELECTRONIC SIGN CORPORATION
On February 18, 1998, the Company acquired Ad Art Electronic Sign Corporation
("Ad Art"), a commercial sign manufacturer located in Stockton, California. Mr.
Lou A. Papais received 680,400 shares of Company Stock for his 40% interest in
Ad Art and also received additional 453,600 shares of Company Stock upon Ad
Art's attainment of certain earnings levels for the 1999 fiscal year. Mr. Terry
J. Long received 170,100 shares of Company Stock and cash of $600,000 for his
20% interest in Ad Art and also received 113,400 shares of Company Stock upon Ad
Art's attainment of certain earnings levels for the 1999 fiscal year. The
remaining 40% shareholders of Ad Art received cash of $2,400,000 for their
interests.
Following the Ad Art acquisition, Ad Art entered into an employment agreement
with Mr. Long to serve as president and chief executive officer of Ad Art. The
agreement provides for a one-year term that commenced February 18,1998 and is
extended automatically for additional one-year periods thereafter, unless Ad Art
or Mr. Long provides written notice to the contrary not less than 90 days prior
to the expiration of the initial one-year term or any extension thereof. Mr.
Long receives a present base salary of $205,000 per year. Mr. Long is to
participate in the Company's senior management incentive plan commencing the
2000 fiscal year. The agreement also provides for the payment of severance, in
the event Ad Art elects to terminate his employment without cause, of the
greater of the base salary that would otherwise be payable over the term of the
agreement or two-thirds of his base salary.
The Company also granted Mr. Long options under its 1994 stock compensation plan
to purchase up to 105,000 shares of the Company's Company Stock at the exercise
price of $3.84 per share, the fair market value per share of Company Stock on
the February 18, 1998 grant date. The options expire February 18, 2003.
Ad Art and Mr. Papais entered into a consulting agreement on February 18, 1998
for a period of three years for an annual consulting fee of $100,000. Under the
terms of the agreement, Mr. Papais is required to devote a minimum of three days
per week to the business of Ad Art.
PROPOSAL 2
APPROVAL OF THE 1999 STOCK INCENTIVE PLAN
The Board of Directors has adopted the 1999 Stock Incentive Plan and directed
that it be submitted to the shareholders for their approval at the annual
meeting. Under Nevada corporate law, approval of the plan requires the
affirmative vote of holders of a majority of the Company's shares entitled to
vote at the annual meeting. The purpose of the 1999 Stock Plan is to align the
financial interests of the Company's officers and other key employees with those
of the shareholders by encouraging and enabling the acquisition of financial
interests in the Company.
No additional options are available for grant under the Company's 1988 Stock
Plan; only options for 398,623 shares are available for grant under the 1992
Stock Option Plan and only options for 175,487 shares are available for grant
under the 1994 Stock Compensation Plan. Additionally, none of the present stock
plans permits the granting of incentive stock options, or ISOs, to employees.
The Board of Directors believes that it is in the best interests of the Company
and its shareholders that a greater number of shares of Company Stock be
available for grants of stock or option awards to employees, and for the Company
to have the ability to grant ISOs to its employees.
25
If the 1999 Stock Plan is approved by shareholders at the 1999 annual meeting,
the 1988, 1992 and 1994 plans will be terminated and no further awards will be
granted under those plans to employees. However, such termination will not
affect employee stock options presently outstanding under those plans.
The following summary describes certain provisions of the 1999 Stock Plan, the
full text of which is attached as Exhibit A:
---------
Under the 1999 Stock Plan, the Compensation Committee, which will administer the
plan, may grant options to purchase Company Stock or direct awards of Company
Stock to employees, directors or other persons providing services to the Company
or any of its subsidiaries. Participants in the 1999 Plan will be those key
employees, directors, officers and other individuals providing services to the
Company or its subsidiaries who, in the opinion of the Compensation Committee,
are in a position to make a significant contribution to the success of the
Company.
A maximum of 1,500,000 shares of Company Stock may be issued under the plan.
Also, the following shares will be available for future grants:
. Shares remaining under an option grant that terminates without having
been fully exercised
. Shares included in an award where cash is delivered to the participant
in lieu of such shares
. Shares of restricted Company Stock that are forfeited to the Company
. Shares tendered by a participant as payment of the exercise price
. Shares held back, or tendered by a participant in satisfaction of tax
withholding requirements
. Up to 500,000 shares, to the extent authorized by the Board of
Directors, that are reacquired by the Company in the open market or in
private transactions after the plan becomes effective
The maximum number of shares that may be issued directly as awards under the
1999 Stock Plan is limited to 33 1/3% of the total number of shares that may be
issued under the plan. Not more than 50,000 shares may be issued as direct
awards to any one individual during any fiscal year if such shares are intended
to be "performance-based compensation" as that term is used in Section 162(m) of
the Internal Revenue Code.
The 1999 Plan permits the granting of options intended to qualify as "incentive
stock options" for federal income tax purposes. The benefit of ISOs to an
employee is that payment of federal income tax by the employee on the difference
between the exercise price and the value of the Company Stock at the time of
exercise is deferred until the later date when the employee sells the shares.
Further, depending on when the shares are sold, the employee may pay tax at the
capital gain rate rather than the ordinary income rate. When an employee
exercises an option that is not entitled to ISO treatment, i.e., a "nonqualified
option," the employee is taxed on the gain at the ordinary income rate at the
time of exercise. This tax burden often has the effect of causing the employee
to have to immediately sell a portion of the shares acquired upon exercise to
provide funds to pay the tax liability. The Company believes that its ability
under the
26
1999 Plan to grant ISOs to employees will encourage them to retain ownership of
more of their shares and for a longer period of time than is the case with
nonqualified options.
At least two persons who are both "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code and "nonemployee directors" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 will serve
on the Compensation Committee. The committee will determine the officers and
employees to whom grants are made, the number of shares subject to each option,
and the terms of each grant. The committee may, however, delegate the authority
to make option grants to one or more of its members or other persons unless such
delegation would jeopardize the benefits of complying with Rule 16b-3 under the
Securities Exchange Act of 1934 or Section 162(m) of the Internal Revenue Code.
