Dear
Participant:
Annually
the Compensation Committee reviews our compensation programs, including the
design and effectiveness of our equity compensation plans.
As a
result of this review, the Company has decided to offer you the opportunity to
trade your “underwater”, vested stock options for a smaller number of New Shares
of Sypris stock and/or New Options (with a new exercise price at the current
market price, exercisable for the next four years). The numbers of
New Shares or New Options offered in this exchange have been calculated to be
cost neutral to the Company.
This
is only to be provided in a manner that is cost neutral to the
Company.
Your
choices are:
|
o
|
Maintain
your current stock option position;
|
|
o
|
Trade
eligible grants of fully vested stock options for New Shares of common
stock; or
|
|
o
|
Trade
these eligible grants for New Options exercisable for $4.31 per
share.
|
As a
result of the “cost neutral” requirement, the number of New Shares of common
stock or New Options you are eligible to receive as part of the exchange offer
will be less than the number of shares you are currently
granted. Each vested grant will need to be addressed independently
because the calculated “Fair Value” of each grant is different.
The major
contributors to grant value are:
|
o
|
Number
of shares in the grant
|
|
o
|
Strike
price of the shares
|
|
o
|
Time
remaining till the grant expires
|
Attached
you will find an Offer to Exchange, which provides a detailed explanation of the
2008 Stock Option Exchange Program, a new Award Agreement, an election form
which provides a summary of your equity grants, an interactive spreadsheet which
allows for the calculation of the number of shares of common stock or options
they would convert to should you decide to participate in the Exchange Program
and the value of these grants at various stock prices. You will need to complete
and return the election form to provide notice of your
decision.
As a
general rule electing to tender your options for New Shares of common stock is
the most conservative choice, requiring you to trade a large number of stock
options for a smaller number of shares of common stock, but these shares would
immediately have a value equal to the current trading price of those
shares. Maintaining your current options at their current price is
generally the most aggressive choice - you would reap larger pre-tax gains
should the stock price increase significantly, but if the price does not
increase your gain may be minimal or even zero. Electing to exchange
your current options for new options is generally a choice that has a
risk/reward profile that falls somewhere between the other two
choices.
The
exchange offer is in effect starting March 31, 2008 and ending May 1,
2008. Any selection you make prior to May 1st can be
changed, but after May 1st all
elections become final. If you wish to withdraw your election to
participate you may due so until 5:00 p.m. ET on May 12, 2008.
We have
scheduled a teleconference for April 7, 2008 at 2:00 p.m. ET to review the offer
materials and to answer any questions that have broad
applicability. Questions that pertain to your personal tax
consequences should be directed to your tax
advisor.