Options granted under the 1999 Stock Plan must have an exercise price of at
least 100% of the fair market value of the Company Stock on the date of grant.
Options granted under the 1999 Plan will become exercisable upon satisfaction of
conditions established by the committee and will expire not more than 10 years
from the date of grant. The committee also has the authority to impose vesting
conditions, financial performance conditions and other conditions on options and
shares of Company Stock issued as direct awards under the 1999 Plan. The
committee may permit an optionee to surrender and exercise options for
cancellation, receiving in exchange either shares of Company Stock, a new
option, or both. The 1999 Plan does not permit the "repricing" of previously
granted options. The Plan specifically prohibits the Committee from canceling
and reissuing previously granted options.
The committee also has the authority to provide that options granted under the
1999 Plan may be transferred by will, by the laws of descent and distribution,
or in compliance with a domestic relations order issued by court, to an
immediate family member which includes only the optionee's spouse, child,
grandchild, parent or a trust established for the benefit of such family member.
The Compensation Committee will establish, from time to time, the conditions
under which optionees may transfer options to immediate family members.
The Board of Directors or the Compensation Committee may terminate, suspend, or
amend the 1999 Stock Plan at any time without the approval of shareholders
unless such approval would be required to retain the benefits of Section 162(m)
or Section 422 of the Internal Revenue Code. No such amendment, suspension or
termination will affect a participant's right under outstanding awards unless
the committee determines that the change is in the best interest of all
participants.
The foregoing summary does not purport to be complete and is qualified in its
entirety by reference to the actual terms of the 1999 Stock Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends that you vote FOR the proposal
to approve the 1999 Stock Incentive Plan.
27
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has followed the recommendation of its
Audit Committee and appointed the firm of BDO Seidman, LLP as our independent
auditors for the fiscal year ending June 30, 2000. This appointment is subject
to your ratification at the annual meeting. BDO has served as independent
auditors of the Company since 1993, and management of the Company considers the
firm to be well qualified. BDO has advised us that neither the firm nor any
member of the firm has any direct or indirect financial interest, in any
capacity, in the Company or any of our subsidiaries.
Representatives of BDO will have the opportunity to make a statement at the
annual meeting, if they desire to do so, and will be otherwise available at the
meeting to respond to appropriate questions from the shareholders.
If the shareholders do not ratify this appointment of BDO it will be
reconsidered by the Board.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that you vote FOR the proposal to ratify the
appointment of BDO Seidman, LLP as independent auditors of the Company for the
2000 fiscal year.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If you intend to submit either a nomination to the Board of Directors or a
shareholder proposal and request its inclusion in the 2000 proxy statement and
form of proxy, those submissions must be in writing and received by the Company
no later than June 30, 2000.
If we have not received your submissions by that date, the nominations and
shareholder proposals that are otherwise appropriate for consideration by the
shareholders may nevertheless be presented to the shareholders at the 2000
annual meeting even if they do not appear in the proxy statement, but only if
they have been submitted to the Company in writing in accordance with Article 1,
Section 3 of the Company's bylaws. The bylaws require submissions to be made in
writing and received by us not less than 150 days prior to the anniversary of
the prior annual meeting. Submissions should be sent by certified mail, return
receipt requested, to 5029 Edgewater Drive, Orlando, Florida 32810.
OTHER MATTERS
We do not know of anything else that will come before the annual meeting,
including any adjournments of it, that has not been discussed in this proxy
statement. If other matters properly come before the meeting, the persons named
in the proxy card will vote your Company Stock in their discretion.
Orlando, Florida MARSHALL S. HARRIS
October 1, 1999 Secretary
THE COMPANY'S 1999 ANNUAL REPORT, WHICH INCLUDES AUDITED FINANCIAL STATEMENTS,
HAS BEEN MAILED TO SHAREHOLDERS OF THE COMPANY. THE ANNUAL REPORT DOES NOT FORM
ANY PART OF THE MATERIAL FOR THE SOLICITATION OF PROXIES.
28
EXHIBIT A
---------
DISPLAY TECHNOLOGIES, INC.
1999 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
SECTION 1
GENERAL........................................................... 1
-------
1.1 Defined Terms......................................... 1
1.2 Purpose............................................... 1
1.3 Effective Date and Duration of the Plan............... 1
1.4 Administration........................................ 1
1.5 Shares Subject to the Plan............................ 1
1.6 Award Limitations..................................... 2
1.7 Eligibility and Participation......................... 2
1.8 Rules Applicable to Awards............................ 2
SECTION 2
OPTIONS........................................................... 5
-------
2.1 ISOs and NQOs......................................... 5
2.2 Exercise Price........................................ 5
2.3 Exercise.............................................. 5
2.4 Payment of Option Exercise Price...................... 5
2.5 Time and Manner of Exercise........................... 5
2.6 Settlement of Awards.................................. 5
SECTION 3
OTHER STOCK AWARDS................................................ 6
------------------
SECTION 4
EFFECT OF CERTAIN TRANSACTIONS.................................... 6
------------------------------
4.1 Changes In and Distributions with Respect to the
Stock................................................. 6
4.2 Change in Control..................................... 6
SECTION 5
COMMITTEE......................................................... 7
---------
5.1 Administration........................................ 7
5.2 Powers of Committee................................... 7
5.3 Delegation by Committee............................... 7
5.4 Information to be Furnished to Committee.............. 7
SECTION 6
MISCELLANEOUS..................................................... 8
-------------
6.1 Conditions on Delivery of Stock....................... 8
6.2 Amendment and Termination............................. 8
6.3 Gender and Number..................................... 8
6.4 Non-Limitation of the Company's Rights................ 8
6.5 Governing Law......................................... 8
APPENDIX A
DEFINED TERMS..................................................... A - 1
-------------
APPENDIX B
FEDERAL INCOME TAX EFFECTS........................................ B - 1
--------------------------
i
DISPLAY TECHNOLOGIES, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1
GENERAL
-------
1.1 Defined Terms. Except where otherwise defined below, capitalized
terms used in the Plan are defined in attached Appendix A, which is incorporated
----------
by reference.
1.2 Purpose. The Plan has been established to: (a) strengthen the
commonality of interests between the Company's employees and shareholders; (b)
link effectively employee motivation and compensation with the Company's
performance; (c) provide incentives and rewards for employees, directors,
consultants and other persons to accomplish the Company's goals and objectives;
(d) offer a comprehensive and competitive total compensation program; and (e)
attract and retain employees of high caliber and ability.
1.3 Effective Date and Duration of the Plan. The Plan will become
effective as of May 7, 1999 (the "Effective Date") and will be submitted to the
Company's shareholders for approval at the 1999 annual meeting of shareholders;
provided, however, that to the extent Awards are granted under the Plan prior to
its approval by shareholders, such Awards will be contingent on approval of the
Plan by the shareholders of the Company. The Plan will be unlimited in duration
and, in the event of Plan termination, will remain in effect as long as any
Awards under it are outstanding; provided, however, that, to the extent required
by the Code, no ISO may be granted under the Plan on a date that is more than 10
years following the Effective Date.
1.4 Administration. The Committee has discretionary authority, subject
only to the express provisions of the Plan, to interpret the Plan; determine
eligibility for and grant Awards; determine, modify or waive the terms and
conditions of any Award; prescribe forms, rules and procedures (which it may
modify or waive); and otherwise do all things necessary to carry out the
purposes of the Plan. Once an Award has been communicated in writing to a
Participant, the Committee may not, without the Participant's consent, alter the
terms of the Award so as to affect adversely the Participant's rights under the
Award, unless the Committee expressly reserved the right to do so. In the case
of any Award intended to be eligible for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code, the Committee will exercise
its discretion consistent with qualifying the Award for such exception.
1.5 Shares Subject to the Plan. Subject to the provisions of Section 4.1,
a total of 1,500,000 shares of Stock have been reserved for issuance under the
Plan. The following shares of Stock will also be available for future grants:
(a) Shares remaining under an Award that terminates without having
been exercised in full (in the case of an Award requiring exercise by a
Participant for delivery of Stock);
(b) Shares subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
(c) Shares of Restricted Stock that are forfeited to the Company;
(d) Shares of Stock tendered by a Participant as payment upon exercise
of an Award;
(e) Shares of Stock held back by the Committee, or tendered by a
Participant, in satisfaction of tax withholding requirements;
(f) Up to 500,000 shares of Stock, to the extent authorized by the
Board, that are reacquired by the Company in the open market or in private
transactions after the Effective Date; and
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
1.6 Award Limitations. Subject to the provisions of Section 4.1, shares
of Stock for which Awards may be granted under the Plan will be subject to the
following limitations:
(a) The maximum number of shares of Stock that may be issued as Stock
Awards will be 500,00 shares plus up to 33 1/3 % of shares reacquired by the
Company pursuant to Section 1.5(f).
(b) Not more than 50,000 shares of Stock may be subject to Stock
Awards granted to any one individual during any one fiscal-year period
(regardless of when such shares are deliverable) that are intended to be
"performance-based compensation" as that term is used for purposes of Code
section 162(m).
1.7 Eligibility and Participation. The Committee will select Participants
from among those key Employees, directors, officers and other individuals or
entities providing services to the Company or its Affiliates who, in the opinion
of the Committee, are in a position to make a significant contribution to the
success of the Company and its Affiliates. Eligibility for ISOs is further
limited to those individuals whose employment status would qualify them for the
tax treatment described in Sections 421 and 422 of the Code.
1.8 Rules Applicable to Awards.
(a) General Restrictions. Delivery of shares of Stock or other amounts
--------------------
under the Plan will be subject to the following:
(i) Notwithstanding any other provision of the Plan, the Company
will have no liability to deliver any shares of Stock under
the Plan or make any other distribution of benefits under the
Plan unless such delivery or distribution complies with all
applicable laws (including without limitation the
requirements of the Securities Act of 1933) and the
applicable requirements of any securities exchange or similar
entity.
(ii) To the extent that the Plan or Award Agreement provides for
issuance of stock certificates to reflect the issuance of
shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
2
(b) Performance Objectives. Where rights under an Award depend in
----------------------
whole or in part on attainment of performance objectives, actions by the Company
that have an effect, however material, on such performance objectives or on the
likelihood that they will be achieved will not be deemed an amendment or
alteration of the Award unless accomplished by a change in the express terms of
the Award or other action that is without substantial consequence except as it
affects the Award.
(c) Alternative Settlement. The Company retains the right at any time
----------------------
to extinguish rights under an Award in exchange for payment in cash, Stock
(subject to the limitations of Sections 1.5 and 1.6) or other property on such
terms as the Committee determines.
(d) Transferability Of Awards. Except as the Committee otherwise
-------------------------
expressly provides, Awards (other than an Award in the form of an outright
transfer of cash or Unrestricted Stock) may not be transferred other than by
will or by the laws of descent and distribution and, during a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons legally
appointed to act on the Participant's behalf).
(e) Vesting, Etc. The Committee may determine the time or times at
------------
which an Award will vest (i.e., become free of restrictions) or become
exercisable. Unless the Committee expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the
extent not already fully vested will be forfeited, immediately upon the
cessation (for any reason, including death) of the Participant's employment or
other service relationship with the Company and its Affiliates.
(f) Tax Withholding. All distributions under the Plan will be subject
---------------
to withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan upon satisfaction of the
applicable withholding obligations. The Committee, in its discretion and subject
to such requirements as the Committee may impose prior to the occurrence of such
withholding, may permit such withholding obligations to be satisfied through
cash payment by the Participant, through the surrender of shares of Stock which
the Participant already owns, or through the surrender of shares of Stock to
which the Participant is otherwise entitled under the Plan. A summary of the
federal income tax effects, as of the Effective Date, of various types of Awards
that may be granted under the Plan is attached as Appendix B.
----------
(g) Use of Shares. Subject to the overall limitation on the number of
-------------
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or an Affiliate, including the plans and arrangements of the Company or
an Affiliate assumed in business combinations.
(h) Dividends and Dividend Equivalents. An Award (including without
----------------------------------
limitation an Option Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee may
establish, including the reinvestment of such credited amounts in Stock
equivalents.
3
(i) Payments. Awards may be settled through cash payments, the
--------
delivery of shares of Stock, the granting of replacement Awards, or a
combination thereof as the Committee may determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee may permit or
require the deferral of any Award payment, subject to such rules and procedures
as it may establish, which may include provisions for the payment or crediting
of interest, or dividend equivalents, including converting such credits into
deferred Stock equivalents. Each Affiliate will be liable for payment of cash
due under the Plan with respect to any Participant to the extent that such
benefits are attributable to services performed for that Affiliate by the
Participant. Any disputes relating to liability of an Affiliate for cash
payments will be resolved by the Committee.
(j) Form and Time of Elections. Unless otherwise specified herein,
--------------------------
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, must be in writing filed with the Committee at such times,
in such form and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee may require.
(k) Agreement With the Company. Awards under the Plan will be subject
--------------------------
to such terms and conditions, not inconsistent with the Plan, as the Committee
in its sole discretion may prescribe. The terms and conditions of any Award to
any Participant will be reflected in such form of written document as is
determined by the Committee. A copy of such document will be provided to the
Participant, and the Committee may, but need not require, that the Participant
sign a copy of such document. Such document is referred to as an "Award
Agreement" regardless of whether any Participant signature is required.
(l) Action by the Company or an Affiliate. Any action required or
-------------------------------------
permitted to be taken by the Company or any Affiliate will be by resolution of
its board of directors, or by action of one or more members of its board
(including a committee of the board) who is duly authorized to act for the
board, or (except to the extent prohibited by applicable law or applicable rules
of any stock exchange) by a duly authorized officer of such company.
(m) Rights Limited. Nothing in the Plan is to be construed as giving
--------------
any person the right to continued employment or service with the Company or its
Affiliates, nor any rights as a shareholder except as to shares actually issued
under the Plan. The loss of existing or potential profit in Awards will not
constitute an element of damages in the event of termination of employment or
service for any reason, even if the termination is in violation of an obligation
of the Company or Affiliate to the Participant. No Participant or any other
person will, by reason of participation in the Plan, acquire any right in or
title to any assets, funds or property of the Company or any Affiliate
whatsoever, including without limitation any specific funds, assets, or other
property which the Company or any Affiliate, in its sole discretion, may set
aside in anticipation of a liability under the Plan. A Participant will have
only a contractual right to the Stock or amounts, if any, payable under the
Plan, unsecured by any assets of the Company or any Affiliate and nothing
contained in the Plan will constitute a guarantee that the assets of the Company
or any Affiliate will be sufficient to pay any benefits to any person.
(n) Evidence. Evidence required of anyone under the Plan may be by
--------
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
4
(o) Section 162(m). In the case of an Award intended to be eligible
--------------
for the performance-based compensation exception under Section 162(m)(4)(C) of
the Code, the Plan and such Award will be construed in a manner consistent with
qualifying the Award for such exception.
SECTION 2
OPTIONS
-------
2.1 ISOs and NQOs. The grant of an Option entitles the Participant to
purchase shares of Stock at an Exercise Price established by the Committee.
Options granted under the Plan may either be ISOs or NQOs, as determined in the
discretion of the Committee.
2.2 Exercise Price. The Exercise Price of each Option granted will be
established by the Committee or will be determined by a method established by
the Committee at the time the Option is granted, except that the Exercise Price
will not be less than 100% of the Fair Market Value of a share of Stock on the
date of grant.
2.3 Exercise. All Options will be exercisable in accordance with such
terms and conditions and during such periods as may be established by the
Committee.
2.4 Payment of Option Exercise Price. The payment of the Exercise Price of
Options will be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option is to be paid at the time of such exercise (except that, in the case of
an exercise arrangement approved by the Committee and described in paragraph
2.4(c), payment may be made as soon as practicable after the exercise).
(b) The Exercise Price will be payable in cash or by tendering, by
either actual delivery or by attestation, shares of Stock acceptable to the
Committee and valued at Fair Market Value as of the date of exercise, or in any
combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price by irrevocably authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.
2.5 Time and Manner of Exercise. Unless the Committee expressly provides
otherwise:
(a) An Option will not be deemed to have been exercised until the
Company receives a written notice of exercise (in form acceptable to the
Company) signed by the appropriate person and accompanied by any payment
required under the Award; and
(b) If the Option is exercised by any person other than the
Participant, the Committee may require satisfactory evidence that the person
exercising the Option has the right to do so.
2.6 Settlement of Awards. Shares of Stock delivered pursuant to the
exercise of an Option will be subject to such conditions, restrictions and
contingencies as the Committee may establish in the applicable Award Agreement.
5
SECTION 3
OTHER STOCK AWARDS
------------------
Each Stock Unit Award, Restricted Stock Award, Restricted Stock Unit Award
and Performance Share Award will be subject to the following:
(a) Such conditions, restrictions and contingencies as the Committee
may determine; and
(b) The Committee may designate whether any such Award being granted
to any Participant is intended to be "performance-based compensation" as that
term is used in section 162(m) of the Code. Any such Award designated as
intended to be "performance-based compensation" will be conditioned on the
achievement of one or more Performance Measures. For Awards intended to be
"performance-based compensation," the grant of the Awards and the establishment
of the Performance Measures will be made during the period required under Code
section 162(m).
SECTION 4
EFFECT OF CERTAIN TRANSACTIONS
------------------------------
4.1 Changes In and Distributions with Respect to the Stock.
(a) Basic Antidilution Provisions. In the event of a stock dividend,
-----------------------------
stock split or combination of shares, recapitalization or other change in the
Company's capital structure, the Committee will make appropriate adjustments to
the maximum number of shares that may be delivered under the Plan under Sections
1.5 and 1.6, and will also make appropriate adjustments to the number and kind
of shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(b) Certain Other Adjustments. The Committee may also make adjustments
-------------------------
of the type described in paragraph (a) above to take into account distributions
to common stockholders other than stock dividends or normal cash dividends,
mergers, consolidations, acquisitions, dispositions or similar corporate
transactions, or in any other event, if the Committee determines that
adjustments are appropriate to avoid distortion in the operation of the Plan and
to preserve the value of Awards made hereunder; provided, that no such
adjustment shall be made to an Award intended to be eligible for the
performance-based exception under Section 162(m)(4)(C) of the Code, except to
the extent consistent with that exception.
4.2 Change in Control. Subject to the provisions of Section 4.1 (relating
to the adjustment of shares), and except as otherwise provided in the Plan or
the Award Agreement reflecting the applicable Award, upon the occurrence of a
Change in Control:
(a) All outstanding Options will become fully exercisable.
(b) All Stock Units, Restricted Stock, Restricted Stock Units and
Performance Shares will become fully vested.
6
SECTION 5
COMMITTEE
---------
5.1 Administration. The authority to control and manage the operation and
administration of the Plan will be vested in the Committee in accordance with
this Section 5. The Committee will be selected by the Board, and will consist
solely of three or more members of the Board who are not employees. If the
Committee does not exist, or for any other reason determined by the Board, the
Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
5.2 Powers of Committee. The Committee's administration of the Plan will
be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Participants those
persons who will receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the Awards, to
establish the terms, conditions, performance criteria, restrictions and other
provisions of such Awards, and to cancel or suspend Awards. However, the
Committee will not have the power or authority to cancel and reissue Option
Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of the
Awards in jurisdictions outside the United States, the Committee will have the
authority and discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to applicable requirements
or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to interpret
the Plan, to establish, amend, and rescind any rules and regulations relating to
the Plan, to determine the terms and provisions of any Award Agreement made
pursuant to the Plan, and to make all other determinations that may be necessary
or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan will be final and binding on all persons.
(e) In controlling and managing the operation and administration of
the Plan, the Committee will take action in a manner that conforms to the
articles of incorporation and by-laws of the Company, and applicable state
corporate law.
5.3 Delegation by Committee. Except to the extent prohibited by applicable
law or applicable stock exchange rules, the Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to any person or
persons selected by it unless such delegation would jeopardize the benefits of
complying with Rule 16b-3 of the Exchange Act or Section 162(m) of the Code. Any
such allocation or delegation may be revoked by the Committee at any time.
5.4 Information to be Furnished to Committee. The Company and the
Affiliates will furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and the Affiliates as to an employee's or Participant's employment,
termination of employment, leave of absence, re-employment and compensation will
be conclusive on all persons unless determined by the Committee to be incorrect.
Participants and other
7
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry out
the terms of the Plan.
SECTION 6
MISCELLANEOUS
-------------
6.1 Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Stock pursuant to the Plan or to remove any restriction
from shares previously delivered under the Plan until: the Company's counsel has
approved all legal matters in connection with the issuance and delivery of such
shares; if the outstanding Stock is at the time listed on any stock exchange or
national market system, the shares to be delivered have been listed or
authorized to be listed on such exchange or system upon official notice of
notice of issuance; and all conditions of the Award have been satisfied or
waived. If the sale of Stock has not been registered under the Securities Act of
1933, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require that
certificates evidencing Stock issued under the Plan bear an appropriate legend
reflecting any restriction on transfer applicable to such Stock.
6.2 Amendment and Termination. Subject to the last sentence of Section
1.4, the Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment or termination will, without the approval of the stockholders of the
Company, effectuate a change for which stockholder approval is required in order
for the Plan to continue to qualify under Section 422 of the Code or for Awards
to be eligible for the performance-based exception under Section 162 (m)(4)(C)
of the Code.
6.3 Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
6.4 Non-Limitation of the Company's Rights. The existence of the Plan or
the grant of any Award shall not in any way affect the Company's right to award
a person bonuses or other compensation in addition to Awards under the Plan.
6.5 Governing Law. The Plan will be construed and interpreted in
accordance with the laws of the State of Florida.
_________________________________________
8
APPENDIX A
DEFINED TERMS
-------------
In addition to the other definitions contained in the Plan, the following
definitions shall apply:
Affiliate. The term "Affiliate" means any corporation or other entity:
(a) Owning, directly or indirectly, 50% or more of the outstanding
Stock of the Company; or
(b) In which the Company or any such corporation or other entity
owns, directly or indirectly, 50% of the outstanding capital stock (determined
by aggregate voting rights) or other voting interests; or
(c) Designated by the Committee in which the Company has a
significant interest, as determined in the discretion of the Committee.
Award. The term "Award" means any of the following:
(a) Options entitling the recipient to acquire shares of Stock upon
payment of the exercise price. Each Option (except as otherwise expressly
provided by the Committee consistent with continued qualification of the Option
as a performance-based award for purposes of Section 162(m) of the Code, or
unless the Committee expressly determines that such Option is not subject to
Section 162(m) of the Code or that the Option is not intended to qualify for the
performance-based exception under Section 162(m) of the Code) will have an
exercise price not less than the Fair Market Value of the Stock subject to the
Option, determined as of the date of grant, except that an ISO granted to an
Employee described in Section 422(b)(6) of the Code will have an exercise price
not less than 110% of such Fair Market Value. The Committee will determine the
medium in which the exercise price is to be paid, the duration of the Option,
the time or times at which an option will become exercisable, provisions for
continuation (if any) of option rights following termination of the
Participant's employment with the Company and its Affiliates, and all other
terms of the Option. No Option awarded under the Plan will be an ISO unless the
Committee expressly provides for ISO treatment.
(b) Stock subject to restrictions ("Restricted Stock") under the Plan
requiring that the Stock be redelivered to the Company if specified conditions
are not satisfied. The conditions to be satisfied in connection with any Award
of Restricted Stock, the terms on which such Stock must be redelivered to the
Company, the purchase price of such Stock, and all other terms shall be
determined by the Committee.
(c) Stock not subject to any restrictions under the Plan
("Unrestricted Stock").
(d) A promise to deliver Stock or other securities in the future on
such terms and conditions as the Committee determines.
(e) Securities (other than Options) that are convertible into or
exchangeable for Stock on such terms and conditions as the Committee determines.
A-1
(f) Awards described in any of (a) through (e) above where the right
to exerciseability, vesting or full enjoyment of the Award is conditioned in
whole or in part on the satisfaction of specified performance criteria
("Performance Awards"). The Committee in its discretion may grant Performance
Awards that are intended to qualify for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code and Performance Awards that are
not intended so to qualify.
In the case of a Performance Award intended to qualify as performance-based
for the purposes of Section 162(m) of the Code, the Committee shall in writing
preestablish a specific performance goal (based solely on one or more qualified
performance criteria) no later than 90 days after the commencement of the period
of service to which the performance relates (or at such earlier time as is
required to qualify the award as performance-based under Code Section
162(m)(4)(C)). For purposes of the Plan, a qualified performance criterion is
any of the following: (1) earnings or earnings per share (whether on a pre-tax,
after-tax, operational or other basis), (2) return on equity, (3) return on
assets, (4) revenues, (5) sales, (6) expenses, (7) one or more operating ratios,
(8) stock price, (9) stockholder return, (10) market share, (11) cash flow, (12)
inventory levels or inventory turn, (13) capital expenditures, (14) net
borrowing, debt leverage levels or credit quality, (15) the accomplishment of
mergers, acquisitions, dispositions, public offerings or similar extraordinary
business transactions or (16) any combination of the foregoing. The performance
goals selected in any case need not be applicable across the Company, but may be
particular to an individual's function or business unit. Prior to payment of
any Performance Award intended to qualify as performance-based under Section
162(m)(4)(C) of the Code, the Committee will certify whether the performance
goal has been attained and such determination will be final and conclusive. If
the performance goal is not attained, no other Award will be provided in
substitution of the Performance Award.
(g) Grants of cash, or loans, made in connection with other Awards in
order to help defray in whole or in part the economic cost (including tax cost)
of the Award to the Participant. The terms of any such grant or loan shall be
determined by the Committee.
Awards may be combined in the Committee's discretion.
Board. The term "Board" means the Board of Directors of the Company.
Change in Control. The term "Change in Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Board which occurs as follows:
(a) Any "person" (as such term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) is or becomes a beneficial owner,
directly or indirectly, of stock of the Company representing 25 % or more of the
total voting power of the Company's then outstanding stock.
(b) A tender offer (for which a filing has been made with the SEC
which purports to comply with the requirements of Section 14(d) of the
Securities Exchange Act of 1934 and the corresponding SEC rules) is made for the
stock of the Company. In case of a tender offer described in this paragraph
(b), the Change in Control will be deemed to have occurred upon the first to
occur of (i) any time during the offer when the person (using the definition in
(a) above) making the offer owns or has accepted for payment stock of the
Company with 25 % or more of the total voting power of the Company's outstanding
stock or (ii) three business days before the offer is to terminate unless the
offer is
A-2
withdrawn first, if the person making the offer could own, by the terms of the
offer plus any shares owned by this person, stock with 50 % or more of the total
voting power of the Company's outstanding stock when the offer terminates.
(c) Individuals who were the Board's nominees for election as
directors of the Company immediately prior to a meeting of the shareholders of
the Company involving a contest for the election of directors shall not
constitute a majority of the Board following the election.
Code. The term "Code" means the Internal Revenue Code of 1986, as amended.
A reference to any provision of the Code shall include reference to any
successor provision of the Code.
Committee. The term "Committee" means a committee of the Board comprised
solely of two or more persons who are both "outside directors" within the
meaning of Section 162(m) of the Code and "nonemployee directors" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934. The Committee may
delegate ministerial tasks to such persons (including Employees) as it deems
appropriate.
Company. The term "Company" means Display Technologies, Inc.
Employee. The term "Employee" means any person who is employed by the
Company or an Affiliate.
Exchange Act. The term "Exchange Act" means the Securities Exchange Act of
1934, as amended.
Exercise Price. The term "Exercise Price" means the price established by
the Committee required to be paid to exercise an Option.
Fair Market Value. For purposes of determining the "Fair Market Value" of
a share of Stock as of any date, the following rules apply:
(a) If the principal market for the Stock is a national securities
exchange or the Nasdaq stock market, then the Fair Market Value as of the
applicable date will be the closing sales price of the Stock on that date on the
principal exchange on which the Stock is then listed or admitted to trading.
(b) If sale prices are not available or if the principal market for
the Stock is not a national securities exchange and the Stock is not quoted on
the Nasdaq stock market, then the Fair Market Value as of the applicable date
will be the average between the highest bid and lowest asked prices for the
Stock on such day as reported on the NASDAQ OTC Bulletin Board Service or by the
National Quotation Bureau, Incorporated or a comparable service.
(c) If the date is not a business day, and as a result, paragraphs
(a) and (b) next above are inapplicable, the Fair Market Value of the Stock will
be determined as of the last preceding business day. If paragraphs (a) and (b)
next above are otherwise inapplicable, then the Fair Market Value of the Stock
will be determined in good faith by the Committee.
A-3
ISO. The term "ISO" means an Option that is intended to satisfy the
requirements applicable to an "incentive stock option" described in Section
422(b) of the Code.
NQO. The term "NQO" means an Option that is not intended to be an ISO.
---
Option. The term "Option" means the right, for a specified period of time,
to purchase shares of Stock from the Company at a specified price.
Participant. The term "Participant" means an employee, director or other
person providing services to the Company or its Affiliates who is granted an
Award under the Plan.
Performance Share Award. The term "Performance Share Award" means the
grant of a right to receive shares of Stock or Stock Units that is contingent on
the achievement of performance or other objectives during a specified period.
Plan. The term "Plan" means the Display Technologies, Inc. 1999 Stock
Incentive Plan as from time to time amended and in effect.
Restricted Stock and Restricted Stock Unit Awards. The term "Restricted
Stock Award" means the grant of shares of Stock, and a "Restricted Stock Unit
Award" means the grant of a right to receive shares of Stock in the future, that
is subject to a risk of forfeiture or other restrictions that will lapse upon
the achievement of one or more goals relating to completion of service by the
Participant, or achievement of performance or other objectives, as determined by
the Committee.
Securities Act. The term "Securities Act" means the Securities Act of
1933, as amended.
Stock. The term "Stock" means shares of common stock of the Company.
Stock Unit Award. The term "Stock Unit Award" means the grant of a right
to receive shares of Stock in the future.
A-4
APPENDIX B
FEDERAL INCOME TAX EFFECTS
--------------------------
Independent Tax Advice
The following discussion is based on Federal tax laws and regulations
presently in effect, which are subject to change, and the discussion does not
purport to be a complete description of the Federal income tax aspects of the
Plan. A Participant may also be subject to state and local taxes in connection
with the grant of Awards under the Plan. The Company suggests that Participants
consult with their individual tax advisors to determine the applicability of the
tax rules to the Awards granted to them in their personal circumstances.
Under Federal income tax laws in effect as of the Effective Date of the
Plan, Awards granted under the Plan will have the following tax consequences:
Incentive Stock Options
The grant of an incentive stock option ("ISO") will not result in taxable
income to the Participant. The exercise of an ISO will not result in taxable
income to the Participant provided that the Participant was, without a break in
service, an employee of the Company or an Affiliate during the period beginning
on the date of the grant of the option and ending on the date three (3) months
prior to the date of exercise (one year prior to the date of exercise if the
Participant is disabled, as that term is defined in the Internal Revenue Code).
If the Participant does not sell or otherwise dispose of the stock within two
years from the date of the grant of the ISO or within one year after the
transfer of such stock to him, then, upon disposition of such shares, any amount
realized in excess of the exercise price will be taxed to the Participant as
capital gain, and the Company will not be entitled to any deduction for Federal
income tax purposes. If the foregoing holding period requirements are not met,
the Participant will generally realize ordinary income, and a corresponding
deduction will be allowed to the Company, at the time of the disposition of the
shares, in an amount equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price. The excess of the fair market value of the shares at the time
of the exercise of an ISO over the exercise price is an adjustment that is
included in the calculation of the Participant's alternative minimum taxable
income for the tax year in which the ISO is exercised. For purposes of
determining the Participant's alternative minimum tax liability for the year of
disposition of the shares acquired pursuant to the ISO exercise, the Participant
will have a basis in those shares equal to the fair market value of the shares
at the time of exercise.
The exercise of an ISO through the exchange of previously acquired stock
will generally be treated in the same manner as such an exchange would be
treated in connection with the exercise of an NQO; that is, as a non-taxable,
like-kind exchange as to the number of shares given up and the identical number
of shares received under the option. That number of shares will take the same
basis and, for capital gains purposes, the same holding period as the shares
that are given up. However, such holding period will not be credited for
purposes of the one-year holding period required for the new shares to receive
ISO treatment. Shares received in excess of the number of shares given up will
have a new holding period and will have a basis of zero or, if any cash was paid
as part of the exercise price, the excess shares received will have a basis
equal to the amount of the cash. If a disqualifying disposition (a
B-1
disposition before the end of the applicable holding period) occurs with respect
to any of the shares received from the exchange, it will be treated as a
disqualifying disposition of the shares with the lowest basis./1/
If the exercise price of an ISO is paid with shares of stock of the Company
acquired through a prior exercise of an ISO, gain will be realized on the shares
given up (and will be taxed as ordinary income) if those shares have not been
held for the minimum ISO holding period (two years from the date of grant and
one year from the date of transfer), but the exchange will not affect the tax
treatment, as described in the immediately preceding paragraph, of the shares
received.
Non-Qualified Options
The grant of a non-qualified option ("NQO") will not result in taxable
income to the Participant. Except as described below, the Participant will
realize ordinary income at the time of exercise in an amount equal to the excess
of the fair market value of the shares acquired over the exercise price for
those shares, and the Company will be entitled to a corresponding deduction.
Gains or losses realized by the Participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of exercise.
The exercise of a NQO through the delivery of previously acquired stock
will generally be treated as a non-taxable, like-kind exchange as to the number
of shares surrendered and the identical number of shares received under the
option. That number of shares will take the same basis and, for capital gains
purposes, the same holding period as the shares that are given up. The value of
the shares received upon such an exchange that are in excess of the number given
up will be taxed to the Participant at the time of the exercise as ordinary
income. The excess shares will have a new holding period for capital gains
purposes and a basis equal to the value of such shares determined at the time of
exercise.
Neither the Participant nor the transferee will realize taxable income at
the time of a non-arm's length transfer of a NQO as a gift. Upon the subsequent
exercise of the option by the transferee, the Participant will realize ordinary
income in an amount equal to the excess of the fair market value of the shares
on the date of exercise over the option price. Upon a subsequent disposition of
the shares by the transferee, the transferee will generally realize short-term
or long-term capital gain or loss, with the basis for computing such gain or
loss equal to the fair market value of the stock at the time of exercise. If a
Participant makes a gift of an option, and surrenders all dominion and control
over the option, the gift should be complete for Federal gift tax purposes at
the time of transfer and should be valued at that time (or, if later, at the
time the option becomes vested). For gift and estate tax purposes, the gift of
an option would generally cause the option (and the stock acquired by exercise)
to be excluded from the Participant's estate. Special rules may apply if the
Participant makes a gift of an Award to a charity or to a "living trust" under
which the Participant retains the right to revoke the trust or substantially
alter its terms.
_________________________
/1/ Although the ISO regulations have been in proposed form for several
years, and are not formally authoritative in the manner that final regulations
would be, they generally form the basis for IRS interpretations relating to
ISOs.
B-2
Performance Units
A Participant who has been granted performance shares will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. The Participant will have compensation income at the
time of distribution equal to the then fair market value of the distributed
performance shares, and the Company will have a corresponding deduction.
Restricted and Other Stock
A Participant who has been granted a restricted stock Award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time, assuming that the restrictions constitute
a "substantial risk of forfeiture" for Federal income tax purposes. Upon the
vesting of shares subject to an Award, the holder will realize ordinary income
in an amount equal to the then fair market value of those shares, and the
Company will be entitled to a corresponding deduction. Gains or losses realized
by the Participant upon disposition of such shares will be treated as capital
gains and losses, with the basis in such shares equal to the fair market value
of the shares at the time of vesting. Dividends paid to the holder during the
restriction period will also be compensation income to the Participant and
deductible as such by the Company.
A Participant may elect pursuant to section 83(b) of the Internal Revenue
Code to have the income recognized and measured at the date of grant of
restricted stock and to have the applicable capital gain holding period
commence as of that date, as described below.
A Participant who has been granted a stock Award that is not subject to a
substantial risk of forfeiture for Federal income tax purposes (for example,
bonus stock) will realize ordinary income in an amount equal to the fair
market value of the shares at such time, and the Company will be entitled to a
corresponding deduction.
Section 83(b) Election
If a Participant is granted shares of Stock that are subject to a
substantial risk of forfeiture, recognition of income may be accelerated to the
date of grant if the Participant files an election under Internal Revenue Code
section 83(b). Such an election must be filed with the IRS not later than 30
days after the date the property was transferred (i.e., the date of grant), and
may be filed prior to the date of transfer. A copy of the election should be
filed with the Company. If such an election is properly filed in a timely
manner: (i) the Company will be entitled to a deduction at the time of grant in
an amount equal to the fair market value of the shares at the time of grant
(determined without regard to forfeiture restrictions and other non-permanent
restrictions), (ii) dividends paid to such holder during the restriction period
will be taxable as dividends to such holder and not deductible by the Company,
and (iii) there will be no further tax consequences when the restrictions lapse.
Gains or losses realized by the Participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of grant. If a Participant who
has made such an election subsequently forfeits the shares, the Participant will
not be entitled to any deduction or loss. The Company, however, will be required
to include as ordinary income the lesser of the fair market value of the
forfeited shares or the amount of the deduction originally claimed with respect
to the shares.
B-3
Deferred Delivery of Shares
If delivery of stock pursuant to the settlement of an Award under the Plan
is deferred to a date that is later than the regularly scheduled delivery date
(by reason of the Participant filing a properly completed deferral form, or by
reason of action of the Company, the Participant will recognize income at the
time of distribution, in an amount equal to the then fair market value of the
shares. However, if stock is subject to a substantial risk of forfeiture at the
time of distribution, recognition of income will be deferred until the risk of
forfeiture lapses. If the shares acquired pursuant to the exercise of an option
are to be delivered following a specified period of deferral, recognition of
income will be deferred until the end of the deferral period (or, if later, upon
the lapse of any substantial risk of forfeiture applicable to the shares).
Withholding of Taxes
Pursuant to the Plan, the Company may deduct, from any payment or
distribution of shares under the Plan, the amount of any tax required by law to
be withheld with respect to such payment, or may require the Participant to pay
such amount to the Company prior to, and as a condition of, making such payment
or distribution. Subject to rules and limitations established by the Committee,
a Participant may elect to satisfy the withholding required, in whole or in
part, either by having the Company withhold shares of Company common stock from
any payment under the Plan or by the Participant delivering shares of Company
common stock to the Company. Any election must be made in writing on or before
the date when the amount of taxes to be withheld is determined. The portion
of the withholding that is so satisfied will be determined using the fair market
value of the Company common stock on the date when the amount of taxes to be
withheld is determined.
The use of shares of Company common stock to satisfy any withholding
requirement will be treated, for Federal income tax purposes, as a sale of such
shares for an amount equal to the fair market value of the stock on the date
when the amount of taxes to be withheld is determined. If previously-owned
shares of Company common stock are delivered by a Participant to satisfy a
withholding requirement, the disposition of such shares would result in the
recognition of gain or loss by the Participant for tax purposes, depending on
whether the basis in the delivered shares is less than or greater than the fair
market value of the shares at the time of disposition.
Change In Control
Any acceleration of the vesting or payment of Awards under the Plan in the
event of a change in control in the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Internal Revenue Code, which may subject the Participant to a 20% excise tax and
which may not be deductible by the Company.
B-4
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.
To vote your shares for all Director nominees, mark the for box. To withhold
voting for all nominees, mark the withhold box. If you do not wish your shares
voted for a particular nominee follow the instructions below:
______________________________________________
VOTE ON PROPOSALS: For Withhold All To withhold authority to vote for any
1. Directors [ ] [ ] individual nominee write number(s) of
2. 1999 Stock Incentive Plan For Against Abstain nominee from reverse side.
[ ] [ ] [ ]
3. Ratification of appointment For Against Abstain Please date this proxy and sign exactly as
of BDO Seidman LLP as [ ] [ ] [ ] your name(s) appear hereon:
independent auditors X
------------------------------
X
------------------------------
Date: , 1999
------------------------------
PLEASE RETURN THIS PROXY AS PROMPTLY
[__ Mailing Label __] AS POSSIBLE IN THE POSTPAID ENVELOPE
PROVIDED.
DISPLAY TECHNOLOGIES, INC. PROXY
5029 Edgewater Drive Orlando, Florida 32810
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary D. Bell and Larry L. Johnson, and each of
them, as proxies each with power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated hereon, all the shares
of common stock of Display Technologies, Inc. held of record by the
undersigned on September 26, 1999 at the Annual Shareholders Meeting to be held
on November 18, 1999 at 9:30a.m., or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL PROPOSALS
The following proposals are being submitted to the Shareholders:
A) Election of 12 Directors of the Company for the following terms of office:
1. Gary D. Bell (1 yr.) 4. Robert M. Smither, Jr. (1 yr.) 7. Larry L. Johnson (2 yrs.) 10. Terry J. Long (3 yrs.)
2. Kevin L. Jackson (1 yr.) 5. Gary J. Arnold (2 yrs.) 8. William A. Retz (2 yrs.) 11. Lou A. Papais (3 yrs.)
3. Lester Jacobs (1 yr.) 6. Thomas N. Grant (2 yrs.) 9. J. William Brandner (3 yrs.) 12. J. Melvin Stewart (3 yrs.)
B) 1999 Stock Incentive Plan
C) Ratification of appointment of BDO Seidman LLP as independent auditors.
VOTE AND SIGN ON THE REVERSE SIDE